You Can't Cheat an Honest Man - James Walsh [61]
Besides, rumors swirled about Taylor’s platinum connections. People in Knoxville talked about his contacts in the J. Peter Grace family, his friends at the state capitol who’d tip him off to hot muni bond deals and his ability to extract prime real estate at rock-bottom prices from probate and divorce court. “I used to say, ‘Joe, you’re one of the most well-connected people I’ve ever met,’” one investor marveled.
In fact, Taylor had started operating a Ponzi scheme with investors’ money some time in the late 1980s or early 1990s. By most reckoning, Taylor had stolen a six-figure sum from investors’ accounts in late 1992 or early 1993 and started the Ponzi scheme to cover his tracks.
Like many Ponzi perps, Taylor had a considerable ability to keep a complex web of detailed lies in his head. In another common move, he controlled what his clients knew about each other’s investments. He’d often tell investors to keep the details of their deals private because he wasn’t making them available to anyone else.
Jim Rogers was the president of Ben Rogers Insurance Agency, Inc. in LaFollette, Tennessee. Rogers met Taylor in the late 1970s and made a series of investments through Taylor & Associates. The investments went conservatively and successfully until the spring of 1994, when Rogers told Taylor that he was interested in some more aggressive investments.
A pattern emerged. Taylor would contact Rogers and ask for a cashier’s check in exchange for several post-dated checks from Taylor & Associates in the amount of the investment plus a hefty return. In a short time—often between seven and 30 days—Rogers could cash the checks.
However, Taylor would usually offer Rogers the chance to roll over his investment in another short-term deal. In these cases, Rogers would cash the interest check but hold on to the principal check. At the end of the next investment cycle, Rogers could make the same choice again.
Rogers thought that he was a limited partner of Taylor & Associates, L.P., because he received investment income tax reports from the limited partnership and was issued individual partnership checks at the time he delivered cashier’s checks to Taylor. He assumed each of his investments, regardless of whether the check was made payable to Taylor & Associates or Joe Taylor, was being made with Taylor & Associates.
In a little more than a year, Rogers gave Taylor about ten cashier’s checks and cashed about eighteen Taylor checks. All but two of the cashier’s checks went into Taylor’s accounts; the two that didn’t were endorsed over to third parties—other investors anxious to get their money back.
This was the surest sign that Taylor was running a Ponzi scheme. But Rogers never noticed the third-party endorsements.
In September 1995, Rogers gave Taylor a cashier’s check in the amount of $62,000. The money was supposed to be used to buy short-term municipal bonds that would be liquidated in 30 to 60 days. Taylor gave Rogers four checks for $16,759.78, $11,173.18, $22,346.37, and $18,994.41—for a total of $69,273.74.
If all went as planned, Rogers would make a 12 percent profit in less than seven weeks. But he was never able to cash any of the four checks.
Taylor became noticeably erratic in the fall of 1995. He seemed in a constant hurry and—for the first time in his working life—could be tough to reach. He confessed to at least one investor that he was getting psychological counseling for stress. “He probably had psychological problems,” said one person close to Taylor’s operation and who added, “Some people have said he was a manic depressive.”
September and October proved a particularly frantic time for Taylor during which he called on dozens of investors, pitching an array of weird deals. He called one of his richest investors with a big one. Taylor said he had