You Can't Cheat an Honest Man - James Walsh [83]
In August 1988, Geldermann’s parent company, ConAgra, hired James Fuller as an audit supervisor. Fuller was aware that Collins had skirted various rules of the CFTC and other agencies. He investigated the Lake States accounts and discovered that Geldermann was allowing Collins to transfer funds between accounts improperly and to open joint accounts with investors without proper documentation.
When Fuller informed them about these problems, Geldermann’s officers told him to stop investigating Collins.
In October 1989, the CFTC began an investigation of Collins. It subpoenaed Geldermann’s records regarding his trading accounts. The Feds asked Geldermann officials to provide copies of account statements and other records associated with Collins and Lake States.
The records showed large deposits into and withdrawals from Lake States accounts. For example, an account held solely in Collins’ name showed more than $3,148,000 in deposits and $3,574,000 in withdrawals during the period from January to September of 1989. This wasn’t, by itself, illegal. But the big volume of big transactions suggested the growth pattern of a Ponzi scheme.
Collins dealt with the CFTC investigations surprisingly well. Most Ponzi perps fold their operations or start making incriminating mistakes as soon as they know the Feds are watching. Lake States kept its interest payments going—and continued recruiting new investors— for more than four years. Collins made legitimate investments often enough to extend his scheme’s life expectancy. “He had quite a few hits,” recalls one investor. “It’s really too bad he was so desperate that he had to steal. If he’d played it straight, he might have really accomplished something.”
But Collins was a thief from the beginning. There was no chance that he could have played it straight. Whatever investment success he had was a happy accident that just borrowed more time.
Lake States reached its breaking point in late 1993. The ill-timed combination of several bad investments and the steady scrutiny of the CFTC put the company in a cash crunch. New investors were getting hard to find.
In early 1994, Lake States investors were complaining that the company wasn’t sending out interest checks. Worse still, it was being evasive about withdrawals of any kind. Some investors formed a group that filed a series of involuntary bankruptcy petitions against Collins and Lake States.
In June, Collins had his chauffeur drive him to a business meeting in suburban Chicago. He went into the meeting...and didn’t come out. A few investors wondered whether he’d been kidnapped or killed. But most guessed—rightly—that he’d simply fled.
For most of Collins’ investors, his disappearance meant the loss of a small part of their net worth. But a handful of big investors were wiped out. About a week after Collins was declared missing, a Washington D.C. man who’d invested several million dollars of family money in Lake States hanged himself.
Because it had lasted so long, Lake States had grown to an epic size. In the 10 years between 1984 and 1993, Collins had taken in more than $100 million from almost 500 investors. He returned about $70 million to investors in the form of bogus profits. He lost about $10 million making commodities investments. The rest went to Lake States overhead—and Collins’ pockets.
After his disappearance, Collins took his mistress—Kathleen Chambers—to Costa Rica for several months. Collins had met Chambers when she was waiting tables a restaurant outside of Chicago that he liked. The couple rented an ocean-view villa while the collapse of Lake States played out back in the States.
Collins had been planning his escape for months. He had detailed aliases for