You Can't Cheat an Honest Man - James Walsh [84]
The couple rented a luxury condo and spent most of their time together. Their most notable outside interest was going to San Diego Padres baseball games. Collins, sporting a graying ponytail, blended in easily with the wealthy refugees from cold climates who live in La Jolla.
The ruse lasted more than two years. But, by the summer of 1996, Collins and Chambers were broke (though she didn’t know it). Most of the people involved in the case thought that Collins had disappeared with about $10 million. In fact, he may have only had a few hundred thousand.
Desperate, and lacking the time or focus to start another Ponzi scheme, Collins tried a bank heist. He took a .22 caliber pistol into a Great Western Bank branch in San Diego and ordered a teller to fill a paper bag with cash. While she was doing this, another employee activated a silent alarm.
With only $840 in his bag, Collins got as far as his car. Then the police arrived. Trapped, he put the barrel of the pistol in his mouth and pulled the trigger.
Case Study: Bill and Marika Runnells One of the telling questions is why some people who work for years legitimately suddenly snap and start stealing.
Again, they may have always felt like they were only somewhat legit. This insecurity explains why so many Ponzi perps work so hard to impress people. They are—among other things—social climbers, looking for the excitement and recognition of making big money.
In a few cases, the Ponzi perp actually will progress to a level of legitimacy. Anthony Robbins, Amway, Herbalife and a handful of other seemingly mainstream people or outfits come from backgrounds tinged with allegations of Ponzis and pyramids. Perps may hope that they will be one of the lucky handful that can grow fast enough...or move fast enough...that they attain the level of legitimacy. And, after the schemes crash, the investors confuse their fear of being poor with innocence.
Some people thrive on the fear and desperation that fray the nerves of most Ponzi perps. During the mid-1980s, William and Marika Runnells scammed investors and lenders with a sophisticated Ponzi scheme called Landbank Equity Corporation. The Runnellses started Virginia-based Landbank in 1980. The company made second mortgage loans and then sold pools of the mortgages to investors. Typically, the investor would not actually take possession of the promissory notes and collect on them from the borrower; instead, the investor would pay Landbank a servicing fee for processing and servicing collection of the loans. In return, Landbank guaranteed timely “pass-through” of principal and interest.
A high school dropout who’d been buying and selling real estate since he was 18, Bill Runnells had a checkered past—including numerous lawsuits and dodged judgments. He was locally notorious for two things: a shaved head and a weakness for high-stakes gambling.
Starting with not much more than a $50,000 line of credit, he built Landbank into one of the largest second-mortgage companies in the nation, with 33 branches in five states up and down the East Coast.
But even the $50,000 line of credit was a stretch for Runnells. The president of the bank that issued the line admitted, “Runnells had not handled his dealings in the real estate industry in an entirely satisfactory manner.” The only reason the bank did business with Runnells was that Frank Butler, an early partner in Landbank, had a good reputation in local business circles.
Because Virginia did not regulate second-mortgage lenders in the 1980s, Landbank was able to avoid outside audits and charge interest rates averaging 18 percent and fees of up to 40 percent. Its borrowers accepted the steep terms because they were usually bad credit risks who didn’t have