You Can't Cheat an Honest Man - James Walsh [87]
Prosecutors said the Runnellses “robbed Peter to pay Paul,” creating a pyramid scheme that could not survive. “Landbank was nothing but a pyramid of debt... a complex and elaborate scheme to defraud,” said assistant U.S. attorney Joseph Fisher.
The Runnellses’ son testified that his father instructed him to hide $200,000 in cash taken from the family home after a federal judge had frozen assets of Landbank. “I was to take it to Farmville, [Virginia,] where my great aunts lived, and put it in a family safe,” Steven Runnells testified. He said he found another $200,000 in the safe when he deposited the money.
At first, Bill Runnells claimed he had a drinking problem that clouded his memory of Landbank’s financial details. When that didn’t seem to diminish any of the charges, he tried to raise an insanity defense— claiming that he couldn’t control his actions because he was a compulsive gambler. “He says he has no control over anything,” said his lawyer, Richard Brydges. “He’s taking a position that he didn’t do anything wrong because he was out to lunch.”
The judge hearing the case rejected the insanity claims. So, Bill and Marika Runnells gradually turned against one another.
He said that, during the worst of the fraud, he’d been semi-retired with the rank of president. Instead, Marika had actually run the business. “Mrs. Runnells is a smart woman, she’s a lot smarter than her husband,” Brydges argued.
She said it had been Bill who’d launched Landbank and Bill who’d approved all the shaky loans. She’d worked night and day, without pay, to keep the company afloat. The reason Landbank went bankrupt was “not fraud, but poor business decisions, dumb decisions,” according to David Bouchard, Marika’s attorney.
In two days of testimony, Marika portrayed herself as a competent manager and hard worker who was not able to control the actions of other Landbank officials—including her husband. At one point she broke down, sobbing that his sexual infidelities added to their problems at Landbank. “In early 1983 it was brought to my attention that Bill was seeing someone else and I became very upset,” she said.
Bill did not take the stand.
In November 1990, after a nine-week trial, Bill and Marika Runnells were found guilty of 87 and 59 felonies, respectively—including conspiracy, racketeering, tax fraud and obstruction of justice.
In January 1991, they were each sentenced to more than 30 years in prison and fined $500,000.
“I always think about [Runnells] on the lam, in some God-awful place in southern California trying to get housewives to stop smoking,” says one Landbank investor...with some satisfaction. “After he’d been a big player in the banking world. It’s not romantic. It’s pathetic.”
CHAPTER 14
Chapter 14: Multi-level Marketing
Multi-level marketing—also called network marketing or the shorthand MLM—takes an almost evangelistic approach to selling. It’s been around for a long time. But, for most of the last fifty years, it’s been frowned upon as a sleazy way to do business. This reputation is due, in part, to how much MLM resembles a Ponzi scheme.
In the 1970s, the frowning started to fade though. MLM began gaining credibility in mainstream business circles. From a corporate perspective, the strength of MLM is that it shortcuts the traditional retail distribution mechanism with all of its attendant support costs—marketing, sales, inventory and distribution.
MLM networks can be run and maintained with limited overhead— no expensive offices, large staffs or marketing support, just an inordinate amount of energy and a heavy long-distance phone bill.
Finally, MLM offers companies a level of plausible deniability if any distributor does something illegal or unethical. People who get involved in MLM are not employees of the producing company; they are independent business owners.
Several interlocking trends have contributed to the growth of network marketing, including technology advances, economic changes, job insecurity and the twin desires for