All language subtitles for American Greed s07e10 Brooklyns Madoff Corrupted Sof

In this episode of American Greed. It
was because there were so many satisfied

clients that the company grew.

Could this man be Brooklyn's own Bernie
Madoff? People who lived in that

neighborhood never conceived that this
flubby looking guy was going to hurt

them. Because unlike Madoff, Philip
Berry is no fancy billionaire flaunting

high life in front of his victims.

He's one of them.

He was wrapping himself in the mantle.

of the hard -working work ethic of that
neighborhood and using it to lure people

in. And he's quietly building what may
be the longest -running Ponzi scheme in

history. I blame myself. I keep saying,
why did I trust this guy? This one

decision I make just ruined my whole
life.

And later, Kevin Carney says he's
invented a revolutionary computer

trades millions of stocks with
guaranteed 20 % return.

Selling people a security the way Kevin
did is a violation of every securities

law known to mankind.

It's outrageous and too good to be true.

But investors, blinded by greed, are
lining up to hand him their money.

I've never seen that much cash in my
life. The wads of cash people would

in there.

On August 1, 2008, 50 -year -old Philip
Berry walks into the U .S. Attorney's

Office in Brooklyn and asks to speak
with a federal prosecutor.

I emphatically told the U .S. Attorney
that I didn't care what happened to me

that point as long as they would protect
my clients.

Berry, speaking exclusively to American
Greed from prison in New Jersey, says he

was looking to clear up some problems
with his 30 -year -old investment

that the investor's assets were in
extreme jeopardy at that point. But it's

worse than he's letting on.

Soon, U .S. Attorney Loretta Lynch will
be stunned to discover that this

unassuming man has quietly been running
a three -decade -long financial scam

right in her backyard.

This is the guy who, up until that point
in time...

has in fact been able to talk his way
out of a lot of trouble and a lot of

dissatisfied people.

And he thinks he can continue to do it.

Philip Barry's story begins in 1978 in
the Bay Ridge section of Brooklyn.

It's one of the best and safest
neighborhoods in New York City. The

are mostly middle and upper middle
income.

It's home to generations of families who
have formed tight bonds and an

insulated community, says New York Daily
News reporter John Marzulli.

Bay Ridge is a neighborhood that's built
on loyalty, that's built on family,

that's built on hard work.

Philip Barry has lived here since high
school.

To most, he's just a neighborhood guy
living a quiet life in his $700 a month

rent -controlled apartment.

He lived sparingly.

He didn't wear fancy clothes or drive a
fancy car, and he was well -known in the

neighborhood. He may live frugally, but
even Barry admits he's always been

interested in other people's money.

I'd started trading stocks for myself at
about age 15. I did very well and then

began to help friends with investment
advice in college, and so I decided to

pursue it as a profession.

After graduating from college with a
degree in business management, Barry

Leverage Management Company on 82nd
Street. At first, he does taxes for

and family, but soon he's offering
investments in stock options to a

list of satisfied neighbors.

U .S. Attorney Loretta Lynch has spent
nearly two decades prosecuting political

corruption and financial crimes in New
York. She says Barry used his

neighborhood status to gain his victims'
trust.

If I want to trust someone with my
money, who better than the local kid

good? Because he understands my needs,
and he understands why I'm not looking

for the Wall Street flashy guy.

I'm looking for someone that I can
relate to.

I never advertised the leverage group.
It grew by referrals from very satisfied

clients over the years.

If you looked closely at Philip Barry,
what would you see? You would see a

person who looked selfless. You've known
him for years.

He doesn't run around with women. He
doesn't gamble. Sounds like somebody you

could trust.

And if you look closely at this famous
movie poster, just behind John Travolta,

you'll see one of those satisfied
customers.

Alex Marchek is a third -generation
funeral director.

But back then, he was a kid that liked
movies and dancing, passions that scored

him a bit part in Saturday Night Fever,
shot in Bay Ridge.

I was a good dancer. It was fun. That
was a pretty cool time.

In 1988, Alex and his family invest $70
,000 with Phil Berry.

His name did come up because I know
people that had accounts with him and

and forth. So, you know, I knew he was
there.

One lure may be the 12 .5 % to 21 %
returns Phil Berry's been promising

year, making him very popular around the
neighborhood.

He promised everyone the same rate of
return, and he took care, like a lot of

con men do, so even though he was
guaranteeing a rate of return, which is

a red flag, it would change from year to
year.

After a few years, Marchak pulls his
initial investment out of Barry's

group. He gets the return that was
promised, although his payout took

than expected.

When you did get money, it wouldn't be
at all at one time. It would be dribs

drabs.

Alex doesn't know. That's because Phil
Barry's not a very good investor.

He's losing money investing in stock
options, and those guaranteed returns,

they're just numbers he's making up.

Certainly, he realized very early on
that he was never going to be a

investment advisor, but he quickly then
realized he could have the facade of one

just as easily with less work than
actually doing the work.

To keep the leverage group operating,
Barry decides to funnel new investor

to pay off any other customers who are
looking to cash out.

On the surface, Barry's leverage group
is thriving. Thanks to those guaranteed

returns, money is flooding in.

Between 2004 and 2008 alone, he received
more than $26 million from investors.

It is the longest -running Ponzi scheme
that we in law enforcement are aware of

for about 31 years.

Philip Barry systematically deceived
over 800 people. He swindled them, every

single one of them. And all that time,
he's honing his carefully crafted

everyman image to lure more investors
in.

Next on American Greed. He absolutely
was a predator, and he really thought of

himself as being at the top of the food
chain and looking down on everyone else.

A sudden windfall for Alex and Holly
Marchak.

will turn into an endless nightmare
thanks to Philip Berry.

I think about it every day, every minute
of my life. I think about it.

I keep going back. Please, can I just
wake up? Can we just change this date?

In 2006, Alex and Holly Marchak of
Holmdel, New Jersey, have just learned

incredible news.

They've sold the building housing their
Bay Ridge Funeral Parlor for $2 .3

million. It was something I'd never
envisioned before in my whole life. It

just no worries, just doing whatever you
want to do and enjoying life.

Alex wants to keep his windfall secure.

And Philip Barry.

The neighborhood guy he successfully
invested with decades earlier seems like

the answer.

He was like an eccentric the way he
walked around, and he never had no

So maybe this non -flesh drew in us poor
suckers from Bay Ridge that were a

trustworthy community.

Barry has close ties with several
neighborhood banks.

His track record and strong word of
mouth convinced the Marcheks to give him

their money.

He was using legitimate banks.

So how unsafe could it have been? In my
eyes, that's what I thought.

And I guess I was wrong.

I placed $2 ,150 ,000 with Phil Barry on
March 9, 2006.

And I told him, I'm just leaving it with
you for a year. And he goes, oh,

absolutely.

Barry doesn't tell them how he's
investing their money. And his record

is as eccentric as he is.

Neat columns of handwritten notes inside
his clients' folders detail how much

Barry has taken in and what, if
anything, he's paid back out.

The operation may be low -tech, but it's
worked for Philip Barry just fine for

30 years, says U .S. Attorney Loretta
Lynch.

He did not have the sophisticated
financial software that any investor

have assumed he would have had, and
frankly, he didn't need it. Money came

And money went out. You write it down on
one column, and you send it out from

another. He does send out quarterly
statements that show impressively large

gains. But these are completely
fictitious as well.

They looked very professional. He made
sure that they had a number of things on

there that gave the illusion of
respectability and the illusion of

branch offices.

There were victims in other cities, but
there were no locations in other cities.

Every year Barry plays the stock market,
he loses money.

But that's not his only losing
proposition.

Starting in the 80s, he spent more than
$6 million buying up hundreds of acres

of pristine wooded property around the
Catskills.

Barry will later claim he hoped to
develop the land to pay back his

But if that's the plan, he's not sharing
it with them.

as he will later admit during bankruptcy
proceedings.

Were any investors given a piece of
paper like a certificate or some

evidence that this property was being
held for their benefit?

I don't believe so, no.

Is there anything in the deed that
evidences that this entity is holding

the property for the benefit of the
leverage investor?

No.

From prison, Barry tells American Greed
he had big plans for the land.

He wanted to develop upscale residences
along Lake St. Joseph.

I always felt that it should be
developed in a way which respected the

beauty, which is why I wanted to do only
single -family homes on large lots and

the houses set back well from the lake
to preserve the beauty of the lakefront.

But Barry's dream of being the real
estate mogul of the Catskills runs into

problems. He misses mortgage payments
and quickly gets behind with his

taxes. But that's not what brings Barry
down the way he tells it. He blames his

downfall on birds.

I fail to anticipate that a pair of bald
eagles...

would build a nest at the lake, and if
they build a nest on your land, the

effectively takes your property, and
they give you no compensation for it.

Isn't it a sick irony that the symbol of
the country, which stands for life,

liberty, and the pursuit of happiness,
has just about taken all three from me

and hurt hundreds of investors as well?

But Phil Berry's real money problems
have little to do with Eagle Nest.

Until now, he's been able to keep his
scam going for 30 years, thanks to word

mouth and good luck.

One of the reasons he was able to keep
it going so long was actually one of the

reasons why it's so tragic.

He didn't steal huge amounts of money at
a time, but he consistently had people

investing in him over a long period of
time.

But in 2007, the foundation of his scam
cracks.

The economy sours.

And investors start looking to cash out.

When Alex Marchak asks for his $2 .1
million back, Barry gives him $80 ,000

stall him.

And when that fails... Then the checks
started bouncing. Then that was it.

Everything started falling apart.

Alex can't bring himself to tell his
wife there's a problem. But his attempts

recover the money are fruitless.

His stories, they weren't adding up. And
he was just flooding the neighborhood

with bad checks.

Next on American Greed, Barry's
financial empire crashes down around

realized that the investor's assets were
in extreme jeopardy at that point.

And Alex Marchak must come clean to his
family and tell his wife he fears their

money is gone.

We weren't normal anymore, and we still
haven't been normal.

For nearly two years, Alex Marchak has
carried a lonely secret.

The $2 .1 million he's given to Brooklyn
investor Philip Barry has disappeared.

Why should I worry my wife during this
time? Let me just try to handle it

and see what happens.

But the stress is taking a toll, and his
wife Holly watches him slowly

deteriorate. She suspects he may be
having an affair.

And being a wife, of course I thought
the worst. I thought something was going

on maybe between him and I because he
wasn't the same anymore.

Even their teenage son Alex sees his
father falter before his eyes.

I saw something change.

The smile, the light in his face went
out.

There was no more carefree. There was no
more wanting to spread the goodness.

Finally, in 2008, Alex breaks and comes
clean.

First to his wife and later his son.

He hasn't had an affair, but Philip
Berry's betrayal is devastating.

When I found out, I just couldn't
believe it. You know, you don't want to

believe it. I'll never forget the day I
found out. He was standing in the master

bedroom, looking out the window,
hysterically crying. And I walked in on

And I didn't know what was going on.

Alex and Holly unite and devote their
time to getting their money back.

with Barry always promising them the
checks in the mail.

It was an ongoing torturous nightmare of
believing, not believing, hoping,

denying, total denial.

They are able to recover $150 ,000
before Barry decides he's returned

We got a couple of checks, and then
everything else just started up.

And matter of fact, my bank at the time
told me, stop bringing checks from this

company. They won't accept it. In fact,
during a three -year period between 2005

and 2008,

Barry bounces nearly 2 ,000 checks,
running up $46 ,000 in bank fees.

The Marcheks are furious, believing
banks allowed Barry to thrive.

And they feel better oversight would
have shut him down years ago.

2005 alone, Mr. Barry bounced 593
checks, totaling fees of $17

,790. You can't have a Ponzi scheme
without a bank, and the banks enabled

Barry's Ponzi scheme for 30 years.

The banks involved have declined comment
to American Greed, but bankruptcy

trustee Alan Nisselson says he doesn't
believe they are culpable.

We didn't see anything which was known
as a smoking gun, where it said, oh, the

banks knew that this guy was a fraudster
and they were going along with him.

In 2008, a fed -up group of six
investors filed a lawsuit against Barry,

saying he owes them hundreds of
thousands of dollars.

To buy time, on August 1st, Barry ducks
into the U .S. Attorney's Office in the

Eastern District of New York and asks to
speak with a prosecutor.

He did not see a way out, and so he
pivoted and thought, let me convert

into the poor beleaguered investment
advisor who needs the government's help

sort this out.

Barry doesn't volunteer much, but he
does admit he owes investors roughly $50

million that he no longer has.

There was no grand admission at first.
He just had had this terrible turn of

events, and he definitely did admit to
being underwater, as he put it.

Barry lets investigators into his office
to look at his files.

They are stunned to find Barry's
meticulous notes, all handwritten inside

victims' folders, pointing back to a 30
-year scheme.

Money would come in, and it would go
right back out to answer a demanding

who was angrily saying, send me my money
now. So we were able to see the actual

Ponzi scheme operate over the course of
the years of the records that were

there. But that's not all they discover.

You would see notes that he would write
about possibly, you know, what can I say

to this person to really get them off my
back? What story can I spin to push

them off and keep this going a little
while longer?

Three months later, on Halloween, Barry
files for bankruptcy.

At his hearing, he wears old clothes and
shoes with holes in them.

And he doesn't hesitate to admit to
lawyers that he's been running a Ponzi.

Most, if not all, of the $10 million was
not used to purchase stock or options

or real estate, but actually was used in
large part as redemptions to other

investors.

Correct. He's kept little money for
himself, and the only assets he still

are 1 ,600 acres of heavily mortgaged
property in upstate New York.

Barry spent just over $6 million on
them.

But now he claims they should be worth
more than $100 million.

There's kind of a myth out there that it
was a bad investment. Not only was it a

good investment, it was an
extraordinarily good investment. It was

in its appreciation during that period
of time.

The market disagrees.

Nine months after being appointed
trustee, Alan Nisselson auctions off the

Sullivan County real estate, Eagles and
All, for $6 .3 million.

the same amount Barry owes on their
mortgages.

Niselson also files more than 30
lawsuits to recover some of the money

stolen. He settled them for a fraction
of what they are worth.

We wound up only collecting maybe $300
,000 of funds from these 35 lawsuits.

We've sued for millions.

That money...

plus an additional recovered $250 ,000
means that of the $40 million Barry's

taken in, only $550 ,000 remains.

For families like the Marcheks, that's
just pennies on the dollar.

We got the final settlement from the
bankruptcy to say

that our grant total that we're going to
receive On over $2 million,

about $5 ,000.

In October 2010, Barry is indicted, and
after a week -long trial, he's found

guilty of securities and mail fraud.

Philip Barry is sentenced to 20 years in
prison, but the mystery of why he stole

millions from more than 800 investors
may never be answered.

For Philip Barry, I think the American
dream.

was the respect and admiration that was
lavished upon him by the people of

Bay Ridge and their family members, that
community, which was his life. That was

the center of his universe.

From prison, Brooklyn's Bernie Madoff
claims he's innocent and that he feels

horrible for everything that went wrong.

But despite what has happened and what
they've heard or been told, I'm still

same person that they originally
trusted. And as long as I'm still alive,

should not consider their money lost.

But that doesn't help families like the
Marchaks who must deal daily with the

devastation Barry has left behind.

Alex and Holly both suffer from anxiety.

Retirement is only a dream.

And they've been forced to sell their
home of 16 years.

You can't stop the pain.

Because every day it's the same thing,
the same feeling, and the same prayers.

And you just want your prayer to be
answered so desperately.

Next on American Greed, Kevin Carney is
telling the neighborhood he's found the

secret to unimaginable wealth. Next
thing I know, he's making his family and

friends so rich.

But he's about to prove that greed is
contagious.

I would line up at his door each morning
with bags of cash, stacks of cash.

and handed it to him, and he just
couldn't say no.

Bill Harmoning is Chief Special Agent
with the Illinois Securities Department.

For 20 years, his job has sent him
across the state investigating financial

fraud.

In October 2008, he's working a case
with another agent who casually mentions

he's just heard rumors about an
investment that sounds too good to be

The sister of his nanny had mentioned
that she was in an investment that was

paying 20 % per month.

Of course, we know that that's not
realistic. That comes out to over 700 %

annual highs.

It won't take long before Harmoning
discovers a bizarre scheme that's been

operating in plain sight for three years
and making a lot of people very

wealthy. The most unique thing about
this case is we never received a

We never received a complaint because
people were getting paid.

The kingpin of this scam is an unlikely
47 -year -old named Kevin Carney.

Carney's living 20 miles west of Chicago
in Elk Grove Village.

He's never had trouble with the law, but
he's not much of a businessman either,

which might explain why he's desperate
to try something new.

He had failed at other endeavors. He had
never been successful at anything, and

I think that was his primary motivation.

Carney's also sitting on some debts from
when his last business, a storage

company, failed in 2004.

according to bankruptcy trustee David
Leibowitz.

He owed a bank maybe $600 ,000, $700
,000, $800 ,000 or so as a result of

failed business operation.

This setback will become the springboard
for a surprising new business plan when

Carney, who has no known finance
expertise, decides he's going to start a

investment firm.

In his mind, it was a great idea, and I
think he legitimately had it in his mind

that he could help some of his family
and friends.

but it got away from him, and he got in
too deep.

Sometime in 2005, he opens his unnamed
company out of his Elk Grove village

and begins offering a likewise unnamed
investment opportunity to friends and

family. It's the Kevin deal.

Everyone was given an account number,
usually a three -digit account number,

sometimes a two -digit account number.

Carney has no securities license.

And he never gives his clients an actual
contract.

In fact, he offers nothing that
traditional investors might expect.

They invested in this transaction
without a prospectus, without an

memo, without a circular, without
anything. Just done a conversation with

and then they give him money.

But there is one unique feature Carney
does offer. And it's enough to convince

those around him to throw caution to the
wind.

A guaranteed 20 % rate of return.

per month.

This is the red flag to any kind of a
sophisticated investor because the

is going to vary depending upon results.

And yet people put their heads in the
sand and said, you know, I'm happy, I'll

take my money.

And they did.

To sell his story, Carney says he's
created a computer program nicknamed

Candlesticks after the bar charts
brokers use to describe stock price

It looks fancy, but it's hardly unique.

He told people that he developed it
himself when, in fact, it was just a

available to anyone on E -Trade, which
is where he had his account.

Carney claims his program allows him to
anticipate a stock futures movements

before that information is available to
the rest of the world.

It's not as crazy as it sounds, admits
Bill Harmoning. In what we call

analysis, what you do is you look at the
movement in the price of a stock and

you predict future movements based on
past movements.

But it's no guarantee.

Stock prices are unpredictable, and
technical analysis is a dangerous way to

play the market, even if Kevin Carney's
program seems to be beating the odds.

Soon, small investments in the Kevin
deal are generating huge returns, and

Carney's beneficiaries aren't afraid to
flaunt their newfound wealth, says

David, who asks that his last name not
be used.

You start seeing the stuff they have.

It's pretty much a given that you kind
of want to figure out what's going on

there. One of David's new friends and
golf buddies is Craig Gutowski, who

to be benefiting particularly well from
Kevin Carney.

He goes, Dave, do you know how much
money I make? And I'm like, I have no

and he goes, $50 ,000 a month.

Thanks to word of mouth like Gutowski's,
Carney expands his operation quickly.

Before long, he's accepting money from
just about anyone who turns up.

Anyone who had the cash to give him to
invest, I don't believe he turned anyone

down. Why wouldn't you invest in
somebody like this, you know?

Bill Harmoning suspects people were
drawn to Carney precisely because his

promises were so incredible.

We see those that simply don't know any
better and truly do believe they're

going to get this return.

And then there are those, they know in
their gut that this thing is going to be

worthless at some point.

But they see other people making money,
and they just can't stand the idea of

being left behind.

It gets so busy that by the spring of
2008, Carney can't handle the steady

stream of people showing up at his house
at all hours with money.

He relocates his still -unnamed company
to a nondescript office nearby.

Inside, he sits in front of a row of
computers that feed him a nonstop flood

stock information.

You walk into his office and you see a
lot of monitors with a lot of charts,

it looks quite impressive because he
certainly was buying and selling a lot

stock.

Using a strategy only he knows, Carney
is feverishly trading up to $200 ,000 at

a time.

But he actually is losing money, nearly
$500 ,000 a year.

There's only one way to keep the good
times going.

Most of the people who got money back
were simply being paid back.

from the money he took in from other
investors.

It may not be a surprise he's running a
scam, but eager investors are willing to

look the other way, as long as the money
keeps flowing.

If you invested just $10 ,000 in this
guy, it's generating what he's

$2 ,000 a month.

So you let that roll a couple months,
next thing you know you're making $4

a month.

A lot of these people weren't even
working.

Coming up on American Greed.

When times are good, Kevin Carney can't
keep the investors away.

They're going in there and handing
money, piles of money. I mean, I've

seen somebody take $100 bills in my
life.

But the good times aren't going to last
long.

He had a time bomb on his hands. He knew
what he was doing was wrong, but he

just couldn't bring himself to shut it
down.

Would you gamble your money on Carney's
scheme?

Listen to David explain why it sounded
legit at AmericanGreed .CNBC .com.

Feeling greedy?

Want more than your share of behind -the
-scenes dirt?

Follow at American Greed TV on Twitter.

We'll be right back.

By 2008, Kevin Carney's unnamed
investment business is thriving in the

suburbs.

And Carney seems a solid, if unassuming,
money manager.

He drives a 2003 Mercedes and lives in a
small suburban house.

But investigators suspect a flashy
lifestyle wasn't what motivated him in

first place.

He had never been successful at
anything. I think it was a big boost to

to have all these people looking up to
him.

And depending on him for payments, and
even though he didn't take a lot of the

money himself, I think that was his
primary motivation.

But Carney does like money.

He tells his clients, cash is king.

And he carefully builds an unusual
business plan around that motto.

Most of this was done in cash payments.
Very few people wrote checks.

He wrote very few checks.

Checks that he did write, he would write
for cash or buy cashier's checks.

In 2008, David, who asked that his last
name not be used, has had enough of

watching from the sidelines as his
friends get rich.

My friend's in for half a million
dollars, him and his family. And he's

me to go invest in that.

Because you can't lose.

David says another friend has made
nearly $340 ,000 since signing on with

Carney's unnamed investment company. She
wasn't working.

She was a divorced mom, didn't take
alimony, didn't take child support,

new cars, donating $10 ,000 a month to
the local church she went to.

Everyone around him seems to be living
large thanks to Kevin Carney.

And although a 20 % return should be a
red flag, David says it seemed worth the

risk at the time.

It was for real. I mean, Warren Buffett
didn't get rich making 1 % on a 10 -year

CD. In May 2008, David meets Kevin
Carney face to face.

Carney explains how his proprietary
software allows him to forecast what the

market will do minutes before it
actually happens.

So he had this advantage that...

It wasn't illegal because it was
speculation.

So eight times out of ten, it was
accurate.

And it's like, okay, so let's take care
of that question.

He told me every night that the records
got locked up in a safe and that his

attorney had a CD of all the accounting
if something was ever to happen to

Kevin. It doesn't take much to convince
David. After all, he's surrounded by the

Kevin Carney success story.

Everybody around you is getting rich and
spending lots of money. Why wouldn't

you invest in somebody like this?

David starts off small, investing $10
,000.

But when he sees his first statement, he
quickly ups the ante.

Soon, he's invested $409 ,000.

And the statements he's receiving show
he's making buckets of money, even if he

hasn't actually seen it yet.

Right here, by the end of August, I've
already made $85 ,000 in four months.

Even if he did have reservations,
David's caught up in the returns he's

He doesn't want to rock the boat and
risk ruining a good thing.

I don't want this guy kicking me out.
You know, I don't want him saying, take

your money and I'm never investing for
you again. I was going to get you rich,

and then I'd be on the curb and
everybody else is still getting rich.

It's a gravy train few of Carney's
investors are willing to climb off of,

Illinois Security Department Special
Agent Bill Harmony.

People were literally lining up at his
office door in the morning waiting for

him to open up so they could come in and
give him cash.

Between January 2007 and October 2008
alone, Carney takes in $17 million

from hundreds of people.

But the truth is, most of that money is
being paid to other investors or

disappearing into Carney's failed
investment strategy.

He was doing classic day trading
where...

He would hang on to a stock no more than
10 or 15 minutes, and he would sell as

soon as it moved in that direction to
make a small profit.

The idea being that over time, enough of
those small profits add up to a pretty

large profit.

It might sound good to someone who
doesn't know better, but investigators

there's a big catch.

It just wasn't a strategy that worked
very well. By the time that you have

predicted the movement of a stock and
attempt to take advantage of that, it's

usually too late.

And in his case, it almost always was.

In three years, he'll lose $1 .5
million, executing nearly $300 million

worth of doomed trades.

He knew he was only going to get deeper
than his words. He just couldn't stop.

Next on American Greed, Carney recruits
others to keep the money flowing.

You'd think he would have been robbed or
something. There's so much cash going

in on that place.

But soon, the thieves will turn on each
other.

Of course, the hole just gets deeper and
deeper.

By 2008, Kevin Carney has more than 400
investors clamoring for the big returns

he's promised.

To keep money flowing into his suburban
Ponzi scheme, Carney begins offering

incentives to some of his closer
confidants so they can help lure new

He would offer them a cut of that 20%.
So some people got 3%, some people got

5%. The remaining 15 % or 17 % went to
the investors they brought in.

These finders will earn more than $1
million worth of commission selling

Carney's scam across the Chicago area.

One of them is 42 -year -old Craig
Gutowski.

He's got his back to the camera in this
blurry picture taken after a long day of

gall.

The men in the foreground are counting
stacks of money, $50 ,000 total, that

Gutowski's been showing off.

according to another Carney investor who
snapped the picture.

He had packs of $10 ,000 and $100 bills.
He had five of them. So I was on the

other side of the table.

Craig's up, leaned up against the bar
with a cocktail, and my friends are

counting all the money, and I just
figured, this is cool.

But Gatowski's got a secret of his own.
He's actually been skimming the money

that he's supposed to be giving Carney.

He thought he was making so much money
in this investment.

He could bring in new investors of his
own, never tell Kevin Carney who they

were, make enough to pay them back, and
they would never have known that he kept

most of their investment.

Gutowski pockets more than $100 ,000 in
10 months, spending it on vacations and

Texas Hold 'em marathons at his Cary,
Illinois home.

He went and bought a shop that he had
the floor epoxy done on it. He had...

a poker room built in this car shop
where he worked on cars.

Gutowski will be convicted of theft in
2012 and sentenced to 12 months' work

release for his role in Carney's scam.

With friends like that, it's not
surprising Kevin Carney is starting to

trouble of his own.

He still had plenty of investors coming
in, but he was starting to get low on

funds, and I think within the next...
Six months or so, he's not going to be

able to pay people their promised
interest.

In the fall of 2008, David decides he
wants to pull his $409 ,000 investment

out.

He's able to get $10 ,000 back without
hassle.

So he makes an appointment to get the
rest.

I remember the date. It was October
17th.

I was supposed to go to get a check for
my full principal amount, and they

promised me the check to be ready.

But Carney's receptionist calls days
later with shocking news.

His money has been seized by the state
of Illinois.

They shut the accounts down. They're
having some issues with the amounts of

transactions he's moving, which wasn't
true at all.

And we can't cut your check at this
time. I'm like, are you kidding me?

The beginning of the end comes one week
earlier, when Illinois Securities

Department agent Bill Harmoning first
hears about that unbelievable 20 %

His suspicions are confirmed when he
digs into Carney's records.

When we look in a bank account and we
see large amounts of money coming in,

then when we see that money going out
immediately to another individual, we

we have probably a Ponzi scheme going.
We saw that in the case of Kevin Carney.

After the accounts are seized, all that
remains is $500 ,000 and hundreds of

stunned clients.

It's the worst feeling in the world.
It's sickening.

And everybody's lives are ruined.

You can't sleep at night. That's all you
think about. You know, your nest egg's

gone. And if investigators are hoping to
find hidden mountains of cash in

Carney's basement or an offshore bank
account, they're soon disappointed.

His frugal lifestyle has left him with
few assets.

We seized, I believe, five accounts and
a used car.

David is able to recover another $34
,000, on top of the $10 ,000 he'd

collected. But when he receives his next
check from Carney, his luck runs out.

Of course, I went to cash it, and it
bounced.

We knew at this point in time he was out
of money.

David and 11 other investors try to
force Carney's hand by petitioning the

for involuntary bankruptcy in May 2009.

But the plan backfires when trustee
David Leibowitz sues David for the $44

he's recovered.

Despite the fact, David's lost more than
eight times that much, nearly $365

,000.

You're already knocked out, and then
you're just starting to get back up, and

you get knocked right back down again.
It's horrible, horrible, horrible.

No one should feel...

immune from my exercise of trustee's
powers and rights. I have to exercise

powers and rights in the fiduciary
interest of all creditors.

Leibowitz eventually drops that suit.

But he does continue to target the
nearly $7 million that some investors

from Carney's scheme.

So far, he has recovered just over $800
,000.

But there is little chance the money
will ever be distributed back to the

investors.

In bankruptcy, the administrative
expenses come first.

So the cost of my lawyers, the cost of
my accountant, I have to charge the

for being the bankruptcy trustee.

Expenses as well are considerable. They
have to be paid off the top.

And there's another group waiting in
line as well.

The IRS wants more than $500 ,000 in
back taxes.

The Internal Revenue Service considers
the money that Kevin Carney got to be

income. And he hasn't filed income taxes
return, and he hasn't paid income taxes

on it, and they've sent me a bill for
it.

In October 2009 and March 2010, Carney
is indicted and charged with

crimes including mail fraud and
securities fraud in two Illinois

He pleads guilty. He's sentenced to 13
years in prison and is ordered to pay

.2 million restitution.

In this scheme, 321 people lost $10
million.

But Leibowitz believes they were
betrayed not so much by Kevin Carney as

their own unrealistic expectations.

What kind of people could possibly
believe that the 20 % per month return

investment was no variability?

If it's too good to be true, it is.

And if you go after something that's too
good to be true, then you think it's

true, you agree.

Because payments were in cash.

Less than 12 % of the money has been
traced.

And considering that early investors
made as much as 10 times what they put

it's likely that when Kevin Carney gets
out, at least some will remember him

fondly. Because of how rich he made
them.

How mad could they be if they barely
invest anything, and next thing you

they're spending money like crazy.
You've got to love him.

And there are a lot of Kevin lovers out
there. And, you know, I see where

they're coming from.