1 00:00:01,320 --> 00:00:06,200 In this episode of American Greed, they thought they were giving to God. If you 2 00:00:06,200 --> 00:00:08,540 can't trust the Baptist, who can you trust? 3 00:00:08,760 --> 00:00:12,340 Instead, they were taken on faith. I didn't understand it. I didn't. 4 00:00:12,620 --> 00:00:16,860 How could this happen? Thousands of investors out hundreds of millions in an 5 00:00:16,860 --> 00:00:17,860 elaborate deception. 6 00:00:18,120 --> 00:00:23,880 As the debt grew and grew, more and more people had to be lied to. It must have 7 00:00:23,880 --> 00:00:25,140 been a nightmare. 8 00:00:25,480 --> 00:00:30,160 And later, when the feds find a podiatrist bilking Medicare for more 9 00:00:30,160 --> 00:00:35,300 million. Just glaring fraud. A doctor banks on his patients to lie for him. 10 00:00:35,300 --> 00:00:40,680 doesn't. That was her mission, is to stand up. Then turns up dead. A 54 -year 11 00:00:40,680 --> 00:00:43,460 -old woman is found murdered inside a church basement. 12 00:00:43,760 --> 00:00:45,220 What, a doctor killed for cash? 13 00:01:07,630 --> 00:01:12,210 For thousands in Arizona, the Southern Baptist Church is an oasis in the 14 00:01:12,530 --> 00:01:14,210 Sin will kill us as Christians. 15 00:01:14,550 --> 00:01:15,810 Where they find righteousness. 16 00:01:16,150 --> 00:01:18,710 Or without falsehood and speak truthfully. 17 00:01:19,010 --> 00:01:19,729 And joy. 18 00:01:19,730 --> 00:01:22,750 You can invite Jesus into your life to forgive you of your sins. 19 00:01:22,950 --> 00:01:27,390 It gave us an inner feeling of love and faith. 20 00:01:27,730 --> 00:01:32,150 It's a calling that retired plant manager Bill Anderson and wife Pat hear 21 00:01:32,150 --> 00:01:33,150 in life. 22 00:01:33,610 --> 00:01:38,110 Three years after Pat is diagnosed with a life -threatening brain aneurysm, they 23 00:01:38,110 --> 00:01:40,070 find peace and meaning in the church. 24 00:01:40,510 --> 00:01:44,930 We were totally engrossed in the church. We were baptized. 25 00:01:45,750 --> 00:01:50,450 Car salesman Robert Shaw also finds God during a crisis time. 26 00:01:50,810 --> 00:01:55,910 At the time, I was mid -30s, got into drinking and such things as that. 27 00:01:56,210 --> 00:01:59,630 I was having a lot of problems with myself. 28 00:02:00,680 --> 00:02:03,720 And when we started going to church, it made my life a whole lot easier. 29 00:02:09,960 --> 00:02:14,320 The Southern Baptist Church becomes the core of their lives. But their 30 00:02:14,320 --> 00:02:16,740 unflinching faith will have a colossal cost. 31 00:02:19,900 --> 00:02:21,000 Phoenix, 1982. 32 00:02:21,700 --> 00:02:26,000 A devout and ambitious attorney named Bill Kratz takes over the Baptist 33 00:02:26,000 --> 00:02:27,320 Foundation of Arizona. 34 00:02:32,680 --> 00:02:36,780 a 34 -year -old nonprofit that raises funds for Baptist causes. 35 00:02:37,100 --> 00:02:40,420 A lifelong Southern Baptist, Kratz has a vision. 36 00:02:40,680 --> 00:02:46,520 He felt he had a calling to build this foundation into a 37 00:02:46,520 --> 00:02:52,920 magnificent money machine for God and that one day would 38 00:02:52,920 --> 00:02:57,600 create massive profits that would then go to Southern Baptist causes. 39 00:02:57,980 --> 00:03:00,060 The plan was to do... 40 00:03:00,600 --> 00:03:05,960 for the people that needed it the most. Low -income housing, senior citizen 41 00:03:05,960 --> 00:03:12,840 housing, donations to food, a wide variety of both denominational 42 00:03:12,840 --> 00:03:15,120 and non -denominational charitable activity. 43 00:03:15,560 --> 00:03:19,300 Like its namesake mythical figure, Phoenix is rising. 44 00:03:19,680 --> 00:03:24,680 Crott sees opportunities in Arizona real estate, raw land and commercial 45 00:03:24,680 --> 00:03:28,700 property, and grows BFA's investment fund for the faithful. 46 00:03:29,100 --> 00:03:34,140 Essentially, the way it worked was the church member would loan the foundation 47 00:03:34,140 --> 00:03:41,040 money, and the foundation would then supposedly reinvest that money, and the 48 00:03:41,040 --> 00:03:45,940 profits from the money that was reinvested would go to Southern Baptist 49 00:03:46,490 --> 00:03:49,550 and the investor would earn a very high rate of interest. 50 00:03:49,910 --> 00:03:54,890 The profit that we earn off the reinvestment of investors' dollars 51 00:03:54,890 --> 00:03:58,770 further the Lord's work. When churchgoers hear of the BFA's investment 52 00:03:58,770 --> 00:04:00,950 opportunities, they're enticed. 53 00:04:01,170 --> 00:04:08,010 The salesmen and some of the people on their staff came into the 54 00:04:08,010 --> 00:04:13,990 churches and gave talks on what the Baptist Foundation could do for you. 55 00:04:14,320 --> 00:04:19,399 We were lucky to get 6 % or 7 % interest. They were paying 10%. The BFA 56 00:04:19,399 --> 00:04:26,380 paying a lot of interest compared to what we could make in a CD or at 57 00:04:26,380 --> 00:04:27,380 the bank. 58 00:04:27,520 --> 00:04:33,180 But also, the money was supposedly used for Baptist causes. 59 00:04:33,420 --> 00:04:37,240 And we felt good about that because we were not only building a retirement for 60 00:04:37,240 --> 00:04:39,520 us, we were building the kingdom. 61 00:04:39,920 --> 00:04:43,300 The foundation has offices in churches across the state. 62 00:04:43,710 --> 00:04:48,290 Their Bible -quoting salesmen visit congregations, houses, and nursing 63 00:04:48,490 --> 00:04:53,950 always preaching the same message. Do good while doing good by earning an 64 00:04:53,950 --> 00:04:58,430 excellent rate of interest and benefiting Southern Baptist ministries 65 00:04:58,430 --> 00:04:59,430 same time. 66 00:04:59,510 --> 00:05:02,250 It's wise stewardship in action. 67 00:05:02,570 --> 00:05:08,030 One word that was repeatedly used in the sales pitches was stewardship. 68 00:05:08,750 --> 00:05:13,950 This was a trusted, almost sacred word, and it had a biblical root. So when you 69 00:05:13,950 --> 00:05:18,330 use a biblical word, that makes the investment program all the more 70 00:05:19,030 --> 00:05:23,650 Established by the Arizona Southern Baptist Convention, the foundation has a 71 00:05:23,650 --> 00:05:24,549 of credibility. 72 00:05:24,550 --> 00:05:31,310 So does Bill Kratz. He was revered. He was considered a 73 00:05:31,310 --> 00:05:32,310 financial genius. 74 00:05:32,650 --> 00:05:34,570 Bill Kratz was one. 75 00:05:36,410 --> 00:05:41,110 if not the most important person in the Southern Baptist Convention. 76 00:05:41,930 --> 00:05:47,890 When he walked into any church, he was greeted like you'd have thought the Pope 77 00:05:47,890 --> 00:05:51,630 showed up. For investors, it's not just blind faith. 78 00:05:51,970 --> 00:05:55,930 Sales material boasts that the BFA is always profitable. 79 00:05:56,310 --> 00:06:00,050 Not one investor has ever lost a penny of their investment. 80 00:06:00,540 --> 00:06:01,920 And they claim they have proof. 81 00:06:02,200 --> 00:06:06,040 Each year, an independent audit is conducted by one of the leading 82 00:06:06,040 --> 00:06:07,520 firms in the nation. 83 00:06:07,820 --> 00:06:12,700 Every year from 1984 into the 90s, the foundation is given a clean bill of 84 00:06:12,700 --> 00:06:15,380 health from a major accounting firm, Arthur Anderson. 85 00:06:15,800 --> 00:06:18,600 In a pre -Enron era, that's a comfort. 86 00:06:18,960 --> 00:06:24,960 This is not some 25 -cent company, you know. This is a big, big concern and 87 00:06:24,960 --> 00:06:26,580 very, very prestigious. 88 00:06:27,000 --> 00:06:29,520 We knew it was secure because it's a Southern Baptist. 89 00:06:29,930 --> 00:06:36,350 But it also was audited by Arthur Anderson, and that really made it even 90 00:06:36,350 --> 00:06:37,350 secure to us. 91 00:06:37,430 --> 00:06:43,110 With all of that in mind, some 11 ,000 investors will take a leap of faith. We 92 00:06:43,110 --> 00:06:46,730 wound up with total investments of close to $200 ,000. 93 00:06:47,230 --> 00:06:52,630 I put everything, everything that I had, about $250 ,000. 94 00:06:53,190 --> 00:06:54,190 A quarter of a million. 95 00:06:54,810 --> 00:06:57,230 We had a senior in high school. 96 00:06:59,030 --> 00:07:05,250 $60 ,000 set aside for her education. I thought the BFA was the safest place in 97 00:07:05,250 --> 00:07:06,990 the world to put her school money. 98 00:07:07,330 --> 00:07:12,510 It's now the mid -90s, and many investors think they are set for life. 99 00:07:12,510 --> 00:07:15,890 don't know that all they've ever worked for will soon be gone. 100 00:07:16,530 --> 00:07:17,530 It's time bomb. 101 00:07:18,410 --> 00:07:19,410 It's time bomb. 102 00:07:34,150 --> 00:07:39,530 Sometimes in the desert heat, there's a mirage. What appears to be true with a 103 00:07:39,530 --> 00:07:41,750 closer look is just a trick of the eye. 104 00:07:42,630 --> 00:07:46,470 Investors in the Baptist Foundation of Arizona think their futures are secure. 105 00:07:46,770 --> 00:07:50,190 But like water on the sand, it's all an illusion. 106 00:07:50,630 --> 00:07:54,850 It was simply a circular flow of money that was keeping all the balls in the 107 00:07:54,850 --> 00:07:55,850 air. 108 00:07:56,040 --> 00:08:02,460 By 1996, thousands of people nationwide have invested $340 million in the 109 00:08:02,460 --> 00:08:04,060 Baptist Foundation of Arizona. 110 00:08:04,400 --> 00:08:06,860 It's wise stewardship in action. 111 00:08:07,160 --> 00:08:12,180 President Bill Crott boasts the BFA has never lost a dime. And annual audits by 112 00:08:12,180 --> 00:08:15,660 accounting firm Arthur Anderson prove it. All seems fine. 113 00:08:16,030 --> 00:08:21,710 We were living on the interest income from our investments, and it allowed us 114 00:08:21,710 --> 00:08:22,830 do a whole lot of things. 115 00:08:23,090 --> 00:08:25,590 Bill Kratz was a wizard with money. 116 00:08:25,810 --> 00:08:30,950 Every year it got better and better and better, always positive, and everybody 117 00:08:30,950 --> 00:08:37,390 gave him a lot of credit for being able to buy these pieces of land and turning 118 00:08:37,390 --> 00:08:39,730 a profit with them every year. 119 00:08:43,049 --> 00:08:47,710 But inside the Baptist Foundation's posh Phoenix headquarters, a few employees 120 00:08:47,710 --> 00:08:49,450 are starting to have suspicions. 121 00:08:49,930 --> 00:08:55,290 Attorney Kyle Tresh is a preacher's son, a devout young Baptist who in 1994 122 00:08:55,290 --> 00:08:59,430 moved to Arizona from Tulsa just to work for the Baptist Foundation. 123 00:09:00,090 --> 00:09:05,050 That seemed like a great way to take my professional skills and translate them 124 00:09:05,050 --> 00:09:07,990 into something that did something good for other people. 125 00:09:08,380 --> 00:09:10,540 The office morale was wonderful. 126 00:09:10,780 --> 00:09:14,600 It seemed by all appearances to be an incredibly successful organization. 127 00:09:15,240 --> 00:09:20,000 But once on the inside, Tresch uncovers a secret that will turn him from an 128 00:09:20,000 --> 00:09:21,940 idealist into a whistleblower. 129 00:09:22,220 --> 00:09:26,280 The picture they were painting was that every year the foundation was spinning 130 00:09:26,280 --> 00:09:32,620 off, you know, hundreds of millions of dollars of profit when that was not 131 00:09:32,700 --> 00:09:33,700 It was being manufactured. 132 00:09:35,050 --> 00:09:37,390 Economic dominoes may be tumbling in Arizona. 133 00:09:37,590 --> 00:09:39,530 The real estate industry is in trouble. 134 00:09:39,750 --> 00:09:44,130 When the Arizona real estate bubble burst back in the late 1980s and early 135 00:09:44,150 --> 00:09:47,030 the Baptist Foundation's investments plummeted in value. 136 00:09:47,330 --> 00:09:51,690 Tresh learns that rather than admit the losses, Bill Crott secretly concealed 137 00:09:51,690 --> 00:09:57,030 them through sham sales to an off -book company, a bad bank called ALO. 138 00:09:57,500 --> 00:10:01,760 Kresch and four staff accountants will later tell investigators that for years, 139 00:10:01,960 --> 00:10:06,800 Kratz has been lying about profits to solicit funds and using investor dollars 140 00:10:06,800 --> 00:10:08,060 to pay mounting debt. 141 00:10:08,300 --> 00:10:12,760 Instead of stepping up in the early 90s and saying we've got a workout situation 142 00:10:12,760 --> 00:10:19,000 here, he instead chose to hide the reality of the situation 143 00:10:19,000 --> 00:10:25,340 and raise more money from the investing public in order to keep all the balls in 144 00:10:25,340 --> 00:10:26,279 the air. 145 00:10:26,280 --> 00:10:30,920 The BFA has become nothing more than a complex Ponzi scheme, a fraud that needs 146 00:10:30,920 --> 00:10:35,180 an incessant stream of new investor dollars to pay off existing investors. 147 00:10:35,940 --> 00:10:42,460 There needed to be constant money coming in to the foundation in order for it to 148 00:10:42,460 --> 00:10:47,040 stay afloat because the assets weren't generating the profit. 149 00:10:48,700 --> 00:10:49,700 It's a time bomb. 150 00:10:50,640 --> 00:10:51,640 It's a time bomb. 151 00:10:52,400 --> 00:10:57,160 In April 1996, Kresch and the accountants confront Kratz and his right 152 00:10:57,160 --> 00:10:59,640 man, in -house counsel Tom Grabinski. 153 00:11:00,400 --> 00:11:04,500 Kratz is adamant that it's a long -term investment strategy and the properties 154 00:11:04,500 --> 00:11:08,020 held by ALO will eventually mature and make profits. 155 00:11:08,740 --> 00:11:12,940 The question was never about whether it was going to work out in the end. In my 156 00:11:12,940 --> 00:11:16,900 mind, the question was always about just disclosing the honest truth. 157 00:11:17,600 --> 00:11:19,660 Kresch feels he has no choice but to quit. 158 00:11:20,060 --> 00:11:24,040 In his resignation letter, he accuses Kratz and Grabinski of fraud. 159 00:11:24,380 --> 00:11:28,820 It'll be a while before he and the accountants talk to the state, but the 160 00:11:28,820 --> 00:11:30,640 fall from grace is set in motion. 161 00:11:31,160 --> 00:11:36,940 In early 1998, the Phoenix New Times publishes an in -depth series that 162 00:11:36,940 --> 00:11:40,980 the possibility that the Baptist Foundation is cooking the books. 163 00:11:41,380 --> 00:11:44,480 The deals were way, way, way too complicated for... 164 00:11:45,160 --> 00:11:48,520 a Christian foundation that was just doing the work of the Lord. 165 00:11:48,760 --> 00:11:53,200 After a tip from a confidential source, investigative reporter Terry Green 166 00:11:53,200 --> 00:11:57,980 Sterling spends six months poring through public records, piecing together 167 00:11:57,980 --> 00:11:58,839 money trail. 168 00:11:58,840 --> 00:12:02,900 They were telling investors they were in great financial shape when, in fact, 169 00:12:02,900 --> 00:12:04,840 they were tanking abysmally. 170 00:12:05,540 --> 00:12:07,320 BFA is quickly on the offensive. 171 00:12:07,660 --> 00:12:12,320 In a letter to investors, Kratz writes, these are wonderful days of blessing. 172 00:12:12,880 --> 00:12:16,960 But they have not come without attacks from Satan, our spiritual enemy. 173 00:12:17,400 --> 00:12:24,260 Certainly if investors believed that I was Satan and they had every reason to 174 00:12:24,260 --> 00:12:28,360 believe Arthur Anderson and they had every reason to believe Bill Kratz, who 175 00:12:28,360 --> 00:12:33,500 sang hymns with them in church, certainly they would leave their money 176 00:12:33,500 --> 00:12:36,980 it worked. I would take the newspaper into the pastor's office. 177 00:12:45,970 --> 00:12:51,170 But the evidence in Sterling's articles amps up an investigation by the Attorney 178 00:12:51,170 --> 00:12:55,650 General's Office and the Corporation Commission, who get Kyle Trash and the 179 00:12:55,650 --> 00:12:57,190 accountants as key witnesses. 180 00:12:57,730 --> 00:13:02,950 There was a significant, long -running securities and accounting fraud that had 181 00:13:02,950 --> 00:13:04,370 been perpetrated on the public. 182 00:13:04,630 --> 00:13:05,950 In August 1999, 183 00:13:06,800 --> 00:13:10,920 The state of Arizona forces the Baptist Foundation to stop selling investments. 184 00:13:11,440 --> 00:13:17,140 We can't let the fraud continue, but we fully understood what the possible 185 00:13:17,140 --> 00:13:18,320 ramifications were. 186 00:13:18,560 --> 00:13:21,920 A Ponzi scheme will always collapse at some point in time. The only question is 187 00:13:21,920 --> 00:13:26,000 when. Three months later, the Baptist Foundation crumbles in bankruptcy. 188 00:13:26,380 --> 00:13:30,820 It owes its some 11 ,000 investors nearly $600 million. 189 00:13:31,340 --> 00:13:35,880 The foundation's assets are estimated at about $250 million. 190 00:13:36,380 --> 00:13:40,820 It just scared the heck out of all of us. I didn't understand it. I didn't, 191 00:13:40,820 --> 00:13:44,060 could this happen? It made me feel really angry. 192 00:13:46,560 --> 00:13:53,020 I'd worked hard for that money, so had my husband, and I was entitled to it. 193 00:13:53,260 --> 00:13:56,600 The first thing we thought was, what are we going to do without this money? So 194 00:13:56,600 --> 00:13:58,000 we both got jobs. 195 00:13:58,600 --> 00:14:04,060 After their $200 ,000 vanishes, 70 -year -old Pat Anderson works as a caretaker. 196 00:14:04,520 --> 00:14:09,800 Former plant manager Bill is a handyman who carves Uncle Sam lawn ornaments for 197 00:14:09,800 --> 00:14:10,800 extra cash. 198 00:14:10,840 --> 00:14:11,840 He couldn't sleep. 199 00:14:12,700 --> 00:14:17,000 He would be going out in the garage and working half the night, trying to make 200 00:14:17,000 --> 00:14:20,240 some money, just driving himself. 201 00:14:20,720 --> 00:14:21,720 It's overwhelming. 202 00:14:22,180 --> 00:14:25,180 I had two heart attacks two weeks apart. 203 00:14:25,860 --> 00:14:29,760 He was working too hard and worrying too much. 204 00:14:30,460 --> 00:14:33,160 Robert Shaw is worried about his daughter's tuition. 205 00:14:33,770 --> 00:14:37,750 She's about to start college, and he's lost $250 ,000. 206 00:14:38,710 --> 00:14:43,870 I didn't tell my wife about it for about two weeks, partly because I didn't know 207 00:14:43,870 --> 00:14:45,710 how to tell her, and I was embarrassed. 208 00:14:47,610 --> 00:14:52,130 I didn't tell my daughter. When we drove her down there to put her in school, I 209 00:14:52,130 --> 00:14:54,890 didn't know if she was really going to stay or not. She would have been 210 00:14:54,890 --> 00:14:56,830 devastated if they wouldn't have let her stay. 211 00:14:57,390 --> 00:15:01,390 Shaw gets financing, but he has to sell his house and go back to work. 212 00:15:01,770 --> 00:15:06,330 I went to one of the rental car places, and I washed cars for them. 213 00:15:06,990 --> 00:15:09,310 I worked there about six months washing cars. 214 00:15:09,890 --> 00:15:16,690 We had a lot of little side jobs. We just did dog walking. We did dog 215 00:15:17,830 --> 00:15:22,430 Anything we could do and everything. I didn't envision my retirement as that at 216 00:15:22,430 --> 00:15:26,470 all. The investors are left feeling betrayed and baffled. 217 00:15:26,690 --> 00:15:29,870 I just couldn't imagine using the church if it had been. 218 00:15:31,020 --> 00:15:35,040 Any other kind of investment, I wouldn't have felt so bad. 219 00:15:35,500 --> 00:15:37,980 But it's not just the church that they trusted. 220 00:15:38,260 --> 00:15:42,280 Each year, an independent audit is conducted by one of the leading 221 00:15:42,280 --> 00:15:43,800 firms in the nation. 222 00:15:44,040 --> 00:15:47,000 They'd also put their faith in the watchful eye of Arthur Anderson. 223 00:16:00,270 --> 00:16:04,350 I'd like to take the next few minutes to share with you important information 224 00:16:04,350 --> 00:16:10,110 about the secure investment products backed by the full faith and credit of 225 00:16:10,110 --> 00:16:12,350 Baptist Foundation of Arizona. 226 00:16:12,770 --> 00:16:18,230 The 1999 fall of the Baptist Foundation of Arizona looks a lot like the coming 227 00:16:18,230 --> 00:16:19,290 collapse of Enron. 228 00:16:19,730 --> 00:16:25,150 Accounting tricks, losses hidden in off -balance sheet companies, and one common 229 00:16:25,150 --> 00:16:26,850 bad fellow, Arthur Anderson. 230 00:16:27,480 --> 00:16:32,260 Investors had a right to rely upon the certified audit, and they did. And as a 231 00:16:32,260 --> 00:16:34,500 result, they lost a lot of their investment. 232 00:16:34,740 --> 00:16:41,640 I blame Arthur Anderson to a certain extent because they were giving them 233 00:16:41,640 --> 00:16:44,480 a pass on something that they shouldn't have. 234 00:16:44,840 --> 00:16:50,380 In January 2001, the state of Arizona sued the accounting firm for aiding and 235 00:16:50,380 --> 00:16:51,840 abetting a securities fraud. 236 00:16:52,280 --> 00:16:56,700 There were significant red flags that should have indicated to Anderson that 237 00:16:56,700 --> 00:17:01,440 there was a problem that they should have followed up on. And instead of 238 00:17:01,440 --> 00:17:05,680 following up on it effectively, they issued another clean opinion. 239 00:17:06,060 --> 00:17:10,680 Among the many warning signs, a detailed road map given to Anderson by a former 240 00:17:10,680 --> 00:17:12,700 BFA staff accountant in 1997. 241 00:17:13,609 --> 00:17:15,750 and the 1998 New Times articles. 242 00:17:16,109 --> 00:17:21,190 But even without those hints, one Phoenix area CPA says Anderson could 243 00:17:21,190 --> 00:17:23,250 should have figured out the fraud. 244 00:17:23,569 --> 00:17:28,470 In my opinion, had I been writing that audit letter, I would have said this is 245 00:17:28,470 --> 00:17:30,210 company that probably is going to go bankrupt. 246 00:17:30,690 --> 00:17:37,130 Back in January 1998, Dee Grebel began her own investigation into the BFA after 247 00:17:37,130 --> 00:17:38,810 the call from a worried investor. 248 00:17:39,230 --> 00:17:40,730 An individual called me. 249 00:17:41,280 --> 00:17:46,640 and said, they want me to borrow money on my house, and you can use the 250 00:17:46,640 --> 00:17:50,820 from the mortgage to invest in the Baptist Foundation of Arizona. 251 00:17:51,140 --> 00:17:52,200 Buy more. 252 00:17:52,600 --> 00:17:56,320 When going through Anderson's most recent audit, Grebel sees one of the 253 00:17:56,320 --> 00:18:01,620 foundation's largest so -called assets, almost $70 million, is a collection of 254 00:18:01,620 --> 00:18:05,720 notes receivable, IOUs, from a mysterious benefactor B. 255 00:18:06,080 --> 00:18:09,300 She heads to the BFA and asks President Bill Krause. 256 00:18:09,820 --> 00:18:11,000 Who's benefactor be? 257 00:18:11,760 --> 00:18:17,000 And I remember Mr. Crott, the president, very calmly said, oh, that's ALO Inc. 258 00:18:17,840 --> 00:18:19,880 ALO, BFA's bad bank. 259 00:18:20,460 --> 00:18:24,780 Weaver wants to know if ALO is good for the IOUs, it's written. So she goes to 260 00:18:24,780 --> 00:18:28,860 the Arizona Corporation Commission to get ALO's financial report, a public 261 00:18:28,860 --> 00:18:29,860 record. 262 00:18:29,960 --> 00:18:33,200 ALO has a negative net worth of more than $100 million. 263 00:18:34,060 --> 00:18:37,580 That's when I fell out of my chair. This company was stone broke. 264 00:18:38,140 --> 00:18:42,580 And that was the largest receivable that the Baptist Foundation had. 265 00:18:42,920 --> 00:18:49,400 So the first asset I look is a complete, total, worthless investment. 266 00:18:49,640 --> 00:18:54,480 Well, I go running down the hallway, tell a friend of mine, they're broke. 267 00:18:54,720 --> 00:18:56,000 They are totally broke. 268 00:18:56,420 --> 00:18:58,200 This whole thing's got to be a fraud. 269 00:18:58,860 --> 00:19:03,140 Grebel calls Arthur Anderson not once, but three times with this message. 270 00:19:03,770 --> 00:19:08,670 You must immediately withdraw your audit opinion on the Baptist Foundation of 271 00:19:08,670 --> 00:19:09,950 Arizona. They're broke. 272 00:19:10,250 --> 00:19:11,450 Give me a call. 273 00:19:11,750 --> 00:19:17,810 She says her calls went unreturned. From the end of 1996 to BFA's collapse in 274 00:19:17,810 --> 00:19:22,450 1999, the foundation raised almost $200 million from investors. 275 00:19:22,950 --> 00:19:28,770 Arthur Anderson, had they done their job as we alleged in our complaint that 276 00:19:28,770 --> 00:19:32,820 they did not do, the collapse would have happened a lot sooner. 277 00:19:33,120 --> 00:19:38,060 Anderson said it, too, was a victim of a complex fraud by BFA senior management 278 00:19:38,060 --> 00:19:42,260 and that other parties, including state regulators, failed to catch it as well. 279 00:19:42,640 --> 00:19:45,600 Anderson never admits or denies wrongdoing. 280 00:19:45,920 --> 00:19:50,540 But in 2002... Anderson has agreed to pay some $217 million, meanwhile, to 281 00:19:50,540 --> 00:19:54,300 settle all pending litigation stemming from its audits of the Baptist 282 00:19:54,300 --> 00:19:55,300 of Arizona. 283 00:19:55,420 --> 00:19:59,680 That settlement, in part, helps investors recoup up to 70 % of losses. 284 00:20:00,600 --> 00:20:04,620 Still, some victims can't rest until those at the Baptist Foundation are 285 00:20:04,620 --> 00:20:05,620 to justice. 286 00:20:06,260 --> 00:20:10,300 I wanted him to go to jail, and I would like to have been the one to turn the 287 00:20:10,300 --> 00:20:11,300 key. 288 00:20:11,400 --> 00:20:12,400 September 2005. 289 00:20:13,260 --> 00:20:16,020 the start of the longest criminal trial in Arizona history. 290 00:20:16,380 --> 00:20:21,120 Former BFA President William Kratz and General Counsel Thomas Grabinski face 291 00:20:21,120 --> 00:20:25,200 charges of fraud, illegally conducting an enterprise, and theft. 292 00:20:25,780 --> 00:20:29,220 But Kratz and Grabinski are not your typical swindlers. 293 00:20:29,980 --> 00:20:33,420 They weren't out there buying fancy cars and living in fancy houses. 294 00:20:33,840 --> 00:20:38,980 The state says pride, not profit, drove the defendants to defraud investors with 295 00:20:38,980 --> 00:20:43,580 false claims of real estate earnings while burying loss after loss in phantom 296 00:20:43,580 --> 00:20:46,840 companies and using investor funds to pay off debt. 297 00:20:47,820 --> 00:20:53,640 Prosecutors contended Bill Kratz was a man who could not admit failure to his 298 00:20:53,640 --> 00:20:58,760 church peers because his church life, his Christian life, was his whole life. 299 00:20:59,130 --> 00:21:02,930 Not one investor has ever lost a penny of their investment. 300 00:21:03,210 --> 00:21:07,910 I think within the community, they did not want to admit that they made bad 301 00:21:07,910 --> 00:21:11,990 decisions, and cumulative, multiple bad decisions. 302 00:21:12,290 --> 00:21:16,290 A small lie became a much bigger and much bigger lie. 303 00:21:16,550 --> 00:21:22,210 For the state to say that BFA's financial statements were not accurate 304 00:21:22,210 --> 00:21:25,190 preposterous. It is outrageous. 305 00:21:26,280 --> 00:21:28,640 The defense blames the state for the collapse. 306 00:21:29,100 --> 00:21:34,380 Lawyers for Kratz and Grabinski say, had BFA not been forced into bankruptcy in 307 00:21:34,380 --> 00:21:39,300 1999, properties held by the foundation and its affiliates in time would have 308 00:21:39,300 --> 00:21:40,300 made millions. 309 00:21:40,520 --> 00:21:44,780 If BFA had not been shut down, no one would have lost a penny. 310 00:21:45,280 --> 00:21:48,880 BFA would still be here. What had hoped would have happened, would have 311 00:21:48,880 --> 00:21:54,600 happened. The hue and cry of the disgruntleds and the tabloid reports 312 00:21:54,600 --> 00:21:57,220 evened. they would have evaporated. 313 00:21:57,780 --> 00:22:01,880 From 1999 up through 2006, 314 00:22:02,660 --> 00:22:06,260 the Phoenix real estate market has been one of the highest markets in the 315 00:22:06,260 --> 00:22:10,620 country, and the assets that the Baptist Foundation and the other related 316 00:22:10,620 --> 00:22:14,480 entities owned could have paid back every investor. 317 00:22:15,040 --> 00:22:20,020 When BFA went bankrupt, those properties were liquidated at fire sale prices, 318 00:22:20,200 --> 00:22:21,200 they claim. 319 00:22:21,600 --> 00:22:24,280 The legs were cut out of the Baptist Foundation. 320 00:22:25,160 --> 00:22:30,120 right at the beginning of the biggest real estate market increase in the 321 00:22:30,120 --> 00:22:31,120 of the state of Arizona. 322 00:22:31,540 --> 00:22:34,900 But that doesn't excuse deception, says the state. 323 00:22:35,180 --> 00:22:40,560 It is irrelevant in terms of the criminal prosecution whether eventually 324 00:22:40,560 --> 00:22:44,500 a sleeper that turned out to be pretty good in the fullness of time. 325 00:22:44,760 --> 00:22:50,020 Every financial report has to be accurate as to the moment that that 326 00:22:50,020 --> 00:22:51,020 report was made. 327 00:22:51,040 --> 00:22:53,540 And in this case, there's no question that it was not. 328 00:22:54,199 --> 00:22:58,360 After ten long months of testimony and more than one million pages of 329 00:22:58,360 --> 00:23:02,480 documentary evidence, the jury finds William Kratz and Thomas Grabinski 330 00:23:02,480 --> 00:23:05,420 of fraud and illegally conducting an enterprise. 331 00:23:06,160 --> 00:23:11,040 They lied to the investors on how their money was being used. 332 00:23:11,600 --> 00:23:14,720 But not guilty on 23 counts of theft. 333 00:23:15,140 --> 00:23:19,380 I didn't think they were personally profiting from any kind of deals that 334 00:23:19,380 --> 00:23:19,919 were doing. 335 00:23:19,920 --> 00:23:21,920 So, therefore, no theft. 336 00:23:22,590 --> 00:23:26,090 Kratz and Grabinski's conviction brings some of the closure that many victims 337 00:23:26,090 --> 00:23:27,090 have been waiting for. 338 00:23:28,370 --> 00:23:35,310 They made our lives a living hell for about 10 years, and I'd like 339 00:23:35,310 --> 00:23:36,530 to return the favor. 340 00:23:37,370 --> 00:23:38,990 But there's a schism among investors. 341 00:23:39,910 --> 00:23:44,390 I do not believe Bill Kratz is the kind of man who would defraud anyone. 342 00:23:44,630 --> 00:23:50,530 I have faith in Bill. I just cannot believe that he has a dishonest bone in 343 00:23:50,530 --> 00:23:54,030 body. Kratz is now serving eight years in prison. 344 00:23:54,350 --> 00:23:55,350 Grabinski, six. 345 00:23:55,930 --> 00:23:57,030 They're both appealing. 346 00:23:57,430 --> 00:24:00,610 Am I angry with Bill Kratz and Tom Grabinski? You bet. 347 00:24:01,950 --> 00:24:05,850 I think they're getting a little bit of what they deserve. They'll get the rest 348 00:24:05,850 --> 00:24:10,230 later. The collapse of the Baptist Foundation is an extreme example. 349 00:24:10,670 --> 00:24:13,870 But crime in the name of God has become all too common. 350 00:24:14,210 --> 00:24:18,350 We've had numerous cases here at the commission over the eight years that I 351 00:24:18,350 --> 00:24:20,790 been here, and we're continuing to see it. 352 00:24:21,020 --> 00:24:25,560 The old story goes, you live and learn. So it's a shame that you have to learn 353 00:24:25,560 --> 00:24:28,260 it with your retirement money. 354 00:24:32,080 --> 00:24:38,940 For many victims, getting taken on faith means losing a lot more than 355 00:24:38,940 --> 00:24:43,080 money. I sure lost my faith in Southern Baptist, and I won't go back to a 356 00:24:43,080 --> 00:24:49,440 Southern Baptist church, whether it's here or in Kentucky or Georgia or 357 00:24:49,440 --> 00:24:50,440 wherever. 358 00:24:50,510 --> 00:24:55,550 Now, every Sunday morning, Katie Moss is in a non -denominational church in 359 00:24:55,550 --> 00:24:59,890 Scottsdale. Robert Shaw is still struggling with the sense of betrayal. 360 00:25:01,030 --> 00:25:04,950 I want to get over this anger, and I want to get back into a Christian 361 00:25:04,950 --> 00:25:07,050 relationship with God. 362 00:25:07,790 --> 00:25:14,470 The Baptist Foundation took away a lot of our faith in the church. 363 00:25:14,730 --> 00:25:16,710 I was a Christian for a long time. 364 00:25:18,450 --> 00:25:22,350 When we return, a doctor gets busted in a million -dollar scam. 365 00:25:22,730 --> 00:25:25,770 We believe, just based upon our interviews, that not a single surgery 366 00:25:25,770 --> 00:25:30,030 performed. One patient refuses to cover for the doctor. She told him, you should 367 00:25:30,030 --> 00:25:32,730 have thought about that before you did this. This is wrong. 368 00:25:33,130 --> 00:25:34,510 Then turns of death. 369 00:25:34,850 --> 00:25:38,210 A suspect is charged and connected with the killing of a church secretary. Next 370 00:25:38,210 --> 00:25:40,890 on American Greed, a doctor turns to murder. 371 00:25:55,180 --> 00:25:59,440 Chicago, the town where Midwestern charm meets big city green. 372 00:25:59,880 --> 00:26:03,040 It's where Dr. Ronald Mikos puts down his roots. 373 00:26:03,460 --> 00:26:04,460 He was Dr. 374 00:26:04,660 --> 00:26:08,280 Ronald Mikos, and podiatry was very important to him. 375 00:26:08,680 --> 00:26:13,340 Mikos runs a lucrative podiatry practice with a long list of patients, most of 376 00:26:13,340 --> 00:26:14,299 them elderly. 377 00:26:14,300 --> 00:26:17,500 Dr. Mikos came to your home, is that correct? 378 00:26:18,080 --> 00:26:18,839 Oh, yes. 379 00:26:18,840 --> 00:26:22,080 Would you sometimes give him a sandwich and a cup of tea? 380 00:26:24,440 --> 00:26:29,040 House calls are routine business for this doctor with the sterling bedside 381 00:26:29,040 --> 00:26:34,380 manner. He would come to their houses, they would put out cookies or give him 382 00:26:34,380 --> 00:26:36,200 sandwiches, and they trusted him. 383 00:26:36,560 --> 00:26:41,940 But beneath the charisma lies a con artist, a doctor playing the system, 384 00:26:41,940 --> 00:26:43,640 off with more than a million dollars. 385 00:26:43,980 --> 00:26:49,520 In 1998, Dr. Michaels pops up on the radar screen of investigator Pete Tyler. 386 00:26:50,140 --> 00:26:54,400 After the patient complains he is charged for a tendon surgery, Mikos 387 00:26:54,400 --> 00:27:01,040 performed. A beneficiary sent us an explanation of benefits, informing us 388 00:27:01,040 --> 00:27:02,300 they did not receive a service. 389 00:27:02,920 --> 00:27:04,080 His suspicions heightened. 390 00:27:04,760 --> 00:27:09,320 Tyler digs in and examines billing records for more than 100 of Mikos' 391 00:27:10,140 --> 00:27:16,240 I found that Dr. Mikos was billing for several surgeries on a patient at a 392 00:27:16,240 --> 00:27:19,340 separate date when, in fact, it would be almost impossible. 393 00:27:20,250 --> 00:27:25,770 Dozens of Micos' patients have bills for multiple foot surgeries, often several 394 00:27:25,770 --> 00:27:26,770 within a month. 395 00:27:26,830 --> 00:27:29,990 One patient's bills alone total $90 ,000. 396 00:27:30,390 --> 00:27:33,190 It seems impossible, and it looks like fraud. 397 00:27:33,730 --> 00:27:37,510 He kept on doing the same thing. He kept on billing for surgeries when they 398 00:27:37,510 --> 00:27:38,510 weren't rendered. 399 00:27:38,790 --> 00:27:41,290 Tyler turns it over to Health and Human Services. 400 00:27:41,850 --> 00:27:45,210 Agent Rene Reyes follows Micos' money trail. 401 00:27:46,640 --> 00:27:51,440 He was averaging well over $250 ,000 a year, and in one year he had made well 402 00:27:51,440 --> 00:27:54,980 over $400 ,000 a year. He was the highest paid podiatrist in the state. 403 00:27:55,220 --> 00:27:58,020 So that, of course, was a huge flag for us. 404 00:27:58,620 --> 00:28:03,760 In fact, Medicare paid Michaels more than $1 .7 million over seven years. 405 00:28:04,260 --> 00:28:07,120 Reyes looks closer and sees other curiosities. 406 00:28:07,780 --> 00:28:11,200 Typically, patients see the podiatrist a few times a year. 407 00:28:11,420 --> 00:28:15,080 Michaels sees his patients monthly and all those surgeries. 408 00:28:15,770 --> 00:28:17,830 One patient had more than 350. 409 00:28:18,590 --> 00:28:23,770 Ideally, patients would have one, maybe two operations on their feet in a 410 00:28:23,770 --> 00:28:29,030 lifetime. Dr. Donald Aronson, a Chicago area podiatrist, is brought in to look 411 00:28:29,030 --> 00:28:30,030 at Mikos' billing. 412 00:28:30,470 --> 00:28:37,210 He would send a bill to Medicare for a particular surgical procedure, and then 413 00:28:37,210 --> 00:28:43,810 week later send a similar bill to Medicare for another procedure, say 414 00:28:44,600 --> 00:28:50,900 the next toe, and then a week later, the toe next to it. And this would continue 415 00:28:50,900 --> 00:28:57,880 for months. But at no time was there a bona fide patient record. 416 00:28:58,060 --> 00:29:05,000 There would be no records of any medications, prescriptions, just glaring 417 00:29:05,560 --> 00:29:11,260 Tyler writes Michaels, suspending Medicare payments until each case is 418 00:29:11,700 --> 00:29:13,100 Michaels calls Tyler. 419 00:29:13,690 --> 00:29:17,710 He's very upset, you know, irate, you know, saying, you know, how could you do 420 00:29:17,710 --> 00:29:18,709 this to me? 421 00:29:18,710 --> 00:29:23,250 Health and Human Services enlists the help of the FBI, and the patient profile 422 00:29:23,250 --> 00:29:24,250 emerges. 423 00:29:24,590 --> 00:29:25,950 The patients that Dr. 424 00:29:26,150 --> 00:29:29,850 Michaels preyed upon were very elderly, and they were very sick. They did not 425 00:29:29,850 --> 00:29:33,170 have much family in the area. 426 00:29:33,450 --> 00:29:38,050 Still, it's unusually hard to get witnesses to talk about Dr. Michaels, 427 00:29:38,050 --> 00:29:41,670 investigators discover why Michaels befriends them. 428 00:29:42,120 --> 00:29:47,940 It was a true friendship that he had with them, and as a result, they didn't 429 00:29:47,940 --> 00:29:50,940 want to do anything to harm that relationship. 430 00:29:51,440 --> 00:29:56,340 Unlike these patients, many face terminal cancer, making it hard for them 431 00:29:56,340 --> 00:30:00,540 come to testify. Others have dementia, which reduces their credibility as 432 00:30:00,540 --> 00:30:05,960 witnesses. In fact, nearly half of Michaels' patients die of natural causes 433 00:30:05,960 --> 00:30:08,360 before the investigation even starts. 434 00:30:09,260 --> 00:30:13,760 We did tape depositions of many patients because we were concerned that many of 435 00:30:13,760 --> 00:30:17,500 them who were great witnesses now, maybe a year down the road, would not be 436 00:30:17,500 --> 00:30:20,800 available. Would he ever give you a shot? 437 00:30:21,100 --> 00:30:22,100 No, no shots. 438 00:30:22,140 --> 00:30:25,320 Would he ever do an incision into your toes? 439 00:30:26,080 --> 00:30:27,180 Only the toenails. 440 00:30:27,460 --> 00:30:28,460 Just the toenails? 441 00:30:28,500 --> 00:30:29,359 Yes, only. 442 00:30:29,360 --> 00:30:31,860 Would you ever get any stitches from any of the work that he did? 443 00:30:32,080 --> 00:30:33,500 No. From patient to patient. 444 00:30:33,980 --> 00:30:35,020 The stories are similar. 445 00:30:35,240 --> 00:30:39,280 Did the defendant perform over 100 surgeries on your feet? 446 00:30:40,640 --> 00:30:42,380 Surgery? Yes. No. 447 00:30:42,880 --> 00:30:46,980 Did the defendant perform any surgeries on your feet? No. We believe, just based 448 00:30:46,980 --> 00:30:49,460 upon our interviews, that not a single surgery was ever performed. 449 00:30:50,140 --> 00:30:53,800 Investigators learn Michaels is telling his patients he's been set up by the 450 00:30:53,800 --> 00:30:55,920 feds and urges them not to cooperate. 451 00:30:56,300 --> 00:31:00,940 In fact, Michaels hands out scripts offering responses to investigators. 452 00:31:01,870 --> 00:31:06,050 He described in the scripts that he made very tiny incisions, which is why 453 00:31:06,050 --> 00:31:08,970 authorities wouldn't see scars from all of these surgeries. 454 00:31:09,430 --> 00:31:13,330 The script reads, if they get too specific, you can tell them you do not 455 00:31:13,330 --> 00:31:18,330 remember. Tell them he is a good doctor and that you are very satisfied and you 456 00:31:18,330 --> 00:31:19,350 have no complaints. 457 00:31:19,950 --> 00:31:25,730 Many had signed these affidavits swearing that he had, in fact, performed 458 00:31:25,730 --> 00:31:28,830 unbelievable number of surgeries on their feet. 459 00:31:29,420 --> 00:31:34,260 As investigators pour through the files, they discover another patient, 54 -year 460 00:31:34,260 --> 00:31:35,340 -old Joyce Brannon. 461 00:31:35,980 --> 00:31:41,540 On September 26, 2001, they pay a visit to the former intensive care unit nurse 462 00:31:41,540 --> 00:31:46,380 who lives in the basement of a church on Chicago's north side where she works as 463 00:31:46,380 --> 00:31:47,380 a caretaker. 464 00:31:48,180 --> 00:31:52,820 She was very honest and very kind. She cared about telling the truth. She 465 00:31:52,820 --> 00:31:53,820 to do what was right. 466 00:31:53,980 --> 00:31:57,880 Unlike many of Michaels' patients, Brannon is mentally alert. 467 00:31:58,160 --> 00:32:01,100 We had explained to her about the foot surgeries, and I remember she had raised 468 00:32:01,100 --> 00:32:04,500 her hand and she said, Honey, I know what a foot surgery is. I'm a former ICU 469 00:32:04,500 --> 00:32:08,620 nurse. There was over 70 foot surgeries that were billed, and she said she knew 470 00:32:08,620 --> 00:32:09,940 that not a single one of them was done. 471 00:32:10,460 --> 00:32:14,900 Meanwhile, Michaels' lawyers requested interview with the feds to clear up this 472 00:32:14,900 --> 00:32:15,900 billing issue. 473 00:32:16,380 --> 00:32:19,280 He denied having done anything wrong. 474 00:32:19,600 --> 00:32:25,040 He explained that he had, in fact, performed these procedures. 475 00:32:25,300 --> 00:32:26,480 We knew he was lying to us. 476 00:32:27,340 --> 00:32:29,680 Investigators aren't buying a word of Michaels' story. 477 00:32:29,900 --> 00:32:33,200 With Joyce Brannan on their side, their case is coming together. 478 00:32:33,680 --> 00:32:35,580 She was going to be one of the best witnesses that we had. 479 00:32:36,120 --> 00:32:40,560 But four days before Brannan is set to testify before the grand jury, their 480 00:32:40,560 --> 00:32:42,120 witness turns up dead. 481 00:32:42,510 --> 00:32:46,030 Joyce Brandon's body was found in the Bethany Evangelical Lutheran Church. 482 00:32:46,250 --> 00:32:49,730 Is Michaels desperate enough to graduate from medical fraud to murder? 483 00:32:49,930 --> 00:32:52,270 Find out when American Greed returns. 484 00:32:53,810 --> 00:32:59,770 For more information and special web exclusives, log on to americangreed 485 00:32:59,770 --> 00:33:00,770 .com. 486 00:33:10,990 --> 00:33:15,470 A 54 -year -old woman is found murdered inside a church basement in the 487 00:33:15,470 --> 00:33:19,210 Edgewater community. The victim, the caretaker of that church. 488 00:33:19,770 --> 00:33:23,590 On the Monday before the grand jury is set to hear the case of Dr. 489 00:33:23,930 --> 00:33:28,330 Ronald Mikos, Assistant U .S. Attorney Sean Berkowitz receives a call from the 490 00:33:28,330 --> 00:33:29,430 Chicago Police Department. 491 00:33:29,890 --> 00:33:35,370 They told me that they had found Ms. Brannon dead in her apartment. 492 00:33:35,790 --> 00:33:37,530 To get into Joyce Brannon's... 493 00:33:37,960 --> 00:33:42,820 living space, there's a number of right and left -hand turns that an individual 494 00:33:42,820 --> 00:33:46,500 has to make before they're actually able to get into the living quarters. 495 00:33:47,020 --> 00:33:50,900 The way that the Chicago Police Department found her was in a sitting 496 00:33:50,900 --> 00:33:53,080 facing the windows. 497 00:33:53,680 --> 00:33:57,320 She had her right arm pinned behind her back, like so. 498 00:33:57,880 --> 00:34:03,080 Joyce Brannon was shot in the back and head six times with a .22, once point 499 00:34:03,080 --> 00:34:06,160 -blank, just hours after attending services upstairs. 500 00:34:06,970 --> 00:34:12,650 Our beloved departed sister, Joyce Brennan. We had a service. 501 00:34:14,150 --> 00:34:16,909 We had a big church service. 502 00:34:17,110 --> 00:34:20,210 I just remember it as an extremely painful day. 503 00:34:21,010 --> 00:34:22,850 Berkowitz and his team are stunned. 504 00:34:24,030 --> 00:34:27,670 The fact that this was three days before she was scheduled to testify, 505 00:34:27,770 --> 00:34:31,610 certainly, at least for a prosecutor, raised a red flag that we ought to look 506 00:34:31,610 --> 00:34:32,509 into it. 507 00:34:32,510 --> 00:34:34,790 Team works furiously on two tracks. 508 00:34:35,639 --> 00:34:41,300 There was still work to be done to prepare the white -collar case, but now 509 00:34:41,300 --> 00:34:42,760 had a murder case on our hands. 510 00:34:43,620 --> 00:34:46,800 The team makes a rare move for a health care fraud case. 511 00:34:47,120 --> 00:34:49,900 They look into the suspect's weapons history. 512 00:34:50,300 --> 00:34:55,199 He did not have a record, but he had been arrested with firearms, and so that 513 00:34:55,199 --> 00:34:58,000 set off at least some more warning bells. 514 00:34:58,320 --> 00:35:02,620 They look further into Michaels the man, once a prominent doctor with a 515 00:35:02,620 --> 00:35:03,620 comfortable life. 516 00:35:03,980 --> 00:35:10,760 He did have a prescription drug problem that was kind of persistent throughout 517 00:35:10,760 --> 00:35:11,738 our investigation. 518 00:35:11,740 --> 00:35:14,300 Towards the very end, he also resorted to alcohol. 519 00:35:14,960 --> 00:35:18,220 After a divorce, Michaels has children with various girlfriends. 520 00:35:18,700 --> 00:35:23,700 Without Medicare, his cash flow dries up. He writes in a letter, I have lost 521 00:35:23,700 --> 00:35:28,460 income, the Lincolnwood house, my dog, I've gotten fat, my alcoholism and 522 00:35:28,460 --> 00:35:30,200 depression have reared their ugly heads. 523 00:35:30,650 --> 00:35:34,850 I am at the lowest and weakest point that I have ever been at in my life. I 524 00:35:34,850 --> 00:35:38,590 become worthless to people in particular and society in general. 525 00:35:39,270 --> 00:35:42,570 With no income to pay rent, he is forced to live in his car. 526 00:35:42,920 --> 00:35:46,640 It's a fall from grace for the doctor who had billed more than $1 .7 million 527 00:35:46,640 --> 00:35:48,340 over seven years. 528 00:35:48,680 --> 00:35:52,940 He would get, you know, large, huge sums of money from Medicare, sometimes a $60 529 00:35:52,940 --> 00:35:56,020 ,000, $70 ,000, $80 ,000 check, and that would have been completely withdrawn 530 00:35:56,020 --> 00:35:57,600 within five to seven days. 531 00:35:57,980 --> 00:36:02,700 Some of his money is sent to an 80 -year -old man named Charles Labosco. 532 00:36:03,240 --> 00:36:07,760 Charles Labosco was an elderly gentleman who had a daughter who was also on 533 00:36:07,760 --> 00:36:11,780 Medicare. On closer look, they see Labosco is Michaels' patient. 534 00:36:12,190 --> 00:36:17,870 And his bills show he's had more surgeries than anyone else, a shocking 535 00:36:17,870 --> 00:36:18,848 fact. 536 00:36:18,850 --> 00:36:21,970 Investigators wonder, is Labosco in for a percentage of the action? 537 00:36:22,850 --> 00:36:26,310 With ample suspicions, the feds tap Michaels' cell phone. 538 00:36:26,830 --> 00:36:30,850 After days of working with little sleep, Berkowitz dials a number on a message 539 00:36:30,850 --> 00:36:31,850 pad on his desk. 540 00:36:32,070 --> 00:36:33,930 I inadvertently called Mr. 541 00:36:34,150 --> 00:36:38,850 Labosco, and as soon as he asked me who it was on the phone, he told me who he 542 00:36:38,850 --> 00:36:41,550 was, and I told him that I inadvertently dialed his number and hung up. 543 00:36:42,250 --> 00:36:46,470 Almost immediately, the wiretap picks up a chilling call from Lebosco. 544 00:36:47,070 --> 00:36:51,310 American Greed obtained access to the tape. 545 00:36:56,090 --> 00:37:02,910 There's a very nervous call between the 546 00:37:02,910 --> 00:37:07,830 two about the fact that I continue to look into these issues and so forth. 547 00:37:28,370 --> 00:37:30,590 The puzzle starts coming together. 548 00:37:31,130 --> 00:37:33,730 Plenty of paperwork connects Michaels to the fraud. 549 00:37:34,050 --> 00:37:37,850 But tying him to Joyce Brannan's murder remains the missing piece. 550 00:37:38,470 --> 00:37:40,910 We had no eyewitnesses to the murder. 551 00:37:41,290 --> 00:37:43,090 There was no murder weapon at the scene. 552 00:37:43,450 --> 00:37:48,530 Nobody in the world had any motive to kill Joyce Brandon except for Ron Mykos. 553 00:37:49,450 --> 00:37:52,790 Investigators need to know more about this devoted church caretaker to 554 00:37:52,790 --> 00:37:55,470 understand why Mykos would kill her. 555 00:37:55,750 --> 00:37:57,850 She was born and raised a Lutheran. 556 00:37:58,090 --> 00:38:04,090 She knew that her purpose in the world was to take care of people. 557 00:38:04,470 --> 00:38:09,250 A week before the grand jury, Brandon tells her friend that Dr. Mykos called 558 00:38:09,250 --> 00:38:11,190 and asked her not to testify. 559 00:38:11,920 --> 00:38:14,140 And he said, I have family at home. 560 00:38:15,200 --> 00:38:19,140 Don't you care what happens to me? And she told him, you should have thought 561 00:38:19,140 --> 00:38:21,500 about that before you did this. This is wrong. 562 00:38:22,180 --> 00:38:26,640 Michaels' Palm Pilot records reveal he's carefully following the entire 563 00:38:26,640 --> 00:38:31,540 investigation. He notes which patients have been contacted, when, and by whom. 564 00:38:31,840 --> 00:38:36,980 And the detail is what stood out to us. 565 00:38:37,200 --> 00:38:43,200 And by that I mean he would write down, a description, physical description of 566 00:38:43,200 --> 00:38:47,040 the agents who came, how they identified themselves, and the questions that they 567 00:38:47,040 --> 00:38:53,280 asked. Then he would rate the interview, and by the interview going well, what 568 00:38:53,280 --> 00:38:58,320 he meant was the patient did not talk to us. If the patient did cooperate with 569 00:38:58,320 --> 00:39:02,120 us, he wrote down in his palm pilot that the interview went poorly. 570 00:39:02,480 --> 00:39:06,900 The feds are just as thorough investigating him to make sure there's 571 00:39:06,900 --> 00:39:09,360 bring him down on fraud and murder. 572 00:39:23,120 --> 00:39:27,440 In Chicago, the feds have enough evidence to bring in Dr. Ronald Michaels 573 00:39:27,440 --> 00:39:28,660 million -dollar fraud scheme. 574 00:39:29,220 --> 00:39:33,360 Still, they struggle to find the murder weapon proving he killed his patient, 575 00:39:33,500 --> 00:39:38,380 Joyce Brannan. In the white -collar case, Michaels' telephone records point 576 00:39:38,380 --> 00:39:39,380 storage facility. 577 00:39:39,940 --> 00:39:41,400 Investigators get a search warrant. 578 00:39:41,700 --> 00:39:48,480 We found a whole cache of firearms and ammunition in the storage locker. 579 00:39:48,960 --> 00:39:50,460 But not a .22. 580 00:39:50,990 --> 00:39:53,570 They do, however, find other items of interest. 581 00:39:53,830 --> 00:39:57,350 We also found a receipt sheet from the Skokie Police Department. 582 00:39:58,030 --> 00:40:02,770 This receipt details all the guns Michaels owns, including a .22. 583 00:40:03,050 --> 00:40:06,350 The call to the suburban police department adds a new wrinkle. 584 00:40:06,710 --> 00:40:11,190 Three weeks before Brannon's murder, a domestic squabble brought the cops to 585 00:40:11,190 --> 00:40:12,510 Michaels' girlfriend's apartment. 586 00:40:12,950 --> 00:40:15,290 She told us that he was throwing guns. 587 00:40:15,870 --> 00:40:19,070 in her storage unit in the basement of the apartment building, and she didn't 588 00:40:19,070 --> 00:40:20,530 feel safe to have him there and wanted him removed. 589 00:40:20,910 --> 00:40:24,270 But O 'Brien ran a check on Michaels' firearms license. 590 00:40:24,670 --> 00:40:25,750 It was expired. 591 00:40:26,190 --> 00:40:31,690 He confiscated Michaels' cache of 11 weapons, including a .22 caliber 592 00:40:32,190 --> 00:40:37,590 Michaels renewed his license, and on January 24th, just three days before 593 00:40:37,590 --> 00:40:41,990 Brannan's murder, he brought the guns, including the .22, back home. 594 00:40:42,760 --> 00:40:44,820 And that's what we believe was the murder weapon. 595 00:40:45,100 --> 00:40:47,580 The feds get a warrant to search Michael's car. 596 00:40:48,000 --> 00:40:53,640 And we found several pieces of evidence that became significant in our trial. We 597 00:40:53,640 --> 00:40:56,100 found a note in Ronald Michael's car. 598 00:40:56,360 --> 00:41:01,020 It was a handwritten note that contained the name of the church where Joyce 599 00:41:01,020 --> 00:41:07,380 Brandon lived and also information about the Sunday services and hours that the 600 00:41:07,380 --> 00:41:11,120 church would have people present and Joyce Brandon was killed. 601 00:41:12,110 --> 00:41:18,990 We found in his car a shell casing for a .22 caliber 602 00:41:18,990 --> 00:41:24,990 bullet. We also found a partially used box of .22 caliber ammunition that was 603 00:41:24,990 --> 00:41:29,270 consistent in physical characteristics with the bullets that were used to kill 604 00:41:29,270 --> 00:41:35,490 Ms. Brannon. And with that, the case is made. June 6, 2002, Michael is charged 605 00:41:35,490 --> 00:41:36,490 with murder. 606 00:41:36,590 --> 00:41:40,130 A suspect is charged and connected with the killing of a church secretary, and 607 00:41:40,130 --> 00:41:43,430 at this hour, federal authorities have an Evanston doctor in custody. 608 00:41:43,690 --> 00:41:47,130 On April 19, 2005, Mikos' trial begins. 609 00:41:47,750 --> 00:41:52,430 The prosecution lays out the numbers proving the fraud and builds a murder 610 00:41:52,430 --> 00:41:56,890 based on circumstantial evidence that puts Mikos at the murder scene and the 611 00:41:56,890 --> 00:41:58,690 and the ammunition in his hands. 612 00:41:59,870 --> 00:42:03,070 On May 5, 2005, Mikos is convicted. 613 00:42:03,660 --> 00:42:06,780 He is sentenced to six and a half years in prison for the Medicare fraud. 614 00:42:07,320 --> 00:42:10,800 And for the murder of Joyce Brannan, his sentence, death. 615 00:42:12,040 --> 00:42:15,640 Michaels now sits on death row in a federal prison in Terre Haute, Indiana. 616 00:42:16,100 --> 00:42:18,080 An appeal of his sentence is pending. 617 00:42:18,900 --> 00:42:22,980 Charles Labosco, who was never a suspect in the murder, pleads guilty to one 618 00:42:22,980 --> 00:42:25,480 count of health care fraud for receiving kickbacks. 619 00:42:25,760 --> 00:42:29,280 He cooperates with authorities and does not receive jail time. 620 00:42:29,540 --> 00:42:32,220 He dies one year after Michaels' trial. 621 00:42:33,420 --> 00:42:37,520 This case started as a relatively routine white -collar case. 622 00:42:37,780 --> 00:42:42,940 But by murdering Joyce Brandon, Dr. Michaels committed a crime that strikes 623 00:42:42,940 --> 00:42:47,460 the core of the justice system. She was willing to do her job as a citizen. 624 00:42:47,780 --> 00:42:50,680 That was her mission, is to stand up. 625 00:42:51,380 --> 00:42:56,260 She went out representing everything she believed in, representing this church, 626 00:42:56,460 --> 00:42:59,000 doing no harm, only trying to do good. 627 00:43:00,780 --> 00:43:02,820 And I can't help but think she's a hero. 628 00:43:03,310 --> 00:43:07,530 In an upcoming episode of American Greed, he was a master jewel thief. 629 00:43:07,750 --> 00:43:11,190 I could make a million dollars one night and start looking for another one the 630 00:43:11,190 --> 00:43:13,670 next day. Bill Mason had a lust for diamonds. 631 00:43:13,990 --> 00:43:19,810 I loved the thrill of it, and I got addicted to it. Now he's gone straight, 632 00:43:19,810 --> 00:43:23,830 he wants to help you avoid being ripped off. Next time on American Greed.