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This is a CNBC original.

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In this episode of American Greed, a
pharmaceutical giant is accused of

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profits over patients.

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Pfizer Pharmaceuticals goes beyond FDA
limits and pushes a pain pill called

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Bextra to the masses.

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This was about putting bottom line above
the patients' lives.

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That's wrong.

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The illegal marketing has already cost
some the ultimate price.

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And later in Southern California,
Janetta Standifor convinces 600

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their cash is rescuing homeowners from
foreclosure.

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It felt like everyone was going to win.

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The would -be marketing mogul relies on
friends, relatives, and investors' trust

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and faith.

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It appealed to their Christian nature to
help someone.

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And while they think they're helping
neighbors stay in their homes, Janetta

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helps herself to millions. She lined her
own pockets with investor funds and

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paid existing investors with new
investor funds.

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Pharmaceuticals. In the U .S. alone, Big
Pharma is a $315 billion a year

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business. For millions of patients,
pharmaceuticals are something they

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can't live without.

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We like to believe that the
pharmaceutical industry is there to

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But oftentimes, especially when you look
at the amount of money they're spending

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in marketing, you realize it really is a
matter of bringing in money as opposed

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to helping out the welfare of patients.

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In the early 90s, a new kind of wonder
drug is in the works.

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It's a type of pain reliever called a
COX -2 inhibitor.

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Under brand names like Vioxx, Celebrex,
and Bextra, the drug is designed to help

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millions suffering from pain.

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Two of the titans of the pharmaceutical
industry, Merck and Pfizer, realize that

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there are billions to be made.

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New pain pills are always welcome on the
market and inevitably have a huge

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uptake by the tens of millions of
unhappy pain sufferers.

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Pfizer, with more than $7 billion in
sales, is among the world's top -selling

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pharmaceutical companies.

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But its spot at the top is precarious.

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It's getting tough competition from
cheaper generics. Its R andD pipeline is

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running dry.

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The new COX -2 inhibitors are the shot
in the arm the company needs.

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Pfizer makes a co -marketing deal with
Pharmacia Upjohn, the developer of two

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the new drugs, Bextra and Celebrex.

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Gardner Harris of the New York Times has
covered the pharmaceutical industry for

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11 years.

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He watches the new partnership and the
new drugs closely.

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The executives knew that their labs were
dry, that their companies were about to

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go off a very steep cliff.

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And so they knew that there was a huge
amount at stake in making sure

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that Bextra and its sister compound,
Celebrex, sold well.

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Pharmacia pulls out all the stops to get
the new drugs approved, funding studies

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that claim Bextra's safety and efficacy.

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But not all the studies are positive.

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One of the experts contacted to analyze
the drugs is Dr. Dennis Mangano.

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one of the world's leading
pharmaceutical researchers.

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Pouring over patient data, Mangano says
he soon discovers disturbing results,

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especially in older, sicker patients.

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What I found was, wait a second, you're
getting twice the serious adverse

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events, heart attacks, strokes, death,
in the patients who got Bextra versus

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the placebo.

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I said, this is remarkable.

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But Mangano makes the discovery too
late.

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Other reports claiming Bextra is safe
are already in the hands of the FDA.

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In November 2001, the FDA approves
Bextra in small doses to treat certain

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of arthritis and severe menstrual pain.

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It's not the green light Pfizer and
Pharmacia are hoping for.

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They want the big market an acute pain
reliever can attract.

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Dr. Mangano sees a red flag go up.

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They're going to give it to patients who
we don't know whether or not it's safe

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because you're going to double to triple
to quadruple the revenue by taking the

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population in whom it was tested and
expanding it.

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The difference translates into millions
of new Bextra users and billions of

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dollars in sales potential.

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But those plans are about to be dashed.

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Dennis Mangano publishes his own
findings on Bextra's safety and brings

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concerns to the FDA.

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Then the FDA was apprised of our
analysis and results, and they threw

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their hands up and said, now, wait a
second.

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What is this?

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We are not going to approve Bextra for
acute pain, this indication, nor to

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comment that it's safe in high -risk
patients.

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By 2002, the controversy over Bextra is
heating up.

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Other safety studies are called for to
evaluate the entire class of COX -2

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inhibitors. While the FDA evaluates the
studies, Bextra is on the shelves, and

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it's doing quite well.

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First -year Bextra sales are almost half
a billion dollars, despite the FDA's

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refusal to approve Bextra for more
widespread use.

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According to court documents, the co
-marketers of the drug, Pfizer and

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Pharmacia, dispatched their sales forces
with a mandate, push Bextra.

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Some doctors are told it's safe for uses
the FDA didn't approve.

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They were missteps that related to the
promotion of the product, primarily what

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occurred out in the field with respect
to statements that were made about the

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product to physicians. And these are
missteps that the company is not happy

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about and takes very seriously.

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Gardner Harris of the New York Times
follows the story closely and reports.

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The secret of Pfizer's success had been
that they understood that far more

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important than hiring researchers was to
hire drug sales representatives.

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People referred to Pfizer as the army of
Pfizer.

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And the result was that rules, ethics,
many of those things that had defined

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the industry in the 70s and the 80s.
really went by the board so that the

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company could meet its sales objective.

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Promoting or selling a drug for
something other than its FDA -approved

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called off -label marketing.

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According to the Justice Department,
this sales drive is blatantly illegal,

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to mention potentially deadly to
patients.

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Gardner Harris of the New York Times
sees it as business as usual.

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The Bextra story combines many of these
themes of the pharmaceutical industry.

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It's extraordinary profitability.

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It's desperate marketing measures. It's
willingness to frankly

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lie to doctors, the media, and to
patients, and put patients at risk

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as a result.

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When American Greed returns, an
exclusive interview with a former Pfizer

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rep reveals some allegations of shocking
sales tactics.

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The company was operating at a place
where they felt untouchable.

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In 2002, Pfizer is marketing what it
believes is the next pain -killing

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drug, Bextra.

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But there's a problem.

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Studies indicate Bextra increases some
patients' chances of heart attack and

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stroke.

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Pfizer was in a real pickle.

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It was coming in and spending $70
billion to acquire these drugs, Celebrex

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Bextra, and Bextra was.

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going to be the new leading candidate,
billions of dollars.

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And this study, which everybody thought
would show that it's safe, I came along

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and uncovered that it wasn't safe.

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The FDA approves Bexter for limited use
in patients with certain types of

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arthritis or severe menstrual pain.

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But according to the Justice Department,
Pfizer and the drugs developer

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Pharmacia ignore that limitation.

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and send an army of 11 ,000 sales reps
to push Bextra as a safe provider of

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relief for many types of ailments.

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On the condition of anonymity, one
former Pfizer sales representative

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speak with American Greed.

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The company was operating in a place
where they felt untouchable.

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The attitude was, we can have our way
with the FDA, and we can push the

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envelope, and nothing's going to happen.

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The man we'll call David says that by
2002, the pressure to fill sales quotas

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overbearing. It was like an intense war.
The market with like Celebrex, Bextra,

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and Vioxx. Merck had Vioxx, and they
were trying to make their foray back

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the number one position.

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And it was like we were archenemies.

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For top sellers, there are trips to the
Caribbean and cash incentives for every

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signed order.

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If you make your sales, you're rich.

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It was the greed side, I guess. The
incentives were there to make a lot of

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money, to win a lot of trips.

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I mean, you wanted to go for that.

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According to the Justice Department, the
incentives reinforce a corporate

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culture that pushes sales reps past
legal boundaries.

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It's not illegal for a doctor to use a
drug outside of indication.

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It's illegal for somebody to sell it to
them. But doctors have the ability to

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use a drug as they see fit.

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That's where the sales force would come
in. You know, doctor, look, we're only

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indicated here.

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Of course, you're the doctor.

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You say that enough times and they get
the message.

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As a prime example of how far some sales
reps push the envelope, Bextra is even

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marketed to dentists.

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People were calling on dentists.

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Clearly, there's no reason.

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Granted, those prescriptions are getting
filled at pharmacies and you're getting

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credit for those sales.

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In 2003, the co -marketing partnership
between Pfizer and Pharmacia evolves.

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Pfizer acquires Pharmacia as one of its
subsidiaries.

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According to the Justice Department,
Pharmacia recruits doctors who give

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presentations at luxurious resorts
promoting off -label uses of Bextra.

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David says some of these doctors, called
advocates, suggest that if a little

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Bextra is good, more is even better.

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You started seeing doses getting cranked
up really high. Some representatives

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and some managers were pushing doctors
and pushing hospitals.

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That was outside of indication.

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But at the same point, that's more pills
being sold, which means better bonus

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money coming in.

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The doctors who join the Pfizer army are
showered with gifts. They get thousands

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of dollars in consultant fees, golf
trips, even tropical getaways.

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Anything would go from places that you
could take doctors, box seats at premier

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sporting events, luxury restaurants,
very, very expensive wine.

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I mean, you name it, limousines.

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I'm sure doctors built houses based on
amounts of money that they were paid.

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David begins to feel that Pfizer is
crossing the line. At least one of his

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colleagues, John Kopchinsky, a sales rep
at Pfizer, feels the same.

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Kopchinsky won't appear on camera. His
attorney will.

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Erica Kelton explains what her client
told her.

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There were things with marketing Bextra
that he and the other sales

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representatives were asked to do, and in
fact were given financial incentives to

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do, that John just wouldn't do.

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According to his lawyer, in early 2003,
Kopchinsky is growing increasingly

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concerned that Pfizer is breaking the
law by pushing Bextra for off -label

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She says he speaks up. He was criticized
as not being a team player.

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Kopchinsky hires attorney Erica Kelton,
and along with several other employees,

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starts the process of a key TAM or
whistleblower lawsuit.

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In 2003, Kopchinsky is fired.

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John Kopchinski was terminated from the
company in the early part of 2003 as a

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result of concerns that related to theft
of product by both him and his manager.

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We don't have a record of John
Kopchinski having indicated to the

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he had concerns about Bextra, about the
way it was being promoted.

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There's certainly the feeling within the
pharmaceutical industry that if you

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do... speak up and if you do raise
concerns and if you do become a

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whistleblower, that you're at a great
risk of being blackballed by the

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So a lot of people don't speak up.

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After the matter settled, we were
contacted numerous times by people

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organization and other pharmaceutical
companies who applauded John for what he

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did.

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The news of John Kapczynski's
termination sends shockwaves through the

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sales force.

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There were a lot of us that said if you
cut us, we would bleed Pfizer blue.

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John had a stellar reputation.

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And when he started questioning wrong
things, that I think is when people

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started to become a bit dissatisfied
because what we believed about Pfizer in

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terms of their loyalty to us, it didn't
exist.

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Meanwhile, according to those who become
watchdogs of the drugs, as Pfizer

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continues to ignore FDA safety
guidelines, patients pay the price.

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I'd say, conservatively, a thousand
people had serious enough complications,

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including death, that didn't have to.

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It didn't solve pain any better.

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It just had this extra risk.

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Explain to me.

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Why any company would launch this drug?

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By early March 2003, attorney Erica
Kelton has started compiling a mountain

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evidence for a civil lawsuit on behalf
of the whistleblowers.

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You had the FDA's denial.

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You had a marketing scheme. We also had
evidence of a nationwide fraud scheme.

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If you were to put together the dream
off -label case, this pretty much would

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it.

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When American Greed returns, scientists
link Bextra to a potentially fatal

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skin disease.

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Not only is it not as good at solving
your pain, but it might actually lead

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skin to fall off.

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In the spring of 2003, Pfizer
Pharmaceuticals is a juggernaut, the

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seller of drugs in the world.

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But the $32 billion a year company has a
chink in its armor.

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Six whistleblowers have filed suit,
claiming that Pfizer's efforts to sell

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00:16:37,200 --> 00:16:41,540
popular pain reliever Bextra are in
flagrant violation of FDA limitations.

231
00:16:42,340 --> 00:16:47,260
The FDA has approved Bextra for certain
types of arthritis and severe menstrual

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00:16:47,260 --> 00:16:48,260
cramps.

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00:16:48,360 --> 00:16:52,640
But according to the Justice Department,
Pfizer and its subsidiary, Pharmacium,

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00:16:52,700 --> 00:16:57,860
are ignoring potential health risks and
pushing Baxter for much wider use as a

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00:16:57,860 --> 00:16:58,860
potent painkiller.

236
00:16:59,160 --> 00:17:04,119
By 2003, Baxter's sales are at $687
million.

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00:17:05,599 --> 00:17:10,619
Gardner Harris of the New York Times
covers the story and believes... Pfizer

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00:17:10,619 --> 00:17:16,200
knew that they were distributing a pill
meant for just a very few people.

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00:17:17,079 --> 00:17:21,880
to everyone, exposing an enormous number
of people to problems.

240
00:17:22,339 --> 00:17:26,579
And did Pfizer stop? Did Pfizer turn
around?

241
00:17:26,819 --> 00:17:30,560
Did Pfizer tell doctors to slow down?
Not at all.

242
00:17:30,760 --> 00:17:36,180
If anything, Pfizer did just the
opposite and told doctors, you know, to

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00:17:36,180 --> 00:17:37,180
going.

244
00:17:37,660 --> 00:17:41,720
Pfizer's chief compliance officer, Doug
Lankler, defends the company.

245
00:17:42,250 --> 00:17:46,330
claiming the sales force has extensive
training in FDA compliance.

246
00:17:47,410 --> 00:17:52,670
It is a difficult area to ensure
compliance, and that's not an excuse.

247
00:17:52,670 --> 00:17:56,850
reality. But it's nonetheless one that's
incredibly important that we have to

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00:17:56,850 --> 00:17:58,190
make sure we abide by.

249
00:17:58,730 --> 00:18:03,150
But according to the Justice Department,
Pfizer and Pharmacia's sales efforts

250
00:18:03,150 --> 00:18:07,890
willfully ignore studies that tie Bextra
to an increased risk of heart attack

251
00:18:07,890 --> 00:18:11,150
and stroke and push it as a broad pain
medication.

252
00:18:12,050 --> 00:18:14,770
Bextra has now been on the market since
early 2002.

253
00:18:15,170 --> 00:18:19,410
More and more patients are using it. And
now other serious health problems

254
00:18:19,410 --> 00:18:20,410
arise.

255
00:18:20,550 --> 00:18:24,250
Gardner -Harris believes the drug
companies are playing a game of Russian

256
00:18:24,250 --> 00:18:25,330
roulette with patients.

257
00:18:26,050 --> 00:18:31,170
Millions of people were taking this pill
thinking it's a miracle drug when the

258
00:18:31,170 --> 00:18:35,530
company's own data suggested just the
opposite is true. Not only is it not as

259
00:18:35,530 --> 00:18:40,430
good at solving your pain, but it might
actually give you a heart attack and, in

260
00:18:40,430 --> 00:18:44,150
rare circumstances, lead your skin to
fall off.

261
00:18:44,770 --> 00:18:51,050
This terrible, terrible side effect
called Stevens -Johnson syndrome, which

262
00:18:51,050 --> 00:18:56,690
be fatal. It's hard to come up with
death that's more painful, and this drug

263
00:18:56,690 --> 00:18:57,690
caused it.

264
00:18:58,230 --> 00:19:05,090
Though very rare, SJS causes
unimaginable misery, painful spreading

265
00:19:05,310 --> 00:19:09,010
blisters, and layers of dying skin that
sheds or peels off.

266
00:19:09,720 --> 00:19:13,720
Doug Lanker explains that the warning
was always on the label.

267
00:19:14,180 --> 00:19:19,480
The skin issues that were associated
with Bextra were part of Bextra's label

268
00:19:19,480 --> 00:19:23,120
the time of its launch. It was something
that Bextra sought to make sure doctors

269
00:19:23,120 --> 00:19:24,120
were aware of.

270
00:19:24,260 --> 00:19:29,440
But lawyer Erica Kelton says Pfizer's
efforts to warn the public about all

271
00:19:29,440 --> 00:19:32,380
Bextra's side effects are just not good
enough.

272
00:19:32,720 --> 00:19:34,300
It was arrogant.

273
00:19:35,150 --> 00:19:41,150
Safety should always take priority over
profits because human lives are at

274
00:19:41,150 --> 00:19:46,530
stake. And unfortunately, those
priorities have been reversed by some

275
00:19:46,530 --> 00:19:47,690
pharmaceutical companies.

276
00:19:48,250 --> 00:19:53,290
While the civil lawsuits continue,
federal prosecutors are strengthening a

277
00:19:53,290 --> 00:19:54,790
criminal case for fraud.

278
00:19:55,170 --> 00:20:01,930
We can prove that the corporate side
only got permission for osteoarthritis.

279
00:20:02,300 --> 00:20:07,020
adult rheumatoid arthritis, and primary
dysmenorrhea, and therefore knew that

280
00:20:07,020 --> 00:20:09,360
the company didn't have permission to
sell it for pain.

281
00:20:09,980 --> 00:20:16,040
As cases mount, the FDA orders larger
studies of Bextra. Its findings are

282
00:20:16,040 --> 00:20:17,600
published in late 2004.

283
00:20:18,340 --> 00:20:19,560
Guess what they found?

284
00:20:20,100 --> 00:20:21,920
Exactly the same things.

285
00:20:22,560 --> 00:20:26,860
Heart attack, stroke, renal failure,
death.

286
00:20:28,010 --> 00:20:34,570
So the first study done, a million
patients before, should have halted the

287
00:20:34,570 --> 00:20:41,250
of the drug during the interim. But what
it did was it allowed the

288
00:20:41,250 --> 00:20:47,210
accumulation of $2 .5 to $4 billion of
revenue with this drug during that

289
00:20:47,210 --> 00:20:48,210
period.

290
00:20:49,470 --> 00:20:55,700
In the largest recall in the drug
industry's history, Pfizer and Merck

291
00:20:55,700 --> 00:21:00,780
their once promising COX -2 inhibitors,
Bextra and Vioxx, from the shelves.

292
00:21:02,300 --> 00:21:06,240
Pfizer is advised to put Celebrex under
new testing.

293
00:21:07,360 --> 00:21:11,260
Pfizer, which makes both Bextra and
Celebrex, said in a statement it

294
00:21:11,260 --> 00:21:15,500
respectfully disagrees with the decision
about Bextra and agreed it will conduct

295
00:21:15,500 --> 00:21:18,380
a long -term study about the safety of
Celebrex.

296
00:21:20,409 --> 00:21:26,230
Pfizer's chief of compliance, Doug
Lankler, says that the FDA's decision to

297
00:21:26,230 --> 00:21:30,730
Bextra from the shelves is unrelated to
the Justice Department's ongoing

298
00:21:30,730 --> 00:21:32,170
criminal investigation.

299
00:21:33,410 --> 00:21:37,310
Importantly, Bextra was not withdrawn
because of any marketing concerns.

300
00:21:37,790 --> 00:21:42,250
Primarily, this was a situation of
looking across the pain medications,

301
00:21:42,250 --> 00:21:46,470
which ones had different risks and
benefits, and making decisions along

302
00:21:46,470 --> 00:21:47,470
lines.

303
00:21:48,760 --> 00:21:53,300
a drug that was pulled off the market
because the FDA insisted that it be

304
00:21:53,300 --> 00:21:55,880
off the market. Pfizer did not want to
take it off the market.

305
00:21:56,140 --> 00:22:02,980
This was done years after it had become
clear that Bextra had an

306
00:22:02,980 --> 00:22:07,020
acceptable risk for many of those taking
it.

307
00:22:07,560 --> 00:22:13,020
For nearly six years, U .S. attorneys in
Boston gather evidence to slap Pfizer

308
00:22:13,020 --> 00:22:16,500
and its subsidiary Pharmacia with
criminal charges.

309
00:22:17,140 --> 00:22:22,220
By September 2009, the pharmaceutical
powerhouse is ready to capitulate.

310
00:22:23,680 --> 00:22:28,840
Pharmacia pleads guilty to a criminal
count of introduction into interstate

311
00:22:28,840 --> 00:22:31,240
commerce of a misbranded drug.

312
00:22:32,180 --> 00:22:35,260
Pfizer has agreed to pay $2 .3 billion.

313
00:22:36,640 --> 00:22:39,760
Pfizer gets hit with a staggering total
of $2 .3 billion.

314
00:22:40,060 --> 00:22:45,020
$1 billion in civil fines and $1 .3
billion in criminal fines for its

315
00:22:45,020 --> 00:22:46,320
subsidiary, Pharmacia.

316
00:22:47,360 --> 00:22:52,560
Pfizer's criminal fines are larger than
Enron, WorldCom, larger than any other

317
00:22:52,560 --> 00:22:54,380
case in United States history.

318
00:22:54,940 --> 00:22:59,800
There were missteps that occurred that
the company ultimately paid a very

319
00:22:59,800 --> 00:23:00,880
significant price for.

320
00:23:01,560 --> 00:23:05,560
$2 .3 billion is just three weeks' worth
of sales for Pfizer.

321
00:23:06,140 --> 00:23:12,860
So even these seemingly blockbuster
fines are difficult to

322
00:23:12,860 --> 00:23:16,280
get the attention of executives around.

323
00:23:17,680 --> 00:23:20,880
Pfizer pays the fine in one wire
transfer.

324
00:23:21,460 --> 00:23:26,080
No one in Pfizer's upper management or
the executive marketing team is charged

325
00:23:26,080 --> 00:23:28,140
to some watchdog's dismay.

326
00:23:28,860 --> 00:23:33,880
If we had senior level people being
prosecuted for crimes or fraud.

327
00:23:34,650 --> 00:23:36,750
And actually going to jail, guess what?

328
00:23:36,950 --> 00:23:38,170
They wouldn't do it anymore.

329
00:23:38,690 --> 00:23:43,110
The pharmaceutical giant is ordered to
put a monitoring program in place and

330
00:23:43,110 --> 00:23:44,650
sign a compliance agreement.

331
00:23:45,650 --> 00:23:49,930
Greed keeps winning, and people keep
dying until people go to jail.

332
00:23:50,190 --> 00:23:54,570
We need to figure out as a society who
should be held criminally liable.

333
00:23:54,970 --> 00:23:58,550
Is it going to be the soulless
corporation that employs thousands of

334
00:23:58,890 --> 00:24:02,190
Or is it going to be the person who
actually devised the fraud scheme?

335
00:24:02,630 --> 00:24:03,630
And I would hope.

336
00:24:04,490 --> 00:24:06,470
that we decide that people should go to
jail.

337
00:24:07,150 --> 00:24:13,890
We as prosecutors can have suspicion,
but we only can prosecute

338
00:24:13,890 --> 00:24:18,350
people if we've made a judgment that we
could prove beyond a reasonable doubt.

339
00:24:18,550 --> 00:24:23,110
It's much easier to prove that a
corporation has committed a crime than a

340
00:24:23,110 --> 00:24:28,290
person. As part of the whistleblower
case, the federal government awards

341
00:24:28,290 --> 00:24:32,550
Pfizer salesman John Kopchinsky $51 .5
million.

342
00:24:34,500 --> 00:24:38,240
Pfizer's other wonder drug Celebrex has
had its own set of problems and

343
00:24:38,240 --> 00:24:42,400
lawsuits. It's still on the market with
a warning of an increased risk of heart

344
00:24:42,400 --> 00:24:43,400
attack and stroke.

345
00:24:43,760 --> 00:24:48,800
As for Big Pharma's future, reporter
Gardner Harris says to expect more cases

346
00:24:48,800 --> 00:24:49,800
like Bextra.

347
00:24:50,120 --> 00:24:55,340
These cases are all filed under seal,
but my sources tell me that there is a

348
00:24:55,340 --> 00:25:00,860
mountain. of these cases out there that
have yet to come to the fore.

349
00:25:01,200 --> 00:25:07,580
And the Bextra case is not the last of
these, and probably not even the biggest

350
00:25:07,580 --> 00:25:08,580
of these.

351
00:25:09,980 --> 00:25:12,520
Up next, it's an appealing sales pitch.

352
00:25:12,740 --> 00:25:16,160
Help your neighbor avoid foreclosure and
make a nice profit to boot.

353
00:25:16,620 --> 00:25:18,300
Too bad it's all a lie.

354
00:25:18,940 --> 00:25:19,960
What a waste.

355
00:25:20,700 --> 00:25:25,380
She did all of this. She went through
all of this to...

356
00:25:25,800 --> 00:25:28,080
BAM! Turn out to be a frog.

357
00:25:42,120 --> 00:25:47,160
In 2005, real estate is in a red -hot
frenzy across America.

358
00:25:47,720 --> 00:25:52,100
Even novice investors are led to believe
they can buy, flip, and profit.

359
00:25:52,880 --> 00:25:57,560
Investing in real estate appeals to
veteran Marine Corps officer Ron Crowder

360
00:25:57,560 --> 00:26:01,780
his wife Poppy, a school psychologist
and new mother to twins.

361
00:26:02,760 --> 00:26:08,440
I knew I was going to be home for at
least a year. And so I wanted to just,

362
00:26:08,440 --> 00:26:12,000
know, put my money into something that
would bring me a little bit of income.

363
00:26:12,940 --> 00:26:17,960
We had just started going to, like,
Trump seminars, investment -flipping

364
00:26:17,960 --> 00:26:21,960
property -type seminars, because that's
the way the market was at that time,

365
00:26:22,040 --> 00:26:23,100
particularly in California.

366
00:26:25,720 --> 00:26:27,480
In January 2006,

367
00:26:28,180 --> 00:26:32,820
Poppy and Ron meet Janetta Standiform, a
37 -year -old entrepreneur with a

368
00:26:32,820 --> 00:26:33,980
background in real estate.

369
00:26:34,340 --> 00:26:37,040
Her real specialty is self -promotion.

370
00:26:37,610 --> 00:26:43,070
I was just very impressed with her. I
thought, wow, she's young, and she's

371
00:26:43,070 --> 00:26:47,530
smart, she's knowledgeable, and she's so
transparent.

372
00:26:48,350 --> 00:26:49,870
Since November 2005,

373
00:26:50,770 --> 00:26:56,090
Standifor has been the founder and CEO
of Accelerated Funding Group, or AFG.

374
00:26:56,510 --> 00:27:00,010
She claims to buy troubled mortgages
from banks in bulk.

375
00:27:00,250 --> 00:27:03,750
For each homeowner in jeopardy, she
finds an angel investor.

376
00:27:04,560 --> 00:27:09,240
The investor ponies up cash for either a
refinance or a settlement with the

377
00:27:09,240 --> 00:27:13,960
bank. Either way, the homeowner avoids
foreclosure, and the investor makes a

378
00:27:13,960 --> 00:27:15,260
tidy return on the deal.

379
00:27:16,080 --> 00:27:20,360
Standifor claims that anyone who invests
can make fast and easy money.

380
00:27:21,700 --> 00:27:25,800
Investors were told that their funds
would be used to get specific properties

381
00:27:25,800 --> 00:27:27,000
out of foreclosure.

382
00:27:27,280 --> 00:27:31,860
And once the homeowner was out of
foreclosure, that homeowner would either

383
00:27:31,860 --> 00:27:32,669
their home.

384
00:27:32,670 --> 00:27:37,470
or refinance, and then pay back the
principles that the investor gave and

385
00:27:37,470 --> 00:27:38,470
receive returns.

386
00:27:39,390 --> 00:27:42,950
Janetta's pitch sounds too good to be
true, and it is.

387
00:27:43,210 --> 00:27:47,250
But she can overcome any doubts, in part
because she capitalizes on

388
00:27:47,250 --> 00:27:48,650
inexperienced investors.

389
00:27:49,370 --> 00:27:53,350
Maybe you just have a little bit of
money to invest, or you never really

390
00:27:53,350 --> 00:27:54,350
about investing.

391
00:27:54,650 --> 00:27:59,530
It's with a young African -American
woman who has all this years of

392
00:27:59,530 --> 00:28:01,230
and skill and expertise.

393
00:28:01,840 --> 00:28:02,860
It feels comfortable.

394
00:28:04,220 --> 00:28:09,920
By early 2006, before most of the
country has heard the phrase subprime

395
00:28:10,380 --> 00:28:13,340
home foreclosures are edging up in
California.

396
00:28:13,840 --> 00:28:16,940
The real estate market in California was
really booming.

397
00:28:17,540 --> 00:28:22,040
Mortgage companies had different lending
rules than they have today, and people

398
00:28:22,040 --> 00:28:25,620
found themselves in situations where
they couldn't make their mortgage

399
00:28:28,460 --> 00:28:32,900
Janetta Standiford is hatching a
business plan designed to exploit a

400
00:28:32,900 --> 00:28:34,100
many don't see coming.

401
00:28:35,220 --> 00:28:40,300
Armed with a catchy marketing kit,
Standiford hunts for investors,

402
00:28:40,300 --> 00:28:45,200
whirlwind seminar tour at learning
centers, conference rooms, golf courses,

403
00:28:45,200 --> 00:28:46,200
Sunday services.

404
00:28:47,300 --> 00:28:52,740
She appeals to their sense of altruism.
At churches, she says investors can do

405
00:28:52,740 --> 00:28:56,720
the right thing and help their neighbors
stay in their homes and still make a

406
00:28:56,720 --> 00:28:57,760
respectable profit.

407
00:28:58,730 --> 00:29:03,510
It was a philanthropic investment of
sorts. They were helping out the

408
00:29:03,610 --> 00:29:08,390
and if all else failed, they believed
they held title to the property.

409
00:29:09,070 --> 00:29:12,230
To many investors, it sounds like a win
-win deal.

410
00:29:12,670 --> 00:29:17,450
The more money they invested, the
greater their return, and these returns

411
00:29:17,450 --> 00:29:20,330
averaged between 25 and 50 percent.

412
00:29:22,800 --> 00:29:28,140
Doing business as AFG, Janetta promises
returns in 30 to 45 days.

413
00:29:28,580 --> 00:29:30,420
There's even a money -back guarantee.

414
00:29:31,220 --> 00:29:35,500
At any time they could receive their
money back with a one - to two -day

415
00:29:35,520 --> 00:29:40,900
they may not receive their profit, but
they would get their money back.

416
00:29:41,540 --> 00:29:44,040
Janetta comes off as a seasoned pro.

417
00:29:44,320 --> 00:29:49,240
She breezes past questions like how
homeowners already in foreclosure could

418
00:29:49,240 --> 00:29:52,300
possibly pay investors a return on their
money.

419
00:29:52,780 --> 00:29:57,800
The red flag should have gone up. A 50 %
return in 30 days.

420
00:29:58,240 --> 00:30:03,780
Unheard of. But this was the case. They
had Janetta that they trusted

421
00:30:03,780 --> 00:30:09,880
implicitly. Janetta's charisma lends
credibility to those unrealistic claims.

422
00:30:10,540 --> 00:30:13,300
Poppy and her husband Ron remember her
appeal.

423
00:30:14,510 --> 00:30:19,110
Any question that came up, she answered
it. The confident was there. She looked

424
00:30:19,110 --> 00:30:22,050
you in the eye. She was a real
professional.

425
00:30:22,770 --> 00:30:29,350
She would meet with people in hair
salons or barbershops, which in the

426
00:30:29,350 --> 00:30:33,210
-American community, that is a very
popular meeting place.

427
00:30:34,230 --> 00:30:39,150
And, of course, if you come with that
demeanor that Janetta has, you know,

428
00:30:39,150 --> 00:30:42,350
personable, very calm, nothing slick.

429
00:30:42,940 --> 00:30:44,540
It's easy to earn that trust.

430
00:30:45,320 --> 00:30:47,840
She has a knack for reaching women.

431
00:30:48,320 --> 00:30:54,860
I think that's the case because they
bonded with Janetta. It was trusting

432
00:30:54,860 --> 00:30:56,220
fellow female.

433
00:30:56,560 --> 00:31:00,200
And so Janetta just wasn't only an
investment advisor.

434
00:31:01,000 --> 00:31:02,380
She was their friend.

435
00:31:03,480 --> 00:31:06,880
Janetta Standifor is operating a scam.

436
00:31:09,080 --> 00:31:10,900
Next on American Greed.

437
00:31:11,260 --> 00:31:15,400
Standifor buys herself diamonds with
investors' money.

438
00:31:15,760 --> 00:31:21,420
You have to wonder about a person who
doesn't seem to care who they're hurting

439
00:31:21,420 --> 00:31:23,300
or how much they're hurting them.

440
00:31:36,010 --> 00:31:41,850
In 2006, Janetta Standifor's Pasadena
-based Accelerated Funding Group is

441
00:31:41,850 --> 00:31:42,850
in cash.

442
00:31:43,670 --> 00:31:47,930
Standifor convinces her investors that
she's buying bundles of troubled

443
00:31:47,930 --> 00:31:51,210
mortgages, which she doles out to them
as deals.

444
00:31:51,690 --> 00:31:57,490
For each deal, investor cash supplies
desperate homeowners a mortgage lifeline

445
00:31:57,490 --> 00:32:00,390
so they can refinance or sell the
property.

446
00:32:00,730 --> 00:32:02,390
It works out for everyone.

447
00:32:02,920 --> 00:32:06,840
Homeowners are rescued from foreclosure,
investors get their money back with a

448
00:32:06,840 --> 00:32:09,500
healthy profit, and Janetta gets a
commission.

449
00:32:09,920 --> 00:32:16,840
I didn't question that this was
legitimate because it had come from a

450
00:32:16,840 --> 00:32:17,940
good friend of mine.

451
00:32:18,340 --> 00:32:21,560
She had done about three or four deals
with Janetta.

452
00:32:22,600 --> 00:32:28,560
In May 2006, Poppy receives a payout
from her first investment.

453
00:32:29,100 --> 00:32:35,080
After it closed, I did immediately
request another deal because the payout

454
00:32:35,080 --> 00:32:36,080
nice.

455
00:32:36,600 --> 00:32:41,640
She doubles her original investment, and
then she does exactly what Janetta is

456
00:32:41,640 --> 00:32:43,940
banking on. She spreads the word.

457
00:32:44,420 --> 00:32:45,820
I told everyone I knew.

458
00:32:46,020 --> 00:32:52,760
I wanted everyone else to benefit from
this idea of you're helping

459
00:32:52,760 --> 00:32:56,820
someone else, but you're also earning
money for yourself as well.

460
00:32:57,610 --> 00:32:59,750
Word of mouth works fast.

461
00:33:00,250 --> 00:33:05,950
In less than two years, AFG boasts
nearly 600 investors in Georgia, Nevada,

462
00:33:05,950 --> 00:33:06,950
California.

463
00:33:07,210 --> 00:33:12,370
Once you hear that people you know were
successful in this investment, they're

464
00:33:12,370 --> 00:33:18,010
more willing to believe that this is a
safe, secure, and legitimate investment.

465
00:33:18,910 --> 00:33:21,670
But everything about AFG is a lie.

466
00:33:22,520 --> 00:33:25,580
Janetta isn't buying a bulk foreclosure
note from anyone.

467
00:33:25,800 --> 00:33:28,040
She's just finding addresses online.

468
00:33:28,680 --> 00:33:35,580
She subscribed to an Internet site that
listed details about properties

469
00:33:35,580 --> 00:33:40,220
that were in foreclosure. What she told
investors is that each one of these

470
00:33:40,220 --> 00:33:45,600
properties had enough equity so that the
homeowner would be able to refinance or

471
00:33:45,600 --> 00:33:50,180
sell their property and use that money
to pay the investor.

472
00:33:50,700 --> 00:33:53,440
back their investment as well as their
profit.

473
00:33:54,560 --> 00:33:58,580
Accelerated Funding Group isn't funding
a single foreclosure rescue.

474
00:33:59,420 --> 00:34:03,080
Investors pump almost $18 million into
AFG.

475
00:34:03,560 --> 00:34:07,980
Janetta kicks most of the money back to
her early investors to keep the scam

476
00:34:07,980 --> 00:34:10,159
going and word of mouth spreading.

477
00:34:10,520 --> 00:34:15,060
She tells them their supposed profits
come from refinance deals she's

478
00:34:15,800 --> 00:34:20,719
In reality, she's just churning their
hard -earned cash and keeping a nice

479
00:34:20,719 --> 00:34:21,719
for herself.

480
00:34:21,920 --> 00:34:26,679
It's a classic Ponzi scheme of you pay
the first investors to help those

481
00:34:26,679 --> 00:34:29,060
investors lure later investors.

482
00:34:30,639 --> 00:34:35,739
Then she preys on emotions to prevent
investors from contacting the supposed

483
00:34:35,739 --> 00:34:40,480
homeowners. She would get these
properties and obviously have no

484
00:34:40,480 --> 00:34:42,980
with the homeowners or the mortgage
companies.

485
00:34:43,560 --> 00:34:47,600
She told investors not to contact the
homeowners, claiming that the homeowners

486
00:34:47,600 --> 00:34:48,760
would be embarrassed.

487
00:34:50,120 --> 00:34:55,100
By 2007, she's stolen nearly $2 million
from investors.

488
00:34:55,820 --> 00:34:58,240
She blows most of it on herself.

489
00:35:00,920 --> 00:35:03,200
Janetta lived a pretty lavish lifestyle.

490
00:35:04,080 --> 00:35:07,640
For one of her homes, she spent over
$650 ,000 to make improvement.

491
00:35:09,290 --> 00:35:13,830
She purchased two luxury automobiles for
$186 ,000.

492
00:35:14,110 --> 00:35:19,450
She bought jewelry with the investor's
money of about $165 ,000.

493
00:35:20,250 --> 00:35:25,930
Tickets, a lot of theater tickets,
concert tickets, front row and center

494
00:35:25,930 --> 00:35:31,630
at sporting events. A lot of money went
towards travel and entertainment.

495
00:35:34,140 --> 00:35:39,840
Janetta and longtime boyfriend Daryl
Dansby decide to marry in May 2007.

496
00:35:40,460 --> 00:35:43,820
She even invites some of her favorite
investors to the wedding.

497
00:35:44,140 --> 00:35:47,460
But the lavish celebration hides a harsh
reality.

498
00:35:48,100 --> 00:35:49,400
She was running out of funds.

499
00:35:49,840 --> 00:35:55,500
So she brought in one last investor, and
that investor put in an additional $150

500
00:35:55,500 --> 00:36:00,120
,000. And most of that money went to pay
for her wedding and her honeymoon.

501
00:36:02,220 --> 00:36:05,240
Stan DeFord lives it up on a plush Maui
honeymoon.

502
00:36:05,840 --> 00:36:07,600
But AFG is crumbling.

503
00:36:08,340 --> 00:36:09,780
Checks are a month late.

504
00:36:10,000 --> 00:36:11,820
Then two, three, four.

505
00:36:12,600 --> 00:36:14,620
Janetta is suddenly unavailable.

506
00:36:15,040 --> 00:36:18,680
Well, I was getting a lot of that. No
one's in the office. Would you like to

507
00:36:18,680 --> 00:36:19,680
leave a message?

508
00:36:20,080 --> 00:36:22,000
Calls and emails are urgent.

509
00:36:22,260 --> 00:36:23,420
Then frantic.

510
00:36:23,920 --> 00:36:26,480
Janetta buys time with a series of lies.

511
00:36:27,260 --> 00:36:29,300
Janetta was telling the inspector.

512
00:36:30,040 --> 00:36:33,260
There were family illnesses. She was
ill.

513
00:36:33,500 --> 00:36:38,220
So they were giving her space to take
care of the illness.

514
00:36:39,160 --> 00:36:44,460
Some of AFG's 600 investors tried to
keep the faith that Janetta will come

515
00:36:44,460 --> 00:36:46,780
through. They held on to hope.

516
00:36:47,060 --> 00:36:53,280
To give that up would have meant that
their investment was worth zero.

517
00:36:54,160 --> 00:36:58,220
By July 2007, the real estate market is
tanking.

518
00:36:58,560 --> 00:37:01,440
Janetta Standifor is nowhere to be
found.

519
00:37:02,100 --> 00:37:05,900
Finally, it dawns on me. This is not
real.

520
00:37:06,280 --> 00:37:11,860
And I go to the Better Business Bureau's
website and check out Janetta.

521
00:37:12,100 --> 00:37:13,100
The rating?

522
00:37:13,500 --> 00:37:14,500
F.

523
00:37:16,840 --> 00:37:20,680
When American Greed returns, the ugly
truth of AFG.

524
00:37:21,370 --> 00:37:24,990
As soon as we got the bank records, we
were able to figure out that this was

525
00:37:24,990 --> 00:37:28,790
essentially a Ponzi scheme and a
misappropriation of investor funds.

526
00:37:44,710 --> 00:37:49,830
In Pasadena, California, Accelerated
Funding Group founder, Janetta

527
00:37:49,870 --> 00:37:54,770
promises to make investors big money by
helping others avoid foreclosure.

528
00:37:55,130 --> 00:37:59,710
Instead, she's built hundreds of
investors in three states out of more

529
00:37:59,710 --> 00:38:00,710
million.

530
00:38:01,090 --> 00:38:06,790
I heard about people who mortgaged their
home, invested basically their life

531
00:38:06,790 --> 00:38:12,130
savings. You know, they were close to
retirement, and now they probably have

532
00:38:12,130 --> 00:38:13,330
work for the rest of their lives.

533
00:38:15,000 --> 00:38:20,160
Prompted by complaints, the Los Angeles
Securities and Exchange Commission opens

534
00:38:20,160 --> 00:38:21,160
an investigation.

535
00:38:21,760 --> 00:38:26,700
Nothing was adding up here. We saw no
evidence that Janetta ever had purchased

536
00:38:26,700 --> 00:38:31,460
any loans from any banks for properties
that were distressed. And so really, the

537
00:38:31,460 --> 00:38:34,940
money that was coming into AFG's account
were all investor funds.

538
00:38:35,500 --> 00:38:40,440
While the SEC works a civil action
against Standiform, U .S. attorneys

539
00:38:40,440 --> 00:38:41,840
criminal fraud investigation.

540
00:38:42,750 --> 00:38:47,450
We have to prove beyond a reasonable
doubt that Janetta Standifor was

541
00:38:47,450 --> 00:38:51,750
investors. Not only that, but we have to
look at what federal crimes she was

542
00:38:51,750 --> 00:38:55,290
violating, and here we decided to look
at wire fraud and mail fraud.

543
00:38:56,610 --> 00:38:59,930
Wire and mail fraud are easy to prove in
Janetta's case.

544
00:39:00,350 --> 00:39:05,710
FBI agent Linda English follows the
money and finds it flows from new

545
00:39:05,710 --> 00:39:06,930
to initial investors.

546
00:39:07,890 --> 00:39:10,270
What struck me the most was...

547
00:39:10,650 --> 00:39:12,870
the volumes of paperwork.

548
00:39:13,370 --> 00:39:20,050
She had a very extensive filing system
for this

549
00:39:20,050 --> 00:39:22,930
investment that there were no
properties.

550
00:39:23,350 --> 00:39:26,910
One place the money does not flow to is
troubled investors.

551
00:39:27,630 --> 00:39:34,350
At the end of the day, I could not
locate one deposit she received from an

552
00:39:34,350 --> 00:39:37,650
escrow company, and alternatively...

553
00:39:38,060 --> 00:39:42,860
One check she had made payable to a bank
to purchase property.

554
00:39:44,020 --> 00:39:49,700
Every closing she arranged with
investors was completely bogus. Every

555
00:39:49,700 --> 00:39:52,080
saved from foreclosure, a mirage.

556
00:39:52,620 --> 00:39:57,040
By May 13, 2008, prosecutors have all
they need.

557
00:39:57,400 --> 00:40:03,040
A federal grand jury indicts Standifor
on 11 counts, including wire and mail

558
00:40:03,040 --> 00:40:08,630
fraud. On May 14th, the SEC files five
securities fraud charges.

559
00:40:09,350 --> 00:40:12,410
FBI agents arrest Janetta the same day.

560
00:40:12,790 --> 00:40:16,350
I think who she targeted was one of the
things that struck us.

561
00:40:17,170 --> 00:40:22,050
A lot of these cases are affinity frauds
in which someone decides to use the

562
00:40:22,050 --> 00:40:26,050
trust and friendships that they've
developed within their own community to

563
00:40:26,050 --> 00:40:27,050
their money.

564
00:40:27,330 --> 00:40:29,110
Janetta can't make bail.

565
00:40:29,370 --> 00:40:30,750
She was running out of funds.

566
00:40:31,770 --> 00:40:37,210
Even her closest friends and family can
barely scrape together the $400 ,000 she

567
00:40:37,210 --> 00:40:38,470
needs to bond out.

568
00:40:38,870 --> 00:40:44,730
Of 600 investors, almost half lose every
dime they put in AFG.

569
00:40:45,150 --> 00:40:51,310
This was no different than a violent
crime because the investor said she has,

570
00:40:51,310 --> 00:40:53,090
effect, taken away our future.

571
00:40:53,630 --> 00:41:00,110
When you're taking someone's life
savings or the child's education

572
00:41:00,700 --> 00:41:06,540
and knowing I'm going to spend my
honeymoon on your money. How can you do

573
00:41:06,540 --> 00:41:08,280
if you have a conscience?

574
00:41:09,180 --> 00:41:14,680
Some investors have even said in open
court that the ripple effect of this

575
00:41:14,680 --> 00:41:16,280
go on for generations in their family.

576
00:41:16,820 --> 00:41:19,180
Others lost more than money.

577
00:41:19,540 --> 00:41:24,380
They so trusted Janetta that for the
future, I think they're going to

578
00:41:24,380 --> 00:41:29,720
their own ability to judge others, and
that's key.

579
00:41:31,280 --> 00:41:36,480
In September 2008, Janetta plea bargains
with the Justice Department and claims

580
00:41:36,480 --> 00:41:39,120
responsibility for multiple fraud
charges.

581
00:41:39,560 --> 00:41:43,960
In that plea agreement, she pled guilty
to a lost amount between $7 million and

582
00:41:43,960 --> 00:41:44,960
$20 million.

583
00:41:45,460 --> 00:41:52,140
On January 20, 2009, Janetta Standiford
is sentenced to 12 years in prison and

584
00:41:52,140 --> 00:41:55,040
ordered to pay nearly $9 million in
restitution.

585
00:41:55,660 --> 00:41:59,640
Both she and her defense attorney
declined to speak to American Greed.

586
00:42:00,450 --> 00:42:04,930
Standifor successfully appealed her
sentence, and it was reduced to eight

587
00:42:04,930 --> 00:42:06,390
in February 2010.

588
00:42:07,390 --> 00:42:12,730
Meanwhile, one of her two homes is in
foreclosure, and the few assets the FBI

589
00:42:12,730 --> 00:42:15,990
seized don't make a dent in the money
she owes investors.

590
00:42:17,250 --> 00:42:21,490
Poppy and Ron haven't forgotten their
AFG experience.

591
00:42:22,210 --> 00:42:27,770
We're going to invest in something.
We're just going to make sure that we do

592
00:42:27,770 --> 00:42:29,190
homework a little better.

593
00:42:29,820 --> 00:42:33,640
If it sounds too good to be true, it
probably is.

594
00:42:34,320 --> 00:42:41,000
Even if it's your mom that's advising
you to invest your money in

595
00:42:41,000 --> 00:42:42,880
something, check it out first.