1 00:00:02,280 --> 00:00:04,780 This is a CNBC original. 2 00:00:11,260 --> 00:00:16,940 In this episode of American Greed, he makes millions by hooking customers 3 00:00:16,940 --> 00:00:18,680 wanting a better sex life. 4 00:00:19,120 --> 00:00:24,720 The Smiling Bob campaign has to go down as one of the more memorable of a 5 00:00:24,720 --> 00:00:29,660 generation. Taking advantage of their sexual insecurities, Stephen Warshak 6 00:00:29,660 --> 00:00:33,000 illegal charges on the credit cards of thousands of customers. 7 00:00:33,420 --> 00:00:37,000 I was upset and I was angry that they did this to her, put her in this 8 00:00:37,000 --> 00:00:38,000 situation. 9 00:00:38,060 --> 00:00:44,640 And later, an investment manager takes on the toughest clients, retired NFL 10 00:00:44,640 --> 00:00:47,300 players, and steals their money. 11 00:00:48,700 --> 00:00:53,260 $150 million vanishes before the FBI moves in. 12 00:00:54,480 --> 00:00:57,540 We found that they only had about $200 ,000 under management. 13 00:00:57,880 --> 00:01:02,700 But when he's tackled for a loss, will his game go into sudden death? 14 00:01:03,280 --> 00:01:08,100 The investors, particularly the NFL investors, were so mad at him that he 15 00:01:08,100 --> 00:01:10,600 afraid for his own personal safety. 16 00:01:25,110 --> 00:01:26,150 This is Bob. 17 00:01:26,810 --> 00:01:31,590 Millions have seen the commercials featuring the character known as Smiling 18 00:01:32,230 --> 00:01:35,970 The ads are filled with innuendo about why he's so happy. And, of course, by 19 00:01:35,970 --> 00:01:39,250 end of the ad, you know why he's so happy, because he's using Enzyte and 20 00:01:39,250 --> 00:01:41,030 making all the women in his life very happy. 21 00:01:41,270 --> 00:01:45,230 A little more self -esteem and a very happy Mrs. at Home. 22 00:01:46,850 --> 00:01:51,290 Billing itself as the once -daily tablet for natural male enhancement. 23 00:01:51,950 --> 00:01:55,650 Enzyte wants to appear to be the herbal answer to Viagra. 24 00:01:56,010 --> 00:01:58,630 Everybody knew about Smiling Bob. 25 00:01:58,930 --> 00:02:04,730 The product started to show up on the shelves of Walmart and Walgreens and 26 00:02:05,270 --> 00:02:11,430 The mastermind behind Enzyte's success is Stephen Warshak, a 37 -year -old 27 00:02:11,430 --> 00:02:12,430 entrepreneur. 28 00:02:13,030 --> 00:02:18,730 His supplements business is bringing in just shy of $250 million in revenue. 29 00:02:19,820 --> 00:02:23,000 more than 50 % from the sales of Enzyme alone. 30 00:02:23,620 --> 00:02:28,880 It seems Warshak is living the American dream, but it's all about to come 31 00:02:28,880 --> 00:02:29,880 crashing down. 32 00:02:34,680 --> 00:02:38,320 Warshak's story begins in Cincinnati, Ohio in 1996. 33 00:02:39,540 --> 00:02:43,320 Berkeley Nutraceuticals is hatched in his basement. 34 00:02:44,340 --> 00:02:46,180 Pretty much a shoestring operation. 35 00:02:46,940 --> 00:02:50,720 They were working in a basement office. It was him, his mom, a couple friends 36 00:02:50,720 --> 00:02:55,940 from college, and they were taking orders over the phone, running credit 37 00:02:56,440 --> 00:03:02,260 People who work with Warshak attest to his sharp business skills and say he can 38 00:03:02,260 --> 00:03:03,600 be very persuasive. 39 00:03:03,800 --> 00:03:07,840 I think people who worked with him will tell you he was charismatic. They 40 00:03:07,840 --> 00:03:08,739 followed him. 41 00:03:08,740 --> 00:03:10,720 They believed in his vision for the company. 42 00:03:11,300 --> 00:03:13,360 Warshak vision durable to buy. 43 00:03:14,300 --> 00:03:18,820 Something to enhance the lives of millions of men without having to get a 44 00:03:18,820 --> 00:03:19,820 doctor's prescription. 45 00:03:20,880 --> 00:03:26,240 To get his products noticed, Warshak plows most of his money into 46 00:03:27,200 --> 00:03:33,040 Since their target was men, they would advertise in the back of men's 47 00:03:33,040 --> 00:03:37,360 And I think they have stuff in Outside Magazine, Playboy, Penthouse. 48 00:03:38,660 --> 00:03:43,220 Warshak's early ads are tasteless and make over -the -top claims. 49 00:03:44,060 --> 00:03:48,400 They were kind of crude, sometimes kind of funny. It'll make you harder than 50 00:03:48,400 --> 00:03:49,400 Chinese arithmetic. 51 00:03:49,640 --> 00:03:52,420 You know, I'm sure they got some attention from people flipping through 52 00:03:52,420 --> 00:03:58,000 magazine. These early ads work well enough, but Warshak wants to attract 53 00:03:58,000 --> 00:03:59,000 customers. 54 00:03:59,860 --> 00:04:01,660 Enter Smiling Bob. 55 00:04:02,200 --> 00:04:06,720 The ads are eye -catching, well -produced, and loaded with innuendo. 56 00:04:07,280 --> 00:04:10,980 When it comes to wood, it always helps to listen to an expert. 57 00:04:11,200 --> 00:04:13,520 The wonders of wood are brought to you by Enzyte. 58 00:04:14,020 --> 00:04:17,880 Worsak buys time on major cable channels and sports networks. 59 00:04:18,820 --> 00:04:23,100 It gave him a credibility that the other herbal supplement companies didn't 60 00:04:23,100 --> 00:04:26,400 have. As opposed to finding it on the back of some men's magazine, they're 61 00:04:26,400 --> 00:04:31,520 seeing this thing advertised in a very slick way on TV, not unlike the As for 62 00:04:31,520 --> 00:04:33,800 Viagra and other legitimate pharmaceuticals. 63 00:04:34,040 --> 00:04:37,500 Warshak is bringing in approximately $100 million. 64 00:04:38,500 --> 00:04:44,160 He rents a large office and warehouse just outside of Cincinnati and increases 65 00:04:44,160 --> 00:04:45,160 his staff. 66 00:04:46,360 --> 00:04:51,340 Besides Insight, Berkeley produces a host of other supplements, claiming to 67 00:04:51,340 --> 00:04:54,700 everything from increasing energy to managing weight. 68 00:04:54,960 --> 00:04:58,740 There's even a pill to boost women's libidos. 69 00:04:59,300 --> 00:05:01,880 But Insight is its cash cow. 70 00:05:04,620 --> 00:05:07,580 Ryan first hears about Insight in 2001. 71 00:05:08,680 --> 00:05:11,840 He asks that his identity be concealed. 72 00:05:12,460 --> 00:05:19,280 They said it would basically increase your size up to 24%. After a time, 73 00:05:19,300 --> 00:05:24,080 the blood flow would actually increase the size. The vessels will actually 74 00:05:24,080 --> 00:05:29,600 stretch. They said most men experience an increase in length and roundness 75 00:05:29,600 --> 00:05:30,780 within three to four weeks. 76 00:05:32,080 --> 00:05:37,780 The commercials promise a double your money back guarantee if customers aren't 77 00:05:37,780 --> 00:05:39,100 completely satisfied. 78 00:05:40,500 --> 00:05:44,340 If you ask 99 out of 100 guys, would you like to be bigger? 79 00:05:45,420 --> 00:05:46,660 They're all going to say yes. 80 00:05:47,600 --> 00:05:49,180 So, yeah, I was curious. 81 00:05:49,600 --> 00:05:51,840 And I thought, well, nothing to lose. 82 00:05:54,660 --> 00:05:59,020 Brian logs on to Berkley's website and gives his credit card information. 83 00:05:59,710 --> 00:06:03,470 He pays $400 for an eight -month supply of enzyme. 84 00:06:05,030 --> 00:06:07,670 Customers like Brian are keeping Berkeley in business. 85 00:06:08,430 --> 00:06:10,090 And business is good. 86 00:06:10,550 --> 00:06:11,550 Very good. 87 00:06:13,250 --> 00:06:16,830 The company is bringing in more than $100 million a year. 88 00:06:18,490 --> 00:06:22,550 President and CEO Stephen Warshak has struck gold. 89 00:06:23,270 --> 00:06:27,590 He had a great business sense. He was a genius at marketing. 90 00:06:28,010 --> 00:06:31,810 He knew exactly what it took to get customers into the fold. 91 00:06:32,570 --> 00:06:37,090 Warshak may know how to attract customers, but can he keep them happy? 92 00:06:40,110 --> 00:06:44,130 Brian becomes disgruntled shortly after his shipment of enzyme arrives. 93 00:06:45,750 --> 00:06:48,090 The first shipment was actually incomplete. 94 00:06:48,850 --> 00:06:52,390 They sent me only just a partial shipment. 95 00:06:53,290 --> 00:06:56,170 Brian eventually gets the rest of his order. 96 00:06:56,670 --> 00:07:00,530 But on his credit card statement the following month, he sees Berkeley has 97 00:07:00,530 --> 00:07:03,470 charged him an additional $122. 98 00:07:04,150 --> 00:07:06,190 But Brian has already paid in full. 99 00:07:06,550 --> 00:07:08,810 Now he is out $522. 100 00:07:09,970 --> 00:07:11,610 Brian calls the company. 101 00:07:12,010 --> 00:07:15,230 They said, well, sure, no problem. We'll go ahead and process that. 102 00:07:15,630 --> 00:07:19,510 The following month, it had not been taken off, so I called them up again. 103 00:07:19,730 --> 00:07:22,650 Well, it takes a while to get these things processed. 104 00:07:23,010 --> 00:07:25,250 It could be a few weeks. Third month, same thing. 105 00:07:25,780 --> 00:07:30,120 Brian calls customer service repeatedly over the next six months before the 106 00:07:30,120 --> 00:07:32,960 charges are finally taken off his credit card. 107 00:07:33,460 --> 00:07:38,880 Adding to Brian's frustration, after taking Insight for eight months, he 108 00:07:38,960 --> 00:07:40,100 it doesn't work. 109 00:07:40,680 --> 00:07:43,520 I went the entire eight months, just like they advertised. 110 00:07:43,940 --> 00:07:45,660 You know, I'm willing to give them the benefit of the doubt. 111 00:07:46,100 --> 00:07:48,220 Maybe it would take longer for me, I didn't know. 112 00:07:48,800 --> 00:07:49,800 Nothing happened. 113 00:07:50,960 --> 00:07:52,540 No, there's no change at all. 114 00:07:52,990 --> 00:07:57,190 Brian contacts the Better Business Bureau and learns he's not alone. 115 00:07:57,590 --> 00:08:01,550 Several hundred consumer complaints have been filed against Berkeley. 116 00:08:01,950 --> 00:08:06,630 This was something of a Jekyll Hyde operation that, you know, on one hand, 117 00:08:06,630 --> 00:08:11,650 looked like a legitimate operation with national marketing and presence on cable 118 00:08:11,650 --> 00:08:17,390 TV. But at the same time, you had, with that kind of volume of complaints, you 119 00:08:17,390 --> 00:08:19,290 knew that something was wrong here. 120 00:08:20,520 --> 00:08:26,580 When American Greed continues, Berkeley's business practices attract 121 00:08:26,580 --> 00:08:32,860 attention from the media and the feds. Federal prosecutors and postal service 122 00:08:32,860 --> 00:08:35,520 and the FBI, everybody started jumping in. 123 00:08:35,740 --> 00:08:39,299 They're all wondering, are customers getting the shaft? 124 00:08:50,790 --> 00:08:56,170 In 2003, 37 -year -old Stephen Warshak's company, Berkeley Premium 125 00:08:56,170 --> 00:09:00,590 Nutraceuticals, is making $100 million in annual sales. 126 00:09:01,130 --> 00:09:05,910 Its male enhancement pill, Insight, is the top -selling sexual enhancement 127 00:09:05,910 --> 00:09:07,150 supplement on the market. 128 00:09:08,130 --> 00:09:13,150 From the outside looking in, Warshak appears to be a success story. 129 00:09:13,390 --> 00:09:18,030 Behind closed doors at Berkeley's corporate headquarters, it's another 130 00:09:19,280 --> 00:09:24,780 The impression of the company from an outsider or somebody new, you think, oh, 131 00:09:24,780 --> 00:09:25,780 what a nice company. 132 00:09:25,860 --> 00:09:28,040 This is nice. And they pay me every week. 133 00:09:28,760 --> 00:09:31,460 John Bradley works in the call center. 134 00:09:32,700 --> 00:09:36,820 All of a sudden the phones would ring and you knew at that time that there 135 00:09:36,820 --> 00:09:40,540 be an ad playing somewhere to call for your free sample. 136 00:09:41,500 --> 00:09:45,480 Because everything would light up as far as telephone calls and noise. 137 00:09:47,150 --> 00:09:51,690 Call center employees read from scripts which explain Berkeley's so -called 138 00:09:51,690 --> 00:09:53,010 continuity program. 139 00:09:53,630 --> 00:09:58,090 It's an agreement stating customers will keep receiving the product and be 140 00:09:58,090 --> 00:10:00,610 billed for it unless they call to cancel. 141 00:10:01,490 --> 00:10:07,250 Once you get your free sample, if you don't call within 30 days, you're going 142 00:10:07,250 --> 00:10:09,470 get billed for a three -month supply. 143 00:10:10,330 --> 00:10:13,050 We had to tell them that if... 144 00:10:13,420 --> 00:10:19,160 they didn't call and cancel, they would automatically be billed. The continuity 145 00:10:19,160 --> 00:10:22,080 program is essential to Warshak's business. 146 00:10:22,440 --> 00:10:27,520 He sends numerous emails to his top executives stating that automatic 147 00:10:27,520 --> 00:10:30,440 billing is the lifeblood of the company. 148 00:10:31,080 --> 00:10:35,280 Initially, John is impressed with Warshak's business sense. 149 00:10:35,800 --> 00:10:39,840 Well, he's obviously a good businessman because the phones were ringing off the 150 00:10:39,840 --> 00:10:46,040 hook. I personally thought that he was a very bright guy, and I just thought he 151 00:10:46,040 --> 00:10:47,700 was a go -getter. 152 00:10:48,960 --> 00:10:53,500 Soon, Bradley is promoted to shift leader in the customer service 153 00:10:54,020 --> 00:10:57,980 That's when he starts to suspect something isn't right at Berkeley. 154 00:10:59,180 --> 00:11:04,420 Customer service reps are reporting a high volume of calls from dissatisfied 155 00:11:04,420 --> 00:11:05,420 customers. 156 00:11:05,840 --> 00:11:09,280 It's got to the point you're almost on a first -name basis with the people 157 00:11:09,280 --> 00:11:10,280 calling in. 158 00:11:10,540 --> 00:11:11,540 The problem? 159 00:11:11,700 --> 00:11:14,340 They're getting insight, and they don't want it. 160 00:11:15,200 --> 00:11:18,960 Customers try to cancel, but their credit cards are still being charged. 161 00:11:19,480 --> 00:11:22,820 In most cases, the amounts are between $1 to $200. 162 00:11:23,520 --> 00:11:27,800 And month after month, their losses are starting to pile up. 163 00:11:28,160 --> 00:11:33,040 The continuity program has become a scam to entrap customers. 164 00:11:33,560 --> 00:11:36,380 I told Warshak, give these people credit. 165 00:11:36,640 --> 00:11:39,100 And he would say, oh, I wasn't aware. 166 00:11:40,270 --> 00:11:41,450 I wasn't aware of that. 167 00:11:42,770 --> 00:11:43,850 He was aware. 168 00:11:44,230 --> 00:11:45,230 He knew. 169 00:11:45,750 --> 00:11:47,570 But he was a real bright guy. 170 00:11:48,010 --> 00:11:49,290 So I knew he knew. 171 00:11:50,770 --> 00:11:55,350 Warshak attributes the botched credits to typical growing pains of a company 172 00:11:55,350 --> 00:11:58,390 that expanded as quickly as Berkeley had. 173 00:11:59,330 --> 00:12:04,550 He assures John the credits will be taken care of. But they aren't. 174 00:12:11,180 --> 00:12:16,300 Michigan residents Ellie and Bob Price come to know all about Berkeley's 175 00:12:16,300 --> 00:12:17,300 continuity program. 176 00:12:17,780 --> 00:12:24,560 In 1995, 29 -year -old Ellie learns she has to have major surgery. 177 00:12:25,040 --> 00:12:30,180 She was getting cysts on her ovaries, so she had to get a complete hysterectomy. 178 00:12:30,620 --> 00:12:35,920 Ellie's surgery goes well, but as a side effect, her hormone levels decrease, 179 00:12:36,040 --> 00:12:38,280 and with them, her sex drive. 180 00:12:38,990 --> 00:12:42,190 And I would just tell her, you know, don't worry about it. It's okay. Once we 181 00:12:42,190 --> 00:12:45,070 get this thing figured out with the hormone replacement, I'm sure things 182 00:12:45,070 --> 00:12:46,070 fine. 183 00:12:46,370 --> 00:12:48,130 But Ellie becomes frustrated. 184 00:12:49,310 --> 00:12:54,810 Then, in 2003, she hears an ad for Avlamil on the radio, the Berkeley 185 00:12:54,810 --> 00:12:57,550 that claims to boost women's libido. 186 00:12:57,770 --> 00:13:00,290 Ellie orders a free one -month supply. 187 00:13:00,890 --> 00:13:05,510 The lady told her this is just strictly a sample pack to try the product and see 188 00:13:05,510 --> 00:13:08,910 if she liked it, if she liked it, she could order more after that, and that 189 00:13:08,910 --> 00:13:11,790 needed the debit card number just for shipping and handling. 190 00:13:12,910 --> 00:13:15,950 But Ellie believes Avlamil does nothing. 191 00:13:16,290 --> 00:13:20,410 Since she doesn't call back to order more, she's surprised to get another 192 00:13:20,410 --> 00:13:21,750 package the next month. 193 00:13:22,390 --> 00:13:23,610 And the next month. 194 00:13:24,520 --> 00:13:29,980 Each time, an automatic withdrawal in the amount of $35 is debited from her 195 00:13:29,980 --> 00:13:30,980 checking account. 196 00:13:31,480 --> 00:13:36,380 Ellie calls Berkeley several times and gets nowhere, so Bob steps in. 197 00:13:37,160 --> 00:13:38,680 I explained the situation. 198 00:13:38,940 --> 00:13:44,040 I told them that whatever they had done was fine, that, you know, just if they 199 00:13:44,040 --> 00:13:47,300 would stop sending the product, that we wouldn't worry about it any further. 200 00:13:47,980 --> 00:13:52,600 But the monthly charges keep piling up for Bob and Ellie. 201 00:13:53,160 --> 00:13:54,560 and countless other customers. 202 00:13:56,620 --> 00:14:03,220 In 2003, consumer complaints against Berkeley are building, with thousands 203 00:14:03,220 --> 00:14:04,500 at the Better Business Bureau. 204 00:14:06,540 --> 00:14:11,680 Cincinnati Magazine illustrates Berkeley's troubles with a comic strip. 205 00:14:12,360 --> 00:14:18,280 Berkeley was considered the worst offender in the area of business 206 00:14:19,240 --> 00:14:22,780 The uproar causes several federal agencies to take action. 207 00:14:22,980 --> 00:14:29,440 With the U .S. Postal Inspection Service leading the way, the FDA, FBI, and IRS 208 00:14:29,440 --> 00:14:32,180 team up and begin a criminal investigation. 209 00:14:32,860 --> 00:14:33,860 Their focus? 210 00:14:34,340 --> 00:14:36,480 Berkeley's illegal billing practices. 211 00:14:37,600 --> 00:14:39,820 Continuity in and of itself is not illegal. 212 00:14:40,240 --> 00:14:44,720 What Berkeley did was they set up a continuity program that didn't disclose 213 00:14:44,720 --> 00:14:45,720 it was a continuity program. 214 00:14:47,020 --> 00:14:50,700 Berkeley sets up several roadblocks when people try to cancel. 215 00:14:51,620 --> 00:14:56,400 Callers are asked to provide documentation of their sexual history. 216 00:14:56,760 --> 00:15:01,840 When you would have to write a letter documenting your sexual history in order 217 00:15:01,840 --> 00:15:03,540 to get a credit? 218 00:15:05,060 --> 00:15:06,300 Something wrong there. 219 00:15:07,060 --> 00:15:09,560 Who's going to do it? You just say, ah, forget it. 220 00:15:10,900 --> 00:15:15,560 Some callers are told to contact Berkeley's vice president of customer 221 00:15:16,060 --> 00:15:17,060 Michael Johnson. 222 00:15:17,460 --> 00:15:20,820 There's just one problem. Mr. Johnson doesn't exist. 223 00:15:21,420 --> 00:15:25,420 I don't know who Michael Johnson was. Maybe there was a Michael Johnson. 224 00:15:26,020 --> 00:15:31,120 I just told my people to take the call that they were taking the calls from 225 00:15:31,120 --> 00:15:32,120 Michael Johnson. 226 00:15:32,700 --> 00:15:36,080 Later, I figured out there wasn't a Michael Johnson. 227 00:15:36,840 --> 00:15:42,740 In other cases, unsatisfied inside buyers are asked to submit notarized 228 00:15:42,740 --> 00:15:43,740 from their doctors. 229 00:15:44,540 --> 00:15:47,140 verifying that their penises haven't grown. 230 00:15:49,080 --> 00:15:54,160 Ellie Price, who takes Berkeley's female sex enhancement product, knows this 231 00:15:54,160 --> 00:15:55,420 game all too well. 232 00:15:56,280 --> 00:16:00,200 The gentleman on the phone told me that before they could take my wife off this 233 00:16:00,200 --> 00:16:04,440 supplemental treatment that I would have to have her go to a doctor, get a 234 00:16:04,440 --> 00:16:05,600 physical, and get a clearance. 235 00:16:06,340 --> 00:16:11,540 And my response to him was, did you have a doctor put her on this treatment? 236 00:16:12,650 --> 00:16:17,390 Bob knows Berkley is scamming them, and the circumstances are starting to take a 237 00:16:17,390 --> 00:16:18,730 toll on his marriage. 238 00:16:19,810 --> 00:16:21,870 We had a couple arguments over the situation. 239 00:16:22,470 --> 00:16:25,370 I was unhappy that she thought she had to do something like that. 240 00:16:25,870 --> 00:16:29,490 I was upset and I was angry that they did this to her, put her in this 241 00:16:29,490 --> 00:16:30,490 situation. 242 00:16:32,890 --> 00:16:38,430 In 2003, Stephen Warshak and several of his top executives are served with 243 00:16:38,430 --> 00:16:39,430 subpoenas. 244 00:16:40,910 --> 00:16:45,430 A short time later, Warshak begins to raid Berkeley's coffers. 245 00:16:45,630 --> 00:16:52,530 From January to November 2004, he deposits $7 .7 million into his and 246 00:16:52,530 --> 00:16:59,430 his wife's bank account and another $16 .5 million into a personal 247 00:16:59,430 --> 00:17:04,010 account. He was just very arrogant about it. Somehow or another, he thought that 248 00:17:04,010 --> 00:17:09,329 he was going to get through it all and be able to pick up where he left off. 249 00:17:09,800 --> 00:17:12,280 and that these charges would magically go away. 250 00:17:12,640 --> 00:17:18,300 When American greed returns, will Warshak and his arrogance be able to 251 00:17:18,300 --> 00:17:19,300 prison? 252 00:17:30,800 --> 00:17:37,740 On March 16, 2005, with a search warrant in hand, 50 armed agents from the U .S. 253 00:17:37,760 --> 00:17:44,460 Postal Inspection Service, FBI, IRS, and FDA descend on the headquarters of 254 00:17:44,460 --> 00:17:47,080 Berkeley Premium Nutraceuticals. 255 00:17:47,580 --> 00:17:54,200 They brought in a number of trucks. They loaded a large number of boxes of files 256 00:17:54,200 --> 00:17:58,320 and computers and hard drives and hauled them off to a secure location. 257 00:17:58,990 --> 00:18:04,730 Officials removed seven tons of evidence, including 24 laptops, computer 258 00:18:04,730 --> 00:18:08,590 drives, marketing plans, even the unopened mail. 259 00:18:08,810 --> 00:18:13,550 In all, the government takes 13 ,500 documents. 260 00:18:14,010 --> 00:18:20,050 The raid results in a 112 -count indictment against Warshak and his top 261 00:18:20,050 --> 00:18:21,290 September 2006. 262 00:18:22,410 --> 00:18:27,550 Fourteen of the company's executives, including Warshak, his mother, his 263 00:18:27,690 --> 00:18:32,430 and his brother -in -law, are charged with federal crimes including fraud and 264 00:18:32,430 --> 00:18:33,430 money laundering. 265 00:18:33,490 --> 00:18:39,690 Federal authorities believe that between 2001 and 2006, Warshak and his top 266 00:18:39,690 --> 00:18:45,830 execs took $100 million without customers' consent by repeatedly billing 267 00:18:45,830 --> 00:18:48,630 credit cards for refills they didn't order. 268 00:18:49,450 --> 00:18:53,630 I think in the eyes of the government, the company went beyond just making it 269 00:18:53,630 --> 00:18:54,650 difficult for people. 270 00:18:54,950 --> 00:19:00,610 It directly tried to mislead people. It went to great lengths to keep people 271 00:19:00,610 --> 00:19:02,050 from returning product. 272 00:19:02,250 --> 00:19:06,970 And most importantly, it went in and took charges on people's credit cards 273 00:19:06,970 --> 00:19:07,970 without permission. 274 00:19:08,150 --> 00:19:11,570 And that was a huge problem for them to get past. 275 00:19:12,300 --> 00:19:16,000 In January 2008, Stephen Warshak goes on trial. 276 00:19:16,260 --> 00:19:19,200 It's one of the biggest consumer fraud cases in Ohio history. 277 00:19:19,540 --> 00:19:23,680 Warshak's lawyers assert that all charges can be attributed to mistakes 278 00:19:23,680 --> 00:19:28,860 when a company grows from zero to $200 million in less than eight years. 279 00:19:29,550 --> 00:19:33,970 And Warshak's entire argument was that this company was growing so fast, we 280 00:19:33,970 --> 00:19:35,870 couldn't keep up with some of the problems that were developing. 281 00:19:36,070 --> 00:19:40,230 We did our best. We worked hard to fix it. But sometimes we didn't quite do as 282 00:19:40,230 --> 00:19:41,230 well as we should have done. 283 00:19:41,310 --> 00:19:44,350 I don't think that you accidentally start ripping people off and scamming 284 00:19:44,410 --> 00:19:48,390 I think that that's what he created, and that's what he intended to do. 285 00:19:49,510 --> 00:19:54,690 In the end, it's a mountain of damning emails, impossible to defend, that would 286 00:19:54,690 --> 00:19:56,350 ultimately bring Warshak down. 287 00:19:57,310 --> 00:19:58,530 In one email... 288 00:19:58,760 --> 00:20:03,460 Warshak writes, I don't care if the card is taken from Grandma's purse so Junior 289 00:20:03,460 --> 00:20:07,320 can buy some insight. If the card is good, I want a ship. 290 00:20:07,940 --> 00:20:12,960 But the most damning email is written by Warshak's nephew, Jason Cosman. 291 00:20:13,580 --> 00:20:18,380 In it, Cosman sketches out a plan for wringing yet more money out of 292 00:20:19,100 --> 00:20:23,940 He suggests that after customers cancel their orders, Company reps call them 293 00:20:23,940 --> 00:20:28,680 back pretending to represent a hospital offering a cheaper and more effective 294 00:20:28,680 --> 00:20:34,420 product. The poor customer bites, Kosman writes, thinking he's getting a better 295 00:20:34,420 --> 00:20:37,700 deal, but he's actually getting taken for a second time. 296 00:20:39,580 --> 00:20:42,820 Kosman goes on to write, the scheme is beautiful. 297 00:20:43,140 --> 00:20:47,920 Dreamed it up after many a bong hit one night. These customers are fish in a 298 00:20:47,920 --> 00:20:48,859 barrel, man. 299 00:20:48,860 --> 00:20:50,420 Exploit their shit out of them. 300 00:20:51,440 --> 00:20:54,760 This is what the company was about. It wasn't about selling a product. It was 301 00:20:54,760 --> 00:20:55,780 about exploiting people. 302 00:20:56,520 --> 00:20:59,700 Warshak has forwarded the email to five Berkeley employees. 303 00:21:00,220 --> 00:21:04,240 In the subject line, he's written, The student has become the teacher. 304 00:21:04,620 --> 00:21:08,040 Our company was built on this kind of creative thinking. 305 00:21:08,280 --> 00:21:09,980 Thanks for the wake -up call, Jason. 306 00:21:10,800 --> 00:21:16,100 At trial, his defense team argues Warshak forwarded the email to others as 307 00:21:16,100 --> 00:21:18,660 joke. I think the issue for... 308 00:21:18,960 --> 00:21:22,740 Federal prosecutors became, you know, this is in the middle of all of this, 309 00:21:22,740 --> 00:21:27,920 know, uproar going on about the company, and yet he's still telling people that 310 00:21:27,920 --> 00:21:30,560 this is the kind of thinking that we want to embrace. 311 00:21:30,960 --> 00:21:35,460 The prosecutors made a pretty strong case that his actions supported what he 312 00:21:35,460 --> 00:21:36,460 said in that email. 313 00:21:36,860 --> 00:21:43,480 On February 22, 2008, Stephen Warshak is convicted on 93 counts of conspiracy, 314 00:21:44,000 --> 00:21:45,960 fraud, and money laundering. 315 00:21:46,760 --> 00:21:52,120 Judge Arthur Spiegel, who presides over the case, says Warshak was motivated by 316 00:21:52,120 --> 00:21:53,120 greed. 317 00:21:54,080 --> 00:21:59,680 The judge made a point to say that not only is he taking money from people, but 318 00:21:59,680 --> 00:22:01,240 he's preying on their insecurities. 319 00:22:01,460 --> 00:22:05,980 And that seemed to bother the judge, that this was something that he knew he 320 00:22:05,980 --> 00:22:06,980 could exploit. 321 00:22:07,380 --> 00:22:11,340 While most of his top executives have gotten one - to two -year sentences, 322 00:22:11,840 --> 00:22:14,600 Warshak doesn't get off nearly so easily. 323 00:22:15,720 --> 00:22:22,380 He's ordered to pay $494 million in forfeiture, and he's sentenced to 25 324 00:22:22,380 --> 00:22:24,380 years in federal prison. 325 00:22:26,100 --> 00:22:32,240 25 years is a long time, especially, again, when you consider that no one 326 00:22:32,240 --> 00:22:37,720 everything. You know, nobody lost a fortune here. Nobody went bankrupt. But 327 00:22:37,720 --> 00:22:39,820 was petty theft on a massive scale. 328 00:22:41,380 --> 00:22:46,340 Michigan residents Bob and Ellie Price never recovered their losses, but for 329 00:22:46,340 --> 00:22:48,560 Bob, it wasn't just about the money. 330 00:22:49,360 --> 00:22:53,560 The money wasn't really the thing that motivated me. It was the way I was 331 00:22:53,560 --> 00:22:56,640 treated by these people, and it was what they did to my wife. 332 00:22:59,360 --> 00:23:05,120 Berkeley customer Brian decides to take his fight one step further. He takes 333 00:23:05,120 --> 00:23:08,120 part in a class -action civil lawsuit against Berkeley. 334 00:23:08,970 --> 00:23:12,370 The company ends up settling for $4 .7 million. 335 00:23:13,690 --> 00:23:15,590 I was awarded $17 ,000. 336 00:23:16,550 --> 00:23:20,150 I'm glad they had to pay me. I'm glad they had to pay the other people in the 337 00:23:20,150 --> 00:23:24,910 class. You know, they're counting on people putting their money down and not 338 00:23:24,910 --> 00:23:26,010 saying anything about it. 339 00:23:26,610 --> 00:23:30,490 I actually decided to stand up to these guys and say, hey, this is wrong. 340 00:23:30,690 --> 00:23:34,130 I don't care what kind of embarrassment I have to go through. I'm going to get 341 00:23:34,130 --> 00:23:35,190 my money back from you guys. 342 00:23:36,410 --> 00:23:41,530 Enzyte is still on the market. The product itself was never deemed harmful 343 00:23:41,530 --> 00:23:44,510 consumers, just Berkeley's business practices. 344 00:23:45,970 --> 00:23:50,230 A new company called Byanda has purchased Enzyte. 345 00:23:50,750 --> 00:23:55,410 And smiling Bob, he's still on the air eliciting chuckles. 346 00:23:55,850 --> 00:23:58,250 Looks like it's all first class from here. 347 00:23:58,610 --> 00:24:01,130 And helping to rake in millions. 348 00:24:13,220 --> 00:24:18,020 Atlanta, southern boomtown, where people know how to enjoy the finer things in 349 00:24:18,020 --> 00:24:19,020 life. 350 00:24:19,740 --> 00:24:25,140 But even here, the lavish wedding party thrown by hedge fund superstar Kirk 351 00:24:25,140 --> 00:24:27,380 Wright was a bit over the top. 352 00:24:28,700 --> 00:24:32,640 There were, you know, bars carved out of ice, three of them, where you could 353 00:24:32,640 --> 00:24:36,120 have champagne and lobster and sushi and everything else in the world. 354 00:24:37,930 --> 00:24:42,490 The reception goes on even as Wright's hedge fund is on the brink of collapse. 355 00:24:43,370 --> 00:24:47,750 Only a sociopathic personality can conduct himself in that manner. 356 00:24:48,570 --> 00:24:52,150 The wedding party is Kirk Wright's last tango. 357 00:24:53,110 --> 00:24:58,430 When Wright exits the stage, he leads the FBI on a national manhunt. 358 00:25:00,190 --> 00:25:03,030 Kirk Wright grows up in the Bronx, New York. 359 00:25:04,490 --> 00:25:08,730 It was clear that he was sort of an individual who had pulled himself up by 360 00:25:08,730 --> 00:25:12,090 bootstraps. He wasn't born into affluence or anything like that. 361 00:25:12,690 --> 00:25:16,670 He came into a little bit of money because, unfortunately, he had a bad car 362 00:25:16,670 --> 00:25:17,670 wreck. 363 00:25:18,870 --> 00:25:20,690 And there was a settlement from that. 364 00:25:20,890 --> 00:25:25,150 And he initially started investing that money when he was 19 and 20. 365 00:25:26,030 --> 00:25:30,110 The settlement from the car wreck also helps put him through graduate school. 366 00:25:30,890 --> 00:25:33,850 He gets a master's degree from Harvard in 1995. 367 00:25:35,230 --> 00:25:41,730 A year later, Wright forms International Management Associates, or IMA, to 368 00:25:41,730 --> 00:25:42,830 operate hedge funds. 369 00:25:44,350 --> 00:25:49,610 Calvin Paris, the father of one of Wright's Harvard classmates, invests 370 00:25:49,610 --> 00:25:52,550 ,000 with Wright in November 1999. 371 00:25:54,350 --> 00:25:57,910 That got into his investments for the month of December. 372 00:25:58,890 --> 00:26:04,650 And when I got my monthly market value for December, I had $145 ,000. 373 00:26:05,850 --> 00:26:11,890 An unbelievable increase in one month. The market is hot, but Wright's return 374 00:26:11,890 --> 00:26:16,870 astronomical. Wright's financial prowess does not go unnoticed. 375 00:26:17,150 --> 00:26:22,230 He got introduced through mutual friends and investors to these two guys in 376 00:26:22,230 --> 00:26:23,950 Atlanta who were anesthesiologists. 377 00:26:24,700 --> 00:26:28,840 who had an entrepreneurial bent and were looking for a place where they could 378 00:26:28,840 --> 00:26:31,300 branch out a little bit more from the business of being doctors. 379 00:26:31,840 --> 00:26:36,900 Within a year, the two anesthesiologists are not only invested, they persuade 380 00:26:36,900 --> 00:26:39,020 Wright to relocate to Atlanta. 381 00:26:39,780 --> 00:26:44,740 The city had grown by a third in population from 1990 to 2000. 382 00:26:45,630 --> 00:26:49,570 There was a lot of business opportunity, but there was a very high cultural 383 00:26:49,570 --> 00:26:52,570 comfort level for people who were black and young professionals. 384 00:26:52,930 --> 00:26:57,990 As it turns out, the 30 -year -old is in the right place at the right time. 385 00:26:58,750 --> 00:27:00,670 There was a lot of money to invest. 386 00:27:01,030 --> 00:27:05,230 There were relatively few hedge funds, and very, very few that were run by 387 00:27:05,230 --> 00:27:06,230 African Americans. 388 00:27:06,590 --> 00:27:11,430 So in some ways, there was a need that was just waiting to be met here by 389 00:27:11,430 --> 00:27:12,470 somebody like Kirk Wright. 390 00:27:13,580 --> 00:27:19,480 The two doctors use their contacts to tap professionals like themselves, 391 00:27:19,480 --> 00:27:23,640 with ample wealth and little time or expertise to manage it. 392 00:27:23,880 --> 00:27:27,440 So when people like Mr. Wright are able to come to him and use terms, you know, 393 00:27:27,480 --> 00:27:31,660 margin calls and short sales and options trading, and throw out the big word, 394 00:27:31,920 --> 00:27:35,740 the person's heard that word before, they might not completely understand it, 395 00:27:35,800 --> 00:27:38,520 but they think, well, he's using the right terms. 396 00:27:39,020 --> 00:27:42,360 But even savvy investors get hooked as well. 397 00:27:43,660 --> 00:27:49,940 In 2001, Los Angeles -based real estate developer Roger O 'Neill agrees to meet 398 00:27:49,940 --> 00:27:50,819 with Wright. 399 00:27:50,820 --> 00:27:57,020 He seemed like a very knowledgeable, articulate guy, and he told me a little 400 00:27:57,020 --> 00:28:00,000 about his background, that he was from Harvard. 401 00:28:00,580 --> 00:28:06,340 By the end of year 2002, I had pretty much liquidated most of my portfolio 402 00:28:06,340 --> 00:28:09,500 my investment group and transferred it over to International Management and 403 00:28:09,500 --> 00:28:10,500 Associates. 404 00:28:11,020 --> 00:28:14,820 Eventually, O 'Neill has $13 million in IMA accounts. 405 00:28:16,060 --> 00:28:20,980 Little do he and other clients know, a portion of their money is being drained 406 00:28:20,980 --> 00:28:26,220 off. An enormous amount of money, over $10 million, was basically the 407 00:28:26,220 --> 00:28:27,680 defendant's own personal checkbook. 408 00:28:27,880 --> 00:28:31,160 That's what the defendant was living out of, this so -called expense account. 409 00:28:32,160 --> 00:28:34,980 But Wright appears to deliver the goods. 410 00:28:35,780 --> 00:28:37,800 Statement from his Taurus Fund. 411 00:28:38,350 --> 00:28:44,890 Trumpet annual returns as high as 20%. Returns that high attract plenty of 412 00:28:44,890 --> 00:28:48,270 attention. Wright continues to work his game. 413 00:28:50,810 --> 00:28:54,990 Mr. Wright was able to get two NFL football players who were retired to 414 00:28:54,990 --> 00:28:55,990 work for him. 415 00:28:56,190 --> 00:29:00,190 And this led to them going out and getting some of their friends that were 416 00:29:00,190 --> 00:29:01,770 the NFL to also invest. 417 00:29:03,340 --> 00:29:08,680 One of Wright's new hires is former Denver Bronco defensive star Steve 418 00:29:09,000 --> 00:29:13,320 He convinces other players to buy in, and Wright does the rest. 419 00:29:13,860 --> 00:29:17,420 None of the NFL players involved would talk to American Green. 420 00:29:17,680 --> 00:29:22,420 The experience with IMA is an embarrassment they want to put behind 421 00:29:25,160 --> 00:29:29,500 Up next, what happens when football players get ripped off? 422 00:29:30,480 --> 00:29:33,020 Kirk Wright is about to get blitzed. 423 00:29:44,240 --> 00:29:48,660 Atlanta hedge fund manager Kirk Wright is building a financial empire. 424 00:29:49,380 --> 00:29:55,120 He claims to have a secret recipe for stock market success, but he's not 425 00:29:55,120 --> 00:29:56,680 his investors what it is. 426 00:29:57,260 --> 00:29:59,940 And that's the classic conundrum of hedge funds. 427 00:30:00,360 --> 00:30:05,220 How much transparency do you have to have for your investors versus giving 428 00:30:05,220 --> 00:30:06,220 your secrets? 429 00:30:07,040 --> 00:30:11,560 International Management Associates grows to $84 million. 430 00:30:12,800 --> 00:30:15,840 All under Kirk Wright's personal management. 431 00:30:16,060 --> 00:30:20,640 He lavishes attention on investors and potential clients. 432 00:30:22,080 --> 00:30:26,180 He was spending a ton of money on travel and entertainment type expenses. 433 00:30:26,960 --> 00:30:31,240 flying people out for football games here at the Georgia Dome, showing them 434 00:30:31,240 --> 00:30:32,840 he was a successful businessman. 435 00:30:33,720 --> 00:30:38,840 He is spending on himself, too. There is a new house for his wife and son. 436 00:30:39,900 --> 00:30:44,020 When they purchased it, the front looked about like it does now. However, the 437 00:30:44,020 --> 00:30:47,220 entire back 20 feet or something did not exist. 438 00:30:47,720 --> 00:30:53,080 And they spent five and a half years adding on to the house. 439 00:30:53,900 --> 00:30:59,720 Building the pool and a great deal of work. They added marble floors, gold 440 00:30:59,720 --> 00:31:00,720 fixtures. 441 00:31:01,840 --> 00:31:04,620 His garage is filled with luxury cars. 442 00:31:04,880 --> 00:31:10,140 A Bentley, a Jaguar, an Aston Martin, a BMW, and a Lamborghini. 443 00:31:10,480 --> 00:31:13,420 It's an almost cartoonish version of modern success. 444 00:31:15,040 --> 00:31:17,540 But his home life is not picture perfect. 445 00:31:18,080 --> 00:31:22,580 In 2003, his wife files for divorce and leaves with the boys. 446 00:31:23,260 --> 00:31:27,940 She says that Kirk has changed, and she doesn't want to be a part of this new 447 00:31:27,940 --> 00:31:28,940 life. 448 00:31:29,420 --> 00:31:33,560 On the business side, some clients are wary of Wright as well. 449 00:31:34,360 --> 00:31:38,360 Calvin Paris asks a lawyer to evaluate him. 450 00:31:39,520 --> 00:31:43,840 He came into the office with Kirk, and he walked out feeling that everything 451 00:31:43,840 --> 00:31:47,980 okay. I came away with reassurance. 452 00:31:48,670 --> 00:31:54,390 of any doubts that I have. But Wright is covering market losses with cash from 453 00:31:54,390 --> 00:31:55,390 new investors. 454 00:31:55,670 --> 00:32:01,450 To keep IMA's statements looking solid, he resorts to something beyond creative 455 00:32:01,450 --> 00:32:06,250 accounting. He just made them up. He just took a template off of the Internet 456 00:32:06,250 --> 00:32:10,090 that the brokerage companies provided to the investors so that you could track 457 00:32:10,090 --> 00:32:11,090 your own investments. 458 00:32:11,150 --> 00:32:16,410 He filled it out, sent those in, and passed them off as actual statements. 459 00:32:17,680 --> 00:32:21,780 According to the government, Wright's employees aren't running the scam. 460 00:32:22,120 --> 00:32:26,660 They talk him into letting them form a more transparent division of the 461 00:32:28,080 --> 00:32:31,940 During its creation, an accountant uncovers something shocking. 462 00:32:32,880 --> 00:32:38,960 While Wright was reporting more than a 3 % gain in two of his funds, the company 463 00:32:38,960 --> 00:32:45,200 had actually lost value to the tune of 24%. The staff demands answers. 464 00:32:46,160 --> 00:32:49,900 The core group of anesthesiologists and football players asked for this 465 00:32:49,900 --> 00:32:54,020 confrontation, asked for this sit -down meeting, where Kirk Wright just wouldn't 466 00:32:54,020 --> 00:32:55,140 disclose any details. 467 00:32:55,480 --> 00:32:59,000 And things became very acrimonious very fast after that point. 468 00:32:59,360 --> 00:33:04,600 Wright tries to calm them with a $155 million account statement. 469 00:33:05,200 --> 00:33:07,920 But he won't let any of them examine the document. 470 00:33:09,100 --> 00:33:13,120 Atwater and other insiders start planning exit strategies. 471 00:33:14,480 --> 00:33:20,660 It's never been completely disclosed who leaked what to whom when, but it was 472 00:33:20,660 --> 00:33:26,060 very soon after that a tip came in to the SEC that something was awry at IMA. 473 00:33:27,060 --> 00:33:32,160 But Wright clearly thinks the best thing to do is pretend nothing's wrong. 474 00:33:33,120 --> 00:33:40,080 On October 22, 2005, he and his second wife throw that over -the -top 475 00:33:40,080 --> 00:33:41,080 wedding. 476 00:33:41,900 --> 00:33:46,680 He had to know that spending $500 ,000 on a wedding, he had to know on some 477 00:33:46,680 --> 00:33:49,520 level that that was not a smart move. 478 00:33:50,720 --> 00:33:53,080 The honeymoon is soon over. 479 00:33:53,740 --> 00:33:57,940 In December, Wright starts to give investors the runaround. 480 00:33:58,760 --> 00:34:03,280 Payments had been missed, checks had been bounced, and investors had started 481 00:34:03,280 --> 00:34:06,600 become very concerned that the money just was not there. 482 00:34:08,300 --> 00:34:12,520 And that was the point where Atwater said, He just felt physically sick. 483 00:34:12,900 --> 00:34:18,800 He knew that something was desperately wrong, and he had brought many of his 484 00:34:18,800 --> 00:34:21,739 friends in on this, and it was getting ready to break very bad. 485 00:34:22,080 --> 00:34:28,060 In an interview with Bloomberg News, Atwater states, In my wildest dreams, I 486 00:34:28,060 --> 00:34:29,840 never thought he was stealing money. 487 00:34:32,380 --> 00:34:34,980 2006 arrives in a downward spiral. 488 00:34:35,760 --> 00:34:39,100 Investors get no further than the receptionist when they call. 489 00:34:40,429 --> 00:34:43,850 I asked her, what's going on? And she said, oh, everything's fine. Just a 490 00:34:43,850 --> 00:34:45,110 shakeup in the company. 491 00:34:45,330 --> 00:34:48,630 But everything's fine. Don't worry about your money, Mr. Praris. Your money's 492 00:34:48,630 --> 00:34:51,070 safe. By February 2006, 493 00:34:52,030 --> 00:34:53,510 Kirk Wright will flee Atlanta. 494 00:34:54,610 --> 00:34:58,830 Next, with the feds on his trail, will Wright take the money and run? 495 00:34:59,110 --> 00:35:01,230 Or will he take a permanent vacation? 496 00:35:13,960 --> 00:35:15,580 In January 2006, 497 00:35:16,380 --> 00:35:20,380 International Management Associates of Atlanta still looks like a good 498 00:35:20,380 --> 00:35:26,680 investment. Its manager, Kirk Wright, claims the company has more than $150 499 00:35:26,680 --> 00:35:32,560 million under management. That month, retired businessman Alan Ehrlich follows 500 00:35:32,560 --> 00:35:35,300 up on a tip to check IMA out. 501 00:35:35,700 --> 00:35:40,160 I read all the paperwork. I called people for references, and everything 502 00:35:40,160 --> 00:35:41,160 checked. 503 00:35:41,960 --> 00:35:42,960 Unfortunately, 504 00:35:43,480 --> 00:35:47,200 His million is the last money invested with IMA. 505 00:35:49,240 --> 00:35:53,260 In Atlanta, everything is about to go down the drain. 506 00:35:54,240 --> 00:35:57,420 Investors who want payments are getting the runaround. 507 00:35:58,240 --> 00:36:02,080 Throughout the month of January, unfortunately, Kurt gave me excuse after 508 00:36:02,080 --> 00:36:06,580 of his business, that it was year -end, they were putting together all their tax 509 00:36:06,580 --> 00:36:10,960 information, that the operations had a lot of ongoing activity. 510 00:36:11,870 --> 00:36:17,650 A key group of investors, retired and current NFL players, band together to 511 00:36:17,650 --> 00:36:18,710 demand their money. 512 00:36:19,070 --> 00:36:21,110 Kirk Wright stonewalls them. 513 00:36:21,930 --> 00:36:25,190 Mr. Wright told the players, you'll get your money next month. 514 00:36:26,070 --> 00:36:28,810 Oh, I've had a problem with the banks. It'll be the next month. 515 00:36:29,090 --> 00:36:32,090 And then finally in February, they realized they probably weren't going to 516 00:36:32,090 --> 00:36:32,689 their money. 517 00:36:32,690 --> 00:36:39,210 On February 17th, the players go to court. A judge quickly freezes IMA's 518 00:36:40,430 --> 00:36:44,950 Ten days later, the Securities and Exchange Commission files charges 519 00:36:44,950 --> 00:36:46,050 been working on as well. 520 00:36:48,310 --> 00:36:53,250 When the FBI raids IMA's office, Wright's computer is missing. 521 00:36:53,550 --> 00:36:54,610 So is he. 522 00:36:55,470 --> 00:36:58,810 Well, it's not exactly road rage, but there was living room rage. 523 00:36:59,030 --> 00:37:00,210 You know, we heard that. 524 00:37:01,270 --> 00:37:06,330 The FBI and the SEC move in to recover what they can of IMA's assets. 525 00:37:07,240 --> 00:37:10,900 But there is less than $200 ,000 left. 526 00:37:11,680 --> 00:37:16,540 Even by the standards of forensic accountants who had seen Ponzi schemes 527 00:37:16,720 --> 00:37:18,180 they found surprisingly little. 528 00:37:18,600 --> 00:37:25,240 They found the physical office desks, chairs, valuables at the office, 529 00:37:25,300 --> 00:37:28,080 file cabinets. They didn't find much more at all. 530 00:37:29,740 --> 00:37:33,360 In the meantime, the FBI is hunting the man responsible. 531 00:37:35,050 --> 00:37:39,070 For three months, they chase every lead and check every possible hideout. 532 00:37:39,950 --> 00:37:42,730 But this is a fugitive case with a twist. 533 00:37:45,730 --> 00:37:50,450 While in hiding, Kirk Wright is giving interviews to the Wall Street Journal. 534 00:37:50,890 --> 00:37:56,690 He was calling us from a cell phone that was non -traceable, throwawayable, but 535 00:37:56,690 --> 00:38:00,330 still saying, well, I'm not on the run. I don't have anything to hide. I'm just 536 00:38:00,330 --> 00:38:01,370 being careful of my movements. 537 00:38:01,870 --> 00:38:06,490 Mr. Wright's explanation for that was that the investors, particularly the NFL 538 00:38:06,490 --> 00:38:11,330 investors, were so mad at him that he was afraid for his own personal safety. 539 00:38:12,150 --> 00:38:17,670 It was highly unusual to be reading about conversations in the paper that a 540 00:38:17,670 --> 00:38:22,110 fugitive is having with a reporter claiming not to be a fugitive when at 541 00:38:22,110 --> 00:38:25,090 same time we are doing everything we can to locate him. 542 00:38:25,670 --> 00:38:26,850 Even on the run. 543 00:38:27,360 --> 00:38:31,720 White -collar criminals typically maintain the lifestyle to which they 544 00:38:31,720 --> 00:38:32,720 become accustomed. 545 00:38:33,180 --> 00:38:35,280 That is certainly true of Kirk Wright. 546 00:38:35,840 --> 00:38:42,300 On May 17, 2006, the FBI catches up with him, lounging in a lap of luxury. 547 00:38:43,040 --> 00:38:47,900 And at the time of his arrest, he was laying by the pool at the Ritz -Carlton 548 00:38:47,900 --> 00:38:48,900 South Beach in Miami. 549 00:38:49,540 --> 00:38:53,200 By all accounts, didn't appear incredibly surprised to be found. 550 00:38:53,630 --> 00:38:58,690 He was just writing out the remaining days until, you know, the web did 551 00:38:58,690 --> 00:38:59,690 tighten in on him. 552 00:38:59,970 --> 00:39:04,330 The 35 -year -old is checked in to different accommodations. 553 00:39:05,710 --> 00:39:11,870 In May 2008, Kirk Wright goes on trial for 47 counts of fraud and money 554 00:39:11,870 --> 00:39:15,730 laundering. Former partners testify against him. 555 00:39:15,970 --> 00:39:21,390 His basic defense is that his losses were basically legitimate trading 556 00:39:22,280 --> 00:39:28,000 We always had a dispute with everyone, the government, the SEC, the bankruptcy 557 00:39:28,000 --> 00:39:31,060 trustee, as to what the total amount of the loss was. 558 00:39:32,040 --> 00:39:36,700 This was a defendant who made his living by convincing people to part with their 559 00:39:36,700 --> 00:39:40,360 money, basically be a salesman, and that's what we argued to the jury that 560 00:39:40,360 --> 00:39:42,980 was trying to do, basically to them, was sell them a story. 561 00:39:43,300 --> 00:39:48,300 The government wins the argument. On May 21, 2008, Kirk Wright is convicted on 562 00:39:48,300 --> 00:39:49,300 all counts. 563 00:39:49,480 --> 00:39:54,200 The man, who so recently was on top of the world, seems to take the verdict 564 00:39:54,200 --> 00:39:58,460 composure. We met with him 15 or 20 minutes after that. 565 00:39:58,820 --> 00:40:02,780 And he seemed pretty upbeat at that point for someone who had just lost a 566 00:40:02,780 --> 00:40:03,880 and a grueling trial. 567 00:40:04,120 --> 00:40:08,500 He'll have to wait three months for sentencing, but he knows it could run 568 00:40:08,500 --> 00:40:09,660 hundreds of years. 569 00:40:10,300 --> 00:40:13,400 On one level, this is a very... 570 00:40:14,570 --> 00:40:19,870 Proud and confident person that it's hard to imagine spending the rest of 571 00:40:19,870 --> 00:40:24,890 life in jail with no possibility of ever getting out. And no quality of life 572 00:40:24,890 --> 00:40:28,010 that resembles the affluence and riches that they had. 573 00:40:29,710 --> 00:40:34,150 At the jail, he is placed on a heightened watch, as all recently 574 00:40:34,150 --> 00:40:35,150 inmates are. 575 00:40:35,410 --> 00:40:38,390 But guards don't watch him 24 hours a day. 576 00:40:38,790 --> 00:40:43,690 Three days after his conviction, Wright ties one end of a bed sheet around his 577 00:40:43,690 --> 00:40:46,670 neck. and the other around the top bunk in his cell. 578 00:40:49,030 --> 00:40:54,250 By the time the guards make their next check, Wright has made his final exit. 579 00:40:55,450 --> 00:41:00,770 He is dead, and so are his clients' last hopes of recovering much money from the 580 00:41:00,770 --> 00:41:05,730 fraud. We figured that the only other leverage we would have is for him to 581 00:41:05,730 --> 00:41:11,410 basically get a reduced sentence based upon the cooperation of letting the 582 00:41:11,410 --> 00:41:13,450 authorities know who else was involved. 583 00:41:14,250 --> 00:41:20,010 and where the money went. I would say that, you know, Kirk, he ruined lives. 584 00:41:21,290 --> 00:41:22,910 I mean, there's 500 investors. 585 00:41:26,070 --> 00:41:32,070 A few assets, Wright's house, cars, and office equipment can be liquidated. 586 00:41:32,440 --> 00:41:35,840 That all takes a long time, so I don't know that there's a final answer to that 587 00:41:35,840 --> 00:41:39,180 question right now as to how much folks are getting back or can expect to get 588 00:41:39,180 --> 00:41:43,140 back, except that I think, as everyone knows, it's likely not to be anything 589 00:41:43,140 --> 00:41:45,800 close to 100 cents on the dollar. 590 00:41:46,500 --> 00:41:51,740 His second wife is allowed to retrieve only her personal possessions before the 591 00:41:51,740 --> 00:41:53,040 house is auctioned off. 592 00:41:53,980 --> 00:41:55,880 Investors are simply out of luck. 593 00:41:57,990 --> 00:42:02,510 71 -year -old Alan Ehrlich's plans for retirement had to be scaled back. 594 00:42:03,270 --> 00:42:09,070 His wife had to return to work, and now he lives in a rented condo. This was 595 00:42:09,070 --> 00:42:12,570 money that, you know, you plan on for the rest of your life, and you're going 596 00:42:12,570 --> 00:42:16,990 earn a certain return, and then you can live, and that changed, obviously. 597 00:42:19,470 --> 00:42:24,230 Other investors think Wright's suicide was his final selfish act. 598 00:42:24,490 --> 00:42:26,930 A case of justice denied. 599 00:42:28,250 --> 00:42:29,250 Not angry. 600 00:42:29,650 --> 00:42:30,650 Not angry. 601 00:42:31,010 --> 00:42:34,570 Disappointed. I wanted to visit him. I wanted to visit him in prison. 602 00:42:34,990 --> 00:42:37,530 And I would have. I would have been at the sentencing. 603 00:42:37,870 --> 00:42:39,570 So I got robbed. 604 00:42:40,850 --> 00:42:43,350 I got robbed, figuratively and literally.