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In this episode of American Greed,
Kenneth Iris Starr is the money manager

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Hollywood's A -list.

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Among his past investors, Annie
Leibowitz, Martin Scorsese, Sylvester

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Wesley Snipes. You know, the names just
went on and on.

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Starr woos potential clients, but he
doesn't stop there.

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Ken wanted to be his client, and he used
my mother's money to purchase

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influence.

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He steals $30 million to buy his way
onto the A -list and live in the lap of

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luxury. And it's all in the name of
love.

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You know, when your money manager starts
going out with a stripper, that's a

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tell.

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May 27, 2010.

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Dawn breaks on the ultra -cheek Lutz 74
building on Manhattan's Upper East Side.

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The elegant building is home to some of
New York's upper crust.

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This morning, four armed IRS criminal
investigators are sitting outside.

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They're paying a house call to money
manager Kenneth Iris Starr, who

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stole $30 million from his high -profile
clients.

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They were pretty sure he was in that
apartment the night before and that he

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would be there at 6 .30 when we planned
on executing the search warrant.

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The doorman rings Starr's $7 .5 million
triplet.

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He called Ken Starr. Ken Starr said,
tell him I'm not home and that only my

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is home.

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The two agents then proceeded to knock
on the door to which nobody answered.

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Minute after anxious minute ticks by.

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In certain instances, you might take a
door down. In this particular instance,

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in a very expensive door and in a very
expensive building, the decision was

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not to do such, so we tried to obtain
the keys.

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The only way to do that was to get that
from the building manager.

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Agent Robert Barringer and his team head
to the lobby to wait for the manager.

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After an hour, Starr's fourth wife,
Diane, a 34 -year -old former exotic

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finally answers the door.

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At first we asked, where is Ken Starr?
Because a significant amount of time was

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banging on the door. They had to know we
were there. They had to know we were

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looking for Ken Starr. And she first
told us he's not home.

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Home for Kenneth Iris Starr hasn't
always been on the Tony Upper East Side.

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Reporter Michael Schneerson chronicles
Starr's rise for Vanity Fair magazine.

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Ken was a real up from his bootstraps or
his Gucci soles kind of guy. He

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grew up in the Bronx. His father was
apparently a public high school

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Good grades come easily to the affable
young Mr.

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Starr.

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Apparently, Ken graduated from high
school at about the age of 15, went

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to college, and then got a degree in
accounting, and certainly by 20 or 21

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was set up in business.

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Starr marries his college sweetheart and
goes to work for his brother's

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accounting firm on Long Island.

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His ambitions were probably fairly
humble in a way. He just wanted to be

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best accountant he could be and then to
extend that by going to New York

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University Law School and becoming a tax
attorney, which certainly helped him

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get clients. But it was all still on a
very modest level until he met Paul

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Mellon.

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Paul Mellon, heir to the Mellon Bank
fortune, is the scion of one of

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wealthiest families.

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Paul and Bunny Mellon were certainly on
the level of Brooke Astor or Jane

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Reitzman, not just in the amount of
money they had, but in their social

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pedigree. They were as, you know, blue
blood as you can get in 20th century

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America.

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Mellon and his wife Bunny reportedly
like what they see in Starm.

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and they begin introducing him to their
wealthy friends.

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Soon, Starr amasses enough clients to
start his own firm, Starr and Company, in

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Midtown Manhattan.

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Aurora Kassirer, a court -appointed
receiver, says Starr serves as a

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concierge for high -profile clients,
providing more than just financial

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planning. For certain clients, he would
pay their housekeepers, their drivers,

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do their taxes, pay their lawyers.

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In other words, essentially he performed
all of the household services in terms

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of the accounting services that you and
I would perform for ourselves.

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Star and Company is successful.

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So successful that Star soon lands in
the Ritchie Hamptons, where he hobnobs

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with New York's elite.

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Diane Sawyer, Mike Nichols, Peter Stone,
a librettist who did the musical in

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1776. All these people knew each other.
And once one of them was charmed into

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going along with Ken, so did the others.
They all just fell

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like dominoes.

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One of those dominoes is auto executive
Arthur Stanton.

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Arthur Stanton was a very resourceful
entrepreneur who brought Volkswagen

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over from Europe after World War II.

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and started various distributorships
here, became very wealthy, had a fortune

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perhaps $70 million.

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Arthur Stanton is married to actress
Joan Stanton, the first voice of Lois

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on the Superman radio show.

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Her daughter, Jane Stanton Hitchcock,
recounts her fairytale childhood.

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They were such a glamorous couple, and
they had this amazing circle of friends.

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I mean, I went to parties with people
like...

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Mike Nichols, Neil Simon, William
Styron, Dick Avedon.

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Leonard Bernstein conducted Happy
Birthday to me at a party when I was 21.

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The Stantons lead a charmed life, and
Ken Starr is desperate to join their

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of confidants.

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Next on American Greed, see how Starr
gets his hands on the Stanton family

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fortune. My mom was the first Lois Lane
on radio. I think she thought Ken Starr

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was Superman, and he turned out to be
Lex Luthor.

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By 1987, the Glitterati are flocking to
money manager Kenneth Iris Starr.

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These artsy people.

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were very confident in one sense about
their success, what they'd done in the

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arts, but they were very insecure about
money.

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And what they really wanted to do was
just hand their money to someone who

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say, don't worry, I've got it taken care
of, just, you know, give it to Daddy.

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Starr gets lucky when one of his biggest
clients, New York auto executive Arthur

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Stanton, dies in 1987 at age 69, leaving
a $70 million estate.

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He left it in very secure stocks, bonds,
some real estate, and it was basically

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very conservatively invested at that
time. He stipulated in his will that

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two people would oversee that.

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One was the family lawyer from Milbank
Tweed, and the other was Ken Starr.

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Stanton's widow, Joan, pays Starr nearly
$230 ,000 a year to handle her

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finances. He became almost like a member
of our family.

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She trusted him to that extent.

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She didn't have a grasp on money. Like
many, many artistic people, and like

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of... Ken's clients, they wanted to do
their own thing and know that everything

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was okay.

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Jane Stanton Hitchcock, Joan's daughter,
says the family's lawyer assures Mrs.

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Stanton that Star is handling her money
properly.

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I remember going to meetings with Ken to
financial institutions where they

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discussed how they would like to
distribute her portfolios and manage her

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money.

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And gradually, Ken began to sort of
change in his attitude towards

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me, and I was not included on any of
those meetings anymore.

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Star diabolically begins to push Jane
out of the picture, and she senses

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something sinister about him.

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Star knows that Mrs. Stanton is an easy
target.

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that he can help himself to the $70
million estate if he can just get her

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meddling kids out of the picture.

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He began to isolate her from me, saying
we didn't know anything about

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money and we were really not to be
trusted in terms of money, that he was

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only one who truly cared for her.

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And to other A -listers, Starr can do no
wrong.

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John Conley, a friend of Starr's and a
Vanity Fair contributor, says that by

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1991, Starr cements his reputation as a
conscientious money manager.

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When he would meet people, it would be
very hard not to like Ken Starr. If he

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came recommended to you as being a good
money manager, well, you'd just embrace

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him. Fraud investigators call that like
the halo effect, like this guy's the

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guy.

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Then, in 1998, the Stanton family
attorney quits, leaving Starr to manage

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estate unchecked. And their daughter's
suspicions are about to come true.

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When he left, there was one pair of eyes
on that statement, and it was a wolf's

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eye.

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By 1998, Wall Street is riding high on a
fourth straight year of record gain.

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The economy booms.

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More celebrities look to Ken Starr for
financial guidance.

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Everyone from Vanity Fair photographer
Andy Leibovit to writer Art Buchwald,

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Lauren Bacall.

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You know, the names just went on and on,
and Ken was very good at working those

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networks.

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Starr begins to invest in risky startup
companies and funds, which he touts as

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sure bets to clients like Mrs. Stanton.

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She would often just receive packages
and be told to sign here. And,

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of course, she only looked at the bottom
line of all her statements.

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Starr surreptitiously takes the Stanton
estate's money and uses it to curry

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favor with his high -profile friends.

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If he wanted a client and the client
said, oh, I'm thinking of doing this

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project or this movie or whatever, Ken
would say, I can get you a million

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dollars for that.

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Or a half a million. Or two million.

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And then he would just use my mother's
money as a piggy bank.

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It's a devious pattern that repeats
itself time and again.

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Star uses one client's account to fund
another client's project.

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One of the most notorious examples is
the faltering restaurant chain Planet

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Hollywood, founded by movie producer and
star friend Keith Barish.

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and backed by celebrities like Bruce
Willis, Arnold Schwarzenegger, and

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Starr client Sylvester Stallone. It was
not a good time to own the stock.

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And by trying to keep people in stock,
what you do is you try to support a

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artificially. If the price of the stock
is going down, it's going down for a

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reason, usually.

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And the reason was that the company was
in trouble.

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Starr advises Stallone to leave his $10
million investment alone.

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But Sly gets wise.

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to hang on to all his stock in this
publicly traded Planet Hollywood chain,

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while hearing from another side that
Keith Barish was quietly selling all of

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stock.

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In 2002, Stallone sues Starr for $7 .3
million in damages.

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Stallone and Starr ultimately settle out
of court.

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But to preserve his reputation, Starr
spins it that Stallone is an

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unsophisticated investor.

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Starr's position with Stallone was
Stallone just, you know, got in over his

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head, and now he's crying foul, but
Stallone wasn't a victim. I think

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was victimized by Ken Starr, and it was
an early sign that you should watch this

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person, and people don't follow these
warning signs.

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By now, Ken Starr, desperate for his own
fame and fortune, is using his client's

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money to climb the social ladder.

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When American Greed returns,

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Starr meets the woman of his dreams, and
he spares no expense to land her.

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With Diane, he became something else
again, sort of a slick, slightly cheesy,

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older guy with a much younger woman. And
his clients were sort of scratching

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their heads saying, who is Ken Starr,
really?

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In 2002, Kenneth Iris Starr, money
manager to entertainment A -listers, has

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emerged from a highly publicized legal
battle with Sylvester Stallone.

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Ken Starr fits the profile of the
quintessential con man. Ken Starr is

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cast. If this were a movie, you could
pick Ken Starr with his trappings, put

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into the role and not really have to do
much.

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While that may be obvious in hindsight,
some clients are only beginning to catch

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on to Ken Starr, like widow Joan
Stanton's caretaker, Jim Fennell.

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In the summer months, she would do a
seasonal migration to East Hampton, and

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took care of her out there. And he would
go for walks with her, and he would

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talk to her, and she loved him probably
as much as she loved Ken.

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Among his other duties, Fennell also
serves as a trusted confidant, and he

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reviews Mrs. Stanton's portfolio.

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Jim is noticing that the bottom line is
always the same, no matter what.

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And he becomes a little concerned about
that, because if you're making

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investments, you know, you're up one
year, down one year, but it's always

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basically the same enormous sum.

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Mrs. Stanton approaches Starr about
Fennell's suspicions. And he says...

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To her, oh, Jim is just a lawn mowing
gardener. What does he know about

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What he did not know was that Jim had a
degree in accounting.

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Fennell alerts Mrs. Stanton's daughter,
Jane, to the improbable bottom line that

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every single year the amount is always
the same.

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Finnell's suspicions deepen when he
discovers that Starr had taken out a $5

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million line of credit on Joan's $16
million East Hampton house, which Starr

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said would be used to invest in the
market.

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Jim saw that money Ken had taken from
Joan ostensibly to invest in the

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market was simply being used to pay her
taxes and other sort of stopgap

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measures. And it was Jim who then said
to Jane,

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Something's gone very wrong here. You
better get involved in this.

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Now, it turns out that Jane was starting
a new career as a mystery novelist. So

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she was the perfect person to start
sleuthing.

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I think it's obvious that he really
thought she was prey.

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Dar had misappropriated so much of the
estate that he needed the line of credit

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just to pay the bills.

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Finally, in April 2006, Starr goes in
for the kill.

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While she's signing a new will, Starr
has Mrs. Stanton unknowingly sign over

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durable power of attorney to him.

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00:16:58,340 --> 00:17:04,240
When you give an accountant your power
of attorney, you're basically losing all

220
00:17:04,240 --> 00:17:06,359
your control over your money.

221
00:17:06,760 --> 00:17:08,900
He can do what he likes. He is you.

222
00:17:10,729 --> 00:17:15,190
Concerned that her mother is being
fleeced, Mrs. Stanton's daughter Jane

223
00:17:15,190 --> 00:17:18,050
with Star and her mother to review the
estate.

224
00:17:18,450 --> 00:17:25,310
I haven't seen Ken in years, and he is
such a far cry from the kind of nerdy,

225
00:17:25,310 --> 00:17:28,410
gray -suited accountant. He looks like a
ninja accountant.

226
00:17:28,630 --> 00:17:30,970
He's all in black. He's kind of hip.

227
00:17:32,210 --> 00:17:38,430
As Jane recalls, Star works his magic
using his favorite terms like

228
00:17:39,659 --> 00:17:42,280
honestly, candidly, to dazzle Mrs.
Stanton.

229
00:17:43,540 --> 00:17:50,160
So we have this lunch, and then Ken
leaves, and my mother says to me,

230
00:17:50,240 --> 00:17:56,240
when you were out of the room, I asked
Ken if he still handled, and she names

231
00:17:56,240 --> 00:18:02,460
the person, and not only does he handle
him, but he's done a big deal for a

232
00:18:02,460 --> 00:18:03,460
member of his family.

233
00:18:04,260 --> 00:18:07,200
And I happen to have this man's number.

234
00:18:07,850 --> 00:18:14,470
And I handed her the telephone, and I
believe on the other end of the phone he

235
00:18:14,470 --> 00:18:18,350
said, Joan, he's a crook. Get out of
there.

236
00:18:19,330 --> 00:18:24,230
She put down the phone, and she said,
Oh, my God, Janie, are we broke?

237
00:18:25,050 --> 00:18:26,910
And I said, We very well could be.

238
00:18:28,570 --> 00:18:32,690
Well, the first time Jane's suspicions
about Star are confirmed.

239
00:18:33,470 --> 00:18:37,630
And the mystery novelist looks for other
evidence of Starr's trickery.

240
00:18:38,130 --> 00:18:39,910
So I said, show me that will.

241
00:18:40,510 --> 00:18:41,930
And she showed me the will.

242
00:18:42,250 --> 00:18:47,930
And Ken had made himself an executor
with a million -dollar fee right up

243
00:18:48,410 --> 00:18:50,790
And there was a durable power of
attorney.

244
00:18:52,910 --> 00:18:55,730
But things are worse than Jane could
have imagined.

245
00:18:56,730 --> 00:19:01,050
She soon learns that over the years,
Starr has misappropriated more than $20

246
00:19:01,050 --> 00:19:07,030
million of the estate to invest in risky
deals and cover other clients' losses.

247
00:19:07,590 --> 00:19:11,670
Jane Stanton Hitchcock takes the case to
the Manhattan District Attorney.

248
00:19:12,190 --> 00:19:18,870
Jane is totally a heroine of this story
because she sensed early on

249
00:19:18,870 --> 00:19:24,490
that Ken was either misusing or
embezzling her mother's money.

250
00:19:26,510 --> 00:19:29,730
kept on the case for years.

251
00:19:30,390 --> 00:19:37,050
I wrote a book called Social Crimes
about a woman who loses all her money

252
00:19:37,050 --> 00:19:38,050
gets revenge.

253
00:19:38,150 --> 00:19:42,050
Little did I know I would be writing
about my mother.

254
00:19:43,970 --> 00:19:49,510
Meanwhile, Starr's marriage to his third
wife and office manager Marissa begins

255
00:19:49,510 --> 00:19:50,510
to fail.

256
00:19:50,930 --> 00:19:53,330
Marissa was a very spunky and...

257
00:19:53,630 --> 00:19:57,850
sexy woman who was quite a bit younger
than Kent.

258
00:19:58,570 --> 00:20:02,290
Unfortunately, she had what seemed to be
multiple sclerosis.

259
00:20:02,790 --> 00:20:09,370
And when it was confirmed in about 2004,
according to her,

260
00:20:09,590 --> 00:20:11,610
Ken completely freaked out.

261
00:20:12,910 --> 00:20:18,210
It seems Starr has been looking for an
out, and with Marissa's illness, he

262
00:20:18,210 --> 00:20:19,210
finally finds it.

263
00:20:19,650 --> 00:20:22,930
Ken... was really backing off from the
marriage.

264
00:20:23,310 --> 00:20:28,670
Although he said he wanted to remain
married to her, to just have sort of,

265
00:20:28,670 --> 00:20:35,290
know, separate lives, but still both be
parents to their two daughters.

266
00:20:36,470 --> 00:20:41,530
Mr. and Mrs. Starr make the unorthodox
decision to find him an escort.

267
00:20:42,510 --> 00:20:46,690
Together they pay a visit to Scores, a
strip club in Manhattan.

268
00:20:47,980 --> 00:20:53,660
He was apparently a man with a very
strong libido who was really pretty

269
00:20:53,660 --> 00:20:55,440
sex -focused.

270
00:20:55,700 --> 00:21:01,460
And he liked Old Anthony Girl. That was
his fantasy.

271
00:21:02,660 --> 00:21:08,900
The stars meet a 29 -year -old stripper
named Diane Passage, a rising pole

272
00:21:08,900 --> 00:21:11,120
superstar with expensive taste.

273
00:21:12,010 --> 00:21:17,070
Star pursues her with unbridled abandon,
and he pays her $1 ,000 to accompany

274
00:21:17,070 --> 00:21:18,070
him to dinner.

275
00:21:18,610 --> 00:21:21,810
Ken was obsessed with this young woman,
no question about that.

276
00:21:22,570 --> 00:21:27,570
But then again, most 67 -year -old men
are pretty happy to be with 30

277
00:21:27,570 --> 00:21:30,810
-year -old women, especially somebody
who has a history of dancing on a pole.

278
00:21:31,610 --> 00:21:33,330
And she danced quite well on a pole.

279
00:21:35,590 --> 00:21:41,490
It's not long before Star decides he
prefers Diane's company to his sick

280
00:21:41,830 --> 00:21:44,150
And he pushes Marissa out of the
business.

281
00:21:44,850 --> 00:21:50,530
He was crazy enough about Diane to take
her, as his date, to all sorts of very

282
00:21:50,530 --> 00:21:56,010
fancy functions where his glittering
clients would be. And some of them were

283
00:21:56,010 --> 00:21:57,130
pretty taken aback.

284
00:21:57,890 --> 00:22:02,370
As one later said, you know, when your
money manager starts going out with a

285
00:22:02,370 --> 00:22:03,850
stripper, that's a tell.

286
00:22:04,910 --> 00:22:10,930
On Valentine's Day 2007, Starr seals the
deal and slips a massive engagement

287
00:22:10,930 --> 00:22:15,690
ring on Diane's finger, despite still
being married to Marissa.

288
00:22:15,950 --> 00:22:21,190
Ken Starr is a middle -aged, balding
individual who is not a movie star, and

289
00:22:21,190 --> 00:22:26,470
he hangs with movie stars. He travels
with movie stars. This gave him a little

290
00:22:26,470 --> 00:22:31,450
bit of an ashy thought. And I think he
really either loved her or was

291
00:22:31,450 --> 00:22:32,450
with her.

292
00:22:34,580 --> 00:22:37,360
Outwardly, Star seems to be on cloud
nine.

293
00:22:37,620 --> 00:22:39,400
But looks can be deceiving.

294
00:22:40,120 --> 00:22:44,640
Despite no longer managing the company,
Star's wife Marissa is still on the

295
00:22:44,640 --> 00:22:48,960
payroll. And Star has trouble keeping
all his balls in the air.

296
00:22:49,280 --> 00:22:53,620
Marissa was getting $750 ,000 a year
salary.

297
00:22:54,020 --> 00:22:58,780
And also, Ken was paying her $2 ,500 a
week in cash.

298
00:22:59,280 --> 00:23:02,840
Plus their phone bill, plus their credit
cards.

299
00:23:03,660 --> 00:23:10,620
It was when he had to both deal with
Marissa and the expenses

300
00:23:10,620 --> 00:23:17,600
and obligations of separation and
divorce with her, as well as Diane, that

301
00:23:17,600 --> 00:23:18,600
became too much for him.

302
00:23:19,520 --> 00:23:24,840
When American Greed returns, Starr is
about to wed the bombshell of his dream,

303
00:23:25,120 --> 00:23:30,500
while another woman, Jane Statton
Hitchcock, prepares to drop a bomb of

304
00:23:30,860 --> 00:23:34,780
I'm going to get to the bottom of this
mystery and I am going to do something

305
00:23:34,780 --> 00:23:35,780
about it.

306
00:23:45,900 --> 00:23:52,460
In 2007, New Yorker Kenneth Iris Starr
is living large, running a boutique

307
00:23:52,460 --> 00:23:56,520
financial management firm for some of
America's wealthiest celebrities.

308
00:23:57,320 --> 00:24:03,300
Ken Starr ran in the right circles. He
had the right credentials. He had all of

309
00:24:03,300 --> 00:24:09,360
the appearances of rectitude and
propriety, with the exception, perhaps,

310
00:24:09,360 --> 00:24:10,500
marrying a stripper.

311
00:24:12,080 --> 00:24:16,820
Despite a pending divorce from his sick
wife, Marissa, Starr goes to great

312
00:24:16,820 --> 00:24:21,080
lengths to woo his fiancée, polled
answer Diane Passage.

313
00:24:21,400 --> 00:24:23,440
It was when she came into his life...

314
00:24:23,900 --> 00:24:29,200
that he started getting sloppy in his
money management, getting greedy, partly

315
00:24:29,200 --> 00:24:34,320
because she wanted all sorts of
expensive baubles and he wanted to

316
00:24:34,620 --> 00:24:40,340
And there's no doubt that it became
harder for Ken to keep this whole

317
00:24:40,340 --> 00:24:41,340
afloat.

318
00:24:42,040 --> 00:24:47,700
Before long, Starr's financial
carelessness catches up with him. It was

319
00:24:47,700 --> 00:24:48,700
2006,

320
00:24:49,320 --> 00:24:51,520
2007, that...

321
00:24:51,980 --> 00:24:58,560
Ken seemed to go into a higher gear of
financial, let's call it mismanagement.

322
00:24:58,580 --> 00:25:04,900
He started putting clients' money into
truly reckless schemes in which he

323
00:25:04,900 --> 00:25:06,900
often had a financial interest.

324
00:25:08,240 --> 00:25:10,080
By now, it's obvious.

325
00:25:10,380 --> 00:25:15,740
Ken Starr is not a solid, trustworthy
accountant, and trouble in his personal

326
00:25:15,740 --> 00:25:17,180
life is in helping matters.

327
00:25:17,980 --> 00:25:23,280
In May, Starr's divorce from his wife
and office manager Marissa is finalized,

328
00:25:23,340 --> 00:25:26,400
just two weeks before his wedding to
Diane Passage.

329
00:25:26,680 --> 00:25:32,620
And without Marissa to manage Starr and
company, clients' tax returns languish

330
00:25:32,620 --> 00:25:34,140
and statements are delayed.

331
00:25:34,640 --> 00:25:39,040
Mike Nichols and Diane Sawyer left at
that point, and others did too.

332
00:25:39,360 --> 00:25:44,600
But Ken was too enamored of Diane to
apparently notice.

333
00:25:46,670 --> 00:25:52,250
Star and Diane passage Mary at the Wynn
Hotel in Las Vegas on Memorial Day

334
00:25:52,250 --> 00:25:53,370
weekend 2007.

335
00:25:54,990 --> 00:26:00,770
By now, the Stantons have blocked Star's
access to the estate, and in April

336
00:26:00,770 --> 00:26:06,210
2008, they slap him with a lawsuit
accusing him of breach of fiduciary

337
00:26:07,310 --> 00:26:12,150
Desperate, Star needs to find another
source to line his pockets, and he turns

338
00:26:12,150 --> 00:26:13,370
to the charity circuit.

339
00:26:13,790 --> 00:26:15,770
I think Ken Stark trolled.

340
00:26:16,030 --> 00:26:18,130
those events looking for potential
victims.

341
00:26:18,830 --> 00:26:24,650
One of those potential victims is famed
jeweler to the stars Jacob the Jeweler

342
00:26:24,650 --> 00:26:25,650
Ereba.

343
00:26:25,910 --> 00:26:29,730
Criminal defense attorney Benjamin
Braffin represents Ereba.

344
00:26:30,290 --> 00:26:35,190
Jacob came to the United States from
Russia with nothing, very little formal

345
00:26:35,190 --> 00:26:36,190
education.

346
00:26:36,270 --> 00:26:41,930
He and his wife began a small jewelry
company on a bench in someone's booth on

347
00:26:41,930 --> 00:26:43,270
47th Street.

348
00:26:43,840 --> 00:26:48,540
And several years later, he turned it
into one of the most successful high

349
00:26:48,540 --> 00:26:50,540
jewelry companies in the world.

350
00:26:52,080 --> 00:26:57,080
Starr first meets Erebov and his wife
Angela at an event hosted by a wealthy

351
00:26:57,080 --> 00:26:59,060
philanthropist back in 2006.

352
00:26:59,860 --> 00:27:05,620
And the next day or the day after,
Ashley showed up in Jacob's store on

353
00:27:05,620 --> 00:27:07,860
Street and bought a watch for $70 ,000.

354
00:27:08,840 --> 00:27:12,480
Over the next few months, Starr launches
a charm offensive.

355
00:27:13,280 --> 00:27:16,260
wooing Jacob the jeweler like his next
conquest.

356
00:27:16,700 --> 00:27:21,860
He even becomes a regular customer at
Jacob and Company, spending more than $400

357
00:27:21,860 --> 00:27:24,080
,000 on diamond jewelry.

358
00:27:24,900 --> 00:27:29,040
That's another way you can seduce
someone into believing that you're the

359
00:27:29,040 --> 00:27:34,360
deal because you appear to have enough
money to shop in a store like that. You

360
00:27:34,360 --> 00:27:38,140
pay your bills ostensibly, at least at
the beginning.

361
00:27:38,680 --> 00:27:43,160
And then it's another way of seducing
someone into believing you're a

362
00:27:43,160 --> 00:27:48,040
person. But why would Starr go after
Jacob the jeweler, a seemingly

363
00:27:48,040 --> 00:27:49,580
and savvy businessman?

364
00:27:50,120 --> 00:27:55,520
Like so many predators, Starr has a
knack for seeing and exploiting

365
00:27:55,900 --> 00:27:59,200
And he knows that Jacob is in some hot
water of his own.

366
00:28:00,460 --> 00:28:04,520
Jacob had lied to law enforcement during
an investigation into a notorious

367
00:28:04,520 --> 00:28:05,540
narcotics ring.

368
00:28:06,750 --> 00:28:10,350
Now he's about to do time for
obstruction of justice.

369
00:28:11,090 --> 00:28:16,450
Starr knew that Jacob would then be
away, that the business that Jacob was

370
00:28:16,450 --> 00:28:22,070
might suffer in his absence, and Starr
then knew that Angela Erebov would be

371
00:28:22,070 --> 00:28:26,730
alone, if you will, for several months
at the very least, and that's, I think,

372
00:28:26,750 --> 00:28:29,070
part of the modus operandi of Ken Starr.

373
00:28:30,150 --> 00:28:34,190
Erebov wants to ensure that his family
will be taken care of while he's in

374
00:28:34,190 --> 00:28:37,290
prison. And he plays right into Starr's
hand.

375
00:28:37,970 --> 00:28:43,030
There was a promise by Starr that your
wife is going to be very, very wealthy

376
00:28:43,030 --> 00:28:46,770
and your family is going to be very,
very wealthy while you're in prison. Do

377
00:28:46,770 --> 00:28:47,770
worry about it.

378
00:28:48,390 --> 00:28:53,790
Starr begins to talk up a few exclusive
investment opportunities, which he again

379
00:28:53,790 --> 00:28:55,350
claims are sure bets.

380
00:28:55,870 --> 00:28:58,110
According to Ken Starr, you have to
earn.

381
00:28:58,640 --> 00:29:03,240
the right to participate. He had to be
sufficiently impressed with your wealth,

382
00:29:03,320 --> 00:29:07,440
with your success, before he allowed you
into these wonderful deals.

383
00:29:08,720 --> 00:29:14,280
Star tells the Erebovs about the
nightclub chain Martini Park, a Chinese

384
00:29:14,280 --> 00:29:19,160
Internet startup, and a technology
company called Universal Identification

385
00:29:19,160 --> 00:29:20,160
Solutions.

386
00:29:20,660 --> 00:29:26,820
That was a company set up to market
voting machines, primarily to areas...

387
00:29:27,100 --> 00:29:30,980
like Venezuela, Mexico, and countries
like that.

388
00:29:31,720 --> 00:29:36,520
If you did some due diligence into a
company like that, one would think that

389
00:29:36,520 --> 00:29:39,820
didn't need Ken Starr to get Venezuela
voting machines.

390
00:29:40,060 --> 00:29:45,200
I mean, I don't even know whether they
vote in Venezuela. But if they do, why

391
00:29:45,200 --> 00:29:51,540
you need Ken Starr? Well, Ken Starr had
a line of, I guess the word is bulk.

392
00:29:52,400 --> 00:29:59,020
By October 2008, the Ereboffs invest
close to $14 million in Starr's

393
00:29:59,020 --> 00:30:00,020
sure bets.

394
00:30:00,300 --> 00:30:06,220
And when Jacob surrenders to the Bureau
of Prisons on January 20, 2009, Starr

395
00:30:06,220 --> 00:30:08,260
finally gets his chance to pounce.

396
00:30:09,060 --> 00:30:15,260
Next, see how Angela Ereboff falls
victim to Starr's scheme and how he uses

397
00:30:15,260 --> 00:30:17,520
money to live in the lap of luxury.

398
00:30:18,040 --> 00:30:22,060
He went after people who are vulnerable
and said, I'll take care of.

399
00:30:22,350 --> 00:30:25,870
the money and invest it for you and make
sure that everything's okay.

400
00:30:27,130 --> 00:30:32,390
For more details about Star Scheme,
visit AmericanGreed .CNBC .com.

401
00:30:33,050 --> 00:30:34,110
We'll be right back.

402
00:30:42,480 --> 00:30:48,640
In January 2009, money manager Kenneth
Iris Starr is sitting on a gold mine in

403
00:30:48,640 --> 00:30:51,900
the fortune of Jacob the jeweler Erebov
and his wife Angela.

404
00:30:52,600 --> 00:30:58,560
The couple invest nearly $14 million
with Starr so that Angela can live off

405
00:30:58,560 --> 00:31:01,800
returns while Jacob is in prison for the
next year and a half.

406
00:31:02,540 --> 00:31:06,680
Ken Starr was promising five, ten times
your initial investment.

407
00:31:07,520 --> 00:31:11,920
You know, my philosophy is if it sounds
too good to be true, it's generally not

408
00:31:11,920 --> 00:31:18,800
true. The con person's spiel, if you
will, is if it sounds too good to be

409
00:31:18,860 --> 00:31:21,980
someone is going to want to believe that
it is true.

410
00:31:22,500 --> 00:31:25,720
The Erebovs want proof of Starr's
performance.

411
00:31:26,560 --> 00:31:31,760
And at attorney Benjamin Brafman's
direction, Angela requests tax forms

412
00:31:31,760 --> 00:31:33,620
-1s from these private companies.

413
00:31:34,000 --> 00:31:39,400
In certain investments, you would get a
K -1, which is basically a report to you

414
00:31:39,400 --> 00:31:43,400
of the financial operations of the
company. Those are things that should be

415
00:31:43,400 --> 00:31:48,060
given to you on a regular basis at tax
season.

416
00:31:48,640 --> 00:31:54,300
But Starr doesn't deliver the K -1s, nor
does he deliver the promised returns to

417
00:31:54,300 --> 00:31:55,320
Angela Ereboff.

418
00:31:56,110 --> 00:31:58,390
Instead, Starr gives it the runaround.

419
00:31:58,750 --> 00:32:03,930
She continually pressed him, almost on a
weekly basis, to the point where he

420
00:32:03,930 --> 00:32:08,810
then started saying the universal deal,
which was with voting machines, was

421
00:32:08,810 --> 00:32:14,290
about to come due. And there was huge
returns for Starr and all of the

422
00:32:14,290 --> 00:32:15,290
investors.

423
00:32:15,530 --> 00:32:21,850
The excuses became more and more
outrageous, and I ultimately

424
00:32:21,850 --> 00:32:27,060
convinced... Angela Arabov that she had
to record some of her calls with Ken

425
00:32:27,060 --> 00:32:30,080
Starr because otherwise there would be
denial.

426
00:32:32,740 --> 00:32:39,660
From Halloween through Thanksgiving
2009, Angela Arabov records dozens of

427
00:32:39,660 --> 00:32:45,580
with Starr. In those calls, Starr feeds
Angela far -fetched excuses

428
00:32:45,580 --> 00:32:49,380
that her checks are available, but they
can't be deposited.

429
00:32:50,170 --> 00:32:54,530
Or that Starr needs the government's
permission to deposit them.

430
00:32:55,390 --> 00:32:56,890
They sounded unbelievable.

431
00:32:57,350 --> 00:33:02,730
You couldn't understand how somebody
could continue to listen to this type of

432
00:33:02,730 --> 00:33:05,970
stuff without interjecting that this is
crazy.

433
00:33:07,010 --> 00:33:12,710
Without a second thought, Brafman and
the Erebovs take the tapes to the U .S.

434
00:33:12,710 --> 00:33:13,710
Attorney's Office.

435
00:33:14,090 --> 00:33:19,290
The tapes that we provided to the
government were powerful evidence that

436
00:33:19,290 --> 00:33:22,670
locked into lies that he could not
explain.

437
00:33:23,050 --> 00:33:27,810
The expression I used, which I hope
people don't find offensive, is that

438
00:33:27,810 --> 00:33:31,470
a couple of weeks, Ray Charles could
have seen that this was a fraud.

439
00:33:32,170 --> 00:33:35,370
Soon, the heat starts to come down on
Starr.

440
00:33:35,990 --> 00:33:39,130
Securities and Exchange Commission
investigators come knocking.

441
00:33:39,710 --> 00:33:43,630
And Star's blue -blood clients like
Bunny Mellon make a run for the door.

442
00:33:44,090 --> 00:33:49,570
Bunny Mellon's lawyer demanded $4 .3
million back that had been invested, I

443
00:33:49,570 --> 00:33:53,610
think, in Martini Park and some of these
other sort of crazy enterprises.

444
00:33:54,370 --> 00:34:00,550
And the prosecutors allege that in
giving that money back, Ken had to then

445
00:34:00,550 --> 00:34:04,350
money from other clients to keep it all
rolling.

446
00:34:05,230 --> 00:34:09,989
Ken Starr took a lot of that money, and
when you trace it, you find that some of

447
00:34:09,989 --> 00:34:15,210
that money went to pay back investors
whose money he had pilfered, and also

448
00:34:15,210 --> 00:34:20,190
back into buying himself and Diane
Passage a $7 .5 million apartment.

449
00:34:21,929 --> 00:34:28,630
That spectacular apartment is in the
exclusive Lux 74 building on East 74th

450
00:34:28,630 --> 00:34:30,570
Street on Manhattan's Upper East Side.

451
00:34:31,480 --> 00:34:34,980
Realtor Jackie Teplitzky was a listing
agent on the unit.

452
00:34:35,800 --> 00:34:37,340
It was a triflex.

453
00:34:37,560 --> 00:34:43,639
You had a beautiful living room with a
great fireplace. You had a large master

454
00:34:43,639 --> 00:34:49,679
bedroom or guest bedroom. And then you
stepped out to 1 ,500 square feet of

455
00:34:49,679 --> 00:34:51,260
outdoor space that was amazing.

456
00:34:51,940 --> 00:34:57,080
It had an indoor lap pool. It had a 1
,500 square foot atrium that was

457
00:34:57,080 --> 00:34:58,120
surrounded by...

458
00:34:58,510 --> 00:35:03,110
the buildings behind it and to the side
of it, and you were able to look up and

459
00:35:03,110 --> 00:35:06,510
see the stars from this atrium. It was
an extravagant house.

460
00:35:07,350 --> 00:35:12,230
I think he did it because he was afraid
of losing face. He told everybody that I

461
00:35:12,230 --> 00:35:17,450
know that he was moving into this
apartment, and it was Diane's dream

462
00:35:17,950 --> 00:35:24,310
In April 2010, that dream is about to
come true for Starr, who quietly siphons

463
00:35:24,310 --> 00:35:30,080
$7 .5 million in cash from his
unsuspecting clients to buy the

464
00:35:30,500 --> 00:35:35,340
Starr had direct control over the
clients' bank accounts and personal

465
00:35:35,700 --> 00:35:42,040
He basically took money from their
accounts, diverted it to two attorney

466
00:35:42,040 --> 00:35:47,820
accounts to make it look legitimate and
conceal the nature of the fraud that he

467
00:35:47,820 --> 00:35:48,538
was committing.

468
00:35:48,540 --> 00:35:52,320
And then from those two attorney escrow
accounts, he directed that to his

469
00:35:52,320 --> 00:35:53,320
personal benefit.

470
00:35:54,350 --> 00:36:01,150
After only a month -long investigation,
on May 27, 2010, the feds gather

471
00:36:01,150 --> 00:36:04,070
enough evidence to serve an arrest
warrant for Starr.

472
00:36:04,950 --> 00:36:08,910
Four agents arrive at Starr's condo at 6
.30 a .m.

473
00:36:09,190 --> 00:36:14,030
When the doorman calls to announce them,
Starr tells the doorman to say he's not

474
00:36:14,030 --> 00:36:15,030
at home.

475
00:36:15,390 --> 00:36:19,970
Rather than take the door down, agents
call the building manager to get a key,

476
00:36:20,170 --> 00:36:23,050
but it takes him about an hour to get
there.

477
00:36:24,910 --> 00:36:29,590
You lose the element of surprise that
you've knocked on the door, and now an

478
00:36:29,590 --> 00:36:32,050
hour later, somebody could be waiting
inside.

479
00:36:32,730 --> 00:36:38,230
With the key finally in hand, agents
give Starr one last chance to open up

480
00:36:38,230 --> 00:36:39,490
before they bust in.

481
00:36:39,970 --> 00:36:44,450
This time we knocked on the door, fully
announcing that we were law enforcement,

482
00:36:44,610 --> 00:36:48,870
that we were there to arrest Ken Starr,
that somebody had to open up the door.

483
00:36:50,650 --> 00:36:53,770
After a few moments, Diane reluctantly
answers.

484
00:36:54,780 --> 00:36:58,940
When American Greed returns, Diane
Passage has a decision to make.

485
00:36:59,200 --> 00:37:03,340
Lie to the feds or give up her husband
and her cushy lifestyle?

486
00:37:04,120 --> 00:37:07,600
I'm an FBI agent. Tell us how. You ever
watch television?

487
00:37:08,300 --> 00:37:10,940
You ever see if it's a crime to lie to
the FBI?

488
00:37:11,360 --> 00:37:12,680
Now I'm going to ask you again.

489
00:37:13,020 --> 00:37:14,020
See you home?

490
00:37:25,130 --> 00:37:27,210
May 27, 2010.

491
00:37:28,210 --> 00:37:33,550
IRS agents wait impatiently at the door
of embattled money manager Ken Starr's

492
00:37:33,550 --> 00:37:35,530
luxury Manhattan triplex.

493
00:37:36,030 --> 00:37:41,490
Starr's wife, Diane, must decide either
to lie to the feds or give up her

494
00:37:41,490 --> 00:37:44,230
husband, knowing her life will never be
the same.

495
00:37:44,570 --> 00:37:50,490
She is trying to say to the feds, I
don't know where he is. And then the

496
00:37:50,490 --> 00:37:54,440
says... Well, you know, if you don't
tell us, you're an accomplice, and then

497
00:37:54,440 --> 00:37:56,200
points out that he's there.

498
00:37:56,400 --> 00:37:58,140
I mean, love has its limit.

499
00:37:59,600 --> 00:38:02,840
Agent Robert Barringer and his team
burst into the apartment.

500
00:38:03,280 --> 00:38:07,180
We knew our focus was to go upstairs,
especially when we knew he was there.

501
00:38:07,440 --> 00:38:10,660
We circled around once or twice, looking
through closets and things.

502
00:38:10,860 --> 00:38:12,600
We really didn't see him.

503
00:38:13,920 --> 00:38:18,540
Agents try to search every inch of the
massive unit, but it's nearly

504
00:38:19,310 --> 00:38:22,370
And on the first go -around, Star is
nowhere to be found.

505
00:38:22,790 --> 00:38:27,330
There was a second sweep, which appeared
to be a bedroom closet, to which one of

506
00:38:27,330 --> 00:38:32,110
the younger agents noticed shoes with
legs attached to them behind clothing.

507
00:38:33,110 --> 00:38:37,050
When you initially opened the closet,
you couldn't actually notice that area.

508
00:38:37,170 --> 00:38:42,930
You had to open it and look inside to
see the other area that was more hidden.

509
00:38:44,190 --> 00:38:46,770
So at that point, our biggest guy...

510
00:38:46,990 --> 00:38:49,310
pulled them out of the closet, and
placed them under arrest.

511
00:38:50,250 --> 00:38:54,010
Breaking news here for Squawk on the
Street. U .S. Attorney for the Southern

512
00:38:54,010 --> 00:38:58,930
District of New York has busted a
financial advisor for a $30 million

513
00:38:58,930 --> 00:39:00,710
name is Kenneth Starr.

514
00:39:01,710 --> 00:39:07,890
In June 2010, Starr is indicted on 23
counts of fraud and money laundering for

515
00:39:07,890 --> 00:39:11,850
stealing from 11 clients, including
Jacob the Jeweler Erebov.

516
00:39:12,460 --> 00:39:17,520
The government freezes Starr's assets
and appoints Aurora Kassirer as the

517
00:39:17,520 --> 00:39:21,360
receiver. When I came into the business,
there were about 40 employees.

518
00:39:21,700 --> 00:39:23,800
They hadn't been paid in a week or two.

519
00:39:24,060 --> 00:39:27,900
Their health insurance premiums, as it
turned out, had not been paid.

520
00:39:28,120 --> 00:39:31,740
The place was shambled. People really
looked for direction.

521
00:39:32,920 --> 00:39:37,900
In Starr's office, Kassirer finds
celebrity memorabilia and photographs.

522
00:39:38,440 --> 00:39:39,860
And there's something else.

523
00:39:40,570 --> 00:39:46,450
Most commonly, officers have photographs
of children and grandchildren and pets

524
00:39:46,450 --> 00:39:48,690
and other family members.

525
00:39:49,530 --> 00:39:53,810
There were some pictures of other family
members here, too, but there were

526
00:39:53,810 --> 00:39:57,710
poster -sized photographs of his wife
all over the place, which is something I

527
00:39:57,710 --> 00:39:58,730
really haven't seen before.

528
00:40:00,370 --> 00:40:07,150
In September, Starr, who is facing a
maximum 45 years in prison, strikes a

529
00:40:07,150 --> 00:40:09,150
with prosecutors and pleads guilty.

530
00:40:10,030 --> 00:40:16,490
Finally, on March 2, 2011, Starr's wife,
Diane Passage, and his victims,

531
00:40:16,650 --> 00:40:21,330
including the Stantons, walk into a
crowded lower Manhattan courthouse to

532
00:40:21,330 --> 00:40:22,330
his fate.

533
00:40:22,650 --> 00:40:29,550
He was a guy who seemed to lack some
sort of moral compass, not only that led

534
00:40:29,550 --> 00:40:35,490
him into breaking the law, but led him
to just blithely plunder the accounts of

535
00:40:35,490 --> 00:40:36,770
people who had trusted him.

536
00:40:37,630 --> 00:40:41,910
Judge Shira Scheindlin's sentences start
at seven and a half years in prison

537
00:40:41,910 --> 00:40:46,650
with three years supervised release,
well below the recommended guidelines.

538
00:40:47,230 --> 00:40:53,430
He's ordered to pay $30 .1 million of
the $33 million he stole in restitution.

539
00:40:53,910 --> 00:41:00,490
The judge thought that this was not
characteristic of Thaw, that there was

540
00:41:00,490 --> 00:41:06,830
charitable deeds that he did, and she
thought that the marriage to his fourth

541
00:41:06,830 --> 00:41:13,080
wife, was partly responsible for him to
go astray. I believe the term she used

542
00:41:13,080 --> 00:41:14,080
was infatuation.

543
00:41:15,860 --> 00:41:20,880
In the end, Starr desperately moved his
client's cash from one account to

544
00:41:20,880 --> 00:41:24,020
another, making the receiver's job
nearly impossible.

545
00:41:24,720 --> 00:41:29,480
I cannot imagine the pressure he must
have been under, taking from Peter to

546
00:41:29,480 --> 00:41:33,620
Paul, to pay Mary, to pay Joan, to pay
this one. I mean, I don't know how he

547
00:41:33,620 --> 00:41:38,360
it. I think Jacob and Angela will get
back a fair amount of their investment,

548
00:41:38,440 --> 00:41:42,700
not a substantial portion, and they'll
never be made whole, but I think they'll

549
00:41:42,700 --> 00:41:45,860
ultimately get back at least several
million dollars, and they would have

550
00:41:45,860 --> 00:41:48,620
zero back if they did not act.

551
00:41:49,760 --> 00:41:56,280
As for Diane Passage, she files for
divorce from the star in July 2011, and

552
00:41:56,280 --> 00:41:59,700
government seizes their $7 .5 million
condo.

553
00:42:00,460 --> 00:42:04,820
Now the former stripper has downsized to
a Times Square pita tear.

554
00:42:05,980 --> 00:42:10,820
Starr ultimately settles with the
Stanton estate, which was not part of

555
00:42:10,820 --> 00:42:11,820
criminal case.

556
00:42:12,080 --> 00:42:18,380
But to Jane Stanton Hitchcock, the
mystery novelist, Starr's crime and his

557
00:42:18,380 --> 00:42:21,320
motivations remain a mystery.

558
00:42:21,740 --> 00:42:27,080
I wonder if he was always like this, or
if it evolved.

559
00:42:28,890 --> 00:42:30,530
Absolute money corrupts absolutely.

560
00:42:30,830 --> 00:42:37,550
I mean, if the lifestyle of his clients
was so mesmerizing to him, if he wanted

561
00:42:37,550 --> 00:42:41,850
that world so badly and wanted to
impress people so badly that it just

562
00:42:41,850 --> 00:42:45,450
corrupted him, or if he was always like
this.

563
00:42:46,070 --> 00:42:50,570
One dark night on a deserted country
road, three shots ring out.

564
00:42:51,090 --> 00:42:54,030
Who shot the lawyer and murdered his
wife?

565
00:42:54,410 --> 00:42:56,130
This is a murder for money.

566
00:42:56,700 --> 00:42:59,480
American Greed, next on CNBC.

567
00:43:00,700 --> 00:43:05,040
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