Doug Thorburn, addiction expert, addiction contrarian and author of the recently released
"Alcoholism: Myths and Realities: Removing the Stigma of Society's Most Destructive Disease," has just released his
May 2009 Thorburn Addiction Report and the Top Story runs through the litany of financial crooks who have come to light during the current recession. Thorburn, a contrarian in terms of the prevailing opinions on addiction, brings to light a number of stories behind the headlines which have been served up lately.
In addition to the
Top Story of the Month and the Runners-up in the TAR, also known as the Thorburn Addiction Report, there is number of interesting sections like Enabler of the Month, Under Watch, Book Review and others.
Top Story
In a recent piece on white-collar crime, "The Economist" magazine observed that "many [Club Fed and other white-collar] prisoners suddenly discover, post-conviction, that they had a drinking problem…." This should come as no surprise to our audience. In
"Drunks, Drugs & Debits: How to Recognize Addicts and Avoid Financial Abuse," I argue that 80-90% of criminals, including those who perpetrate white-collar crime, are addicts.
Students of my books know how to use this simple idea to protect themselves from the financial devastation wrought by addicts. However, try proving the existence of alcoholism when it is so often hidden by both addicts and their enablers. As I wrote in the Top Story on Los Angeles City Attorney Rocky Delgadillo and his wife Michelle in the July 2007 edition of
"Thorbun Addiction Report," which can be viewed at
www.preventragedy.com. "I have long bemoaned the fact that the press discloses the drinking and using foibles of celebrities and sports figures while generally failing to report any evidence of use in law enforcers, politicians, CEOs, attorneys and doctors. In my files of likely and confirmed alcoholics, for every [celebrity suspected strictly on behavioral clues, I can confirm addiction in four or five others]; of every four or five law enforcers suspected, I have only one in whom I can prove alcoholism. Yet, the behaviors are similar in all those under suspicion, celebrities and non-celebrities alike."
This is as true of con artists, including those perpetrating the spate of recent Ponzi schemes, as of law enforcers and CEOs. In the spirit of "The Economist's" discovery, I would suggest that those prisoners who have yet to gain such awareness might benefit from greater introspection. The same applies to those who should be in prison but aren't yet. Let's take a look at some recent alleged white-collar criminals, for whom the evidence of alcoholism is in the alleged crime itself.
Businessman Tom Petters, whose Petters Group Worldwide owned parts or all of Fingerhut, Polaroid and Sun Country Airlines, charged with running an unusual multibillion dollar Ponzi scheme. Petters promised fat returns to investors who lent him money to buy surplus merchandise and resell it to retailers, including Wal-Mart. According to a federal indictment, there were no such purchases or resales. Instead, Petters used the money raised from new investors to pay off old ones in classic Ponzi-like fashion. He also gifted millions of dollars to colleges, which is significant not only because having university buildings named after oneself is satisfying to the ego, but also because the resulting notoriety is consistent with alcoholic egomania. Oh, and he also funded an "extravagant lifestyle" for himself, which included five lavish homes in several states, several Mercedes, a Bentley and "expensive" boats.
After founding Petters Group Worldwide, Petters often stressed that his core values included caring, humility and integrity. He often said that to "build connections or relationships, you can't survive without trust." Yet, his professional life belied the claim. A private investigator, Randy Shain, found that for 15 years up to 2002 there were one or two lawsuits a year for failure to pay for products purchased. Court records show he was involved in multiple breach-of-contract lawsuits with business partners, either he suing them or vice versa.
The problem with Mr. Petters—and the best explanation for the otherwise inexplicable contradiction of overachieving while abusing others—is that he is an addict. His lawyer says he went through rehab for cocaine addiction. The behavioral evidence suggests it was unsuccessful.
Robert Allen Stanford, accused by the Securities and Exchange Commission of engaging in a "massive, ongoing fraud" in which eight billion dollars has gone missing. The SEC claims savers who bought uninsured certificates of deposit from his bank with "unusually high yields" of 6% to 10% were told the funds would be primarily invested in easy-to-sell liquid assets. They were instead invested in illiquid assets such as real estate and private equity funds. The SEC tried calling an accountant who was supposed to have audited the investment portfolio, but, according to the SEC complaint, "no one ever answered the phone" (reminiscent of Bernie Madoff's accounting team of two). The accountant died in January. Among seemingly innocuous questions surrounding his character, Stanford claims to have genealogical research proving he is related to Leland Stanford, the founder of Stanford University, while the university says it has proof he isn't. He says he went to Baylor University and played football on an athletic scholarship, tearing a rotator cuff and breaking his collarbone along the way. Yet Baylor has no record of such a football scholarship and a college spokesperson says he hasn't been able to find anyone associated with the team who can recall him ever playing. Little indicators, such as elaborately-told lies, often prove to be the tip of a mighty alcoholic iceberg. This suggests if we were able to dig deep enough we might find that Stanford, too, needs rehab.
California financier
Danny Pang, arrested by the FBI on charges of structuring cash transactions totaling more than $300,000 to keep them under the level that triggers a report to the federal government ($10,000 per withdrawal or cashed check). However, this charge is believed to be a "placeholder," which will allow federal officials to dig deeper into allegations of far graver felonious conduct involving Pang and his Irvine, California investment firm, Private Equity Management Group, known as PEMGroup. Apparently, a page one article in The Wall Street Journal in early April about questionable claims and business practices surrounding Pang caught the FBI's attention. Questions were raised about Pang's claim that he had earned a bachelor's and master's degree from UC Irvine when he had earned neither and that he had previously worked as senior vice president and high-tech merger advisor for Morgan Stanley when he had not. It also included allegations by a fired ex-president of PEMGroup that Pang privately admitted to running a Ponzi scheme inside the firm.
Pang has had a checkered past. His marriage to Janie Louise Pang, who worked on and off as a stripper, was stormy. Police were called to their home four times over complaints of domestic violence (which is an almost-certain indication of alcoholism in one or both spouses). She was quoted in a 1993 incident as saying she was afraid Mr. Pang "was going to kill her." She told police he'd drained the equity from her parents' home and spent it on "gambling, women, alcohol, etc." and later broke her nose while forcing her to withdraw $70,000 from the bank, which she claims he gambled away in one night. In 1997 Pang was accused of a $3 million theft from an escrow account, for which he was never charged and the alleged victim didn't sue because he later got most of his money back.
A few months later Ms. Pang hired an investigator after observing Mr. Pang holding hands with another woman. The next day, shortly before a schedule meeting with the investigator, Ms. Pang answered the door to their home to a man in a suit with a briefcase who, according to witnesses, asked if she was "Miss Pang" and chased, caught up with and shot her to death (the witnesses, Pang's son, a maid and the maid's daughter, fled through the back door). Four years later, authorities arrested a suspect in the slaying, one of Mr. Pang's attorneys, who faked his suicide off the Golden Gate Bridge days after the murder. The man, Hugh "Randy" McDonald, went to trial and was acquitted, with one juror saying many on the jury thought Pang either killed her or had her killed, because she wanted a divorce and "she probably knew a lot of his business." When called to testify, Mr. Pang invoked the Fifth Amendment. The lead investigator, Sgt. Yvonne Shull of the Orange County, California sheriff's department, observed that anytime a husband takes the Fifth regarding his own wife's death, you have to wonder if there's something they've missed.
The sort of drama and turbulence Mr. Pang has experienced would be unimaginable in the life of, say, Bill Gates, or any other non-alcoholic.
Former Illinois Governor Rod R. Blagojevich, along with his brother Robert Blagojevich, his fundraiser Christopher Kelly and three other men, indicted on political corruption charges. Blagojevich's sordid tale (all alleged, of course) was told in the January 2009 edition of
"Thorburn Addction Report" (www.preventragedy.com). What's new to the story is that Kelly, a wealthy roofing contractor, pleaded guilty in January to tax fraud for concealing his use of corporate funds to cover gambling debts and, weeks later, was charged in connection with a kickback scheme at O'Hare International Airport. As mentioned in previous Top Stories on tax cheats ("Survivor's" Richard Hatch and actor Wesley Snipes), such behavior, especially in conjunction with other misbehavior, is rarely seen in non-addicts.
Mike Carona, who was crowned "America's Sheriff" by Larry King for having led the search and ultimate capture of the killer of 5-year-old Samantha Runnion, sentenced to 5 ½ years in prison for attempting to obstruct a grand jury investigation into corruption in his office. Numerous behavioral indications of alcoholism were discussed at length in the November 2007 issue of TAR (www.preventragedy.com, where Carona qualified for Top Story. Among other clues, he blamed everyone else for his predicament, he was accused of handing out bribes in cash-stuffed envelopes, Sheriff-reserve badges were given to his supporters and those with political connections, he had a long-time mistress and was accused by a former accomplice of being a serial adulterer. Jurors said they thought Carona had accepted cash and improper gifts but acquitted him on related counts because the statute of limitations had run on many of the alleged acts.
Paul A. Morabito and Jack Welti, named in a lawsuit against "brokers at Marcus & Millichap," a prominent California real estate brokerage, of assembling a portfolio of properties on which franchises such as Jiffy Lube and Church's Chicken operated, leasing the properties at rents well above market rates and selling them to investors at inflated prices. The suit alleges the tenants then closed the businesses, leaving investors in four states with greatly devalued real estate. Morabito, once described as a "whiz kid" rising fast in the world of real estate and finance, was an emerging figure in Democratic Party politics and recently served as chairman of the State of California Costal Conservancy. Without complicit unnamed appraisers working for PGP Valuation, Inc., a nationwide appraisal firm specializing in commercial and industrial properties, this alleged fraud would have been far more difficult, if not impossible, to perpetrate.
John Malburg, the 40-year-old scion of the family that has for decades run the tiny industrial city of Vernon, four miles south of Los Angeles, sentenced to eight years in prison for sexually molesting one boy over a five-year period and videotaping another for commercial purposes. The case, in which Malburg admitted to abusing the boy while acting as his therapist when the child was 10, arose inadvertently out of an investigation over public corruption involving his father, Vernon Mayor Leonis Malburg, 80. The elder Malburg, along with former longtime city administrator Bruce Malkenhorst, Sr., has been indicted for illegally spending city money for personal use, including "massages," golf outings, meals and political contributions. The city has less than 100 full-time residents (who, it turns out, may or may not actually live there), almost all in city-owned housing, and rakes in almost $40 million yearly in fees paid by a plethora of industries. Malburg, who has been mayor for 50 years, has been accused of running the city like a fiefdom (The Los Angeles Times ran an excellent series of articles on the alleged corruption that seems to permeate the city). Before he stepped down as city administrator, Malkenhorst was California's highest paid official, raking in almost $600,000 yearly; he now reportedly receives a pension of over $400,000 (and you wonder why California is broke).
Michael Petronella, 50, and his wife Devon Kile, 44, charged with defrauding the State Compensation Insurance Fund, California's biggest workers' comp insurer, of $38 million over a nine-year period beginning in 2000 by underreporting payroll for their three roofing and contracting companies and filing 42 fraudulent claims for uninsured injured workers. The couple spent their ill-gotten gains on five homes, a Bentley, two Ferraris, at least $500,000 in jewelry and other luxury (in this case read: ego-inflating) items. Authorities found $50,000 in cash at their homes, along with an application from Kile to be on the reality TV series "The Real Housewives of Orange County." The couple is also accused of shorting the State of California about $2.3 million in income tax (which translates to about $23 million in understated income and/or overstated deductions).
I have included perhaps too many recent cases in which alcohol or other-drug addiction should be suspected. However, the lessons are crucial, especially in times of economic strife when the behaviors of addicts may worsen, putting us at greater risk personally and professionally. The SEC roundly ignored Harry Markowitz's warnings that Bernie Madoff's returns were mathematically impossible unless he was either front-running trades or operating a Ponzi scheme, so we obviously can't count on government to protect us from such predators. My books are filled with warning signs that victims of these alleged criminals would have been wise to heed had they been aware of the indicators. We should be constantly vigilant for signs of alcoholism in others, for when the alcoholic who is desperately trying to inflate his ego strikes it could take our life savings, our health and even our lives.
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Copyright 2008 Doug Thorburn All Rights Reserved.
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