Starry-eyed celebrities brought down to earth
The National, June 5, 2010
The fact that Kenneth Starr, investment adviser to Uma Thurman, Annie Lebovitz, Al Pacino and Martin Scorsese, is accused of scamming $30 million from his celebrity clients to buy, among other things, a $6.5 million Manhattan home with a 32 -foot indoor lap pool, is the stuff that movies are made of. Reports that, following a tip from his wife, a former pole dancer, the FBI caught Starr hiding in a closet at his house when they spotted his shoes sticking out from under a bundle of coats, only makes the story even more surreal.
However, what is most remarkable about this extraordinary tale that investors are still being duped so soon after Bernie Madoff's multi-billion dollar swindle. Unless they have been living in a cave for the last 18 months, Starr's investors must be aware about the perils of financial fraud. They must also know that celebrity doesn't offer some sort of immunity. After all, Kevin Bacon, John Malkovich, CNN presenter Larry King and a host of other high profile figures were all conned by Bernie Madoff, yet America's rich and famous are still struggling to pick a financial adviser that won't rip them off.
Granted, some of his clients got suspicious about Starr, who faces criminal charges including wire fraud to obtain property, investment adviser fraud and money laundering. According to the criminal complaint, Uma Thurman, identified as Client 2, confronted Starr this April when she discovered that $1 million had been wired out of her account without her knowledge. Allegedly, Starr used this and $6 million from other clients accounts to buy his 5-bedroom, 6.5 bathroom home on Manhattan's Upper East Side.
But the complaint suggests that other clients of Starr were pretty gullible. Jeweler Jacob Arabov, famed for supplying hip hop stars such as Jay-Z with their bling, invested almost $14 million with Starr. Starr told Arabov and his wife that they make five to 10 times their investment, but gave them few documents detailing what they'd actually bought into nor any interest payments. When they asked for their money back, they were fed the line that Starr's son had to travel from Florida to Caracas with the vice president of Venezuela to collect a cheque. Note to Arabov and others: vague investment schemes that sound too good to be true probably are.
Starr, whose has denied any wrongdoing, was certainly the master of persuasion. Much like Bernie Madoff, he formed a personal bond with his clients over many years, showering them with attention and assurances about all his unparalleled financial connections until he won their trust, and even their friendship.
Still, while there's no doubt that celebrities operate in a world lubricated by trust and personal relationships, you do not choose a financial adviser because you like them. You choose them after you've done plenty of research and then keep them at a distance. Note to Thurman and others: giving your adviser unfettered access to your bank or investment accounts is also a bad idea.
However, you don't need four holiday homes around the world and a garage crammed with sports cars to successfully get duped. Plenty of common or garden investors in the US still get suckered into fraudulent schemes every day and never make the headlines. According to the Federal Trade Commission, 42.4 million US consumers of every age group entered into fraudulent transactions in 2009.
US financial adviser, Bonnie Kircher, knows all about this. Her book 'Who can you trust with your money?' advises people how to spot bogus financial advisers, after she discovered that her own husband, Brad Bleidt, had scammed over 100 clients in a $32.6 million ponzi scheme.
In the book, she warns about financial advisers who ask clients to write checks directly to them, statements that suggest that investment portfolios are always doing well and documents from advisers that do not show itemized transactions.
Perhaps she should send Starr's clients a copy.
Copyright The National 2010