As we have been reporting, Scientologist David Gentile — CEO of GPB Capital Holdings — is suing his former partner Patrick DiBre for fraud, embezzlement and conversion. Gentile alleges that DiBre kept the $42 million he was paid for his car dealerships and refused to transfer the dealerships to GPB Capital. DiBre filed a counter suit in which he called GPB Capital Holdings a Ponzi scheme.
Over against this vicious legal battle, GPB Capital is being investigated by the SEC, FINRA and the BIC. Last week the FBI executed search warrants on both GPB’s corporate office in New York City and the GPB-owned Five Star Carting, a waste management firm in New York.
Patrick DiBre’s allegation that GPB is a Ponzi scheme raises the specter of Scientologist Reed Slatkin’s $593 million Ponzi scheme. At the time, Slatkin’s Ponzi scheme was one of the largest in US history.
Scientologist Reed Slatkin (1949-2015) perpetrated his Ponzi scheme over a period of fifteen years from 1986 to 2001. Some of his 800 victims included Scientology celebrities Greta Van Susteren, Anne Archer, and Giovanni Ribisi.
Reed Slatkin had absolutely no training or credentials as an investment advisor or securities broker. Rather, in 1974 Reed Slatkin was 25 years old when he joined the Church of Scientology. He became a staff member at the Celebrity Centre in Hollywood, California. There, Slatkin trained other Scientologists.
Slatkin’s pathetic weekly pay as a Scientology staff member would not allow him to support himself let alone his family. He therefore left staff, moved to Santa Barbara, and began to work in the investment world. His mentor was his fellow Scientologist Bob Duggan who taught him the basic principles of investing.
In 1986 Slatkin created and operated an informal “investment club” wherein investors entrusted him to take care of the money they invested with him. Most of Slatkin’s early investors were his fellow Scientologists. Slatkin plodded along for many years with results that were impressive enough for him to solicit even more of his fellow Scientologists for money.
Slatkin soon had seven million dollars under management. Slatkin used this money to buy and sell stocks. In the quarterly statements he mailed out, Slatkin fraudulently represented returns to his investors as being 25%. This in turn brought in more investors. In typical Ponzi scheme style, Slatkin was paying his early investors with the money from new investors.
Lightning struck for Slatkin in 1993 when he made a $75,000 investment in a tech startup named EarthLink. Owned by fellow Scientologist Sky Dayton, EarthLink was an incredible success and turned Slatkin’s investment into $100 million dollars in Earthlink shares.
EarthLink burnished Slatkin’s image as a genius investor. Slatkin thereafter began promoting his investment skills to the wealthy in and around Santa Barbara, Montecito, Goleta, and Hope Ranch where he lived on a palatial four acre estate. Slatkin’s was a typical affinity fraud in which everyone thought Slatkin was a great guy and an investment wizard.
Reed Slatkin got lucky with the $75,000 he put into EarthLink. After that, however, he made incredibly bad investments with the money he collected from his victims. Slatkin had no coherent strategy and his portfolio was scattered across real estate, investment partnerships, and securities. Slatkin even invested in one of the worst high risk investments possible for amateurs and that is film and production companies.
Slatkin had no experience in the cut throat world of investing in Hollywood. However, Slatkin’s partner Ron Rakow had at one time managed the Grateful Dead and perhaps this influenced Slatkin. Later, when Slatkin’s Ponzi scheme was falling apart, the FBI raided Rakow’s home in 2001. The news emerged that Rakow was a fellow Scientologist with a criminal past:
In late June, the FBI also raided Ron Rakow’s house. Rakow turned out to be more than just Slatkin’s concerned neighbor. A onetime manager of the Grateful Dead, Rakow was a Scientologist and sometime art dealer who had gone to federal prison for mail fraud in connection with a cosmetics scam in 1985. According to someone close to him, Slatkin told associates that he had driven Rakow to prison in 1987, weeping all the way.
Rakow seems to have never given up his life of crime. From the Wikipedia page on Ron Rakow:
Ronald Leon Rakow or Ron Rakow was the head of now defunct Grateful Dead Records and manager of The Grateful Dead.
Rakow allegedly embezzled $225,000 from the band. When confronted by band members Phil Lesh and Jerry Garcia, Rakow allegedly told them to go “fuck themselves”; he had cut himself a check for “what he was owed” and then left.[
On April 11, 2007, Rakow was sentenced to five years in federal prison for tax evasion of $2.2 million since 1985. On December 1, 2011, Rakow was released from prison.
Slatkin paid his early investors substantial returns so they would boast to their friends about how much money they were making with Slatkin handling their money. This attracted even more money into Reed’s private investment club.
Like all con artists of his ilk, Slatkin used the money he swindled from his victims to finance a lavish lifestyle for himself and his family. He had a palatial four acre estate in the very exclusive Hope Ranch community near Santa Barbara. Private jet travel, luxury vacations, expensive cars, an art collection, jewelry, exclusive country club memberships, and donations to charities allowed Slatkin to present himself as the epitome success. Slatkin’s prestige in wealthy Santa Barbara grew to immense proportions.
Slatkin also donated significant sums of money to the Church of Scientology as did his clients who were Scientologists. As wealth is valued above all things in Scientology, Slatkin was used in Scientology PR to exemplify the ideal Scientologist.
Slatkin’s Ponzi scheme began catching up with him in 1999 and the SEC began closing in. Slatkin later said he tried to buy time to figure things out and find another investment like EarthLink. To buy time Slatkin told the SEC he had $300 million dollars in a European bank and would pay his investors with that money. However, the bank was nonexistent as was the money.
Slatkin was criminally charged and cooperated with the authorities. According to a US Department of Justice Report:
[Reed Slatkin] misappropriated over $230 million, defrauded more than 500 investors, concealed $90 million in accounts, and commingled investor funds with personal funds. Criminal charges were later filed against Slatkin, and he pleaded guilty to 15 counts of mail fraud, wire fraud, money laundering, and conspiracy to obstruct justice in connection with an investigation by the Securities and Exchange Commission.
In September 2003 following trial, Slatkin was sentenced to fourteen years in prison. The authorities used the US law to claw back money from those who had benefited from Slatkin’s Ponzi scheme — and this included the Church of Scientology. As reported by the LA Times in 2003:
Investors defrauded of $255 million by EarthLink Inc. co-founder Reed Slatkin are hoping to recover funds from the Church of Scientology International and six affiliated organizations that allegedly wound up with tens of millions of dollars from the investment scam, their attorneys said Tuesday.
The investors won an initial battle when a bankruptcy judge in Santa Barbara recently refused to block subpoenas ordering the Scientology groups to hand over records of money transferred to them by certain Slatkin investors who came out ahead financially.
The Church of Scientology and its affiliated groups fought tooth and nail and refused to give back any of their ill-gotten gains. After spending a fortune on lawyers fighting the Trustee and the bankruptcy court, Scientology agreed to disgorge $3.5 million, a pathetic amount given what the Church had raked in on Slatkin’s scam. As reported by the Los Angeles Times in November 2006:
Groups affiliated with the Church of Scientology have agreed to pay back $3.5 million they received from former Santa Barbara money manager Reed Slatkin and others who invested with him…
Slatkin, whose clients included actor Peter Coyote and television legal commentator Greta Van Susteren, paid $1.7 million in ill-gotten gains directly to Scientology organizations, bankruptcy trustee R. Todd Neilson said in court filings.
Millions of dollars more in tainted funds were funneled through other investors to Scientology-affiliated groups, including Narconon International, the Church of Scientology Celebrity Centre International and the Church of Scientology Western United States, the filings said.
Reed Slatkin served ten years of his sentence and was released in 2013. He thereafter stayed in hiding. This was likely due to his fear of reprisal from the many people he had destroyed financially by his crimes.
Reed Slatkin died of a heart attack in June 2015 at age 66.
The only real winner in Reed Slatkin’s Ponzi scheme was the Church of Scientology which fought a legal battle to keep virtually all of the money it had gained from Slatkin’s fraud. Always a tawdry and extreme hypocrite, the Church of Scientology kept the money Slatkin stole from his victims even as it expelled Slatkin for not living up to its “high moral standards.”
For more information: The Reed Slatkin Media Resource
Below: The 2001 Trustee’s Report to the Court on Reed Slatkin presents an overview of what had been discovered up to that point about Reed Slatkin’s Ponzi scheme. Note: Please hover your cursor over the document to invoke the page up/page down controls at the bottom of the page frame:
Categories: The Scientology Money Project