Investors told a federal bankruptcy judge yesterday that the man they suspect of bilking them out of millions of dollars was a big spender involved in high-stakes gambling who flaunted wads of cash.
Scores of investors fear they may have lost more than $6 million they gave to Richard A. Scott, who state securities officials allege operated an illegal mutual fund from a coin and stamp shop in Camp Springs.
Author Tom Clancy and his wife Wanda are the largest investors. They gave Mr. Scott $1.6 million, and recommended him to friends and family who also invested money with the coin dealer.
"They [the Clancys] are stunned by the rather incredible complexity of this scheme," said Ellyn L. Brown, an attorney representing the Clancys. "This is not poor management it's a complex, integrated tissue of lies."
Investors who testified at the five-hour-plus hearing said they were betrayed by a man to whom they entrusted their life savings, children's college tuition and retirement money.
One investor, Walter Smith, of Dunkirk, Calvert County, told U.S. Bankruptcy Judge Paul Mannes at the hearing in Greenbelt that Mr. Scott promised big returns on the $70,000 he invested from the sale of his Virginia house.
"I said, 'What could you do with $70,000?' " Mr. Smith testified. "He said, "I'll turn it into $300,000 in three years.' "
Mr. Smith said he was so impressed by Mr. Scott's promises that he sold the house and two cars to invest the proceeds, invested his inheritance and his wife's, and quit his job because he believed that he'd never have to work again after investing $311,000 with the coin specialist.
He said Mr. Scott advised him to collect credit cards, borrow against them and invest the money in stocks.
He also said he invited Mr. Scott to his home for dinner, went fishing with him and met him in Las Vegas for gambling trips.
"At times, there would be $1,500 on one bet," Mr. Smith said.
Mr. Smith said he received about $2,000 a month from Mr. Scott, enough money to pay his monthly bills, and he never questioned what was going on with his investments.
"I trusted him with everything," he said. "He gave me his word: 'If anything happens, my word is my bond.' "
"He's a scam artist," said George Mysior, who invested $7,150 with Mr. Scott and talked his father into investing $40,000.
The investors won a small victory when Judge Mannes agreed to appoint a trustee to prevent Mr. Scott and his associates from liquidating Goldie's Coin and Stamp Center Inc.
"It is clear to me there was dishonesty," Judge Mannes said. "That has been proven to me by a country mile."
Goldie's Coin and Stamp Center filed for reorganization under the bankruptcy code Nov. 2. Eight days later, Maryland Securities Commissioner Robert N. McDonald filed a complaint in Prince George's County Circuit Court alleging that Mr. Scott operated an illegal mutual fund, and lured investors by making misrepresentations and guaranteeing rates of returns on investments in coins and stock.
According to documents filed by Mr. McDonald, the Clancys invested $200,000 in a coin and stamp fund that Mr. Scott allegedly said was guaranteed to return 15 percent annually, and they invested another $1.4 million in stocks through Mr. Scott.
In addition, a $450,000 gift to the Calverton School and a %J $100,000 college trust fund that the Clancys set up for three children of friends were invested with Mr. Scott, the documents say.
Stephen F. Fruin, attorney for Goldie's Coin and Stamp Center, said that, despite the allegations, "there is no money lining anyone's pockets."
Neither Mr. Scott nor his attorney could be reached yesterday for comment.