When Richard Scott turned 50 last October, one of his customers dropped by his coin-and-stamp store with a cake with joke candles that wouldn't extinguish, no matter how hard he blew.
Then there was a splashier celebration: Mr. Scott's marquee clients, author Tom Clancy and his wife, Wanda, invited him to their private box for the Oct. 14 Washington Capitals hockey game.
It was the kind of night he would later mention to current and potential customers at Goldie's, a small and rather run-down shop in Prince George's County where he sold coins, stamps, baseball cards, jewelry and, oddly enough, stocks.
It gave him a certain cachet, his business and personal connection to the best-selling novelist and part-owner of the Orioles.
He had met the Clancys through a mutual friend three years earlier at a game at Camden Yards. The couple came to invest $1.4 million with him, and he slipped easily into their social circle.
He regaled customers with stories of parties like the Clancys' 25th wedding anniversary celebration in 1994, where Mr. Scott met their friend Colin Powell. He even intimated that the general might start investing with him, too.
But if dropping the Clancy name caught the attention of potential investors, it was ultimately Mr. Scott's engaging personality that reeled them in.
Soon, he was more than an investments adviser: He was invited to their weddings and family reunions. They remembered his birthdays. They traveled together. Their children called him "Uncle Richie." They even brought him to their churches.
They trusted him with their money, their nest eggs, their inheritances, their children's college funds, the safety nets for the medical care they would need in the final years of their lives.
But then, in November, they learned their trust was betrayed. Mr. Scott abruptly filed for bankruptcy and locked the door of Goldie's.
Most of the $7.3 million that 95 investors had given him over the years was simply gone; the coins and stocks he supposedly purchased for them were nowhere to be found. The toll has been immense -- and immeasurable.
"Definitely it's a financial loss," said one investor, "but it's also a personal betrayal."
What Mr. Scott did with their money remains, for now, a mystery that investigators are hoping to solve by delving through years of financial records. But there is only so much that can be documented when one person hands money over to someone in return for nothing more than a hand-scrawled store receipt.
And that, perhaps, is the biggest mystery of all: Why so many people signed over their financial security to a man who bought and sold stock from the corner of a coin store in a fading shopping strip in Southern Maryland.
The sweet deal
Goldie's is closed now, its rotating display cases bare, the "big board" of coins up for bid stripped clean, the television that continually flashed stock quotations silenced.
But once, the shop in Camp Springs, Md., just west of Andrews Air Force Base, hummed with activity, abuzz with a mix of friendship and commerce. It was the place to have a cup of coffee and visit with the affable Mr. Scott, his partners and even his elderly parents, who worked a couple of days a week.
And it was the place to chase the big killing, the sweet deal that would clinch an early retirement, a vacation house or a child's college education.
Mr. Scott, who grew up in Alexandria, Va., had a long interest in stamps and coins. He was president of his high school coin and stamp club and, after a tour with the Navy, began managing Goldie's stamp operation. After the shop's original owner died about 10 years ago, Mr. Scott became the majority owner. His partner, Edward M. Pereira, nicknamed "Butch," 31, also had worked there for years, starting as a teen-ager who swept up and did other odd jobs.
Mr. Scott and his partners refused requests for interviews, and his lawyer declined to comment because the case is still under investigation. Mr. Scott's father, Corey, rebuffed reporters and investors who telephoned or knocked on the door of their home, saying lawyers advised his son not to speak. Yet the portrait of Richard Scott that emerges from his betrayed investors and one-time friends is revealing -- not just for what it says about the man who drew such trust but about the group of people so eager to hand it to him.
"You'd come in, everyone hugged you, kissed you. 'How was your kid?' 'How was your cousin?' All you needed was a fireplace," C. J. Boggs, a longtime friend and customer says dourly now. "They'd order lunches, ask you to stay. Butch would poke his head out to say hi. Corey would run out to greet you."
The hockey game in October was the last time the Clancys saw Mr. Scott. Their likable, gregarious friend seemed the same as always, enjoying the game and the family and friends gathered around him.
And why would he seem otherwise, his friends and clients now say. Why would he have acted any differently toward the end if, as some suspect, the fix had been in from the start? If he was able to look them straight in the eye all these years as he took both their money and their friendship, why would he exhibit any discomfort just weeks before he would be accused of squandering both?
"Just everything about it," Mr. Clancy says, "was grossly ordinary."
"That's what's terribly amazing," Mrs. Clancy says, thinking back to the birthday gathering at the Capitals game. "He knew he was being investigated."
Commission closing in
You hear it over and over again from the investors: He knew. He must have known. If not from the start, then certainly by October.
By then, the Maryland Securities Commission was closing in; it had been investigating Mr. Scott for about a year and were ready to come down hard.
On Nov. 10, about a week after Mr. Scott and his partners declared Goldie's bankrupt, security officials filed the civil complaint alleging that he sold stocks without a license, took money for stocks he never purchased and misrepresented the returns that he could guarantee investors. It is unclear how long Mr. Scott had been offering stocks, but most of the customers involved in the complaint began investing with him in the past five years.
Last week, they expanded the complaint to include Mr. Scott's partners, Mr. Pereira and Jeffrey K. Goodman, in what a judge called a "deplorable scam." A criminal investigation is also under way.
The state froze the assets of the store and its owners, none of whom has a criminal record. Investigators, so-called "forensic accountants," have been combing through financial records the
way other detectives pick through crime scenes.
"We haven't found any gold mines," said James Gordon, head of Maryland First Financial, a firm that locates illicit money. They have discovered that Mr. Pereira bought precious metals and a 27-acre farm in Calvert County and Mr. Goodman purchased a $196,000 townhouse in Alexandria. But locating the millions Mr. Scott took in will not be simple. Records show he withdrew more than a quarter of a million dollars from his personal bank accounts in the last five years, but what he did with it is harder to determine. Simply looking at him offered no clues, friends say: He lives with his parents in a home in a nondescript development in Alexandria, dresses casually and drives leased Cadillacs -- hardly the likely lifestyle of a man accused of siphoning off millions of dollars that clients gave him to invest.
He seemed, his friends say, the disbelief still fresh, just like them. Middle class and solid. Like many of them, he'd served in the military. He had roots here, and was close to his family. The point, they say, is he was no carpetbagger who swept into town with wild promises and then disappeared with their money.
"This is what makes it so hard," Mrs. Clancy says. "He never came after us, I went to his store. He did not come pounding down our door."
A Vegas trip
Walter Smith and Robert Miller had been friends for more than 10 years. They had lived two doors away from each other in Anne Arundel County, they attended the same church. And so it was natural that when Mr. Smith discovered a good investments guy, he told Mr. Miller about him.
"I hung out there a lot," Mr. Miller said of Goldie's, "went to Vegas with him, went to Atlantic City."
The Las Vegas trip, about a year ago, might have been Mr. Scott's first visit there, friends say, because the inveterate smoker was loath to go without a cigarette for five hours, the time it takes to fly there. Once there, though, he was in his element, staying in a top-floor, Jacuzzi-equipped suite at the Tropicana, playing the craps and blackjack tables. He bet big.
"He would have $1,500 on one roll," Mr. Smith said.
"The funny thing is, I never saw him lose. He was the luckiest guy I ever saw," said Mr. Miller. "He kept wads of cash in the back of the store. He said he couldn't deposit it because he'd won it all at the casinos."
Once, Mr. Miller recalled, at a casino night at a Knights of Columbus hall in Camp Springs, Mr. Scott won so big -- $15,000 -- that police escorted him home for his protection.
Even now, Mr. Miller smiles at the memories. The outings were a welcome diversion for the 58-year-old who in recent years has had to cope with losing his retail management job to a younger man and, most crushingly, his wife to cancer.
After making it through those ordeals, learning that Goldie's was bankrupt and the $170,849 he had invested was gone, Mr. Miller could only laugh a hollow laugh. What next?
Mr. Miller learned that his friend had taken a commission from Mr. Scott for bringing him into the fold. "After I heard that," Mr. Miller says, "I kept away from him. It hurt."
In January, however, they ran into each other at their church. "He said, 'You have something to talk to me about,' " Mr. Miller says. "He admitted he made money off me."
Mr. Smith, declining to be interviewed directly, said through his attorney that Richard Scott had given him a commission of about $5,000.
Seemed so simple
"I guess my wife would say I was greedy," Walter Smith said on the witness stand during a court hearing to freeze Mr. Scott's assets. "I wanted to make more money."
Mr. Smith was trying to explain why he applied for new credit cards, let Mr. Scott run blank credit slips over them and then charge the limit. Why he took out a home equity loan -- "Get as much as you can," Mr. Smith remembers him saying. Why he sold a home in Virginia in which he had $70,000 in equity -- "I'll make you $300,000." Why he quit his job as a printer. Why he sold some old cars and even his childhood coin collection.
Greed. Stupidity. Wishful thinking. Any number of factors were at play, combining to convince the investors to give up their money for the chance to make more of it. It is, of course, the legitimate way of increasing your wealth: You put in an initial sum, and the bank or the corporation pays you interest or dividends down the road. But it is also the basis of many classic frauds: The chain letter. The pyramid scheme. The telemarketer who promises a big prize but says you need to send in a deposit to secure its delivery.
It seemed so simple, so reasonable -- and safe, because so many people they trusted were already a part of it. And so Richard Scott's customers funded their own financial demise.
Robert Miller's son turned over the savings bonds that his late mother left him. Another investor's stepfather, Dominic Lynch, transferred IRAs, remortgaged his house and even sold his family's private island in northern Georgian Bay in Canada to invest a total of $356,973 with Mr. Scott.
"He made us believe he was part of the family," said Mr. Lynch, 66, a retired Pennsylvania government worker. "But looking back on it, what he was doing was just worming his way in."
When Mr. Lynch's friends were killed in a plane crash three years ago, he advised their son, Peter Brown, to invest his nearly $170,000 inheritance with Mr. Scott.
"He made me feel very comfortable," says Peter Brown, 27, a Navy veteran like Mr. Scott.
And then, there was the clincher: Tom Clancy. You don't become a multimillionaire, it was implicit, by making bad investments. If you could afford any investments specialist in the world and you chose Richard Scott, why, he had to be something special.
"I thought if the Clancys invested with him," Mr. Brown says, "he must have been reliable."
Drawn by a friend
The Clancys, though, were drawn into investing with Richard Scott the same, casual way others were: by a friend, C. J. Boggs.
Ms. Boggs, who is a psychologist, had known Mr. Scott for years and had steered friends, family, and in at least one case, a client, his way.
Walter Smith's wife, Jane, had lost her mother, was taking the death hard, and turned to Ms. Boggs for bereavement counseling. At the end of one therapy session, after Ms. Smith spoke of her mother's estate and financial problems, Ms. Boggs brought up Mr. Scott and his savvy for investing.
"She said, 'By the way, I know someone who can give you 15 percent on your money,' " Ms. Smith recalled. "She gave me his number, and I didn't do anything with it. Then, at the next session, she brought him up again and said I should call him. I got the sense that she really believed in him."
Ms. Smith and her husband contacted Mr. Scott. Now, more than $300,000 later, they are on the brink of financial ruin and have mixed feelings about Ms. Boggs.
"I depended on her credibility as a psychologist," Ms. Smith said. "I really felt at the time that she was trying to help us. But the repercussions to us have been tremendous."
Ms. Boggs says she did make the referral, although she compared it to providing information to patients who ask her about a good gas station or a church. When asked further about the ethics of mixing business with therapy, Ms. Boggs said patient confidentiality prevented her from discussing specifics.
She did provide Mr. Scott with his most lucrative clients: The amount of money invested by the Clancys and those they in turn recommended to Mr. Scott totals in the millions.
After the Clancys, who invested more than $1.4 million, the next largest creditor in the case is the Calverton School, which their children attend. Mrs. Clancy, who heads the school's board of trustees, had invited Mr. Scott to make a presentation to the board's finance committee.
When asked about investment options, Mr. Scott usually outlined two plans. The first was the so-called "15 percent account." Mr. Scott claimed that Goldie's had unique expertise in appraising coin collections, and would buy them from estates and then resell them at a profit. "If we have a reliable source of ready cash," he wrote in a letter to the school, "we can bid on collections where others cannot. We are easily able to pay you 15 percent in good times and in bad." The other plan was the stock option, with Mr. Scott picking the stocks to invest in and taking a commission on the transaction.
The finance committee, which included an accountant and a lawyer, was convinced, and the school chose the 15 percent account. Initially, the school invested its $29,000 endowment fund with Mr. Scott, and later added a $450,000 gift from the Clancys to expand its facilities.
But most gnawing to the Clancys is the $100,000 they gave Mr. Scott to start a college fund for the children of Gerald and Debbie Carroll. Gerry Carroll and Tom Clancy met in an English class at Loyola High School in Baltimore and remained close even as Mr. Clancy grew in fame and fortune and came to number people such as General Powell and actor Tom Selleck as friends. Mr. Carroll, a Navy pilot, died in 1993.
"He was my best friend, I promised to take care of his kids," Mr. Clancy says. "That's what I'm really angry about. He knew what that money was for."
With their millions the loss is easier to take, at least financially. "This thing with Richard, I guess we are the most prominent people involved," he says. "A lot of people are hurt considerably more than us. We can afford to take this hit -- I'd just as soon not take the hit -- but other people are going to be hurt more."
And yet in one way, the Clancys are no different from Mr. Scott's other investors.
"It was a genuine friendship," Mr. Clancy says. "When a friend sticks it to you, that makes it really bad."
Two who were suspicious
Perhaps it was the physical distance that gave them perspective, but the only investors to become suspicious were on the other side of the country, in Northern California.
They are Katherine Robinson and James SanSouci, two officials with Mr. Clancy's Kyle Foundation, a nonprofit group that supports seriously ill children and their families. It is named after and inspired by a young boy, Kyle Haydock, whom Mr. Clancy befriended shortly before the boy died of leukemia in 1991.
The Clancys referred Ms. Robinson and Mr. SanSouci to Mr. Scott in the spring of 1993. Although the two investors refused to comment on the case, they detailed their experience with Mr. Scott in affidavits provided to the state last fall.
Ms. Robinson and Mr. SanSouci wanted to invest in high-tech companies and frequently visited and tracked the developments Silicon Valley for possible investments. That is how they came across a company called General Magic, a Silicon Valley start-up much like those that in recent years have created frenzies on Wall Street when they go public and investors dream of buying into the next Microsoft or Netscape.
The company is developing technology for the next major gadget, the hand-held computer and personal communications device, and its initial public offering, or IPO, of stock was considered a risky yet intriguing opportunity.
Ms. Robinson and Mr. SanSouci learned from General Magic employees that the company would go public in early 1995, and told Mr. Scott they wanted to buy shares in the IPO. With several relatives, they pooled about $41,000, and, when the IPO was released in February, Mr. Scott said he managed to buy the eagerly sought shares.
Later in the day, though, as Ms. Robinson and Mr. SanSouci followed the stock's progress through an on-line service, they saw it heading south -- and fast. The next day, and for weeks thereafter, they asked Mr. Scott to sell, but he continually rebuffed them.
Finally, in April, they called Mr. Scott's stockbroker at PaineWebber, Jacqueline Willens. She shocked them by saying she knew nothing about the General Magic IPO and denied purchasing any shares for Mr. Scott. The stockbroker put them on hold, apparently to call Mr. Scott, and soon he was on the phone to Mr. SanSouci and Ms. Robinson.
Mr. Scott confessed that he hadn't been able to buy the General Magic IPO but was too "embarrassed and upset" to admit it, Mr. SanSouci said.
"He apologized continually. I suspected that he was drinking, as he occasionally slurred his speech. He indicated he was calling from a Las Vegas hotel room. He called back several times during the day. During each call, his speech seemed more impaired."
Mr. Scott offered to repay them for the stock he had told them he purchased, Mr. SanSouci said, and each of them soon received a check in the mail.
Feeling the impact
It appears, however, that none of the other investors had reason to suspect anything was amiss, at least until last fall.
But perhaps they didn't want to look too closely: At least some were receiving statements that showed their investments rising in value, their 15 percent returns adding up over the years. Given such returns, many of the investors in the case simply left the money where it was rather than cashing out. Others arranged for Mr. Scott to send them a certain sum each month out of the accounts he managed for them, and they say the checks arrived regularly until last fall.
Why, in other words, look a gift horse in the mouth?
Now, however, it is the details that consume them as they search for canceled checks, receipts and statements to make their case.
They are thrown together against a common enemy, and yet theirs is an uneasy alliance. Even if some of the money is recovered -- and that is a big if -- there surely will be more claims than funds to cover them. There are hopes that hidden assets will be discovered, but also fears that the money is long gone, perhaps gambled away or lost in what the securities commission calls Mr. Scott's "speculative" stock picks. It is a complex case that may not be sorted out for some time. Some investors have hired attorneys to represent them; others are holding back for now, not wanting to throw good money after bad.
As they start to feel the impact of their losses -- some have filed for bankruptcy; others have come out of retirement -- they face dry procedural hearings that seem to be about everything but fixing the mess they're in.
Last December, in a stuffy courtroom in Prince George's County, the investors were fretful and righteous. A few disdainfully huffed as it grew apparent that Mr. Scott's attorneys were smoother than the prosecutors. Anger became outrage as Mr. Scott's attorneys tried to ensure that his assets weren't frozen so completely that they wouldn't get paid.
They seem like a sadly wounded village, as if even before Richard Scott came into their lives, something had swept through and left every family bereft. Deaths and illnesses and personal problems.
Not even the Clancys were immune -- her mother and his father died recently, she was diagnosed with cancer and they went through a highly publicized separation after his involvement with another woman.
Getting ensnared in a bad financial scheme on top of all that is not entirely coincidental: Money and hardship tend to follow each other. Someone dies and leaves you money. Or, someone falls ill, and you need more money to provide care.
In September, George Sowa, a World War II bomber pilot, spent a lot of anxious hours in the waiting room of the Andrews Air Force Base hospital, where his wife was operated on for lung cancer and placed in the intensive care unit. In the situational intimacy of such places, he got to know Robert Miller, a retired military man, who was hospitalized for an irregular heartbeat and liked to escape his bed occasionally for the more companionable waiting room.
Mr. Sowa worried aloud about having to put his wife in a nursing home, and how much that would cost. Mr. Miller, who had lost his wife to cancer a year earlier, told him about this investments guy who gave him "unbelievable" returns. "He told me that's how he was able to take care of his wife," Mr. Sowa recalled.
It was just a 10-minute ride from the hospital to Goldie's, so Mr. Sowa went to check out this investment wizard. He ultimately gave him $100,000.
Now, the Sowas are part of the group that follows the case from proceeding to proceeding -- or as much of it as they can. At the December hearing, they left while the judge and lawyers were still in the midst of a lengthy recess.
"We have to go," he said, pointing to the wheeled oxygen tank that was enabling his wife Irene to breathe. "She's running out."
Letters from state
Mr. Sowa says sardonically that he was probably among the last to "donate to the cause." And, indeed, by mid-September, the state had already sent letters to some of Mr. Scott's clients, saying that he was under investigation and soliciting information on their investments with him. Although the letter asked that they keep the matter confidential, at least one investor went to Mr. Scott.
Mr. Scott explained it away as a minor oversight easily rectified with some routine paperwork. It was more than that, though: He had never registered as an investment adviser as required by Maryland law.
Financial planners and investment advisers must be licensed through the securities commission just as broker-dealers are, said Robert N. McDonald, the state's securities commissioner. While about 10 people a year are fined a small amount for operating without the proper registration, much harsher penalties apply to those who pose as brokers or financial planners as part of an illicit moneymaking scheme. If criminal charges are filed against Mr. Scott and his partners, they could be fined as much as $50,000 and sentenced to three years in prison for each count.
"We don't get many cases of this magnitude," Mr. McDonald said.
The September letters from the securities commission started raising questions among some investors. By late October, the Clancys asked Mr. Scott to liquidate half their account. He neither carried out the instructions, court documents say, nor responded to the Clancys.
In September or October, the Calverton School comptroller asked Mr. Scott how much notice he needed to liquidate all or part of its investment so that it could purchase some land. Thirty days, he said, and the school wrote to give him that notice.
But by November, Goldie's had filed for bankruptcy.
Lawyers have been circling for months now. All that squabbling, all those aggrieved feelings -- there has to be a lawsuit somewhere.
Last week, attorney David H. Zimmer opened his sprawling Potomac home to any investor who cared to hear his pitch. He offered possible legal strategies; the investors vented anger that builds with every recalled story of their former friend, sipping champagne and flying off to Las Vegas and the Caribbean.
Mr. Zimmer raised possibilities: suing the casinos where some of the money may have been gambled away, suing PaineWebber for whatever its role was in Mr. Scott's dealings.
PaineWebber contends that Mr. Scott's broker, Ms. Willens, knew nothing of any unregistered, illegal or reckless operation of a stock fund. "Neither the firm nor its employees had any knowledge of these activities," said an official statement issued by PaineWebber.
Some investors, though, remain optimistic against all odds, much as they were when Richard Scott first turned their heads with his seductive pitch.
"I heard about another case," a wistful Robert Miller said, "where the people got more money back than they invested."
Even as they look to sue or blame or otherwise lash out at any convenient target, the investors seem to realize where the responsibility begins, if not ends.
"You kick yourself on one side for being taken, and you kick yourself on the other side for the others you told about Richard, so you end up pretty black and blue," C. J. Boggs says ruefully.
"You feel pretty stupid," Mr. Clancy says. "On the other hand, I'm not the only person. He made a credible case as an investment counselor. A lot of people bought into it."
Among the investors are smart people, experts in human nature and those who are either by nature or profession streetwise and knowledgeable. Yet they are in the same boat as the more gullible and innocently wishful of the investors.
Arnold Mysior, a retired investigator with the Office of Strategic Services, the wartime predecessor of the CIA, was dubious at first when his son, George, introduced him to Mr. Scott.
His claims about buying and reselling coins at estate sales "seemed a little funny," Mr. Mysior recalls. "I mean, how many estates could be out there? He would have had to have been going out and killing someone so there could be an estate sale. It didn't make any sense."
But then, even his professional skepticism vanished in the face of a guaranteed return on his $40,000 investment.
"Once a guy guarantees me 15 percent," Arnold Mysior admits, "I don't want to know any more."