A former Maryland businessman pleaded guilty yesterday in a stock fraud scheme that bilked more than 100 people -- including best-selling spy novelist Tom Clancy -- out of more than $8 million, money which authorities say was squandered on bad investments and gambling junkets.
Richard Scott, 54, of Alexandria, Va., pleaded guilty in Prince George's County Circuit Court in Upper Marlboro to three counts of conspiracy to misappropriate funds and two counts of securities fraud. Clancy was the largest investor in Scott's stock business and lost $1.6 million.
Scott's guilty plea came as a surprise ending to a five-week trial that was supposed to finish today. The trial had seen a steady stream of victims testify that Scott had deceived them with stories of 15-percent returns on their investments.
Scott and two of his employees at his Camp Springs business, Goldie's Coin & Stamp Center, used much of the money on speculative investments, personal expenses and gambling trips to Atlantic City, N.J., and Las Vegas, the Maryland attorney general's office said.
"Because of this I'm living a completely different life," said one of the investors, Dominic J. Lynch, 70, a retired government worker from Beaver, Pa. "Of the $400,000 I invested, I got back $30,000. I live in a little rented floor of an old house."
A co-defendant and a former employee of Scott's, Edward Pereira, 35, of North Beach, Calvert County, also pleaded guilty yesterday to the same charges as Scott. Another of Scott's employees, Jeffrey Goodman, pleaded guilty to similar charges at the start of the trial.
Scott and the two other men were charged with defrauding 25 of the investors of about $3 million.
"These men were not only wolves in sheep's clothing, they were liars," said Maryland Attorney General J. Joseph Curran Jr. "They posed as honest businessmen, then proceeded to mishandle, mismanage and divert monies belonging to hard-working people ranging from carpenters to doctors."
Clancy, who lives in southern Maryland, was out of town and couldn't be reached last night.
Scott, who many described as a smooth-talking, likable man, met Clancy at an Orioles game in 1993 and became friends with him. He talked Clancy and his wife into investing in his stock enterprise, which he ran from his coin shop.
With Clancy as his marquee client, Scott quickly began to build his investor list, getting money from people around the country. He offered them high rates of return based on "safe, certain investments" that he often didn't make, Curran said.
Scott offered investment in what he called a "15 percent account," which he told investors got high return rates through his buying and selling of rare coin estates.
"My dad lost $40,000," said Maryland resident George Mysior. "We were only able to recover 30 percent."
Prosecutors said Scott and his partners didn't purchase the safe stocks they promised but used the money to pay back other investors and purchase highly speculative stocks that lost money.
To satisfy investors, they sent them grossly exaggerated reports of their supposed profits, which induced victims to invest more money and recruit their friends, prosecutors said.
Scott and Pereira will be sentenced April 14 and could receive 11-year prison terms.