Assets and Timeline Santa Barbara News-Press 3/31/02 http://news.newspress.com/topsports/033102timeline.htm TIMELINE * January 22,1949: Born in Detroit, Michigan. * 1963: Father commits suicide; Mr. Slatkin turns to Scientology. * 1966: Studies with L. Ron Hubbard at St. Hill school in East Grinstead, Sussex, England. * 1973: Moves to Los Angeles with wife Mary Jo and begins working and studying with the church full time. * 1975: Ordained as a minister in the church, begins training other Scientologists. * 1983: After second son is born moves from Los Angeles to Goleta and begins learning about investing through friend and fellow Scientologist Bob Duggan. * 1984: Starts investing money and says he has a couple of years with 100 percent returns. * 1987: After helping convicted felons Chris Mancuso and Ron Rakow invest money they made in the Culture Farms scam, he gets a note from Mr. Mancuso, who is serving time in from Lompoc Federal Prison. "Another day at Club Fed!" the note begins and then goes on to say, "I know we will do great things in the future together." * 1988 confesses in a note to himself that he lied about what he was doing. "Instead of working on stocks -- I was working on fabricating statements." * 1990: A business associate, Patrick Gallagher, concerned about the nature of Mr. Slatkin's trades, and his computer program dissolves any involvement with Mr. Slatkin. saying, he is fearful that a review of Mr. Slatkin's business would "reveal unsavory characteristics of a scabrous nature involving, among other things, irregularities with respect to the exchange rules and conduct, which under closer scrutiny, may subject one to prosecution by various government agencies." * 1993: Buys two estates in Hope Ranch. * 1994: Has a meeting with Sky Dayton and Kevin O'Donnell and Decides to invest $75,000 in EarthLink. Within three years his share in the company is worth more than $200 million. * 1995: Tells the 383 investors in his club that the $133 million fund has made $67 million in profit and is now worth $210 million, but in actuality the fund made less than $420,000. * 1997: The Securities and Exchange Commission begins an informal investigation into Mr. Slatkin's business dealings. * 1998: In one set of bank accounts he reports to investors that he has more than $50 million, but in reality has less than $3 million. * 1999: Tells SEC that he is liquidating his club and return the money to investors. * January and February 2000 repeats claim to SEC that he is in the "process of liquidating accounts," and that "I am not accepting any new accounts or any money from existing accounts." * February 2000: Associate Chris Mancuso helps set up a telephone line with a fake Swiss number that, "when you dial the number the line has been conditioned to provide a truly genuine European ring (nice touch, huh?)" * January 2000 to May 1, 2001: Mr. Slatkin takes in more than $100 million from investors instead of closing accounts and returning money as he promised the SEC. * November 2000: Gets a $10 million unsecured personal loan from Sidney Azeez. * December 2000: Convinces John Poitras to invest an initial $5 million; he later adds another $10 million to the pot. * March 30: Mr. Slatkin produces a memo from a Swiss financial firm, NAA, showing he has $380 million in investment account. Mr. Steadman and his attorneys make a few phone calls and discover there is no such firm as NAA in Switzerland. * April 7, 2001: Sends letter to investors saying: "We are experiencing delays in our ability to meet your request for withdrawl of funds... Rest assured your funds are safe and the delay has nothing to do with the current fluctuation in the market." * April 13, 2001: Frustrated that he hasn't had his money returned, John Poitras files suit and Mr. Slatkin's assets are frozen. * April 20, 2001: Texas foundation manager Stuart Steadman files suit to get his and his foundation's money $18 million returned. From the quarterly statements generated by Mr. Slatkin, Mr. Steadman thought the account had grown to $34 million. * April 27, 2001: Denise Del Bianco, Mr. Slatkin associate and wife of Ron Rakow, receives $1.9 million, court records show. * April 30, 2001: In a meeting at the office of his Los Angeles attorney, first informs his investors that there's a problem with the money. * May 1, 2001: Files for bankruptcy. * May 11, 2001: FBI and IRS raid and search Mr. Slatkin's homes and offices. * May 11, 2001: The SEC sues Mr. Slatkin for violating federal securities laws. * May 29, 2001: Mr. Slatkin agrees to a consent decree to stop any investment activity. * May 30, 2001 FBI searches the New Mexico offices of Mr. Slatkin's bookkeeper Jean Janu. * June 1, 2001 a early attempt at a plea bargain is stopped. * June 24, 2001: FBI and IRS agents raid and search the home of Slatkin associate Ron Rakow. * July 30, 2001: The U.S. Bankruptcy Trustee tells 800 investors that their money is mostly gone. He's assets total perhaps $30 million on debts that exceed $250 million. * August 8, 2001: The trustee begins to put Mr. Slatkin's homes and property up for sale. * December 14, 2001: The trustee says Slatkin's investment club was a scam from the start. * February 28, 2002: The last day for creditors to file claims against the estate. * March 25, 2002: More than 500 people and institutions have filed claims against the estate totaling $817 million. * March 26, 2002: Reed Slatkin agrees to sign a guilty plea, taking responsibility for $254 million in losses and admitting to orchestrating one of the largest Ponzi schemes in history over a 15 year period. ASSETS An accounting of Mr. Slatkin's assets listed a value of just $30 million for the estate, including: * Hundreds of bottles of wine including four bottles of Mountain Rothschild valued at $300 each. * One million shares of EarthLink stock, which has ranged in price from $4.75 to $18.92 in the past year. * Three country club memberships: El Caballero Country Club, The Alisal and La Cumbre Country Club. * Vehicles: A 2001 Porshe Turbo, 2000 Volvo C70, 2001 Toyota Prius, 1967 Chevrolet Corvette, 1969 Pontiac Firebird, 1998 Lectr golfcart, 1994 Volvo 960, 1995 Jeep Grand Cherokee. * Properties: Hope Ranch homes at 4480 and 4484 Via Esperanza estimated to be worth $6 million. Goleta home at 890 N. Kellogg Avenue estimated to be worth $775,000. Solvang property 3125 Riley Road worth about $400,000. Undeveloped property in Santa Ynez 1275 Roble Branco Road, Santa Ynez Valley 100 acres estimated to be worth about $1.6 million. Newport Beach property 6 Sea Greens, Newport Beach, worth about $1.14 million. Undeveloped parcels in Ashland, Ore., on Strawberry Lane worth about $5.25 million. Interest in three malls in Tennessee, Florida and Louisiana, worth about $14 million.
Millions 'lost in a financial black hole' Santa Barbara News-Press 3/31/02 By SCOTT HADLY http://news.newspress.com/toplocal/033102slatday1.htm A full year before his investors first learned there was something rotten in Santa Barbara, Reed Slatkin was already feeling the heat. Securities and Exchange Commission investigators brought the friendly and smooth-talking 53-year-old to Los Angeles for questioning in January and February of 2000. They wanted to know more about the investment deals Mr. Slatkin spun from the suburban Goleta home he had converted into offices from which he operated his "investment club." But instead of confessing to any financial sins, the EarthLink co-founder and former ordained minister of the Church of Scientology began to proselytize about the teachings of the late science fiction writer and Scientology founder L. Ron Hubbard. "It's important to me, and it's been the basis of almost everything I've done in life," he told them. Mr. Slatkin then pulled out his copy of Mr. Hubbard's book "What is Scientology Doing in the World?" and started reading: "The aims of Scientology are civilization without insanity, without criminals and without war, where the able can prosper and honest beings can have rights, and where man is free to rise to greater heights." Mr. Slatkin rose to great heights -- an estate in Hope Ranch, a jet at his command, a half dozen vehicles, properties in Oregon and the Santa Ynez Valley, and personal wealth that was once pegged at $200 million. Now comes the fall. In a 33-page plea agreement with federal authorities Tuesday, Mr. Slatkin, now bankrupt, admitted he is guilty of 15 counts of fraud, money laundering and conspiracy. The former Hope Ranch resident and private investor now faces up to 105 years in federal prison, but will likely only serve between 12 to 15 years if he cooperates, authorities said. Mr. Slatkin is taking responsibility for operating one of the largest Ponzi schemes in history, fleecing at least $254 million from more than 800 investors since 1986. He has agreed to pay restitution, to the extent of his ability, and to completely divulge his assets. He must follow through with the agreement and help investigators track down any co-conspirators and locate his investors' missing money. The money came from Internet moguls, actors and big-time Hollywood producers, but Mr. Slatkin also acknowledges that he took in cash from dozens of his longtime friends and neighbors in Goleta, Hope Ranch and Montecito. But the full story -- what happened to the hundreds of millions of dollars Mr. Slatkin took in, and how it was either lost on bad investments or siphoned off for the benefit of his friends, family and associates -- has yet to be told. Even federal prosecutors concede that Mr. Slatkin had an uncanny ability to make people feel at ease handing over their cash for his care, and a knack for slipping out of tight spots. "Early on, he had everyone so snowed that they thought he just screwed up and lost some money on a dot-bomb, and they just hoped they would get most of their money back," said John Poitras, of Santa Ynez, who lost $15 million. "Now the most frequent question I get from creditors and the public is 'Why is he not in jail?' They all want him to go to jail now, like yesterday, and for a long time. They don't even ask me how much money they might get back. They want him gone." HIGH ON A HILL Mr. Slatkin, facing the prospect of spending much of the rest of his life behind bars, is waiting out the inevitable in a $4,000-a-month rental high above Hale Park in Montecito, with a view of the craggy peaks of the Channel Islands. He's been living off borrowed money from family and friends and has paid his attorneys up front, according to sources. His creditors want to know more about where the money is coming from, and have filed requests with the court asking for an accounting. They want to make sure the money is not from cash he's hidden away somewhere that really belongs to his estate. Investors who heard about how he's living or spotted him over the last few months -- noshing at the Paradise Cafe, pumping iron at Gold's Gym downtown, or swatting a tennis ball around the court at the Cathedral Oaks Country Club in Goleta -- want him put away as soon as possible. "They should put him in jail and make him suffer like the people he hurt," said a frail 83-year-old widow and former neighbor, who contends she was made desperate in her golden years after she lost more than $113,000 from her life savings. But friends and neighbors say Mr. Slatkin hasn't been living a life of luxury, oblivious to his fate and the consequences of what he has done. He told investors this summer that he "isn't hiding," but since then, he has been silent. He has denied requests for interviews. And he won't even talk to friends who believe that he was "taken in by the wrong people." Mr. Slatkin tells them he's "taking the Fifth," whenever asked about what happened, they say. "He doesn't want to talk about what happened to me or explain it," said one associate, who did not want his name used because he, like other sources interviewed by the News-Press, may also face both criminal and civil liability. The only thing Mr. Slatkin tells his friends is this: His life isn't easy now, and it will soon get worse. He is borrowing money from his parents and in-laws to cover the rent, sources said. His wife is working again. To get around town, he drives his sons' Toyota Prius or Jeep Cherokee. His own cars will soon be auctioned off by the U.S. Bankruptcy Trustee. His family may not be immune to scrutiny either. To recover more money for creditors, the court is considering requests that his sons turn over their cars, that his wife hand over her engagement ring, an Ebel watch and a tourmaline broach. One of his sons, who is struggling to get into the music business, recently petitioned to have his name changed from Justin Slatkin to Justin Michael, court records show. Mr. Slatkin, who once estimated his net worth in the hundreds of millions, has been working part-time as a landscaper, sources said. "He's not living a lavish lifestyle, far from that," his criminal defense attorney Brian Sun said. "He's living pretty much in isolation. Here's a guy who was respected, loved by hundreds of people a year or so ago, who is now a pariah, shunned by his church and his lifelong friends, whether it is deserved or not." The Church of Scientology, where he first turned for help as a 14-year-old boy after his father committed suicide at their Detroit home, will no longer be a refuge. Earlier this month he was excommunicated for his deeds. Any hope of leniency from the court may hinge on his willingness to implicate others. He promised to cooperate with federal prosecutors and bankruptcy investigators, said Mr. Sun, a former assistant U.S. Attorney who is now a partner in a Santa Monica law firm. "He has been and continues to cooperate with the trustee," said Mr. Sun, who led the team that successfully defended Los Alamos National Laboratory nuclear scientist Wen Ho Lee against espionage charges. "Reed sincerely believes he can provide valuable assistance to maximizing the recovery for his creditors." Last week, his defense team said, "Mr. Slatkin's agreement with the government is a reflection of his decision to accept full responsibility for his conduct and move forward by continued cooperation with both government authorities and his creditors." However, some still have a hard time believing Mr. Slatkin's commitment. In the plea agreement the U.S. Attorney's Office says as much: "The government currently questions the veracity of certain information provided by (Mr. Slatkin) regarding, among other things, the alleged transfer and the alleged legitimacy of transfers of certain assets including real estate, artwork, and gold, the existence of foreign assets, and the potential destruction of computer evidence." The story of Mr. Slatkin doing manual labor as a landscaper is hard for some of his former investors to swallow. "I'm at the point where if Reed told me that the sun rose in the east and set in the west, I'd have to go out and check that," said Michael Azeez, a New Jersey businessman who, along with his father, mother and sisters, lost all the $42 million they gave to Mr. Slatkin to invest. 'GREED SLATKIN' Described by some as a cross between Gordon "Greed is Good" Gekko in the film "Wall Street" and the trustworthy Mr. Rogers from the PBS children's television show, Mr. Slatkin's standing as a stock market sage was pumped up by claims that he got his small group of investors out of the market just before the crash in 1987. Then, in 1994, he turned a $75,000 investment of seed money in the nascent Internet-provider EarthLink into a $200 million share in the company. His reputation and personal wealth soared. Despite dips and dives in the market over the years, the regular quarterly statements Mr. Slatkin sent to his investors never showed a loss. He told his investors he kept it all in a Swiss account to ensure its safety. He told the ones who wanted high returns that he would get them profits in excess of 25 percent. He told those who wanted to be more cautious that he was very conservative. "He was a good listener," said Mr. Azeez. "He gave different people different stories or different solutions to their investment based on what they wanted to hear." He told the Azeez family that most of their money was in T-bills. But it was all a sham, according to R. Todd Nielson, the U.S. Bankruptcy Trustee. In fact, most of the money he took never was invested, and much of the rest of it was "lost in a financial black hole," Mr. Nielson said in his December 2001 report on the case. The plea agreement spells it out clearly: There was no Swiss account. The stunning returns in the quarterly statements were pure fiction. All of them. Mr. Slatkin's scheme was "built upon the shifting sands of lies and misrepresentations," said Mr. Nielson. Mr. Slatkin used "investor funds to operate a massive Ponzi scheme whereby he defrauded his investors by paying them returns largely with funds raised from other investors," states the plea agreement. The bankruptcy investigation was paralleled by the work of the U.S. Attorney's Office, the IRS and the FBI. The trustee alone amassed more than 3 million pages of financial documents and evidence, but there still are holes in what happened with the money and whether some of his associates share guilt. So far, the bankruptcy investigation alone has cost his estate about $4 million, a bill that could climb to as much as $15 million before all is said and done. This is from an estate that right now only has about $30 million in assets. The trustee expects to recover tens of millions more by suing for the return of false profits and digging up any money that might be hidden someplace else. Almost a year after the collapse, even long-time friends have been itching to see payback for the man they've nicknamed "Greed Slatkin." "You couldn't have scripted a better movie," said investor Thomas Rook, a Santa Barbara chiropractor whose family and business lost more than $600,000, according to bankruptcy records. "Why it happened and what happened is an interesting story that makes good copy, but the bottom line is the money's gone." Although the evidence against Mr. Slatkin is damning, Mr. Rook said he is reserving judgment. "Only a very few people knew what went on here and they're not talking yet," he said. "I want to hear what they have to say." DISAPPEARING IN THE PIT Mr. Slatkin's scheme worked as long as he could find fresh investors willing to hand over their cash, according to the bankruptcy trustee and the U.S. Attorney's office. But the number of investors had to grow exponentially to keep it afloat. In the last months, Mr. Slatkin cycled dozens of deposits through two accounts, all the while stringing along people trying to get their money back, according to dozens of investors. Even as their suspicions grew, he continued to send out quarterly statements indicating profits from 24 percent to 100 percent a year, according to court documents. To calm their fears, he sent out notes asking for investors' patience. "Rest assured, your funds are safe and the delay has nothing to do with the current fluctuation in the market," he told investors as late as April 7, 2001. Just a month before declaring bankruptcy, he was still taking in money. He accepted $400,000 from Kate Edelman Johnson, a Los Angeles widow who had already invested half-a-million dollars. "He was eager to take my proffered investment and have it disappear into his bottomless pit," Mrs. Johnson said in a letter to the court. Sorting through the paperwork to separate fact from financial fantasy has been hard work, so it's difficult to accurately peg the size of the bankruptcy. The amount of money actually invested that has not been repaid amounts to about $254 million, according to the bankruptcy trustee. But many investors filed claims based on how much they thought their accounts had grown. Those claims may exceed $890 million, according to estimates. As of late last week, 527 individuals had filed claims totaling $817 million, and those numbers keep climbing. "It isn't the biggest Ponzi scheme in U.S. history, but it's got to be in the top 10," said Richard Wynne, an attorney with the Los Angeles firm Kirkland & Ellis, which represents a committee of the creditors who lost the most money. WHERE DID IT GO? While most lost money to Mr. Slatkin, about 75 people thought they substantially benefited from their relationship with Mr. Slatkin, taking in $151 million more than they paid him, according to bankruptcy records. Most of those individuals had no idea the profits were fiction. "All account statements sent to investors were fabricated," it states in the plea agreement signed by Mr. Slatkin. But other investors, including at least a half dozen locals who received $1 million to $5.8 million each, are now being singled out by bankruptcy attorneys and may attract the attention of criminal investigators. "It's possible that certain investors knew, or should have known, of Slatkin's investment scheme," the trustee said in his December report. "What an investor knew or should have known is likely to depend on, among other things his or her specific relationship with Slatkin." As part of the plea agreement, Mr. Slatkin has agreed to explain the relationships with individuals he says "knowingly conspired and agreed to obstruct the SEC proceedings." "We think that he had various people that helped him facilitate this scheme," said Mr. Wynne. "I don't know how big the circle is." The U.S. Attorney's Office specifically identifies three individuals in the statement of facts. Those include two men, Dan Jacobs in France and Didier Waroquiers in Germany, who were paid to help set up the bogus Swiss accounts, and Jean Janu, Mr. Slatkin's bookkeeper. The U.S. Attorney also singles out Hope Ranch resident and former Grateful Dead road manager Ron Rakow as someone who helped attract new investors. Over the next several weeks, many of those individuals -- as well as Mr. Slatkin's wife Mary Jo and sons Justin and Brett -- are scheduled to give sworn statements in the bankruptcy proceedings. Ms. Janu's attorney would not comment for this story, and she has invoked her Fifth Amendment rights in court. Neither Mr. Jacobs nor Mr. Waroquiers could be located for comment. "His business relationships with these people raise a lot of questions," said one source close to Mr. Slatkin. "Some of them didn't know he was engaged in a fraud, but you have to ask yourself how some of them didn't know. It's clear that some people took advantage of their relationship with Reed and made millions from it." The short list of business associates with active knowledge of his work includes a former Santa Barbara radiologist, a local couple who acted as advisers on tech stocks, and several others who provided advice on investments. According to the trustee, at least one person, Richard Levine, a Tarzana businessman and Mr. Slatkin's partner in several investments, knew of the fraud. "The Trustee and Committee have reliable evidence that by no later than 1989, Levine knew that Slatkin had been making fraudulent representations about his investment results," the trustee's report states. Mr. Levine could not be reached for comment, but in court papers, he said he is devastated by the implication. "Mr. Levine and his family have been subjected to harassment and embarrassment as a result of the media and the public distortion of the facts and misuse of mere theories and allegations," Mr. Levine's attorney said in a letter to the court. The letter asked the judge to grant a protective order keeping Mr. Levine's testimony closed to the public and media. While a few former associates, including Ms. Janu, have invoked their Fifth Amendment rights against self-incrimination, many others are stepping forward, according to papers filed with the court. Richard McMullin, a former neighbor, started out working as a 19-year-old "gofer" for Mr. Slatkin and went on to become one of his full-time associates. Mr. McMullin and his mother received $3.7 million more than they invested. "He has cooperated fully with the investigation and plans to be forthcoming in his deposition to the Trustee," said Bruce Glesby, Mr. McMullin's attorney. "Richard is as big a victim, if not one of the biggest, as anyone in all of this," his attorney said. "When all is said and done, I'm 100 percent convinced that he will not be found guilty of any wrongdoing whatsoever." 'A GOD COMPLEX' What will Mr. Slatkin say when he finally testifies under oath about the scheme? Some of his friends have been trying to reconcile "the idea of Reed, this wonderful, wonderful guy and Reed the fraud-monger," one former associate said. Mr. Wynne, the attorney working with the committee, called the plea a "smart deal" for Mr. Slatkin because if he had gone to trial to contest the charges, he would have been exposed to a life term. Because the plea compels Mr. Slatkin to cooperate with investigators, it may help creditors uncover any missing money, Mr. Wynne said. "While some of his victims certainly might have preferred that Mr. Slatkin be drawn and quartered, his plea... is an appropriate resolution to his 15-year fraudulent scheme," he said. "Mr. Slatkin will have a long time to sit in jail and contemplate what he did to hundreds of his creditors and their families." Another former investor, George Kriste, who claims to have lost more than $1.5 million, said the next phase of the investigation will be interesting. "The hope is that he has every incentive to be forthcoming," Mr. Kriste said. "If he's forthcoming, there are more than enough rats on this ship that we can chase." Another twist in the case includes some of Mr. Slatkin's former associates lashing out against the actions of the bankruptcy trustee and members of the creditors committee, made up of six businessman who in all lost more than $115 million, according to court records. A number of them say the losses reported by the Azeez family and businessman George Abbott do not reflect all the money they made with Mr. Slatkin. It's a charge the bankruptcy trustee calls bunk, but associates say Mr. Abbott and the Azeez family were among a select few who were able to purchase founders stock in EarthLink. Michael Azeez and Mr. Abbott both say those are misstatements of the facts. "It shows you how desperate some of these people are," said Mr. Abbott, who made his EarthLink investment through someone other than Mr. Slatkin. As for the Azeez family, they say even though they were introduced to EarthLink through Mr. Slatkin, they took an investment risk on their own. In addition, the profits they made from EarthLink were nowhere near enough to offset their $42 million loss to Mr. Slatkin. Others feel like they're being victimized a second time. Mr. Poitras, who lost $15 million, boils over when people say Mr. Slatkin just "stole from the rich." "Every dollar he stole I made with my bare hands -- painting, landscaping, every kind of improvement on a terrible house on a beautiful property," Mr. Poitras said. "Am I a little guy or a big guy? I think I am a working man who got lucky, but all my money is still gone." But some buy the argument, even if they think Mr. Slatkin is guilty. "There is a certain amount of credence to that whole Robin Hood idea," said one former associate. "Yeah, at least in later years, he was taking money from the rich. But to me Reed had a 'God Complex.' He decided who won and who lost. "I don't know how he rationalized what he did, but he had to have known this day was coming."
A Scientology minister once, Slatkin expelled from church
Santa Barbara News-Press
Waiting to serve what will likely be a long prison sentence and shunned by
ex-friends, bankrupt investor Reed Slatkin had another punishment befall
him recently when he learned that he has been excommunicated from the
Church of Scientology.
Even before he agreed to plead guilty last week to 15 counts of fraud,
money laundering and conspiracy, church officials held a hearing and
decided to expel the former Hope Ranch resident.
Mr. Slatkin, who first turned to the teachings of Scientology founder L.
Ron Hubbard as a 14-year-old in Detroit after his father's suicide, had
abused his church connections, officials said.
Most of his early investors and well over half the 800 people he ended up
attracting to his investment club were fellow Scientologists, according to
bankruptcy court claims files. Indeed, the main reason many people turned
over money to Mr. Slatkin was because they were also Scientologists,
according to those claims.
"While the underlying issues in the Slatkin bankruptcy case are primarily
economic, not religious, it would be difficult to imagine a more dominant
force in the life of Slatkin than Scientology. It would be fair to say
that Scientology permeated almost every aspect of his life," states the
report by R. Todd Neilson, trustee of the Chapter 11 Bankruptcy Estate of
While the church benefited indirectly because Mr. Slatkin and many of his
investors were generous donors, Mr. Neilson concluded that so far there is
no evidence that the church was a large beneficiary. In addition,
Scientologists were just as much victims in the scam as
non-Scientologists, court records show.
After a formal church hearing process, Scientology officials decided to
expel Mr. Slatkin, who has been a member since 1963, studied directly
under Mr. Hubbard in England, and went on to rise in the church hierarchy
before becoming a full-time investor in 1983.
Mr. Slatkin told Securities and Exchange investigators in 2000, the
teachings of Scientology form the "basis of almost everything I've done in
According to church officials that was an overstatement.
"He misused his connections to the church tremendously," said Linda
Simmons Hight, a spokesperson for the Church of Scientology International.
"He overstated his connections. He hasn't ministered in the church since
1983 and he has abused his position since then."
There are more than 8 million Scientology members worldwide, according to
church publications. Established in 1954, the church's doctrine, among
other things, places a high regard on personal ethics, Ms. Simmons Hight
said. Mr. Slatkin violated those basic teachings, she said.
As part of his plea agreement, Mr. Slatkin is taking responsibility for
operating one of the largest Ponzi schemes in history, fleecing at least
$254 million from more than 800 investors since 1986.
Raised in Michigan, Mr. Slatkin was introduced to the teachings of L. Ron
Hubbard by an uncle. He had just faced the trauma of his own father's
suicide and he and his family were in "pretty bad shape," Mr. Slatkin said
in a 2000 deposition he gave to the SEC.
In a deposition he gave to the Securities and Exchange Commission two
years ago, Mr. Slatkin said his religion helped him recover. Then,
following an accident soon after his father's death in which he almost
severed his finger in shop class, Mr. Slatkin again turned to his new
"And almost miraculously, within a couple of days I had full use of my
hand again. And it was a big moment for me. And at that point I said,
'Well, I don't know how this works but it works for me,' so I decided that
I was going to find out about this."
His commitment to the church led him to study at Hubbard-led Scientology
colleges in England and Scotland in 1966 and 1968.
In 1971, while studying Asian languages at UC Berkeley and volunteering at
the church, he met his future wife, Mary Jo, a fellow Scientologist. They
decided to quit school to pursue Scientology full time. They moved to Los
Angeles, where both were ordained as ministers in 1975.
"And I went out on my own and began to disseminate, to proselytize
Scientology to friends, family members of people I knew. Because I was, at
that point, a very highly trained counselor," Mr. Slatkin told
investigators with the SEC.
After the birth of their second son in 1983, the couple decided they
needed more money and decided to move to Santa Barbara and learn about
He put the same devotion into investing as he had into the church. When he
started making money, he brought in fellow church members and neighbors,
promising returns of up to 60 percent.
One of those early investors remembers Mr. Slatkin as focused but also
very involved in the lives of his sons.
"Our sons were at Mountain View School together," the former friend and
early investor said. "He was this very generous guy and one of his tenets
was to give back. Made donations to UCSB athletics, to a private school.
He was also really involved in the Boys and Girls Club. He coached
baseball. You know he was always the same guy."
His list of investors quickly grew from a dozen or so to scores and
finally hundreds. Even after attracting hundreds of non-Scientologists to
his club, Mr. Slatkin still saw his work as part of his religious
When he promised the SEC in 2000 that he was closing his club and
returning his investors' money, he added: "I have a strong feeling that
several hundred people that are involved in this is a very small drop in
the bucket compared to the people that I want to help relative to
Scientology. And I'm very anxious to get going."