Component III of III in this series of content articles on Ponzi strategies will examine a actual environment, ongoing rip-off, the con man powering it and a couple of the hundreds of investors victimized by his legal organization, Millennium III Corporation.
Historical past: At an early age, Gregg Scott Luce was falsely led to feel that his Maine dependent blood line was directly linked to the storied Time-Everyday living Henry Luce legacy. It can be unclear no matter whether this fallacy was instilled within just him by private dementia or a collective familial dementia. Luce fled his hugely dysfunctional family members at age nineteen and started trafficking in cannabis. Within a five calendar year interval, petty trafficking grew to major distribution: cargo planeloads of item, considerably of it introduced in immediately from Jamaica.
Ten years into this venture, Luce realized that a a great deal higher profit margin was to be recognized in trafficking cocaine. It was the early 1980’s and cocaine was a popular and acknowledged leisure drug among the institution. There was not the stigma hooked up to the narcotic that exists nowadays. Luce was driven to the swift fix by impatience, an entrepreneurial spirit, ruthless and boundless ambition, and an insatiable craving for the recognition, dollars and cache that experienced eluded his household for the much better element of a technology as it strived, futilely, to identify alone with the gilded Time-Life Luce lineage.
Sociopathology, one minded focus and indifference to the human body depend in his wake, each practically and figuratively talking, permitted Luce to set up a port of entry distribution hub in Seattle, Washington, and quickly dominate the unclaimed US Northwest territory. Coming from a family of industrial fishermen, Luce was effectively versed in nautical maps. The Pacific Northwest’s unsettled, remote shoreline allowed inconspicuous ingress and egress of transport planes from Colombia. Luce leased a pier and houseboats off Lake Washington, internet hosting cocaine fueled events frequented by notable region artists, company leaders, attorneys, politicos and bankers.
Inside a five 12 months period of time of time, the distribution community prolonged north to Canada and as considerably Southwest as Aspen, Colorado, wherever his cartel’s administrative crew oversaw operations. The expanding business invested in a Nascar race team. Solution was transported to merch drop details in trailers utilised to ferry cars and pit machines from metropolis to city.
As with most narco-centric companies, Luce’s venture operated on borrowed time. When the DEA and Feds broke up the drug ring, all senior staff, conserve for one particular unique, escaped. The captured operative refused to switch state’s proof, permitting his associates to quietly search for out other organization prospects. Luce took a two 12 months hiatus lying reduced and pored around current financial tendencies. It was the early nineties and the Nasdaq bubble experienced started to gestate. Silicon Valley, Boston, Austin and Seattle have been the new Wild West. Greed and green have been in the air. In the rapid paced world of new media startups, the “cocktail serviette to boardroom” paradigm dominated, as did medications, violence, treachery, and authorized manipulation: usually identified as Twenty-First Century corporate best tactics. Simple specials were the forex of good results futures contracts and penny shares ended up the new blow. The mindful vetting of enterprise designs demurred to the haste of staying 1st to market with a provided product or service . Undertaking capitalists indiscriminately showered IT neophytes and veterans alike with much more seed income than most could realistically hope to match in earnings. Increase-bust significant tech gold fever was in total drive. Luce could not have scripted a far better entree into legit organization.
Ponzi Scheme: Therefore marked Gregg Luce’s emergence from the arranged criminal offense of drug trafficking to the arranged criminal offense of Wall Road. The founding of Millennium III Corp. (MIII) commemorated Luce’s introduction to Fortune 500 society at the VC cotillion. In buy to fly underneath the radar of SEC laws and regulators, the freshly minted CEO of MIII, a broadband media streaming corporation, constrained his initial investor pool to thirty-5 non-accredited shareholders. He later on violated the SEC Rule 505 exemption provision with inclusion of an additional ten traders. Fairly than issue shares to traders, Luce issued “convertible observe mortgage agreements”: an instrument convertible to possibly buybacks or shares in MIII at maturation. Luce took his tortured business enterprise design a phase more, arguing the corporation managed a non-financially rewarding trust that secured trader monies. In this and subsequent downsides, Luce argued, with poetic license, that the first company form would by some means morph into a “lender”, thereby making certain the liquidity of MIII’s money resources and the safety of trader monies.
In maintaining with Millennium III’s smoke and mirrors business framework, its CEO was functionally illiterate in New Technologies: the company’s core item featuring. Luce was equipped to productively pass himself off as an IT avatar by encompassing himself with seasoned, authentic engineering specialists, furnishing the Ponzi scheme with a patina of legitimacy. He preserved an entourage of tech savvy advance individuals, lest his shareholders and clientele realize that the emperor experienced no garments.
7 a long time after the founding of MIII, I was retained to assessment mental house issues. Roughly twelve months into my do the job, authentic observe holders began making contact with me, expressing worry that they experienced been given no once-a-year statements from MIII — for that matter, no communication at all from the board of directors or corporate officers for several decades. Far more troubling, to a man, each and every trader experienced demanded buyback on maturation of their convertible notice mortgage agreements. Luce refused to honor the promissory notes. The paper trail confirmed Luce made use of dollars from the non-accredited investor pool to line his very own pockets, and funds from new buyers to spend contracted staff members that held stock solutions therefore, perpetuating the ruse. A textbook definition of the traditional Ponzi plan with a slight twist: employing dollars from new investors to pay back dividends to unique traders.
I approached the CEO with my worries. He was non-responsive, as was the board. The newly enacted Sarbanes-Oxley Act furnished new remedies for attorneys caught in this dilemma, enabling them the potential to whistleblow without having panic of reprisal for breach of legal professional-consumer privilege. The new legislation permitted me to notify the shareholders and regulation enforcement to Luce’s misuse of company resources. Lawyer-customer privilege was a lesser problem, as Luce had very long due to the fact waived any privilege enjoyed when he actively solicited me, demanded basically, that I launder corporate receipts for his conversion to personal use. As I dug deeper into the CEO’s record, unearthing a deep record of accounting companies, law corporations and contractors owed funds, I came to find out that this was just one of Luce’s tips: secreting money in his attorneys’ client rely on accounts, recognizing that the attorney would be obliged to release the funds to Luce as client, irrespective of no matter whether the revenue was soiled. In addition to confronting shareholders with Luce’s malfeasance, I reported his actions to lawyer normal offices in two states. Formal investigations into Millennium III and its CEO were being underway.
With warmth turned up by law enforcement and shareholders, Luce did a revenue seize, embezzling from his possess corporation, and fled the state to set up store in Arizona. Luce did not see running off with investors’ money as theft. His mentality was this kind of that he was constitutionally incapable of distinguishing concerning corporate belongings and particular assets. As he observed it, MIII’s property have been his property that’s why, there was no theft in this distorted world perspective. This would be a recurring topic in his subsequent Ponzi techniques. His flight left dozens of investors in Washington State, Nevada and Idaho keeping the bag — out all their money. To this working day they have not recouped a penny, in spite of two eighteen thirty day period prolonged concurrent investigations by AG places of work in both of those Washington and Arizona.
A excellent con guy rarely stays static in item or presentation. This is specifically correct just after a Ponzi scheme has been exposed. Immediately after Luce was chased out of Washington Point out and begun anew in Arizona, he altered his overall company design to cater to the New Age Sedona group. Con adult men gravitate in the direction of merchandise and companies the place effectiveness simply cannot be measured empirically. New Age meditations, administrations and potions proved a marketplace ripe for exploitation, given that it was mainly faith primarily based and not governed by the Food and drug administration or AMA. Underneath the banner of a MIII Corp. international company registered in Arizona, Luce started to solicit buyers for ventures ranging from the mundane — self-enhancement classes — to the fantastical — area tourism. He held out his partner’s Flagstaff true estate as his personal, applying it to collateralize investments. His shotgun solution to offering a multiplicity of products and services unsuccessful. Right after five a long time without the need of viewing a return and struggling a reduction in surplus of $500,000 USD, Luce’s partner gave him the boot, forcibly evicting him from the house. To this day, Luce holds out the property as his have, in spite of the truth his title is not on the title and a courtroom order was awarded for unlawful detainer.
Luce then ventured more south to Santa Fe, New Mexico, this time altering his bodily appearance to a startling degree: Luce retired the Brooks Brothers fits and button-down conservatism for ‘aging rock star’ couture and a metaphysical slant in pitching his “marks”, entirely switching his appear and product. The person looked like Rod Stewart. On a bad working day. Exactly where he was reserved and presentable although functioning and living in Seattle, Luce now came throughout as a raving lunatic with no someone knowledgeable, articulate and well balanced fronting him at the bargaining desk. These handlers were being defecting in lockstep with their CEO’s deteriorating psyche Luce’s entourage of competent advance gentlemen was fast thinning the patina of legitimacy appearing additional trompe l’oeil. To see just how “insane” insane is, peruse the nonsensical manifesto that seems on his MySpace page: myspace.com/duraingo. Video clip clips and images of Luce executing his different downsides are joined to his homepage. Courtesy of his formidable ego, this is a scarce possibility to see a con person in action.
In the vicinity of Los Alamos, the MIII CEO tapped into a group of retired physicists and businessmen doing the job on new encryption technological innovation. Luce managed to convince them he was an Details Know-how visionary with the capability to pair product or service builders with financiers. Despite his new eccentric appear, he virtually pulled this off, mesmerizing a youthful, naive investor from Los Angeles that ponied up $75,000 USD with the pledge of a much greater, 2nd angel investor examine. Prior to proffering this 2nd verify, the trader had the belated fantastic feeling to run the attendant paperwork by his legal professional. The lawyer experienced the joyless activity of informing his customer that, not only was his revenue gone, there was no foundation for legal or civil fit due to the nebulous mother nature of the “providers agreement” he entered into with MIII. The contract did not bind the con person to any identifiable, legally binding specific effectiveness. As a lawful document the deal was meaningless. It was convoluted plenty of to influence the trader to element with his cash: which is where by its worth finished. In limited, from a legal standpoint, the $75,000 was no additional than a “present” from one particular person to a different.
Present day: Word of Luce’s reemergence in New Mexico attained my regulation offices this previous month. I was put in contact with legal professionals representing the two traders and innovators to the deal. Neither lawyer was amazed to locate Luce was a con person, as they had arrived at that conclusion with out my assist. They ended up, having said that, shocked that he had such a prolific and recidivist historical past as an seasoned self-assurance guy. I provided them with documentation outlining Luce’s Ponzi techniques in Washington and Arizona. A mere 7 days afterwards, Luce surfaced in Santa Monica, California, in which he experienced settled in as interminable dwelling visitor at the demi-mansion of a effective, properly-intentioned New Age marketer. In limited order he experienced tapped into the marketer’s qualified network wherever he succeeded in both of those co-opting and alienating small business contacts.
Like a parasite searching for out a host human body, Luce would not only insinuate himself into the small business life of his marks but their particular life, as well. The essential to his con — and that of quite a few self esteem guys — was to correct the specialist and social networks of his victims in buy to feed his fraud. If one trader dries up, yet another in the network is primed and can be approached.
As a consequence of his connection with Luce, the marketer was dropping reliability, standing and associations in just the limited knit naturopathic community. Further fomenting discord was Luce’s volcanic mood. He experienced a background of violent outbursts, lashing out at people that would concern him, specially minorities and ladies. Not precisely regular with the New Age humanist point of view. Luce’s correct character was disclosed when his temper flared. Irrespective of the grave liability he introduced his host, the businessman was so taken in by the scam artist’s charisma that he was in denial.
The marketer’s superior pal, one more prominent businessman in Los Angeles’s homeopathic community, was not so enamored by Luce or deluded by his charisma. In truth, when released to the con gentleman at a Hollywood Hills bash, he located his pitch too excellent to be real and Googled Luce’s name on his Blackberry: up popped my title with a warning to future Millennium III traders. He called my office the next day, sharing his worry for his friend’s very well remaining. It took recurring sit downs and patient conversations with the marketer, armed with documentation I delivered him, to objectively layout Luce’s historical past and machinations. Even with really hard, tangible info in front of him, the marketer remained incorrigible. It took a 2nd spherical of files and direct correspondence from my desk to the marketer’s in get to shake him free of charge from the con man’s Svengali-like choke hold on his reasoning ability. The marketer kicked Luce to the suppress.
In the previous five decades, Luce has properly mounted 3 different financial frauds, even getting so brazen as to threaten legislation fits against investors who severed ties with him soon after acknowledging they experienced been swindled. Constant with all successful con adult men, Luce has a eager eye for pinpointing a need to have in his mark, then convincing the mark that he is uniquely positioned to fulfill that require –even with missing the intent, ability or wish to provide on his guarantees.
Luce is commencing to unravel and grow ineffectual. The con male has turn out to be entangled in his possess net of deceit. Unable to continue to keep his lies straight, he contradicts and exposes himself at every turn. His mood, misogyny and racism have surfaced regularly as the intensifying scrutiny of law enforcement, bilked buyers, attorneys and accountants attenuates anxiety by directing klieg lights on his different Ponzi schemes.
Con gentlemen are usually complicated to apprehend, for the reason that they are not driven by monetary achieve, by yourself. They are sustained in significant part by the adrenalin rush experienced shifting in for the eliminate, gutting then hanging their prey to bleed out. Luce is significantly skewed in this regard, typically forfeiting the large rating in purchase to slink absent and mount a different fraud in a further point out. Stealing just ample hard cash to continue on the ruse, but not so much bounty that criminal or civil satisfies are submitted as a matter of course.
