Investors testify how they lost money in massive fraud

  • Article by: DAN BROWNING , Star Tribune
  • Updated: April 24, 2012 - 5:48 AM

Trevor Cook's Ponzi scheme attracted sophisticated investors as well as financial novices.

Investors ranging from a retiree living on Social Security to a former top executive with Valspar Corp. told jurors in a Minneapolis federal courtroom Monday how they ended up investing in what turned out to be a massive Ponzi scheme run by since-convicted fraudster Trevor Cook.

Marguerite Witte, 73, of Meadview, Ariz., said she first learned about Cook's currency investment program from a radio program hosted by defendant Patrick Kiley, 73, of Minneapolis. Kiley's program, "Follow the Money," promised that investors would profit despite the chaos of the marketplace, she said.

"I felt kind of fearful," recalled Witte, whose husband died in 2005.

The investors appeared on the second day of testimony in the trial of former Cook associates Jason "Bo" Beckman, Gerald Durand and Kiley, all of whom blame Cook for the fraud. Cook is serving 25 years in federal prison after pleading guilty.

Witte said she came to trust Kiley after listening to his program on shortwave radio and speaking with him numerous times on the phone. Witte said he offered to help her tap investment vehicles previously available only to multinational corporations, pension funds and other financial heavyweights. He promised double-digit returns with no risk and full liquidity, Witte said.

"I thought, 'Wow! You know, big corporations, and now they're opening to people like me,'" she said.

Witte sent in her life's savings -- $20,000. Kiley never let on that the program was really run by Cook, as he has since claimed, she said, nor did he alert her when the program began to falter in 2008.

After its collapse in July 2009, Witte said Kiley never responded to her calls and e-mails seeking an explanation.

H. Nasif Mahmoud, Kiley's attorney, asked Witte if she'd been coached by federal prosecutors on what to say.

"No, sir!" she responded.

Investor Robert Pajor, 75, of Wayzata, presented jurors with a starkly different image. Pajor had been president and chief operating officer of Valspar paint products in Minneapolis for 18 years before he retired wealthy. He said he met Beckman, 42, of Plymouth, at a 2005 investment seminar in the Twin Cities.

Initially, Pajor said he was impressed by Beckman's apparent success and his claim to be ranked among the best financial advisers in the nation. But he soon had misgivings when he analyzed his own investment results and found the numbers didn't match the statements he got from Beckman.

"We had some words on it," said Pajor, who was described as he departed Valspar's board in 1997 as the company's "benchmark for hard work, dedication and integrity."

Pajor said Beckman's explanations about the currency investment program amounted to "double-talk." In an e-mail to Beckman in 2007, he wrote, "I am not a happy camper. Maybe I am just not smart enough to work with you guys."

Pajor said Beckman offered to work at no charge until he regained his confidence, so he left his money in the program.

But Pajor said he harbored suspicions and closely monitored his accounts.

"When I was in Bo Beckman's office one time I continued to have feelings that were uncomfortable," Pajor said. "I said, 'You know, Bo, either I should get out of this currency thing entirely or I should put more money into it.' He said, 'It wouldn't bother me if you put everything into it.'"

In the end, Pajor said he and his family foundation lost about $2.1 million when the currency program collapsed.

David Graybeal, a retired truck driver from Watertown, S.D., testified that he got into the program after hearing Kiley on the radio.

But it was Durand, 61, of Faribault, who managed his investment. That is, until Durand mysteriously dropped out of sight in about June 2008.

Graybeal, 66, said Cook told him Durand was ill, but never mentioned that he had fired Durand, whom Graybeal believed to be a successful, licensed financial adviser. He said neither Durand nor anyone else ever told him the investment program was on the rocks. He said he didn't find out until he read about it in the Star Tribune in July 2009.

By then it was too late. Graybeal said he lost $185,000, and three friends he introduced to the program lost more than $500,000.

Dan Browning • 612-673-4493

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