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A STRANGER-THAN-FICTION SCAM THAT GOT DEAD SERIOUS
It has all the ingredients of a trashy potboiler: a supposed trillion-dollar fortune stashed away in secret European bank accounts, the mob-style murders of a shadowy British financier and his wife in France, and the dreams of American investors gambling on hitting the big time. But the true story that began unfolding in a federal courtroom in Atlanta on Oct. 8 is heading toward a much more prosaic denouement. The Securities & Exchange Commission believes thousands of gullible U.S. investors have been conned by one of the most outlandish scams in the history of get-rich-quick schemes.
The SEC maintains that investors were sold a stake in a nonexistent fortune. According to an SEC complaint, the scheme was hatched early in 1989. That's when Sam S. Brown Jr., a onetime oil promoter, met in Luxembourg with Leslie W. Chorlton, a British businessman. In Atlanta, Brown formed SBC Chorco Inc. and allegedly solicited funds from investors to finance Chorlton's efforts to free up an $800 billion fortune that Chorlton purportedly had amassed by facilitating the trading of commercial paper among European banks.
SIDE DEAL. The funds supposedly were being wrongfully held by the banks.In at least one case, Brown promised $10 million per $1,000 invested. None of the Chorlton fortune has turned upor is likely to do so, according to the SEC. In its suit, the SEC said Brown sold unregistered securities promising "as-tronomical" returns. Through his lawyer, Brown has refused to comment.
Among those who bit hard was John Peters, a Columbia (Mo.) real estate developer who, together with another Columbia businessman, invested $650,000. "It was one of those roll-of-the-dice things," says Peters.
The SEC lawsuit estimated that Brown raised more than $1.2 million from investors. And as recently as this June, charged the SEC, Brown was still trying to raise money fraudulently so he could make a $75 billion bribe to a nonexistent "Swiss Banking Commission" to finally free the Chorlton treasure trove.
Meanwhile, in 1991, another Atlanta-area promoter, James B. Gilmore, began trying to convince many of Brown's original investors that Chorlton and Brown had engineered a secret side deal to cut them out. Gilmore raised more than $2 million to fund a European investigation by selling unregistered securities, dubbed "war chest receipts," to more than 1,000 new and existing investors, said the SEC. The investors, many of whom were recruited at fundamentalist churches, were dazzled by promises of $25 million for each $1,000 invested. Through his lawyer, Gilmore declined to comment.
Gilmore-inspired conspiracy fears among the investors intensified, according to the SEC, when Chorlton and his wife were found strangled near their French home in July, 1991, in what police described as a "mob-style" murder. The killings remain unsolved.
Gilmore then told his investors, who may have become impatient, that he had located the Chorlton estate's fortune--which he said now totaled $1.5 trillion--and that he had obtained a court order requiring the banks holding the funds to disburse them to Gilmore. In fact, the SEC said, the Scottish lawyer who conducted the investigation for Gilmore found that the estate was worth no more than $350,000.
Lawyers say that investors are still being victimized. As Gilmore's promised payout date keeps getting postponed, they say, some investors are making money on their own by selling sub-interests in their shares to others, who have been reselling them yet again.
APRIL FOOL. In August, 1992, a third scam was unleashed. The SEC contends Gilmore began selling unregistered shares in International Trading Inc. (ITI), described in Gilmore-produced literature as a Liberian gold and diamond trading firm. Shares were priced at $100 each and were paired with a free warrant said to be redeemable by next Apr. 1 for $200,000, once the Chorlton proceeds were obtained. In his latest sales pitches, Gilmore upped the supposed value of the estate to $10 trillion, the SEC says.
Among those who bought this pitch was Leroy Arends, a Burlington (Colo.)-based fertilizer salesman who heads a syndicate that invested $160,000 in Brown's original deal. Arends says his group also put a "little bit of money" into ITI. "We're all grown men. We know how to accept risk," he says.
On Oct. 8, the SEC obtained a court order that froze whatever assets remain under the control of Gilmore and ITI. Brown was forced into bankruptcy. The SEC is also investigating if any funds are left to repay investors. An FBI criminal probe is believed to be continuing.
The moral of the story? Pretty obvious. Says Missouri investor Peters: "I guess I wasn't listening when my dad taught me, if it sounds too good to be true, it probably is."Chuck Hawkins in Atlanta