Life After a Ponzi Scheme: Victim Turns Million-Dollar Loss into Literature

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Courtesy McCabeIn 2008, R.P. McCabe and his wife were heading into retirement with a solid financial future that included a $1 million investment in real estate with Right Place Properties and the Red Door Group in Phoenix.

By the end of the year, their money -- as well as the investments of roughly 700 others totaling more than $100 million -- was gone. The years of statements purporting solid returns were pure fiction. The money they were supposedly making did not come from profits, but from their own funds and money coming in from new investors.

Lawsuits followed, but so far no criminal charges have been filed and the perpetrators claim innocence.

Writing It Out

Courtesy R.P. McCabeThe money may be gone, but the memories of being a victim of a Ponzi scheme will not soon be forgotten. McCabe reached out to fellow victims and interviewed 200 of the 700 to find out how the scheme had affected their lives.

His research informs the pages of his novel Betrayed, which gives a personal perspective on the fallout from a financial tragedy.

In the novel, McCabe's characters, Wally and Poppy Stroud, are ready to reap the rewards of 40 years of successful investing and saving for their retirement. When they receive a letter from their investment manager telling them of their loss, the couple's plans are shattered. Poppy commits suicide and Wally goes into a deep depression until he decides to take justice into his own hands and exact revenge on the scammers.

While the Strouds' story shares elements of McCabe's experiences, they are not identical. We interviewed McCabe about what he lost, what he learned from fellow victims, and why he wrote Betrayed.

Q: What happened to you and your wife?

A: Our wealth management company recommended the real estate investment. We liked that there was a social conscience element to the plan because they were taking crumbling inner-city properties and rehabbing them into affordable condos for first-time buyers. The first two cycles paid off nicely; after four years we earned 10 to 12 percent on our investment.

No one knew what was happening, but at some point they started taking money from new investors and paying it out in interest to the old investors. They never completed a project.

We were stunned when we got a letter that told us that the losses were due to the economy and mortgage financing problems, especially because they were never supposed to have been using bank loans in the first place. We lost about $1 million.

All we had left was an emergency fund of about $100,000, which sounds like a lot but it isn't really when you don't have an income. I was 65 and retired. We had sold a business and had no real way of starting a new one, especially at a time when the national economy was imploding and Arizona was even worse. I spend most of my time now in Mexico, where the cost of living is cheaper.

Q: Describe some of the experiences of other victims you interviewed.

A: Some of the younger investors were not dealt as crushing a blow as the older investors. One 40-year-old investor lost $200,000, but he has time to build up savings again. Another 65-year-old lost $16 million and one family with five different members investing in the deal lost $6 million among them.

At the end of the day, the effect depended a lot on what each one of them had in reserve. For some people it was an immediately devastating blow but for others it was more like a slow death. Lending institutions don't want to help you because you don't have any capital of your own. For those people whose ability to recover was limited or nonexistent, the best hope was for an early death. There were entirely too many heart attacks and strokes among the victims I contacted.

Many of the people I reached had lost their homes, declared bankruptcy, and had moved in with family members. One family with three adult kids and both parents lost three homes between them. They all ended up moving into the parents' original home because that was the only paid-up property.

Q: What was the emotional impact of the scam?

A: At first I was extremely angry and that was followed by a deep psychological depression, which eventually destroyed my marriage of 34 years. I was suicidal, but luckily I had enough lucid moments to recognize the danger of my psychological state and to get help.

Suicide is very common after financial fraud has been committed, so I included that in the book so that people understand that suicide creates not only the horrific loss of a loved one but also anger at being abandoned.

The psychological impact for a lot of us was a deep shame and self-recrimination that we should have seen it coming. The thing is, we weren't investing in something sketchy. The investors here were not overreaching with some get-rich-quick scheme like a promise of a 25 percent return on something in some banana republic.

Q: In what unexpected ways did some of the victims rebuild their lives?

A: The overwhelming majority of the victims were resourceful people to start with, so they took what they had left and backed down their plans. One airline mechanic lost his kids' college fund and had to sell his home and move into a smaller place with his family. But unfortunately, some people who couldn't cope at all ended up in a state or county program of some sort, like one 70-year-old who became homeless and didn't have any family to help.

For me, part of the rebuilding process was to write this book. After six to eight months of therapy I was ready to be more philosophical and look at what I gained instead of what I lost. I gained the ability to be completely fearless and free. You can't take anything away from me anymore because that's already been done.

While my book definitely has a violent twist at the end, it isn't really just a good guy versus a bad guy kind of story. I wanted a variety of people who have been victimized to find a cathartic release from this book and to have something greater going forward. There's a tremendous amount of love throughout the story.

Michele Lerner is a contributing writer to The Motley Fool.


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69 Comments

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nlevis

To all of the "eggs in one basket" jerks I hope you get what you deserve... in hell... stop blaming victims and start blaming regulators and enforcement agencies who would rather bust sshoplifters.

February 28 2013 at 12:28 AM Report abuse rate up rate down Reply
nlevis

To all of the "eggs in one basket" jerks I hope you get what you deserve... in hell... stop blaming victims and start blaming regulators and enforcement agencies who would rather bust shoplifters than embezzlement. Satan is waiting for you all....

February 28 2013 at 12:27 AM Report abuse rate up rate down Reply
ccurt78

So far the best retirement plan I have seen is being a politician, all others pale in comparison.

December 15 2012 at 6:34 AM Report abuse rate up rate down Reply
rtuswns

Betrayed. This loss is Bad, Secular Humanism is Spiritually Deadly,waking up
with nothing Forever
With no recourse. Grand deception since the Government has.
Legalized it, condemning the Truth.
http://truth-revealed.name

December 15 2012 at 2:28 AM Report abuse rate up rate down Reply
pmbalele

I am glad President Obama was re-elected. What a break in my life! There is a problem with Republicans – they don’t want government because they want to scheme others. This article tells what I said two days ago. You see, Republicans still believe in “Trickle down” economics which Bush Sr. called voodoo economics. Voodoo economics is actually unfettered capitalism or survival of the fittest. That's whoever is smarty and has most money rules the country. The writer of this article should have blamed republican for his fate. Republicans love corruption to cheat on investors-survival of the smartest. We need government to monitor bad people. That is why people of all color and creed voted to re-elect President Obama. Let’s enjoy working hard for the next 4 years with President Obama as leader of the world.

December 14 2012 at 11:33 PM Report abuse rate up rate down Reply
2 replies to pmbalele's comment
Brian Workman

Let's NOT forget about WhiteWater and the Democrats Clinton's Realastate scandal!?!?!

December 15 2012 at 12:09 AM Report abuse -1 rate up rate down Reply
amdm

sorry but it was your demorat breathren that caused the housing market to fail. they just drank the cool aid not stopping to think about how people who cant afford a house and dont want to work will pay for them

December 15 2012 at 3:31 AM Report abuse -1 rate up rate down Reply
kevwalton2

how can you people in good concience condemn these people for investing ? when most or all of you have a 401 k ? You are all in a ponzi scheme! And when you have no retirement but Social security you will sing a far different tune. Since i lost half the value in my invetestment in my 401 after the financial crisis, I cannot and will not judge! Nor should you ! The only thing these people are guilty of is trying to leave a greater legacy for their future generations, and yet you condemn them. Shame on you ! put your condemnation where it belongs with the thieves that stole thier fortunes !

December 14 2012 at 10:28 PM Report abuse +2 rate up rate down Reply
nxston08

Frankly I don't feel sorry for these people. Just another case of greed gone wrong. Never ever put all you money into a single investment. That's basic and also common sense.

December 14 2012 at 8:42 PM Report abuse -1 rate up rate down Reply
rymic

What exactly is a wealth management company? Are they regulated by anyone?

December 14 2012 at 7:49 PM Report abuse rate up rate down Reply
gjohn411

This scam was so typical of the Bush era and the fraud that occurred on wall street on a daily basis. This guy can join the pool of thousands, if not millions, that got scamed one way or the other

December 14 2012 at 5:46 PM Report abuse +1 rate up rate down Reply
1 reply to gjohn411's comment
Brian Workman

WhiteWater & The Clintons!!! How soon the Democrats forget!!!

December 15 2012 at 12:12 AM Report abuse -1 rate up rate down Reply
wdcarterjr

Never put all your money in one place.

I have a dime in my sox drawer and the other one buried in the back yard.

Before Obama was elected, I had folding money. Oh well, the new America.

December 14 2012 at 4:05 PM Report abuse +1 rate up rate down Reply