Ex-CIA Deputy Director Frank Carlucci Fell for This Scam. Would You?

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Jan. 5, 2006 - Washington, District of Columbia, U.S. - I10363CB.Former Secretary of Defense Frank Carlucci talks to reporters outside the White House. 01-05-2006.  - -   2006.(Credit Image: © Christy Bowe/Globe Photos/ZUMAPRESS.com)
Christy Bowe/Globe Photos/ZUMAPRESS.com

Intelligence: To most of us it means smarts, wisdom, cleverness -- but when the word sits at the heart of the name "Central Intelligence Agency," it stands for vital information, and the special methods used to gather those key facts.

Surprisingly, it turns out that even someone who once was the No. 2 man at the CIA can forget to pay attention to both of those versions of intelligence when it comes to investing.

In Florida this week, former Deputy CIA Director (and former Secretary of Defense under President Reagan) Frank Carlucci walked into court and demanded that a Florida judge enforce judgment against a huckster who Carlucci says defrauded him out of $32 million.

The huckster in question, Michael Han, and his company, West Palm Beach-based Envion, had offered the prospect of taking scraps of plastic waste, originally manufactured from oil, and converting the stuff back into oil for use as a fuel source. Basically, it was promising a form of 21st-century alchemy -- except the base material in this case was plastic instead of lead, and the product it would supposedly would be turned into wasn't real gold but "black gold."

According to Carlucci's complaint, originally filed in April 2012, Han had assured Carlucci that Envion had a patent on this plastic-to-oil technology, a stable of "highly regarded directors" running the shop, a bevy of orders in backlog for sale of the "oil generator" machines that would do the conversions, and plenty of heavy-hitter investors lined up to finance the project.

Unfortunately, none of that was true.

More unfortunately still, Carlucci was unaware that it was not true. He got duped.

In for a Penny, In for a Pound

First approached by Han in 2004, Carlucci happily anted up $500,000 as his first investment in Envion -- apparently doing no due diligence, instead accepting Han's statements at face value.

Further happy-talk from Han about the great strides the company was making, and Carlucci's own prospects of earning a return 50 times greater than his investment, enticed the former CIA Deputy Director to hand over millions of dollars more in subsequent years.

It was not until eight years later – 2012 -- that Carlucci began to suspect that something was up. This was after Han closed down the Washington, D.C., office of his supposedly hyper-growing company and moved the firm's headquarters to Florida. It also apparently took Carlucci those eight years to begin asking around, and investigating Han's assertions that he had such luminaries as Bill Gates, Warren Buffett, Bill Clinton, and George W. Bush investing alongside him -- with corporations Morgan Stanley (MS), Petrobras (PBR), and Russia's Gazprom beating down the door to invest as well.

(Hint: He didn't, and they weren't.)

Of course, by that point Carlucci was $32 million in the hole, with much of his wealth having gone to pay Han a $5 million salary, and to buy Han a $3.5 million home -- in Florida's soon-to-implode real estate market, no less.

Last month, Carlucci won a judgment for $37 million in Virginia to try to collect what he could out of whatever money Han has left -- nine years too late.

What's the Lesson Here for You?

Now, for small investors there are a couple of possible takeaways to this story. One possible interpretation: If the former second-in-command of the CIA, and a former honest-to-goodness spy (in the early 1960s, Carlucci held an undercover CIA posting in the Congo) couldn't figure out that the company he was investing in was a fraud, what hope can we little guys, we small-fry investors, ever have?

If you ask me, though, the real moral of this story is much more simple: Use your common sense.
First and most obviously, if some guy walks up to you and offers you an easy way to turn your money into a 5,000 percent profit, ask yourself: If this idea is so great, then why is this guy giving it to me, instead of keeping it to himself?

Second, do some due diligence. Before committing $32 million, or $32,000, or $320 to a project, do a bit of research. You don't need the resources of the Department of Defense or CIA for this. The SEC will suffice. If some guy named "Han" tells you he's got investors from Petrobras and Morgan Stanley investing in a plastic-to-oil scheme, look up Petrobras or Morgan Stanley on the SEC's website, and see if their filings say anything about their involvement in it.

Third, if your suspicions are already up, you may be able to get by on even more basic research. For example, a Google search for "plastic + into oil + machine + hoax" might have turned up a link to this 2010 post on the snopes.com website -- two years before Carlucci finally caught on to his goof, and filed his lawsuit.

Motley Fool contributor Rich Smith has no position in any stocks mentioned. The Motley Fool recommends Petroleo Brasileiro S.A.


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13 Comments

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Steve Kennedy

Don't be too hard on him, consider the fact that he was a government employee.
The government makes these deals everyday. They Pi*s away Billions of taxpayer money.

This guy had a government mentality, 32 Mil was chump change. The only problem was, this time it was his own money (Ouch)

One wonders how much money he had before he went to work for the government ????

June 05 2013 at 5:41 PM Report abuse rate up rate down Reply
Margaret Opine

OMG...YOU HAVE JUST STROKED AN AMERICAN NERVE. That's where we are going now in our thinking. We are on our way there now. I have just written an article draft with this sentence: "Sure we love capitalism in America. It seems to work well for us on the surface, that is: we have lots of shine from it but in my world view and the people who like what I have to say: $90 billion in personal wealth of The People's hard-earned money is just off the charts of humane decency. We need to tweak our capitalism--not get rid of it--tweak it; change the formula so that our streams of wealth flow in all directions or we need to redefine the definition of "being wealthy in America"--we need to assign some kind of "wealth responsibilities" and we should not be allowing people to leave the country with untold wealth (to avoid taxes on American dollars) and with enough money to fund their own government and their own military. Chemical warfare is cheap, so is terriorism, compared to state-of-the-art weaponry like we use. We could end up realizing our own money coming back at us in enemy form."
--MO

June 03 2013 at 3:33 PM Report abuse rate up rate down Reply
setanta54s_back

ooooooh that old alchemy scam strikes again !

and it was what ?

........... had offered the prospect ........


since the bs with madEOFF,everyone that was scammed believes they will get a REFUND.

May 31 2013 at 3:58 PM Report abuse +1 rate up rate down Reply
salmo60

Frank Carlucci was the Chairman of the Carlyle Group. He could have called his friend George W. Bush, a member of the Carlyle Group, and asked Bush if he was invested in Michael Han's company. Looks like greed clouded Frank's vision.
If it sounds to good to be true, it probably isn't. Every investor should know that saying.

May 31 2013 at 2:41 PM Report abuse +2 rate up rate down Reply
gatorhans

Interesting is he is worth more than 32 million on a job that pays six figures and he is still trying to make money? My own business is very profitable, but for me to make that much money I would have to have 20 times the building I have now. The other funny thing is you can live like a king off 3 million dollars in the bank and never have to work another day in your life what is the matter with people in America you dont need that much money at all to be happy

May 31 2013 at 12:22 PM Report abuse +1 rate up rate down Reply
robyxf

Why jump on this CIA man, look half of the American people fell for the Obama scam

May 31 2013 at 11:57 AM Report abuse -3 rate up rate down Reply
2 replies to robyxf's comment
robyxf

Yes, that’s like winning 100 million on the lottery and taking off to Las Vegas and gamble. Right after you bought your double wide.

May 31 2013 at 12:06 PM Report abuse rate up rate down Reply
meeeeeeeeeee

Looks like someone watching to much Fox news.

May 31 2013 at 1:56 PM Report abuse +1 rate up rate down Reply
Hardy

I have an even bigger concern here. A guy with 32 million does not need to take any great risks. I mean come on, his house was probably already paid for, he has educated his kids, he has the toys he needs, he can afford, food, drink, music literature, etc. ; why commit any funds to this scheme at to any other scheme for that matter?

What a fool indeed! This article is more about the corruption and folly of zealous greed than it is about proper due dligence and investigation of a possible investment opportunity.

May 31 2013 at 11:05 AM Report abuse +6 rate up rate down Reply
miamibobk

Is this a test? After an article about an investment scam and how to avoid being scammed, you post a "The Death of the PC" piece listing all the big names of companies waiting to cash in on this investment tsunami. Wow!

May 31 2013 at 10:25 AM Report abuse +2 rate up rate down Reply
hcheer

i actually can understand how he got dupe into believing in the deal...what i do not understand is how does a lifetime govt employee accumalate 32m to invest????

May 31 2013 at 8:52 AM Report abuse +5 rate up rate down Reply
franzr00

Silly article. Less about one person then it is about personal greed. Most people do not have $32M to waste anyway,let alone not pay any attention to it for eight years.

It is less about whether he could have found out it was a fraud then it was that he didn't try. And that is why appealing to greed works so well. Just ask Bernie Madoff.

May 31 2013 at 8:04 AM Report abuse rate up rate down Reply