Good name, bad family
In September 2001, a group of investors with whom we deal were approached by a Chuck Sullivan, a former executive with the New England Patriots, and a Martin D. Fife, one of the Dreyfus Corporation Fund Directors, about an opportunity to invest, through a company called Seaview Development. They were pitching 5-to-1 returns in less than a month and they were promising exorbitant returns on what were called “prime bank instruments.”
Our client had us do a due diligence investigation on Martin Fife to see if he really was a director with Dreyfus, and to find out if this Chuck Sullivan really was a former executive with the New England Patriots. While Dreyfus refused to acknowledge whether Martin Fife was or wasn’t a director, that information was available in public records. A call to the New England Patriots, who were very kind, revealed that yes, Mr. Sullivan was a former executive with them.
Sullivan was a son of the former Patriots owner, the late Billy Sullivan. Billy Sullivan was one of the original owners who organized the American Football League to challenge the supremacy of the National Football League in 1960. Chuck Sullivan was at one-time president of the company that owned and managed the team’s Foxboro Stadium. He became famous in the mid 1980s for organizing singer Michael Jackson’s 1984 Victory Tour. The tour reportedly lost $20 million dollars, helped drive the stadium company into bankruptcy, and triggered events that led to the Sullivan family’s having to sell the team after 28 years of ownership.
As a director at Dreyfus, Martin D. Fife was certainly on the A List for any party invitation for Wall Street executives. Besides being a fund director with Dreyfus, his wife was a former Deputy Mayor of New York City.
Research into the deal itself showed that there was a lawsuit in New York, where money deposited into Seaview Development had been demanded back, and Mr. Fife and Mr. Sullivan had not repaid that money in a timely fashion. Since other investors were already experiencing problems with Martin Fife and Chuck Sullivan, and what with one thing and another, we recommended that our client not participate in this suspiciously remunerative scheme.
According to the subsequent SEC complaint, Michael A. Clark, a Briton, brought Sullivan andFife together to enter into the high-yield scam. The fraudulent scheme, according to the SEC complaint, sent letters to their investors, including one to one of their investors, assuring them that their $7.5 million investment was safe, and urging them not to help the SEC investigators who had begun investigating the deal.
The SEC record showed that the elaborate scheme originated with the fugitive, Michael A. Clark, who wanted to attract US investors for various investment schemes in the late 1990s. Through an intermediary,Clark linked up with Sullivan and Fife, a director of Dreyfus Corp. Fife set up a New York subsidiary of Clark’s Bright Business SA, based in the British Virgin Islands. Clark, along with other defendants in the SEC action, including one Robert L. Watchtel, a one-time California resident whose current whereabouts and activities are unknown, then pitched the investment scheme to investors.
According to the SEC, the three defendants persuaded Canadian Robert Fitzhenry to invest $12.5 million through Fitzhenry’s company. Three other investors put in nearly $32 million, most or all of which has been repaid to them, the SEC complaint says. The SEC further alleges that the $20 million Al Bloushi and others invested was spent by Fife and misappropriated by Dennis S. Herula and his wife Mary Lee Capalbo, both of Rhode Island. Until January 2001, Herula was a broker with the Cranston, Rhode Island, office of Raymond James. Further, the complaint alleges that Hula and Capalbo used stolen funds to buy a four million dollar home in Tiburon, California and a $625,000 home inWesterly. According to the police inBermuda, Herula and Capalbo were arrested in late December after trying to open a bank account there with forged documents.
The good news is that our clients spent a few thousand dollars hiring us to exercise due diligence for them, and thus saved themselves millions of dollars.
The bad news is that thirty-two (32!) other “experienced” investors had the dubious pleasure of becoming material witnesses – or victims, from their point of view – in a multi-million dollar international fraud because they failed to take even the most elementary precautions. In the process these good folks substantial enriched Sullivan, Fife, Clark and the other fraudsters, and demonstrated once again that with the right name and the right connections a lot of otherwise savvy people will buy almost anything.
There are a number of things that otherwise-sensible people do that continue to amaze us. Among these are not bothering to wear seatbelts and not bothering to exercise due diligence before investing large amounts of money in schemes that sound too good to be true. We grant you that, in fact, people rarely have traffic accidents, and most financial deals are honest. However, the results of either a car crash or fraud are so great, and the cost of prevention so small, that we are constantly puzzled by these anomalous, self destructive, behaviors.