I just finished digesting the epic Kenneth Starr ponzi article in Vanity Fair. I linked to it this morning, if you haven’t read it you definitely should. The most amazing aspects of this lowlife’s swindle were the following:
* He actually sent out account updates on stationary from his firm. Nothing from any third party custodian firm. And the Hollywood actors and directors he counted as clients saw nothing odd about that.
* Nobody second-guessed why an accountant would make a good technology hedge fund manager. Really?
* The private investment stuff is always a scam. Why would Al Pacino really need to be a shareholder in a company claiming to make South American voting machines? He doesn’t need to get rich, he is rich. Private investments in a chain of martini bars for 90 year olds? What’s the upside (we all know the downside)?
Anyway, below is a link to the story. A great, cautionary read for all investors.
And here’s a recap of my general advice to celebrity investors (originally posted in May). Enjoy:
Apparently, something happens when you get famous…the things that tether you down to earth, such as rational thought and common sense, evaporate into the aether.
Yesterday, Kenneth Starr, money manager for Sly Stallone, Annie Leibovitz, Jacob the Jeweler, Uma Thurman, Martin Scorsese and Wesley Snipes, was arrested for a ponzi scheme. In light of this news and in remembrance of similar scams gone by (Dana Giachetto, Bernie Madoff, etc), I thought I’d offer the following free advice to the Hollywood set when working with an advisor…
1. Anyone who refers to himself as a “Financier” is full of sh*t.
2. Your financial advisor is not supposed to play polo or wear designer sunglasses, nor should he ever have a popped up collar under any circumstances. He must never wear shoes without socks or wear a watch with a diamond bezel.
3. In truth, if an advisor or money manager’s opening shpiel is about all of the other famous people he works with, this should not make you feel comfortable. Its actually a giant red flag indicating that you are dealing with a starf*&%er and a social climber who is more concerned with himself than you.
4. Even your brother-in-law will rob you if you give up power of attorney. Go ask Billy Joel. Uma Thurman signed over Power of Attorney so that Ken Starr would do her taxes. That’s funny, my CPA never seemed to need signatory authority over my bank account to prepare my tax forms…hmmm.
5. Custody of assets is all you need to know. If your money guy needs to set up extraneous accounts in both your name and his, its a scam. If he asks you to transfer money into a financial institution that you haven’t seen advertise during The Masters, its a scam. If he tells you not to worry about receiving statements because he’s “taking care of everything”, its a scam. You get the idea.
6. Most important: Your financial guy is NOT supposed to party with you. He shouldn’t be at the same nightclub as you buying bottles, nor should he have a copy of Variety in his waiting area. The financial advisor is the guy you apologize to when you sleep through an appointment with him, hung over from an all-night rager. He’s not supposed to be there with you at the club, holding your hair while you vomit up Veuve Cliquot and Red Bull.
7. Almost forgot, young stars and starlets… if the advisor has a nicer home than you or your initial consultation takes place on his yacht – run, Forrest, run.