Bad Neighbor: The Man Who Defrauded a Small Town, Part 2

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[00:00:02] Bob: This week on The Perfect Scam.

[00:00:04] Ronda Winn: You had no reason to ever question or doubt him. And the entire community looked on him and his businesses that way. He maintained a perfect composure. You know he was very charming, and he kept getting enough investors to be able to keep the scam going. It was all monopoly money. There was no real money ever involved. It was just all pretend. He ran the perfect scam until it wasn't the perfect scam.

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[00:00:42] Bob: Welcome back to The Perfect Scam. I'm your host, Bob Sullivan.

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[00:00:46] Bob: This is part two of a series. If you haven't listened to part one yet, you might want to go back and do that now. When we left our story, residents of the upstate New York hamlet of Hamilton, home of Colgate University, have just learned of a financial scandal that seems to have hit every resident and every institution in town. Maybe even in a whole county. A man named Burt Marshall is accused of running a Ponzi scheme so widespread that even the town fire department and cemetery are roped in. Marshall had dominated families personal finances for decades. It seemed he did everyone's taxes, managed their insurance, and set up investment accounts promising 8% interest, and he paid that interest for years. About 1000 victims have an average of roughly $100,000 invested with Marshall, but now the New York Attorney General has accused Marshall of running a Ponzi scheme. No one knows where their money is. While awaiting trial he still bikes through town every day, lives in his 5-bedroom Victorian home in the center of town, and generally acts like nothing's wrong, infuriating victims like Ronda Winn.

[00:01:54] Bob: Yeah, you wanted to get him off the street.

[00:01:56] Ronda Winn: Yes, I did. I did. That was hard for my sons to see him pedaling around and I'm sure it was hard for everybody.

[00:02:05] Bob: Well he clearly thought he was smarter than everybody else.

[00:02:07] Ronda Winn: He did. And yeah, he, he definitely thought he was smarter than the cops and smarter than the attorney general, and smarter than any of us, but I remember when this first started, he would tell people, "I'm never going to jail."

[00:02:22] Bob: Really? Wow.

[00:02:23] Ronda Winn: Yeah. Yeah.

[00:02:26] Bob: Maybe Burt Marshall thinks he's never going to jail, not going to face any consequences, but the rest of the town faces plenty of consequences. Rachael Owen has one of those Burt investment accounts. So do her two children and three grandchildren. Altogether, the family has about $200,000 tied up in Marshall's enterprise. And perhaps even worse, a nearby town cemetery where her husband, Tom, is buried, is now facing abandonment.

[00:02:53] Rachael Owen: The cemetery committee, they had put all $170,000 with Burt Marshall. I had put my husband in the cemetery four years prior, and it going to be abandoned. Our cemetery was in the middle of the town of Brookfield, in the middle of the town. It was 218 years old, and it was going to be abandoned.

[00:03:26] Bob: Burt Marshall claimed those guaranteed 8% interest payments were backed by his vast real estate holdings. By the time he was indicted, Marshall owned about 100 homes in town, most rented out to college students. But now it seems there isn't nearly enough income to support all those interest payments. Marshall was using new investors money to cover payments to earlier investors, a classic Ponzi scheme according to the Attorney General. As news sinks in, an entire town, most of the county really, grapples with the loss. There is still a lot of disbelief that Burt Marshall, the man who paid for all those youth sports teams, that Burt Marshall could do something so crushing.

[00:04:05] Ronda Winn: And of course the problem was, he and his family had been in business for a very long time. So he had customers that were customers of his mother's, and, and of course growing up locally in the village and living in one of the finest houses in the village, that he, they were considered untouchables, and it never occurred to anybody that he would do something like this. But he did.

[00:04:38] Bob: Do you happen to remember the first time you talked to a friend or a neighbor and said, hey, I think something weird is up. Is it happening to you too? Do you recall any conversations like that?

[00:04:46] Ronda Winn: Oh heavens, yes. My brother would call several of his friends in the area, and then he would call me. He talked to one friend, and she would say, “Chip, that can't happen. He calls me every year on my birthday." And then my brother is like, "Yeah, Glenda, it can happen. And it has happened. And I'm just seeing if you know more than we do." But that's kind of how everybody felt that nobody wanted to believe it was true. And...

[00:05:22] Bob: I mean, it is like the five stages of death and dying. I mean your first reaction is denial, of course.

[00:05:27] Ronda Winn: Oh yeah, and then you get to the depression part. (chuckles) I mean I'm going to say grief because that was a real world, and embarrassment. Oh my gosh, embarrassment was tough. It was sad for all of us and every one of us and my goodness, the cemeteries and the fire houses, and that's all public money with those folks. And on top of that, you're going to get written up by the state, so yikes. I don't know. He ran the perfect scam until it wasn't the perfect scam. You know when you would get the disbursements, you would also get a nice little statement that made everything look up and up. But it was all monopoly money. There was no real money ever involved. It was just all pretend.

[00:06:19] Bob: How could he get away with it for so long?

[00:06:21] Ronda Winn: He maintained a perfect composure. You know he was very charming, and he kept getting enough investors to be able to keep the scam going. So never in that, all those years, did he ever have to default. He had enough money coming in so that he could just keep up with the mess he'd already created. And I think, I don't know if I'm correct on this, but I think a lot of the new investors, they just wanted to draw interest or just have it in savings. So the new investors' money, he was able to keep the whole thing going until, until he wasn't. This man held up this profile that was just impeccable. I mean you had no reason to ever question or doubt him. And the entire community looked on him and his businesses that way, and he did have several small businesses and they made t-shirts for all the high school students, and every benefit he donated to, and so everybody on sports teams was all very happy because Marshalls brought the pizza and all of that stuff. So there was never any indication in that sense.

[00:07:50] Bob: Yeah, it's hard to say you should have seen these warning signs, because they weren't really warning signs.

[00:07:55] Ronda Winn: No, there weren't. I mean the whole time he maintained this perfect; he walked, you could set your clock by him. He'd walk by the village office on his way to work. He'd walk home. I mean it was just; you could set a clock. You know we; I could sit in my office window and look out and say, oh, it must be time to go home because Burt walks by. So, I mean there was never, and he did not live a very lavish lifestyle. He wasn't driving expensive vehicles, or he wasn't kind of the person that was flashy with money. So I mean surely with his home and everything else it was clear that he had money, but he was never blatant with it. And that, that would have been something that everyone would have picked up on.

[00:08:46] Bob: Especially in a town like yours, right? If he drove around in a red convertible, people would have asked questions.

[00:08:50] Ronda Winn: Absolutely. And he was very cautious, so...

[00:08:56] Bob: So back when you start to figure all this out and your neighbors start talking and all that, at some point you find out that there's a genuine criminal investigation un--, underway. Do you remember how you found that out?

[00:09:08] Ronda Winn: I do remember that because the Attorney General was calling people. And they interviewed me, and then they decided I was going to be the lead testifier.

[00:09:20] Bob: Wow, that's a big responsibility.

[00:09:22] Ronda Winn: It was. Which is no problem if you're telling the truth, you have no need to worry. So yeah, I mean if you're speaking for everyone involved, it is a lot of responsibility. But we all were sharing the same thing, and the same heartache and grief.

[00:09:42] Bob: As Burt Marshall's bicycle's wheels keep churning around town, the wheels of justice turn slowly, but they do turn. George Cowen, another one of the victims, he had more than $200,000 in a Burt account, well George makes a point to attend the court proceedings.

[00:09:58] Bob: And what was that like?

[00:09:59] George Cowen: It was interesting. Of course, initially he was denying any wrongdoing, and seemed to be getting away with things.

[00:10:10] Bob: I seem, hmm. So when you saw him in court, what did you think?

[00:10:17] George Cowen: Uh, well I thought that he, I know that he told bold faced lies that day.

[00:10:26] Bob: Rachael goes to court too.

[00:10:29] Bob: Did he look at you while you were in court?

[00:10:31] Rachael Owen: No, he was in a little safety box with, uh, cops all around him, but he was in an orange suit. The only satisfaction I got out of that court hearing was to see him in an orange suit. His hands were handcuffed and his feet were shackled. So...

[00:10:52] Bob: I mean were you angry? Were you satisfied that he was in shackles?

[00:10:56] George Cowen: I am satisfied that justice is currently being done.

[00:11:04] Bob: Ronda Winn has to summon up all her courage to appear in court on behalf of all the 990 victims.

[00:11:12] Bob: That must have been really nerve-wracking.

[00:11:13] Ronda Winn: Uh, you know what, it was until I sat down in that chair and I looked around the room and I said these are regular people and I think they'll understand what has happened, what has transpired, and that a lot of people were taken complete advantage of. And now it's just this big horrific mess. And none of us are going to recoup anything.

[00:11:44] Bob: Right. Did, did he look at you while you testified?

[00:11:47] Ronda Winn: No, he did not.

[00:11:48] Bob: He never looked at you. Wow.

[00:11:49] Ronda Winn: No. No, he didn't. And I wish he had.

[00:11:55] Bob: What was it like to see this arrogant man who didn't have the time of day for you, who had all this money and lived in this big house, to see him in an orange jumpsuit in the handcuffs sitting in a courtroom, what was that like?

[00:12:03] Ronda Winn: I would like to say I was the kind of person that would get pure satisfaction from that, seeing him in that orange jumpsuit. And I'm also a very kind person. I don't want to see people suffer, not that I think he deserved a break, but I don't like to see people suffer. And I'm not even going to say that his prison term gave me any satisfaction.

[00:12:32] Bob: Finally, after nearly four years in April 2026, Burt Marshall pleads guilty to grand larceny and securities fraud. He admit that as far back as 2016, his liabilities exceeded his assets by $40 million. Yet, he still claimed to be profitable and still solicited new investments. In the end, by the time he declared bankruptcy, he owed investors more than $90 million and those vast real estate holdings and everything else he owned were worth only about 20 million. A few weeks later at the sentencing hearing, Judge Rhonda Youngs reads several painful letters from Marshall's victims and then says to him...

[00:13:10] (hearing clip) "This was not a mistake or a lapse in judgment. It was an intentional fraud carried out over decades. There was deliberate deception. There was targeting of friends and neighbors, acquaintances, hard-working individuals in a community. Many of the letters were from retired teachers, from nurses, from farmers. The conduct was manipulative, it was purposeful, calculated. The sheer scale of the crime itself is evident in what a trusted position that you held in the community. You lied, you cheated, you just left a trail of devastation for future generations."

[00:13:51] Bob: She then sentences him to 4 to 12 years in prison.

[00:13:56] Bob: How do you feel about the sentence?

[00:13:58] Ronda Winn: I don't feel like it was long enough. I think he got a very minor sentence compared to the chaos that he caused to 990 other people. He destroyed a lot of lives and a lot of generational families that trusted him. A lot of his clientele around here, a lot of them were farmers, regular working people that, that don't understand taxes and it's like Burt was, Burt was the guy.

[00:14:35] Bob: At sentencing Burt Marshall is no longer acting like the big man.

[00:14:40] Ronda Winn: No, honestly, Bob, the man looked so devastated. I'm not going to say I felt sorry for him, because I didn't feel sorry for him. But he looked like a broken shell and so he should. I mean this is a weight he's going to have to carry for the rest of his life, as we all are.

[00:15:01] Bob: Still 4 to 12 years for such wide-ranging impacts? The punishment doesn't seem to fit the crime.

[00:15:09] Ronda Winn: The Attorney General's Office was absolutely wonderful. They really were. They were very much hoping for more time, but they settled to get it settled, and at that point I think everybody just wanted some, some closure, some end in sight. So not that I think that closure made us any, feel any better, but at least we didn't have to keep reading about it every day, and I didn't keep watching him ride his bicycle by every day.

[00:15:43] Bob: I cannot imagine that, honestly, and seriously, the arrogance of someone biking by all of these people whose lives he's ruined for a year or two, on my God.

[00:15:53] Ronda Winn: No, that is really hard. I, I would just sit here and think, can you change your route? Please, stop. I don't want to see you pedal by my house.

[00:16:04] Bob: That almost seems on purpose.

[00:16:06] Ronda Winn: I hate to think that, but I don't know.

[00:16:09] Bob: Most of the victims were neighbors.

[00:16:13] George Cowen: I did know these other people, farmers and so on, who had done business with him for decades before I ever did, and they all spoke highly of him at that time. For years he apparently was able to do as he said he was going to do. And he had earned a good reputation with folks. But then he sprung the trap, so yeah.

[00:16:40] Bob: Crystal Cowen, George Cowen's wife thought about all those victims too.

[00:16:46] Crystal Cowen: And it really hurt a lot of the people because they thought they were really good friends with Burt. There was people that had dinner with him. People that went to his camp and went to his parties.

[00:17:01] Bob: He drew victims from every walk of life.

[00:17:05] Ronda Winn: Even Colgate professors. I mean it wasn't just one demographic. It was um, across the board. But I cannot imagine taking, stealing money from a fire company. I mean those people save our lives, and it's just heartbreaking that... I don't know. I mean this was a guy that would have been a Rotary person or something that just, you know he, he carried the perfect pretense.

[00:17:44] Bob: As part of the guilty verdict, Burt is ordered to pay restitution to his victims, but as so often happens, there's little hope they'll be made whole. Even after Burt's properties are sold, there isn't much leftover to return to his 990 victims. A lawsuit filed against the financial institution involved in Burt's companies was dismissed in September, leaving the victims with little hope for additional compensation.

[00:18:09] Bob: Well when they sold all his properties and all that, did, you got a few pennies on the dollar, didn't you, or did you get nothing?

[00:18:14] Ronda Winn: I got a very small amount, yes.

[00:18:18] Bob: God, that's almost an insult, right? Okay, would you mind sharing roughly how much?

[00:18:21] Ronda Winn: In total, I ended up getting back 5, 5% of everything.

[00:18:29] Bob: Wow.

[00:18:29] Ronda Winn: Nothing more than 5%.

[00:18:32] Bob: Wow.

[00:18:34] Ronda Winn: So yeah, that's been pretty hard to take, and you're right, the checks would come and it, I mean my son threw his on the floor and said, "I'm not even going to cash this." And I said, "I'm going to pick it up and cash it, but I understand."

[00:18:51] Bob: Hearing from other victims, that takes a toll too.

[00:18:55] Ronda Winn: There is a Facebook account that is called the 8% Survivors Fund. And it, it's very, I mean it's heartbreaking because I lost most of my savings, but I still have my home. And there are people there that sold their homes, invested everything with Burt, and then they have nothing. And so many elderly people, that is just, that is the hardest thing to swallow because if anybody deserves redemption, it is those people. But he's a heartless man.

[00:19:41] Bob: And many of these are people you know very well, right?

[00:19:43] Ronda Winn: I do. This one woman that was on there that they had just sold their house and the invested all of it with Burt.

[00:19:53] Bob: Oh, no.

[00:19:54] Ronda Winn: And then her husband passed. And there she is with no home and no money and no spouse. And I mean that woman was devastated. So no, it's not minor. When you're, when you destroy people that have worked their entire lives and saved their entire lives, it's not amenable at all. And I mean, he did hundreds of tax returns. So and he did a great job. I mean people were happy with him. So...

[00:20:30] Bob: It's so insidious though because he knew everyone's income then, right?

[00:20:33] Ronda Winn: Well that's kind of getting, when you look at it, and you've got a client in there, and you find out they're getting $100,000 back, and then you say, well, I have an investment fund that's paying 10%. I mean, he was so charming when he said that, and it was just like, oh, what a good idea.

[00:20:58] Bob: Ronda says she's still fighting off the depression that hit from the theft of her lifetime in savings, savings that she had planned to use to help her children.

[00:21:07] Ronda Winn: It is awful.

[00:21:08] Bob: It's probably a constant fight even still for you, right?

[00:21:10] Ronda Winn: Oh my gosh, absolutely. I have two sons and when I had that money, I never spent one penny. That money was saved for my boys, and that was that. And then it was gone. And I feel so, so badly, I mean it's just heartbreaking that I can't help them. I mean they're both in their mid-30s, and they're both doing well, and they're independent and but it breaks my heart to not be able to say, hey, I can help you with that, because I can't. I can, I mean I have my house, I could take out a second mortgage, but other than that, I have no way to help them. So that, and I grew up extremely poor, and the most important thing to me in my life was to be able to help my children. And I got that money, and I gave it to him, and I trusted that. And it's gone, just poof. It's all gone. This goes much bigger between myself and my mother and my two sons, I probably lost a half a million dollars.

[00:22:28] Bob: Oh my God, I'm so sorry.

[00:22:30] Ronda Winn: I am finding the golden years aren't that golden. (chuckles)

[00:22:34] Bob: Oh God.

[00:22:37] Bob: And with the truth out in the open, some of the crimes committed by Burt seemed even worse. Ronda believes Burt took advantage of her mom's declining health.

[00:22:46] Ronda Winn: I know in my heart, I couldn't prove this in court, although I did try, that I know that she had started with a relatively small amount with him, and then my father passed, and I am positive, because she would say, "Oh I talked to that nice, Mr., nice Mr. Marshall today." I'm like, "Why did you talk to him, Mom?" "Oh, insurance." And then I found out he was soliciting more money from her, an elderly widow with dementia. And that's exactly what he was doing. But so she ended up giving him a lot of money that no one knew about, except her, and it was just like a vulture. And I think as times got, keep, kept going and they kept going downhill for him, the more desperate he got.

[00:23:45] Bob: And the more voracious the vulture became.

[00:23:48] Ronda Winn: Absolutely. You know if you want to say anything, if you ever wanted to find anything positive about dementia, I will say that at one point my mother forgot and stopped asking about her money because that ripped my heart out every time she did. I'd say, oh my God but what do you say? Burt took it.

[00:24:15] Bob: Sure, yeah. The wake of damage is insane.

[00:24:18] Ronda Winn: It is. And I understand Hamilton, New York, is small, and I understand that in the big screen this isn't that much money to people what he took from everyone, but it's more important than the money. If you're a farmer that has been working 7 days a week for your whole life and saved for your granddaughter to go to college, and then it's gone? It's just gone, and it's not like there's any chance anybody's going to recoup anything. And those were the people he preyed on. So that's pretty heartless.

[00:25:01] Bob: And I would actually beg to differ; this is a huge thing. These are clearly hundreds of lives that were destroyed, so that, there's nothing small about this story.

[00:25:12] Ronda Winn: Ah.

[00:25:12] Bob: As I mentioned at the beginning of this episode, victims couldn't escape the consequences of Burt Marshall's crimes, even in death. He stole from local institutions too like the fire department and a local cemetery. It becomes Rachael Owen's calling to make sure that the place where her husband Tom is buried would not be abandoned.

[00:25:32] Rachael Owen: It was very personal. I was determined. I mean I was so determined that Burt Marshall wasn't going to take our cemetery away from this town.

[00:25:43] Bob: The cemetery board had its entire reserves of $170,000 stolen by Burt, so there is no way it can meet its minimum annual cost of about $16,000 just to mow and upkeep the property. At a meeting where the board is set to abandon the cemetery, Rachael speaks up.

[00:26:02] Rachael Owen: And at the end of the meeting, I raised my hand. I said, what if somebody walks in here April 16th with $16,000? That's the cost of what it is for the cemetery to be mowed a year. Okay, so they looked at me and they said, "Well everything would come off the board if you can do it."

[00:26:28] Bob: That gives Rachael only a couple of weeks, but she is determined.

[00:26:32] Rachael Owen: I went home and I was so furious. So I thought about it and I was 75 years old, and it was March 25th, 2024. I walked the streets by myself, my kids had a pencil holder, a plastic one, the clear through, you put it in your notebook to send them to school with all of the pencils. I took that and started knocking on doors. At every 5th door, I would knock, either in the morning or in the afternoon for 16 days. And I went to every house, explained to them what was happening to our cemetery. And of course, after being 2--, over 200 hundreds year old, everybody had people in that cemetery, somebody was in that cemetery. I knocked on probably 100 doors in that 16 days and guess what. I got the $16,000. The night of April 16th, 2024, two more people met me as I was walking from the parking lot into a standing room only for the town of Brookfield's board meeting. And I slapped the, that plastic bag of $16,400 on that table.

[00:28:03] Bob: That bought the cemetery a year, but since then, Rachael has helped organize more fundraisers for the places trying to put the cemetery back on solid, financial footing.

[00:28:13] Rachael Owen: That August we made, we had a Fun Day in the park for the cemetery. We made $8,000. We had a pie sale, auction. So everybody bought pies, so they were going crazy prices, and then we made 8,000.

[00:28:32] Bob: Burt Marshall might have pushed this town to the brink, but pie sales and heroic determination are bringing it back.

[00:28:40] Rachael Owen: I was getting calls from people out in Syracuse that said it was amazing you, what you did to save the cemetery. I said it was my community that saved it. I just put the walking in to let them know what was happening to it. They all donated that money. But if they didn't, I would have put the 16,000 in a check myself.

[00:29:07] Bob: All the victims I spoke with have been through a long, emotional journey. Remember, they've known Burt for decades. Found out their money was stolen four years ago, but Burt was only sentenced to prison in June, so now many are ready to tell their full stories.

[00:29:22] Ronda Winn: I was kind of hesitant and I said if I can in any way stop one single person from falling into a trap like this, I will do it, because it, it's so easy, and it seems so harmless.

[00:29:42] Bob: Sure.

[00:29:44] Ronda Winn: And I think a lot of us are still shell-shocked, we just never dreamed this would happen. But it has and it is, and...

[00:29:54] Bob: Do you think that he, this business started as something legitimate, or at least he thought it was legitimate, and then he got in over his head, or do you think he was a criminal from the beginning?

[00:30:07] Ronda Winn: It's an interesting question. I think this probably started out with like a legitimate business. I also think that as he got deeper into it, it was an unstable plan from the beginning. But he was so arrogant that he thought he could get away with it. And he did for a long time. So I don't think any of it was intentional. I think it comes down to pure, basic greed. And I don't think he could stop himself. I mean the smart person would have said after a period of time said, I got to get out of this. This isn't working. But that didn't happen. He just kept digging himself deeper and deeper.

[00:30:57] Bob: And just taking everybody else down with him.

[00:30:59] Ronda Winn: Yes, he did. He did an excellent job of that.

[00:31:04] Bob: Wow. What do you want people to learn hearing this story?

[00:31:07] Rachael Owen: I want them to just; you got a promissory note is not a guaranteed note. If you've got to save where there's a guarantee behind your money. And like I said, I thought he was my friend and I didn't want to admit it for a few months, and then when I did, it's like, then of course the cemetery comes up 14 months later, so then I really had a lot to say of how bad he was.

[00:31:39] Bob: Yeah, of course. So this is, this, it's amazing to me the pain that someone like Burt Marshall can cause when you think about all of it.

[00:31:47] Rachael Owen: Oh it was, I mean I'm not supposed to hate, but I hated the man that was doing that to me. How could he hurt so many people? But he had taken all our money. We had many churches, our fire department, even here in Brookfield, our fire department, our historical society, our churches. We lost about 17 to 20 thousand. But really, I just need people to really look over the big picture when they're discussing saving money somewhere. I don't trust anybody. I really do not trust anybody. And that's, they, it's taken away a lot from me because I was a trusting person. If I liked the person I like him, but I, I really can't trust people.

[00:32:48] Bob: It sure makes sense that Rachael feels like she can't trust anybody anymore. It is amazing the damage one person can do to a whole community, which will be recovering for a long time. If this whole Burt Marshall Ponzi story reminds you of the name Bernie Madoff, it should, because there's a lot of similarities between Marshall's scam and Madoff's scam. For starters, Madoff's Ponzi lasted for decades too, and so do many others. Ponzi schemes are far more common than many people realize. So to talk about them more, we have Marie Springer here today. She is a professor at John Day College of Criminal Justice where she teaches courses on white-collar crime, and she also studies Ponzi schemes.

[00:33:33] Marie Springer: I see it in all the Ponzi cases and people are emotionally crushed because they trusted this person. Whoever they are, they really thought they could trust whoever this was. And it has a tremendous impact on them psychologically.

[00:33:47] Bob: So what I find amazing about this Burt Marshall story is he was the man of town. Everyone seemed to know him, everyone liked him, and no one had any reason not to trust him, and that's kind of the same sort of...

[00:34:00] Marie Springer: Exactly.

[00:34:01] Bob: Yeah, 'cause...

[00:34:01] Marie Springer: Yeah.

[00:34:02] Bob: Why don't you tell me, what are the connections between what Bernie Madoff did and what Burt Marshall did?

[00:34:06] Marie Springer: Well that, exactly what you said is the number one thing that I would say, everybody trusted him. He was the go-to guy. But, and that's exactly what Bernie Madoff was in the financial industry. He was the financial expert everybody went to.

[00:34:17] Bob: And there comes a point at which people just stop asking questions because the name is, the face is so familiar, right?

[00:34:22] Marie Springer: Exactly. That, that's exactly what it is, and I do concentrate on that when I'm doing my research. They just thought he's got five businesses. He's got to be raking in the dough. But I think in the town of Hamilton, that everybody knew this guy, everybody went to him for their taxes. He was a nice guy. They had every reason to trust him except the fact that he was promising 8%. No investment can do that.

[00:34:51] Bob: And it wasn't just people, it was institutions, right? The fire department, the cemetery. I mean he really just did a number on this entire region.

[00:34:58] Marie Springer: Absolutely. And that was the same thing with Bernie Madoff is there were institutions. There were universities. There were nonprofit funds that lost everything. But in the Bernie Madoff case, they're showing currently that 93% of the victims have been reimbursed or I don't know if it's 93% of what was taken or 93% of the victims, it's not real clear, but there is a tremendous amount of money that has gone back to the victims. And I don't think that's going to happen...

[00:35:26] Bob: Wow.

[00:35:27] Marie Springer: ... in the Marshall case.

[00:35:29] Bob: No, I mean the victims I spoke to said they got 5%.

[00:35:32] Marie Springer: Yeah. That's not...

[00:35:35] Bob: So little that one of them will say I'll just throw out the check it was so insulting.

[00:35:39] Marie Springer: That sounds about right.

[00:35:41] Bob: Criminals who run Ponzi’s can keep up appearances for many years.

[00:35:46] Marie Springer: Right. But Bernie Madoff did do that for decades. There were people who were getting their monthly revenues right on time for years, so it was like Bernie Madoff.

[00:36:01] Bob: I think that's an important point I want you to make. People can keep up this appearance for a long time, right?

[00:36:06] Marie Springer: Oh, absolutely. There were, there were a couple other Ponzi schemes that went on for 30 plus, at least 30 years.

[00:36:15] Bob: In fact, many Ponzi’s can keep operating, thriving even when the overall economy or the stock market is in an upswing, when new money keeps coming in. Ponzi’s often collapse during downtimes, Marie explains.

[00:36:28] Marie Springer: Because there was record of number of Ponzi schemes that had happened because of the huge financial bubble before the financial crisis, and then they all collapsed. As soon as things, the going gets rough, then people want to extract their money from whatever funds they have it in, or wherever they have it. They need it to live on, and so all of the sudden the money comes out of their investments.

[00:36:49] Bob: If there's a run on the bank if you will, right?

[00:36:51] Marie Springer: Yep, that's it.

[00:36:53] Bob: I covered Wall Street for a long time, and as long as things are good, a lot of bad behavior is covered up, right? But when ...

[00:36:58] Marie Springer: That's exactly right.

[00:37:00] Bob: Marie first became interested in Ponzi’s because she was in graduate school when news of the Madoff scam hit. She built a huge database of Ponzi’s that she still maintains. She's logged thousands of cases.

[00:37:13] Marie Springer: Yeah. And I only keep track of the federal ones be--, and again, I said it's because the federal records are publicly available and that lends itself to replicability in academic research. So yeah, I think my current dataset on federal, what do I have? I think I have about 2000, but that's going back to about the 1940s.

[00:37:42] Bob: And but that just represents federal cases.

[00:37:45] Marie Springer: That's only federal cases. That's not the ones that were prosecuted on state municipal levels.

[00:37:50] Bob: I asked Marie to define the term Ponzi scheme for me.

[00:37:55] Marie Springer: It's a specific type of fraud. The Ponzi scheme is a type of fraud where the perpetrator, he gets people to invest with him, and he has some very, he or she has some very convincing arguments like, I'm doing this and this is all the money, you know... then he brings in more people and then more people. And with each level, the money going in from the, the newer investors is used to pay the interest to the earliest investors.

[00:38:27] Bob: In many cases, Ponzi’s come down to the force of one person's personality.

[00:38:32] Marie Springer: I'm very sure that Marshall was a very nice guy. I mean everybody trusted him, everybody thought they, that he was their friend. And I, that's very common with Ponzi schemes is the people who commit these frauds are extremely charming. If they were unpleasant or not easy to get along with, nobody's going to give them their money. So part of the criteria for succeeding is you've got to be a really nice person.

[00:38:58] Bob: He donated to all the little league teams; he did all those kinds of things.

[00:39:02] Marie Springer: That's commonplace in Ponzi schemes. They're always big on giving to charities and election campaigns. It's like I can't tell you how many Ponzi schemers have photographs with presidential candidates because they give big money to these campaigns, and then they get their picture taken with whoever it is. And then, of course, they can say, look, I'm really a good citizen when they're anything but.

[00:39:25] Bob: That, a photograph like that is worth so much credibility, right?

[00:39:28] Marie Springer: Oh yeah. Absolutely. Absolutely.

[00:39:31] Bob: Social proof, everyone else is doing it, it must be okay. That's a critical element in Ponzi schemes. Afterall, people often asks friends for help finding a dentist or a car mechanic or a financial advisor.

[00:39:45] Marie Springer: When the economy is good, people have discretionary income, and they look for places to invest, and usually who are they going to invest with? People who find that experience with investing, they're going to ask their friends, alright? And they feel they can trust their friends, and they're going to do what their friends do. In the town of Hamilton, then that's who everybody invested with 'cause this guy was somebody everybody trusted.

[00:40:09] Bob: Yeah, let's talk about that because I think that's really important that no one really, it's like when you pick a doctor, an auto mechanic, a dentist, you ask people who they use, right?

[00:40:17] Marie Springer: Right.

[00:40:17] Bob: Look for a referral from someone who's trustworthy.

[00:40:19] Marie Springer: That's what normal.

[00:40:19] Bob: ... and that's what people do with money. Yeah, sure. Unfortunately, I think, that often, almost every story like this begins with, well a friend told me that this person was trustworthy.

[00:40:27] Marie Springer: Exactly. Exactly. For the most part, yeah.

[00:40:32] Bob: Well it's more than human nature. I don't want to have to be an expert in cavities or an expert in heart disease.

[00:40:37] Marie Springer: Same here.

[00:40:38] Bob: Or an expert in construction, right?

[00:40:39] Marie Springer: Yeah.

[00:40:40] Bob: So if I'm going to hire someone to do my floors, maybe I'll look up a license, but otherwise, I'm going to hope a friend of mine used them and it went okay. Right. Some people aren't expert in money, so that's what, that's how this goes.

[00:40:51] Marie Springer: Yeah. It's sad. It's very sad.

[00:40:54] Bob: Sad because as we've seen, just because your friend says this or that person is trustworthy, well that's only one piece of information. Friends can be wrong. In Burt Marshall's case, the investment vehicle he used was a simple promissory note. Marie says she seems them in Ponzi's frequently and consumers should know how fragile they are.

[00:41:16] Marie Springer: He basically was using promissory notes or simply IOUs and there's very little there to, of substance to say we have a real contract here. It's just an IOU. They were, it looks like he, it looks just like an IOU that he had gotten commercially made, not even, so nothing legit. And bottom line, if you are investing with a friend and it's just promissory notes, understand you are taking your chances and there is a 50/50 chance you're not going to get your money back. No matter how good a friend they are. That doesn't mean they are good at business.

[00:41:51] Bob: Whenever you invest money with anyone, it's a good idea to confirm they're licensed to manage money or sell securities. And see if there are any complaints about them.

[00:42:01] Marie Springer: Often that's one of things I teach people to do is the first thing you do is look at FINRA and/or the SEC and see, or the state filings to see what exactly they are licensed for, because part of the, some of the documents said that he was a financial advisor. And it's like, okay, well is that just somebody's misuse of the term, or was he functioning as a financial advisor? Because if you're a financial advisor in most states you must be licensed with the state.

[00:42:31] Bob: What over red flags or things do you think consumers should notice when they think they're investing in something, but it might be a Ponzi scheme? What are the tell-tale signs?

[00:42:41] Marie Springer: Well, I would say that's the number one thing is you have to be able to look at the business plan and understand how a profit is made. That's the number one. And if you can't understand how the profit is being made, you should back off and the things is if they, and a big red flag, 'cause if they give you such a, if you say, how are the profits made, and they give you such a complex response that you have no idea what they're saying, I call it emp--, emperor's new clothes vocabulary. That it's so over your head you really can't understand what they're talking about. It's meant to confuse. It's the, the whole point is it is meant to confuse you and make you feel stupid so that you will trust them right there. When the discussion of how profits are made is over your head, then you should be leery.

[00:43:36] Bob: Another typical element of Ponzi’s, a promise of financial returns that are both guaranteed and higher than anything traditional investments can offer.

[00:43:45] Marie Springer: And I tell people this all the time. It's like, okay, no investment can promise you a profit at any level. And many times I see some of the Ponzi schemes are promising people like percent profits in like a year or something. It's like, no company could do that, and you have to think about it. If the company was making so much in profits, what did they need your money for? What do they need investors for if they're making that much in profits?

[00:44:14] Bob: In the end, I want every Perfect Scam listener to remember the name Burt Marshall, well the way you all remember the name Bernie Madoff. It's just shocking, the trail of tears one man can leave behind.  And I want you to remember that while it's certainly a good idea to ask friends and neighbors for help finding a financial advisor, that's not enough. It's really important to fully vet anyone you trust with your money. For The Perfect Scam, I'm Bob Sullivan.

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[00:44:58] Bob: If you have been targeted by a scam or fraud, you're not alone. Call the AARP Fraud Watch Network Helpline at 877-908-3360. Their trained fraud specialists can provide you with free support and guidance on what to do next. Our email address at The Perfect Scam is: theperfectscampodcast@aarp.org, and we want to hear from you. If you've been the victim of a scam or you know someone who has, and you'd like us to tell their story, write to us. That address again is: theperfectscampodcast@aarp.org. Thank you to our team of scambusters; Associate Producer, Annalea Embree; Researcher, Becky Dodson; Executive Producer, Julie Getz; and our Audio Engineer and Sound Designer, Julio Gonzalez. Be sure to find us on Apple Podcasts, Spotify, or wherever you listen to podcasts. For AARP's The Perfect Scam, I'm Bob Sullivan.

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