The Waterford Files : A Trail of Intrigue: Part one of a three-part series
Naples Daily News (FL) - Sunday, June 30, 2002
Edition: FinalSection: A Section
Today, Chapter One:
Jack Pentz and Lauri Smith met at the close of the 1980s, full of big plans and raw ambition. The mortgage business was their answer. In 1991, they founded Waterford Mortgage Bank Corp. and later they found an angel -- Ron Brown, a retired Naples multimillionaire who saw in Jack and Lauri the fierce work ethic he had himself as a younger man. But Brown's misplaced trust would cost him $14 million. Accountants, lawyers and federal agents on the hunt for Brown's money would question if Waterford had cost Lauri her life.
By GINA EDWARDS
Clear skies touched the breeze-swept Pacific Ocean that cool morning on April 27, 1998, when San Diego police arived at the luxurious Hyatt Islandia Hotel to investigate the death of Lauri Smith, a Naples mortgage broker.
Her life ended in room 1517, its 15th-floor balcony overlooking the sailboats bobbing at the marina on Mission Bay.
Later, the assistant San Diego medical examiner reduced Lauri to a collection of sterile details: 108 pounds, 64 inches long, 37 years old. She had long straight blond hair, blue eyes.
The dissection of what remained of her life didn't describe her fierce work ethic or how she fought to make something of herself after surviving two failed marriages. The autopsy doesn't reveal whether she felt fearful and threatened or smothered by guilt in her final moments.
Still, Lauri's mother, Bobbi Dunn, has combed the autopsy report for answers that haven't come.
Lauri's face and mouth were bruised and so was her scalp, consistent with injuries from hair pulling. Her boyfriend, who found her face down on the hotel bed, told the cops that Lauri was a pill popper. There were pills scattered around the hotel room, but there were no pills found in Lauri's system. Instead medical examiners found a wad of partially dissolved cocaine in her stomach. Curiously, she had to have swallowed the cocaine that killed her. The medical examiner pronounced her death a suicide.
Now, four years later, FBI and IRS investigators are probing the secrets Lauri took to her grave. Her business partner at the defunct, Naples-based Waterford Mortgage Bank Corp., Jack Pentz, is under investigation as part of a suspected fraud in which a Naples family lost $14 million.
Lauri's family now wonders if someone wanted her dead.
The story of Waterford is a tangled tale that stretches from a small Naples lending shop to that San Diego hotel room where Lauri died. Its details are in the multiple thick volumes of court files spawned by a probate fight over Lauri's estate and the civil lawsuit filed against Waterford and Jack by Ron Brown, a retired Naples multimillionaire who loaned Waterford the $14 million.
State banking regulators, court-appointed accountants and attorneys have traced a Waterford money trail that forks to offshore accounts at the banking secrecy haven of the Channel Islands off the French coast, and to such other diverse places as Las Vegas, Toronto and Athens, Tenn. Great Britain's Serious Fraud Office is probing the overseas transactions.
In his explanation to the Daily News, Jack won't concede that Brown is missing any money.
Instead, he says, Lauri and Brown concocted a plan to launder money.
Brown's attorney, Bill Spivey, calls the claim "absolute criminal buffoonery."
At least $11 million of Brown's money evaporated from Waterford after Lauri died, according to court-appointed receiver Gerry McHale. Jack's Waterford corporate credit card bills show international travel, shopping sprees at elite boutiques, even veterinary bills, and charges for plastic surgery at a Hollywood clinic.
Lauri's name appears forged on some company checks and business documents, court-appointed accountants say, and investigators are deciphering bizarre transactions in which Jack and Lauri swatted ownership of Waterford back and forth like a beach ball.
Jack, now 40, told the Daily News that Lauri called the shots at Waterford .
But Lauri's family and former Waterford employees say from the beginning, Jack was in firm control.
"She was the waitress, and he was the finance expert," Lauri's mother says.
They met in the late '80s waiting tables at the freshly opened Vineyards Country Club in North Naples. Lauri, a high school graduate with a service-industry resume, took Jack under her wing. They became fast friends and sought comfort in each others' company.
Lauri, an attractive and athletic blonde, had always been independent. In high school in Marysville, Mich., northeast of Detroit, she was more social butterfly than serious student, her parents say. After graduation, she moved in with her older sister and hustled to get ahead as a waitress at Red Lobster.
When she met Jack in 1989, Lauri was ending her brief and stormy marriage to a chef, a man she followed from her native Michigan to Wisconsin and finally to Naples. He took off from Naples that year and didn't keep in contact. A judge granted Lauri a final divorce in his absence.
It was a second failed marriage for Lauri, who was 29 at the time. Her first husband, a Cadillac factory worker whom she married in Michigan at 19, had abandoned her to return to his previous wife.
Jack, a tall Southerner with a thick drawl, grew up poor in Orange Beach, Ala., and worked odd jobs to put himself through college. He tended bar, split wood, fixed cars and toilets, even farmed.
In 1984, Jack graduated from the University of Alabama with a degree in finance. After college, he chose the restaurant business and bounced around in management jobs at Steak and Ales and Bennigan's restaurants throughout the South.
A restaurant he launched in Tuscaloosa named Brittany's flopped within a year and a half. Jack came to Naples in the late '80s for what he called a "sabbatical." Actually, he was on the lam for writing more than $10,000 in bad checks in Tuscaloosa. Records show he paid restitution on the 1988 Tuscaloosa criminal charges in November 2000 in exchange for the misdemeanor counts being dropped.
In Naples, Jack kept that part of his past a secret.
Recently in an interview, he denied meeting Lauri at the country club job until reminded of his past statements under oath in court proceedings. He shrank from admitting that he worked as a waiter: He said he took the country club job to research hospitality management styles for a book.
Eventually, Jack quit the Vineyards job and began work for a Fort Myers mortgage business with a Naples branch. Lauri soon joined him.
"Lauri was tired of being a waitress and, like anybody, wanted to get ahead," says her stepfather, Jerry Dunn. "Jack had big plans and he pushed her."
Jack and Lauri became inseparable. Jack called Lauri his best friend. In early court depositions he refused to say whether he and Lauri were lovers. Lauri's mother insists that her daughter and Jack weren't involved. Jack's mother says the two dated in the early '90s.
They were close, but never romantic, Jack says now.
Whatever the tie, Jack and Lauri did everything together. They took trips to the Keys. Hung out. Went to movies. They became roommates.
And they worked together -- long workaholic hours.
Striking out on their own, they incorporated Waterford Mortgage Corp. in 1991. Both were listed as directors of the company.
Jack never got a mortgage license after the state started requiring criminal background checks. Lauri licensed the business.
From the beginning, Jack had Lauri put Waterford assets in her name, Lauri's mother, Dunn, says now. Years ago, Jack told Lauri he didn't want credit problems from his restaurant days in Alabama to hurt their new venture, Dunn says. Now she wonders if Jack had ulterior motives.
The early days
Waterford opened its office at 649 Fifth Ave. S. At the time, it was hardly the tony address it is now. Jack and Lauri built Waterford from scratch with sweat equity. They brokered mortgages -- putting borrowers and lenders together for a fee -- so the start-up costs weren't big. The mortgage business is all about contacts. Jack was the face of Waterford , the salesman with the Southern charm drumming up business on the street. Lauri worked back office processing. She'd check up on loan applicants, verifying employment and income and credit.
Jack and Lauri hired Lauri's older sister, Cathy Scherer, as Waterford 's first employee. Scherer handled the real estate closing paperwork and notarized company documents.
In time, Jack put his own family members on the Waterford payroll. His brother, Tim Pentz, earned more than $30,000 a year from Waterford . Waterford paid Jack's mother, Mary Ellen Pentz, a salary of $25,000 a year even though she didn't commute to Naples from her trailer in Orange Beach, Ala.
Most of her life, Mary Ellen Pentz worked as a cook. She had no computer skills to speak of, no knowledge of the mortgage business.
Waterford paid her to do whatever Jack needed, she explained to Brown's lawyers in a sworn statement. For example, when Jack took trips, she'd drive from Alabama to Naples to watch Jack's dogs. Mary Ellen Pentz didn't question her son or question why she got the salary she did for so little work.
"Jack takes care of me," she told Brown's lawyers. "I don't ask any questions, and he don't tell me anything because I don't need to know anything about his business."
Jack did take care of his mother. The salary was only the beginning.
Using Waterford money, Jack purchased a $200,000 resort condominium in Destin in the Florida Panhandle and let his mother move in. She lived there rent-free for more than six years until the Waterford receiver evicted her. When she moved to the Destin condo, Mary Ellen Pentz didn't bother to take most of her belongings from the trailer where she'd spent the past 30 years. There wasn't anything worth taking, she later explained to Brown's lawyers.
In a recent interview, Jack said it was Lauri who hired and paid his mother and brother.
He insists that Lauri controlled Waterford . Those who suggest otherwise are sexist, Jack says.
"She's the strongest person I've ever met," Jack says of Lauri. "She wasn't afraid of anybody."
But a number of former employees remember otherwise.
"Lauri was never in control of anything," former Waterford mortgage broker Scott Spence says. "Jack pulled all the strings."
Dunn recalls visiting her daughter and watching her work 12- and 14-hour days to keep up with the Waterford workload.
"She did what Jack told her to do," Dunn says now.
In the early days, business for Waterford boomed seemingly overnight. Former Waterford employees remember Lauri as the efficient worker-bee type -- well-organized, efficient, attractive, a meticulous dresser, honest. Jack was the businessman looking for an angle. He had a Bill Murray-ish kind of charisma -- not good looking but funny and sweet.
He also had a ruthless and vindictive side toward those who crossed him, numerous past employees say. He'd spin his enemies in circles with his weapon of choice -- the civil lawsuit. He was private and hard to get to know.
"Jack is very secretive," says Spence, who hung out with Jack socially for about a year before they had a falling out over the business. "He didn't let you know where he lived."
Spence remembers a stressed-out Lauri working herself to burnout at Waterford . A vacation to the Florida Keys with a boyfriend turned into a two-month leave of absence, Spence recalls.
Lauri's mother remembers her daughter trying to get away from Jack and Waterford , first to the Keys and then later in 1996 to Michigan. But Jack had a hold on her, a way of pulling her back.
In a recent interview, Jack insisted that Lauri never left the business. But he retracted the statement after he was reminded of various sworn court statements he's given to the contrary in recent years.
Spence backed out of an opportunity to join Waterford as a partner with Jack and Lauri after he learned Jack had his mother and brother on the Waterford payroll.
"Jack wouldn't show the books," says Spence, who left to work for a developer. "I'd had enough."
Eventually, Spence and Waterford ended up in court over his former employment contract that barred Spence from wooing Waterford customers. Jack eventually dropped the lawsuit but not before tying up Spence and his former girlfriend in court for years with claims that they'd stolen Waterford 's database of business contacts.
At the Fifth Avenue office, Jack and Lauri met Ron Brown, the self-made multimillionaire from the Midwest who earned his fortune in the health-care industry with a chain of nursing homes. Brown retired to a Gulf-front mansion on Naples' posh Gordon Drive. He rented an office in the same building as Waterford . It became his place of refuge.
He noticed Jack and Lauri at the office night and day.
"He was impressed with them because he said these young people are always working," says Michelle Brown, Ron Brown's wife. "He believes in hard-working people; he's helped people all his life."
In September 1993, Brown agreed to loan Waterford $1 million. In 1995 he increased the loan to $8 million and in early 1998 the loan -- or line of credit -- grew to $15 million.
The deal was set up like this: Brown loaned Waterford money and Waterford in turn loaned money to prospective home buyers in need of mortgages. Brown received the payments and interest. To secure his loan, Brown received notes on the real estate from Waterford . So for example, if a borrowing homeowner defaulted, Brown could take the real estate.
It seemed like a secure, conservative investment.
Brown was to get his original money back once Waterford sold the mortgages and underlying notes on the secondary market to large banks. Fees and a cut of the profits would go to Waterford . It would be 61/2 years before Brown would realize the deal wasn't going as planned.
Each month, Brown received interest payments from Waterford -- always on time.
"He felt he was dealing with a secure investment," says Michelle Brown, who speaks for the family. Ron Brown declined to comment for this story. "It's a mortgage. It's not like he's holding a fly-by-night piece of stock."
Trickle of money
By the mid-1990s, Jack began flashing symbols of wealth. Lauri did, too, but never to the degree that Jack did. Jack always drove new leased Jaguars. Lauri bought a 1987 Jag convertible that constantly broke down.
Jack moved to a ranch house in the well-heeled Park Shore neighborhood. Lauri moved to a modest duplex-style condo in the Walden Shores subdivision. Waterford paid for both and titled them in Lauri's name.
Buying and selling real estate was always part of Waterford 's game plan, Jack told the Daily News in a recent interview. He was in charge of such special projects.
The first thefts of the Browns' money began in November 1995, the Browns' lawyers believe. That's when Waterford began selling the notes out from under Brown without his knowledge: Brown unwittingly hung on to fake notes, while Waterford sold the real mortgages on the secondary market to large banks and pocketed the Browns' money, their lawyers say.
Jack now says that Lauri took control of Waterford in 1995 and bought him out that year. At that time Jack became merely an employee, he said.
Investigators and the receiver are examining the notes.
"There have been allegations of forgery all around the table," receiver McHale says.
Jack says he didn't steal any money or forge any notes. His attorneys say they've offered to give handwriting samples to federal investigators.
In court filings, Jack claimed he made only $50,000 annually at Waterford from 1993 to 1998. But that salary didn't jibe with his lifestyle. In an interview with the Daily News, he contradicted the court filings and said his compensation annually topped six figures.
Jack lavished gifts on his then-girlfriend, Julie Loader. In 1995, he gave her $15,000 as a birthday gift -- or so she thought. She testified about the gift under oath as part of a nasty court battle launched by Jack after their 1997 breakup. During the court fight, Jack said the $15,000 wasn't a gift, but rather a loan to Loader from Waterford .
On Christmas Eve 1996, Jack surprised Loader with a quitclaim deed for the ranch-style house at 667 Park Shore Drive. The couple moved in and began renovations using Waterford money. Later in the court case, Loader learned the deed Jack gave her was a fake.
Court files show Waterford checks to Loader, including checks with Lauri's name that show two dramatically different signatures.
In his suit with Loader, Jack accused her of stealing household goods big and small -- from the entertainment center to a pair of iron candle holders. Loader's sister vouched under oath that she'd given the candle holders as a Christmas present.
Loader's attorney, David Garber, became suspicious of the checks flowing from Waterford to Loader and Jack. In March 1998, he asked a judge to allow him to examine Waterford 's records given that substantial payments went to both Loader and Jack "not normally expected of an employer mortgage corporation."
Garber issued a subpoena to question Lauri at an interview scheduled for May 6, 1998.
Lauri never made it. Ten days before she was set to testify, her life ended.
Coming Monday: The discovery of Lauri's body was just the beginning of an unraveling mystery.
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