Naples Daily News (FL) - Tuesday, July 2, 2002
Section: A Section
By late 1999, Jack Pentz had embarked on a full-throttle spending spree on the Waterford corporate credit card. There were junkets to Hollywood, a vacation in Canada, even a diamond engagement ring. Ron Brown's money paid the bills, his lawyers say. In April 2000, Brown got wise, realizing the $14 million worth of mortgage notes he held as collateral for his loan to Waterford were nothing but bogus forgeries. His money was gone.
By GINA EDWARDSIn the months counting down to the millennium, Jack Pentz, the charming owner of Waterford Mortgage Bank Corp., looked like the high-rolling successful businessman he so desperately wanted to be.
He often dined out at his favorite Park Shore haunt, Cloyde's Steak & Lobster House. A sharp dresser, his dry cleaning bills topped hundreds of dollars a month. He took regular trips to the tanning salon. He jetted off to Hollywood and Chicago. In November 1999, he bought an $8,667 diamond engagement ring for his girlfriend at McCaskill's & Co. jewelry in the Panhandle town of Destin -- all of it on the Waterford corporate credit card.
In Naples, Jack had come a long way from his humble beginnings in Orange Beach, Ala. and the $10,000 in bad check charges in Tuscaloosa that made him a wanted man in his native state.
Waterford spent $1 million in late 1999 and early 2000 on two luxury condos for Jack and Waterford employee Nicole Young at the Tropics -- a swank address on Naples' well-manicured Gulf Shore Boulevard where the art deco-style buildings rise on stilts out of Venetian Bay.
Jack called the condos real estate investments for Waterford .
Although Jack portrayed the image of a successful mortgage banker, it was a charade.
Waterford had lurched into the red, court-appointed accountants and attorneys would later discover. Tax returns filed for the previous year, 1998, showed Waterford lost around $300,000. Those returns didn't even mention the millions Jack moved to junk bonds offshore.
Ron Brown, one of Naples' horde of retired multimillionaires, didn't know it at the time: Jack and others at Waterford lived decadent lives with his stolen $14 million, Brown's attorney now says.
All together, Jack had already drained $7 million from Waterford 's accounts in the months after the suspicious death of his partner, Lauri Smith, who a medical examiner said overdosed on cocaine in April 1998.
* n n
It was December 1999 when Jack met up with Young in West Hollywood. Young, a loan processor and bookkeeper for Waterford , used her Waterford American Express card to pay a nearly $5,000 bill at an exclusive plastic surgery recovery resort in West Hollywood called Le Montrose Suites Hotel.
The Waterford credit card also covered a $2,385 bill from Maggie Lockridge Inc. -- private nurse to Hollywood celebrities -- for recovery care for facial surgery. A separate $800 tab at the Le Montrose resort was on Jack's Waterford corporate card. He dropped $160 at a Beverly Hills hair salon.
The Waterford credit card spending spree continued in 2000.
Jack bought $1,725 worth of airline tickets to Calgary, Canada, for himself and a female guest in February 2000 and ran up a bill of nearly $2,300 at the Banff Springs Hotel, a Victorian-style castle resort nestled in the Canadian Rockies.
Nothing appeared off-limits with the Waterford corporate credit card: not Jack's $1,700 dental bill, or hundreds of dollars in veterinary bills, or Young's $500 shopping binges at Burdines and Ann Taylor.
In 1999 alone, Jack and Young used Waterford corporate credit cards to pay for more than $200,000 in travel and entertainment expenses.
Brown's attorney, Bill Spivey, says Jack's personal financial records are devastating to his credibility.
"The financial records are an absolute road map to his improprieties," Spivey says.
Jack told the Daily News that personal expenses were logged as "employee loans" and paid back to Waterford . He said he personally paid back more than $100,000.
Young's attorney, Richard Hersch, declined to discuss the corporate credit card bills. But he says Young didn't steal any money.
"She's gotten wrapped up into something she's not responsible for," Hersch says. "She had zero involvement with Brown's money."
The Gordon Drive War Room
In early 2000, Brown alerted Jack that he wanted to scale back his loan to Waterford . With $4 million due to Brown in April 2000, Jack concocted a desperate plan to sell Waterford in a ruse designed to delay detection of the fraud, Brown's attorney claims.
Jack told Brown that Continental Asset Management Corp. -- the same Minnesota company that had acted as a conduit for $2 million of the overseas junk bond investments -- had offered to buy Waterford for more than $30 million.
In a phone interview with the Daily News, Jack said Continental offered to pay the $30-million-plus price tag for Waterford because of the company's valuable real estate holdings that include an Athens, Tenn., property at a major intersection coveted by Wal-Mart.
As part of the deal to buy Waterford , Jack said Continental agreed to buy Brown's $14 million worth of mortgage notes.
"I'm trying to get away from Brown and close out all dealings with Brown," Jack says.
The notes added $14 million to Waterford 's value, Jack said. When challenged, he agreed that the notes represented millions owed to Brown, not something that added millions to the value of the company for purposes of its sale.
Jack maintains that Continental -- even after Brown discovered his notes were bogus -- was still willing to pay $17.5 million for Waterford .
Brown's lawyer, Spivey, calls the explanation nonsense. The ludicrous deal was structured so Continental wouldn't have to pay until a year later, thus buying Jack more time to conceal his thefts, Spivey says.
In April 2000, Waterford missed its first payment to Brown after years of paying meticulously on time.
Within a matter of days, Brown realized his 113 notes -- with an unpaid balance of $14 million -- were bogus forgeries. The real notes and mortgages had already been sold to large banks. Waterford had pocketed Brown's money.
Brown, who made his wealth in Indiana developing nursing homes, felt shocked and betrayed.
"He went catatonic," says Michelle Brown, his wife. "He couldn't speak."
Even today, Ron Brown doesn't talk about Waterford .
Brown's family feared they'd lose him to a heart attack. His grown children gathered in Naples at the family's beachfront home on Naples' exclusive Gordon Drive. They took charge.
"We set up a war room in our home," Michelle Brown says. "We all started becoming private detectives."
Brown went to court with his attorneys, George Vega and his son, John Vega. In an emergency action behind closed doors, they asked Collier Circuit Judge William Blackwell to freeze Waterford 's assets and appoint a receiver, Fort Myers accountant Gerry McHale.
On April 20, 2000, McHale and state regulators from the Department of Banking and Finance took control of Waterford 's offices on the fourth floor of Naples' Newgate Tower on U.S. 41 North.
That day, Jack was out of town.
McHale, a veteran fraud investigator with nearly three decades of experience as a receiver, found massive records missing. He estimated that 90 percent of Waterford 's records had disappeared.
Worse still, Jack siphoned $230,000 from Waterford 's accounts in the days leading up to McHale's appointment, the receiver has testified. Jack wrote himself a check for $90,000 just three days before McHale seized Waterford and its group of affiliated companies.
As regulators and the receiver began combing Waterford 's records, the picture became murky and twisted.
"We're trying to make sense out of things that don't make sense," McHale says.
They found a schizophrenic bookkeeping trail that showed money bouncing between shell companies set up by Jack and Lauri.
And they found $4.5 million in offshore transfers to the Channel Islands junk bonds after Lauri's death.
British investigators from the Serious Fraud Office are probing the Channel Islands company, Trinity Project Management Ltd.
Jack says now he was duped in the junk bond scam.
The Browns see little hope chasing that $4.5 million.
"Once it goes out of the country, it goes into mist," Michelle Brown says.
In the early days, Michelle Brown was naive. She thought the cops, the FBI, someone in authority would immediately chase her family's stolen money. Then she realized they had to do it on their own: They filed a civil fraud lawsuit in Collier Circuit Court on April 20, 2000.
For the Browns, Michelle Brown in particular, the litigation has been an exhausting odyssey.
The court docket that tracks back-and-forth legal maneuvering in the case R.L. Brown Family L.P. vs. Waterford Mortgage Bank Corp. et al. lists more than 600 entries. The 2-year-old case file now spans more than 12 thick volumes.
Jack has stalled the lawsuit by switching lawyers twice. He says he has no money for attorney fees: His current lawyers at Sparkman & Quinn, a firm with modest digs in an East Naples strip mall, say they're not getting paid. The firm has represented Waterford since its early days. Richard Sparkman and Karen Beavin say they've stuck by Jack because they think he's done nothing wrong.
"As far as we're concerned, there's no money missing because it's all accounted for," Beavin says. No money was stolen because Jack left a promissory note, she says.
Adds Sparkman: "I don't think this guy has committed any crimes."
Beavin, who represented Jack in Lauri's estate case and myriad other civil lawsuits, has unsuccessfully appealed a half-dozen pretrial decisions. She's moved to disqualify Collier Circuit Judge Hugh Hayes, who's presiding over the case, saying he's pandered to Brown and the receiver.
She's attacked McHale as Brown's "alter ego," saying Jack's business has been chopped up and sold before he's had his day in court.
Judge Hayes has allowed the receiver to pay Brown $500,000 with what remains of Waterford 's assets. But Michelle Brown estimates that most of that has already been eaten by legal bills. Wal-Mart has offered to buy part of the Tennessee land for $1.4 million and the Browns hope to eventually recover that money.
Besides the court fight with Jack, the Browns have filed a malpractice lawsuit against attorney John Vega and the Naples law firm of Vega, Brown, Stanley & Burke. In that case, Ron Brown alleges the firm was negligent and gave him bad legal advice when it set up the deal with Waterford . Also named are accountants from Rogers, Wood, Hill, Starman & Gustason, who conducted an audit of Waterford 's records. Both firms deny Brown's claims. The Browns have also gone to court with Lauri's mother, recovering most of what little was left in Lauri's estate.
Each new twist and turn in the litigation dredges up feelings of betrayal. Ron Brown was manipulated for years, his wife says.
"He says 'How could I not have seen this?" Michelle Brown says.
In Naples, the Browns have stacked up an impressive resume of generous giving to local charities. Michelle Brown was on the board of the private Community School of Naples for years. She's chaired numerous balls and fund-raisers, raising thousands of dollars for the David Lawrence Center, the YMCA, The Boys and Girls Club of Collier County, and Saint Ann's Catholic School. A plaque with the Browns' name hangs in the Naples Philharmonic.
But in the past two years, she's dropped off the charity scene. She's been consumed by Waterford . She prefers the label survivor to victim. And she laughs about a recent spoof she saw in a magazine about the vicious gossip that travels in elite social circles about the "once haves."
"I'm fine... My identity isn't taken away because of the loss of money," Michelle Brown says.
Still, the family will never fully rebuild what took nearly a lifetime to earn. The Browns have money left and are trying to get on with their lives. They're rallying around their now 2-year-old grandson who has hemophilia.
More than two years have passed since that day in April 2000 when they learned that their $14 million was gone.
"You wake up every morning and you wonder if you're going to get the phone call today," Michelle Brown says.
The dream phone call would come from the FBI agents saying they've arrested the people who stole the Browns' money.
In court filings, Jack's attorneys have argued that such a long-running theft couldn't have occurred under the nose of a man as astute as Ron Brown. They say Brown micromanaged Waterford .
In an interview, Jack said Brown lived by what Jack calls the golden rule.
"He who has the gold makes the rules. This was his baby, this was his thing," Jack says.
If any fraud or money laundering took place, Brown and Lauri instigated it, Jack and his lawyers say.
"Even to this day, I'm not sure what happened," Jack says. "I know I'm not involved. It doesn't leave very many people. It leaves Lauri and it leaves Brown. And Brown is a control nut. I mean he controls down to the micro-penny. It's inconceivable to me that he didn't know what happened to that money."
Brown's lawyer, Spivey, calls Jack's claims about Brown absurd.
"His purpose is to shift all blame to Lauri who's not here to defend herself under mysterious circumstances," Spivey says.
He believes Lauri was neck deep in the fraud, but that Jack masterminded it.
"He would have an apparent motivation to keep her mouth shut," Spivey says.
The family's struggle
Lauri's mother, Bobbi Dunn, remembers her daughter in-line skating, riding motorcycles, joking with her family, challenging her parents to matches of Scrabble.
Mostly, she remembers Lauri always working.
In life, Lauri had few friends. Reclusive, she had married her job.
For Dunn, the pieces don't fit: Lauri, face down on a hotel bed in San Diego with a stomach full of cocaine, her hair pulled, her body bruised in a violent fight.
Dunn never knew her daughter to abuse drugs; neither did Lauri's brother, Dan Scherer. He recalls his younger sister turning down offers of marijuana. Lauri's sister, Cathy Scherer, who continued to work at Waterford until it closed in 2000, has declined to be interviewed and her attorney, Nelson Faerber, declined comment. Dunn says her daughter, Cathy Scherer, won't talk about Waterford with her family.
Brown's lawyer believes Lauri had a cocaine habit: He questions whether chunks of Brown's stolen cash ended up as powder in Lauri's nose.
Lauri wasn't a party girl. Some say the coke was her workaholic crutch.
"The only way you can stay up all night and work all day is doing coke," says Larry Goethals Sr., whose son was Lauri's boyfriend. Larry's father says he's done cocaine with Lauri.
Jerry Dunn, Lauri's stepfather, can't accept that Lauri committed suicide.
"There was no way on God's green earth that she was a drug addict or took her own life," Jerry Dunn says.
Bobbi Dunn didn't know Lauri's boyfriend had a criminal past, a drug dealing charge in Michigan for which he spent a year in jail. To Lauri's family, her relationship with Larry Goethals Jr. didn't make much sense: Larry Goethals' smarts paled compared to Lauri. He had an elusive occupation, something to do with transporting cars, Lauri's family thought.
Lauri's brother, Dan Scherer, says Lauri thought she could help Goethals straighten out his life.
Goethals was with Lauri the night she died. He told San Diego investigators that Lauri was a pill popper. But medical examiners found no pills in Lauri's system. Lauri's family wonders if Larry scattered pills around the hotel room to make her death appear a suicide.
Today, Goethals is in federal prison in Pensacola serving an eight-year sentence on a drug-dealing charge. Charged in West Palm Beach in 1999, Goethals pleaded guilty.
His family says there's no way he killed Lauri.
"He would never beat her up," says Linda Goethals, Larry's mother. Lauri's bruises came when her son tried to stop Lauri from jumping off the Hyatt Islandia's 15th floor balcony, Linda Goethals says.
Lauri seemed overwhelmed by stress about Waterford .
"Just before the San Diego trip, she'd finally made a decision to quit working for Jack," Linda Goethals says.
Lauri's mother says during the fight over Lauri's estate, her attorney found suspicious payments going from Waterford to California. Dunn wonders if Jack's fingerprints are on those payments and if they're tied to her daughter's death.
"We didn't know half of what Jack is capable of until years after her death," Jerry Dunn, Lauri's stepfather, says.
In an interview, Jack said he had nothing to do with Lauri's death. He was in Naples, in the office that night. He doesn't believe Lauri killed herself.
"I absolutely want Lauri's death investigated," Jack says.
Assistant San Diego Medical Examiner Christina Stanley says Lauri's death was unusual.
"There certainly was evidence of a fight," Stanley says.
No investigators have contacted Stanley about Lauri's death. She still comes down on the side of suicide.
"To force someone to take an oral overdose is pretty hard to do," Stanley says.
* n n
A year ago at a court hearing, Jack said he was in Denver working as a limo driver.
In a phone interview with the Daily News arranged by his attorneys, Jack said he's still in Denver. He declined to say what he's doing there. His number was blocked from caller ID. He declined to give a reporter his phone number, saying he's afraid of Ron Brown.
"I'm afraid of him politically," Jack says. "I'm afraid of him physically."
Jack has a Colorado driver license. The address listed is a Suburban Lodge hotel in Aurora, a Denver suburb.
"The bottom line is I didn't sign any notes. I didn't take any money," Jack says.
Now, Jack directs the tough questions to Lauri.
Her answers died with her that early morning on April 27, 1998.
Lauri's mother, Dunn, says she has no new concrete evidence to offer authorities that her daughter was murdered. But she believes Jack set up Lauri to take Waterford 's eventual fall.
"Everything looks like Lauri did it," Dunn says. "I think he knew years ago that he was going to use other people's money to live his lifestyle."
She believes Jack threatened Lauri.
"I think he had her convinced that she was just as guilty as he was," Dunn says. "He had her convinced there was no way out."
She wonders if Lauri planned to go to the authorities or Ron Brown.
It's just one of the relentless questions that gnaws at her.
Today, Lauri's brother, Dan Scherer, has her ashes in a green marble urn at his home in North Carolina. He's thought of scattering Lauri at the beach or going skydiving and dusting her high above the earth.
But he can't let her go.
He wants answers that haven't come. Did Lauri know too much? Was her heart sick with guilt? The autopsy that he's combed over and over in his search for answers offers only sterile detail: Her dormant brain weighed 1430 grams. Her empty heart weighed 250 grams.
Index Terms: The Waterford Files
Copyright (c) 2002, 2005 Naples Daily News