Aspen a frequent target for con artists
ASPEN With a long trail of civil suits leading back to California, Peter Frommer arrived in Aspen in December and allegedly wrote a string of bad checks that led to his arrest.Frommer, a dot-com entrepreneur from Malibu, faces 11 counts of check fraud from creditors ranging from the Hotel Jerome to his landlord, a lingerie retailer and two area baby sitters. He also is the target of more than 20 civil lawsuits in California for as much as $5.5 million – for a total of more than $25 million.Some victims claim Frommer engineered a so-called Ponzi scheme. And if that’s the case, it wouldn’t make him the first person to try to capitalize on Aspen’s wealth by employing one of the most common white-collar crimes. “Con artists go where the money is, and there’s money here,” said Pitkin County Sheriff Bob Braudis. “I would say that embezzlement and con games are gross industries here.”Braudis cited the federal case of Victor Kozeny, aka the “Pirate of Prague,” perhaps the biggest Ponzi case with Aspen ties. Promising payoffA Ponzi scheme involves a con artist attracting investors with the promise of a sky-high return on their investments – usually something like 20 percent. The perpetrator then pays out big to initial investors with money from subsequent investors. Those first happy investors tell their friends and attract more investors until the scheme is either found out or the perpetrator flees with the profits. Ponzi schemes – unlike pyramid schemes, which count on investors to fan out – rely on one central orchestrater and depend on the greed of initial investors who get a taste and want more.Kozeny – who once owned Peak House, a then-$20 million home on Red Mountain – faces charges of defrauding area investors out of millions for investments in oil fields in the former Soviet Union. The case is pending in federal court. The plan was hatched at a Christmas party in 1997, where visitors were greeted at the door with bowls of caviar, and Natalie Cole was on hand to perform.”He put on a big splash, entertained, promised a big return on investments, and people basically got fleeced,” Braudis said.Another area Ponzi scheme involved Ronald Wallace of Basalt, who is set to appear in a federal court in Los Angeles today for sentencing on convictions of fleecing wine connoisseurs out of millions of dollars. He faces seven to nine years in federal prison. Michael Wise, a financier and former Aspenite, pleaded guilty to two federal counts of wire fraud in 1999 and served three and a half years in federal prison for bilking investors through his Cornerstone Private Capital Corp. in Aspen. His earlier involvement in a 1980s savings and loan scandal earned him a ban from banking.Aspen police arrested Frommer, 31, at his Woody Creek rental on Feb. 2, took him to the Pitkin County jail and later released him on a $27,500 bond. A Pitkin County judge gave him leave to return to California over the weekend to address business and legal issues there; he will return Tuesday.Tom Smutts, who worked with Frommer at a Los Angeles hedge fund in the 1990s, was one of a number of former associates of Frommer who contacted The Aspen Times to tell their stories.”There was a cocoon of credibility around him,” Smutts said. “He seemed like the kind of guy who knew how to make a lot of money. A lot of people trusted him.”And with promises of high returns, Smutts invested with Frommer and won big. He remembers being impressed by Frommer’s multimillion-dollar Malibu mansion and said Frommer used the deed on his home to secure investments.’Flat-out fraud’Smutts believes Frommer was running a legitimate businesses at first, including Internet provider Tangeo, Overboost.com and an office furniture reclamation scheme. But then things got out of hand, Smutts said.”It turned into just flat-out fraud,” Smutts alleged. Smutts made a 40 percent return on a $10,000 real estate investment but claims he had to cajole the money out of Frommer.”He’d be three weeks late on a payment and say, ‘To make good, I’ll throw in an extra $1,000,'” Smutts said. But despite his suspicion, Smutts kept his money with Frommer, rolling the cash over in two-month cycles.Hearing of his good luck, Smutts’ brother invested $125,000 with Frommer and made a return, all with the promise the Smutts brothers would lure more investors. But by then Smutts was leery.”There’s something about him. He’s extremely straightforward. He’s the kind of guy you can’t believe he’s stealing from you,” Smutts said. “I didn’t trust him, but at the same time I lent him on short notice $30,000 two weeks before he fled L.A.”Smutts claims he and his brother lost more than $100,000 to Frommer.”He would tell people he was making investments, but he was paying off other people to keep himself afloat,” Smutts said. “He made money for us – until he stole it.”Frommer never loses his cool, Smutts said. Even when Smutts blew up at him, Frommer would apologize and make excuses in measured tones, then not return a call for six weeks.”I’ve written it off,” Smutts said. “But it’s going to get harder and harder for him to do what he does.”Other disgruntled associates, all of whom wanted to remain anonymous so as not to prejudice ongoing civil suits, had similar stories. Solicited by a friend who’d made a big return, they were offered security in the form of a promissory note, and invested big – from $50,000, to one man who claimed that his group invested more than $2 million.Other complainants said Frommer is a flight risk, claiming he has offshore accounts and alleged business dealings in Bulgaria. Police said a bonding company confiscated Frommer’s passport when he got out of jail Friday, but former associates claim Frommer will use a Hungarian passport to flee.”He has caused a tremendous amount of pain and damage to me and my family, and no amount of money could ever repay something like that,” said one of the anonymous investors.”I always pick up my phone,” Frommer said Thursday, denying allegations he is ducking creditors. Frommer acknowledged the many California civil lawsuits, and said that things went poorly there, forcing him to foreclose on his Malibu home. But he denied there were any criminal charges against him.He claimed he just wants to make things right both in California and in Aspen. He said he feels sorry for California investors who lost money in real estate investments with him, but he declined comment other than to say he had run into trouble. “I made a lot of money for a lot of people,” Frommer said. He said he had plans to bring wireless Internet service to the Roaring Fork Valley – and had even lined up a number of investors for the project. “But then last Friday happened,” he said.Aspen a targetRon Ryan, investigative coordinator for the Pitkin County Sheriff’s Office, said that while the days of masked robbers are over, he has seen an increase in white-collar crime and Internet scams.Ryan said a number of check fraud cases are under investigation in the valley, and Aspen is a common target for Internet criminals who use ritzy Aspen addresses to legitimize an operation or target wealthy residents.”A lot of times what we have is just an element of a bigger case,” Ryan said. And perpetrators know smaller crimes spread across different jurisdictions are hard to prosecute, and federal investigators don’t go after the little fish.”A lot of victims are reluctant because they’ve been duped,” Ryan said.”I don’t think it’s more than anywhere else,” said Gail Nichols, assistant district attorney in Pitkin County, about scams and frauds in Aspen.Nichols stressed that Frommer faces charges of simple insufficient funds checks, and that her office must prove that he wrote bad checks with the knowledge there weren’t enough funds in his account.Charges from California are inadmissible, Nichols said, unless she gets special permission from the judge. Prior convictions, however, would affect sentencing, she said.Frommer’s defense, so far, is that the bad checks were simple misunderstandings and that he’s paid all (or nearly all) of his creditors in Aspen.”You can’t unrob a bank, and you can’t unwrite a bad check, but it does make some difference if its paid back right away,” said John Van Ness, Frommer’s lawyer. Frommer said he’ll return from California by Tuesday per a judge’s order. He’ll face charges March 5.Charles Agar’s e-mail address is email@example.com.
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