FORT LAUDERDALE, Fla. – A South Florida retiree doesn't want you to know his name, but he does want you to know how he lost his entire life's savings in an alleged Ponzi scheme.
"We were told that the risk ratio was extremely low," said the victim of a massive alleged scam, who we’ll call Jack. "I thought it was very conservative and it obviously backfired on me."
At 70 years old, Jack is one of 8,400 victims, many of them senior citizens, swept up in what the feds allege is a $1.2 billion Ponzi scheme. The Securities Exchange Commission says the scheme originated with a company called the Woodbridge Group, which sold so-called first position commercial mortgage notes, allegedly backed by equity in property and offering seemingly modest 5 and 6 percent returns. Jack not only invested his entire $300,000 nest egg, but he also encouraged other family members to invest as well -- bringing the total investment to about $1 million.
At first the monthly return checks came like clockwork, then late last year they stopped and Woodbridge filed for bankruptcy. The SEC says it was a scam, and that in many cases the money wasn’t backed by mortgages at all, but simply went into shell companies owned by Woodbridge CEO Robert Shapiro, who was living the high life on the scheme in homes in California and Colorado.
"It's all my savings and all my family's savings so it's not pretty," Jack said.
The Ponzi allegedly began in a nondescript office building in Boca Raton, where the lights were still on recently even though the company is being sued by the SEC and in bankruptcy. A woman who answered the door refused to comment.
Coral Springs attorney Scott Silver is representing several victims in litigation regarding the case.
"It's heartbreaking when these investors, when they come to me and they start asking, 'What happened here? How did Woodbridge turn out to be a Ponzi scheme,'" Silver said. "They’re devastated and they’re embarrassed. It’s shame on the fraudster and not on them. They were trying to be super prudent, not trying to double or triple their money."
Selling the Woodbridge investments across the country were the foot soldiers in the scheme – unlicensed and barred brokers from around the country, like Andrew Costa, of Fort Lauderdale, whom regulators barred from the market back in 2008 when he refused to turn over documents related to an investigation.
"He's not registered in the state of Florida," Silver said. "Nobody is overseeing his actions."
Costa was able to sell the allegedly fraudulent Woodbridge investments, because they were never registered as securities. A number of states sued Woodbridge for selling unregistered securities well prior to the scheme’s implosion, but Florida was not one of them.
Costa was at his lavish Las Olas home when he denied that he had ripped off retirees and refused to answer any questions by saying, "Please leave!" and "No! Just leave!"
It was another barred broker, Barry Kornfeld, who, along with his wife Ferne Kornfeld, sold Jack on the idea through their firm, First Financial Tax Group. The couple enticed investors with ads in the Sun-Sentinel and on the internet.
The Kornfelds also boasted that they taught "Baby Boomer" retirement classes at Florida Atlantic University. While they weren’t hired as professors, the university confirmed that they rented space at the college where they taught their classes, and allegedly hawked Woodbridge investments.
Florida Atlantic University didn’t respond to a request for comment or answer question about what, if any, vetting they do for those who rent space at the university and use its name in their ads.
Jack said the FAU connection and newspaper ads served to give him a false sense of confidence in the Kornfelds.
Barry Kornfeld "did not tell his prospective investors that he was not a licensed representative to do this," Jack said. "That in itself tells you he was not on the up and up."
In an Internet ad that apparently was aired on the radio, Ferne Kornfeld touted the "conservative retirement income planning classes" the couple taught at FAU and claimed the type of investments offered by Woodbridge were safe.
"[The investments] have been exceptionally well received, especially by our seniors who've been looking for reliable predictable income from short term instruments," said Ferne Kornfeld. "You can start with $25,000, $30,000, $50,000, $100,000 … We have many people jumping in with two feet … there truly are easy and effective ways to protect and grow what you have."
Ferne Kornfeld was recently at her office building in Boca Raton and said she "absolutely" did not lie to retirees who want their money.
"I don't have their money to give back," she said.
Ferne Kornfeld also said she doesn't need to be licensed to do what she did. She may claim that she and her husband weren't selling securities, but after I spoke with them, and after years of inaction, the state of Florida finally took action on the scheme, hitting Ferne Kornfeld, her husband, Costa, and several other brokers across the state with civil charges of selling unregistered securities, including a whopping $40 million worth allegedly sold by the Kornfelds alone.
"I want my money back and I want these people to be prosecuted for what they've done," Jack said.
He holds out some some hope that investors will receive some of the money back through the bankruptcy, which is sorting through remaining Woodbridge assets. Early indications are that investors might get as much as 40 percent of their losses returned, though Jack is skeptical.
Jack said he learned an important lesson: "Don't trust anybody ever!"
"Terrible," he said. "Absolutely awful."