More On Legal & Compliancefrom The Advisor's Professional Library
- Suitability and Fiduciary Duty Recommending suitable investments is more than just a regulatory obligation. Many investors bring cases claiming lack of suitability, so RIAs must continuously put the onus on clients to notify the advisor of changes in their financial situation.
- Proxy Voting RIAs are not required to vote proxies on behalf of their clients. However, when an RIA does assume responsibility for voting proxies, the firm’s policies and procedures should help to ensure that votes are cast in the best interest of clients.
AdvisorOne Editor at Large Bob Clark likes to say that advisors’ main job is to protect their clients from the financial services industry. While most do just that, we know that some advisors are no-goodniks. Some very wealthy people are their own worst enemies, especially if they're new members of the 1%. Some get very bad advice, especially from managers and other hangers-on who are more interested in lining their own pockets than in growing or preserving their clients’ riches.
When con men strike, it is rare that the names of the victims register for more than a second or two as the salacious details of the crime take over. Scams are never named for the victims: Ponzi and Madoff and even Clifford Irving were all the criminals behind the deeds.
But there are those times when the victims are already well known. That's when the victims are remembered. There is logic to the idea that celebrities would find themselves targets of con men. After all, as Willie Sutton is supposed to have said, he robbed banks “because that’s where the money is.”
Celebrities these days have the money. And any itinerant scammer can get an idea of who in Hollywood might be a good mark with a quick search of the internet.
That got us at AdvisorOne wondering which celebrities have been hit by scams. The list is impressive, including actors like Robert De Niro; athletic stars like John McEnroe; and even a playwright, Neil Simon. But the star with the worst luck lost her money, and then her heart.
So we ask, Could You Have Saved These Clients? 7 Scams That Hit Celebrities Hard:
The Celebrities: Cher, Jennifer Aniston, Liv Tyler, Melanie Griffith, Anne Hathaway
The Scam: Credit card fraud
The Take: $511,000
The ladies of Hollywood need their stylists and their salon time. So it must have been particularly upsetting when facialist to the stars (yes, she was really known as a facialist) Maria Gabriela Hashemipour took advantage by ripping off credit card numbers. The con artist was undone in 2010 when the management company representing Liv Tyler saw $214,000 in unexplained charges on the actress’s account.
Evidently, testimonials from Cher and Jennifer Aniston on her website weren’t enough celebrity help for Hashemipour. Aniston has said that she stopped using Hashemipour in 2005 and her exposure was minimal. In the end, the facialist was sentenced to five years’ probation and was ordered to pay $511,000 in restitution.
The Celebrity: Kiefer Sutherland
The Scam: Bogus cattle trading
The Take: $1.5 million
Kiefer Sutherland might be famous for bringing TV terrorists to rough justice as Jack Bauer on “24,” but that didn’t scare off the con man Michael Wayne Carr. In 2010, Carr was arrested for taking $869,000 from the actor and hundreds of thousands from others to purchase cattle in Mexico to be resold in the U.S. at a profit. The money was collected, but authorities found no evidence of any cattle being purchased.
Although his lawyers contended the lackluster economy was the culprit, Carr pleaded guilty. He was ordered to pay more than $1.5 million in restitution. Any jail time depends on how much he is able to pay back.
The Celebrities: Kevin Bacon and his wife, Kyra Sedgwick
The Scam: Bernie Madoff (’nuff said)
The Take: Likely in the millions
Bernie Madoff’s scam ruined many people at time of their lives when they had little chance of rebuilding. That isn’t the case for Kevin Bacon and Kyra Sedgwick, marriage partners and actors. Bacon and Sedgwick lost much of their savings, although they have kept the exact amount private.
The amount was damaging enough that Bacon has been widely quoted as saying the pair have no choice but to continue working. Fortunately for Bacon, 54, and Sedgwick, 46, parts keep coming. For Madoff, of course, his only gig is doing prison time as the courts try to divvy up his assets among his victims.
The Celebrities: Uma Thurman, Neil Simon and others
The Scam: Money manager siphons clients’ cash
The Take: More than $30 million
Unfortunately, it’s a tale often told in Hollywood: the one about the scheming money manager who finances his own lifestyle with the treasure of his trusting clients. Such is the story of Kenneth Starr. He ran a scheme netting himself more than $30 million from 2005 until he was caught in 2010.
Some celebrities smelled something rotten. The director Mike Nichols reportedly cashed out early on because he was suspicious. The actress Uma Thurman noticed a mere million missing and browbeat Starr until the money was returned. Of course, she didn’t know the payment came from another client’s pocket.
Starr was sentenced to repay more than $29 million and serve up to seven and a half years in prison.
The Celebrities: Robert De Niro, John McEnroe
The Scam: Art Theft
The Take: $120 million
Robert De Niro might be a master of playing tough guys on the silver screen, but it was his emotional, real-life testimony that helped put a scammer in the slammer. The case involved Manhattan gallery owner Lawrence Salander. According to prosecutors, Salander claimed ownership of works worth $120 million from the estates of deceased artists. One of those artists was Robert De Niro Sr., who was a friend of Jackson Pollock, Tennessee Williams and others.
In 2011, De Niro took the stand and by all accounts gave emotional testimony about the theft of paintings from his father’s estate.
The tennis great John McEnroe also had a role in catching Salander after he filed a civil suit over the theft of a painting. That suit put prosecutors on the case. In the end, Salander pleaded guilty and received up to 18 years in prison.
The Celebrities: Sidney Poitier, Norman Lear, Henry Mancini
The Scam: Tax shelter fraud
The Take: $130 million
It sounds like something happening today, but this scam took place on Wall Street in 1983. Two Wall Street brokerages, Donaldson, Lufkin & Jenrette and Carroll McEntee & McGinley (later purchased by HSBC Securities), invested $600,000 from each of 88 people in tax shelters that the IRS later deemed phony.
Is it any surprise that investments in dilapidated trucks or Picasso stamps from exotic islands were deemed fraudulent ways to get write-offs? In the end, DLJ and HSBC settled civil suits for $42 million. Still, they denied any wrongdoing.
Charles Atkins, who promoted the shelters, and two others, were convicted in the case—the largest case of tax fraud ever. It involved $1.3 billion in phony losses, which were used to reduce tax bills. Atkins received two years in prison followed by four years of community service. The companies were never charged.
The Celebrity: Anne Hathaway
The Scam: Real estate fraud
The Take: A broken heart (and $2.4 million from others)
Anne Hathaway is the only celebrity to appear on our list twice. This time she lost out in love when her boyfriend (now ex), Raffaello Follieri, was nabbed for masterminding a real estate scam that was based on purported links to the pope.
One of those taken in by the confidence man was the California billionaire Ron Burkle, a friend of former President Bill Clinton.
Before he was busted in 2008, Follieri told investors his links to the pope could be used to buy surplus churches in the U.S. at a discount. Alas, any profits were based on a prayer. Days before the FBI arrested Follieri, Hathaway dumped him. In the end he got four and a half years in prison and forfeited $2.44 million as well as watches and jewelry. Hathaway has moved on with her career (she portrays Catwoman in the latest Dark Knight film) and her love life.
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