July 23, 2014
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So Where's Our $77.3 Million?

Now out of jail, a Naples scam artist has paid only $400 of the huge sum he owes his victims. Before Madoff...there was David Mobley.

David Mobley in an undated publicity photo for his fraudulent investment company.

David Mobley in an undated publicity photo for his fraudulent investment company.

The last the world heard from David M. Mobley Sr., he was back in a courtroom for skimping on his restitution. Why, the judge wanted to know, had he paid back only $400 of the $77.3 million he owes the victims of his Ponzi scheme?

Well, for one, his back hurts, he had told a probation officer. Also, he has no transportation. And for a while, no one would hire him. Then, finally, a temp agency dropped him into a gig paying $7.67 per hour. After a month of that, he peeled off $400, all of which went to pay the probation department for supervision costs. The hundreds of investors he ruined have no expectations at this point.

Nonetheless, the judge ordered him to contribute a quarter of his monthly earnings or risk going back to prison, the Naples Daily News reported from the September 2012 hearing. Assuming he works 40 hours a week and 52 weeks a year, his annual repayment would come in at just less than $4,000. At that rate, it’ll take him almost 20,000 years to pay off his debts.

Many of the victims would rather see him caged.

As Mobley left court that day, a Daily News photographer snapped a picture of the formerly wealthy con man strutting down the sidewalk. He is smirking. At 57, his hair is lightening toward gray. A gut pushes out the baggy gray T-shirt spilling over his blue jeans. If Mobley was trying to convince U.S. District Court Judge John Steele that he epitomizes down-and-out, his John Deere uniform lacked only a cardboard banner: “Bad back. Out-of-work swindler.”

Indeed, Mobley has earned few dollars honestly. The bulk of his life’s income came between 1992 and 2000, the years during which he convinced people he was a legitimate hedge fund manager, took their money and then squandered it either on bling (sports cars, private jet rides, etc.) or on foolish investments.

“He would do it again if he could,” says Bill E. Branscum, a former federal Customs agent whose private investigation helped unmask the fraud.

But Mobley probably can’t do it again. The problem with a career in the Ponzi industry is that once your trade secrets hit the newsstands, the market dries up fast.

Thirteen years have passed since the fall of Mobley. His rise seems farcical in the era of Madoff , with the benefit of retrospect. His investors have had 13 years to stew over their mistakes. In the moment, though, in the rush of ’90s optimism, Mobley was damn convincing.

Before he moved to Florida from Ohio, he had been only two things: a factory worker and a shady real estate developer. Mobley is from Toledo, a blue-collar town on the Lake Erie shore. This was the scratch pad of his budding con artistry. He bought up farmland to subdivide and sell, but stiffed the farmers out of about $30,000. They came after him in court and won a judgment, which he partially paid (about one-third of the owed amount).

Others, including family members, reported investing—some even borrowing to do so—in utterly failed Mobley schemes. Around 1981, Mobley’s brother Bill and Bill’s wife borrowed money to invest in a coal mine, but they lost all their money. One of his ex-wives said Mobley convinced his in-laws to invest
$20,000 with Mobley, just before he filed for bankruptcy. They didn’t press charges, she said, because he was their son-in-law. A local sheriff ’s deputy said he identified churches in the Toledo area that lost money investing with Mobley, but none wanted to pursue charges.

All of this turned up in Branscum’s investigation, which he submitted to the Securities and Exchange Commission in 2000. His only conviction was for writing bad checks in the early ’80s. But he was indicted on charges he defrauded a churchgoer out of $20,000 on the premise the money would go into an escrow account and be invested in real estate. According to the Branscum investigation and indictment filings, there never was an escrow account, and Mobley was spending the money for himself. But Mobley agreed to pay restitution, and the charges were dropped.

In the early 1990s, Mobley left the Rust Belt and drove to Naples. With its streets crawling with flush retired executives, the community was con catnip.

Respected investors were among the first targets. Once they saw their statements (pure fabrications), it was a matter of time before they mentioned it on the golf course. Even in the very worst year of bogus receipts, 1994, they believed Mobley’s hedge fund, called Maricopa, was raking in a 34.54 percent return.

Mobley befriended a North Carolina psychologist named Van K. Tharp, who advocates an off beat investing style based on understanding “who you are as a trader.”  Mobleywrote the foreword to the first edition of Tharp's book, Trade Your Way to Financial Freedom.

“I must admit that when I first learned what Dr. Tharp was going to write about in this book, I was concerned,” Mobley wrote. “He was giving away too many of our secrets! However, I’m not concerned anymore because I now realize that those secrets are so personal. My Holy Grail is not the same as your Holy Grail.”

Mobley bought four homes and a $1 million lot for a fifth. He bought a Porsche and a $40,000 diamond ring, all while investing in failed ventures and paying himself a $1 million salary. He gave himself a $2 million bonus in January 2000.

In February 2000, Barron’s financial magazine published a piece about the “King of Naples” in a cover story that precipitated Mobley’s arrest. Author Jonathan R. Laing wrote then about many of the things we view now as obvious flags: Mobley refused audits; Mobley had a history of bankruptcy, conviction and criminal charges; Mobley was outperforming Warren Buffett and George Soros; Mobley never registered with a regulatory agency; Mobley’s wife sent out the performance results.

Investors made a run on the fund. Gina Edwards, at the time a Naples Daily News reporter who had written about Mobley, called him for a comment. He met her in his office. She found him with a sore throat, sipping hot tea. He was in “damage-control mode.” Four days later, the SEC filed charges.

“As a reporter, it was really sad to cover the aftermath,” Edwards says. She uses the word “devastation” to describe the feelings of those caught in Mobley’s orbit.

One hundred seventy investors who thought they were tripling and quadrupling their wealth had only pennies of each dollar.

Mobley, in an email, politely declined to give an interview for this article. It took several weeks to coax this rejection from him. Mobley has been out of prison since August 2011. He now lives behind a gate in a coach home off Vanderbilt Beach Road purchased by Carolyn Mobley in 1996 and valued at less than $200,000. He did not answer when I asked the security guard to ring him. Several calls to his residence also went unanswered, but twice, a person picked up the line. The first was an elderly-sounding woman who could not hear very well but recognized my area code as from Ohio.

The second was a man who identified himself as an “associate” of Mobley’s named “John.” He said he doubted Mobley would want to talk because “his perspective is that people are going to view it from all different angles.” Besides, he said, Mobley’s “whole focus is ministry.”

Finally, after a last-ditch handwritten letter arrived in his mailbox, Mobley responded through a Gmail account that included a picture of him wearing the same smirk from outside the courtroom. In a rambling prose, often incoherent, he provided several reasons why participating in journalism served
him no benefit, but thanked me for trying to reach him. In the email, he referenced “the Gospel.”

This biblical talk is not new. He is said to have participated in church services that include miracle healing and speaking in tongues. Even when he was robbing from the rich to give to himself, he was also donating $3.5 million to several charities, including Christian ones—which were later sued during the post-Ponzi rush to claw back all the bilked money.

One law enforcement officer in Toledo told Branscum that Mobley is “a two-bit con artist who hustled church groups.”

Midway through his run, Mobley hired a talented young mathematician named Mahesh Johari to develop a kind of market-analysis software for Maricopa. Chris Vernon, a Naples attorney who represented dozens of investors in the aftermath, believes Mobley was hoping to find someone who could execute the imaginary strategies he had been promising for years. Johari doubts Mobley did much with his research.

Johari worked diligently from a satellite office in Chicago, but often traveled to Oz’s lair. The office evoked “old money and conservative style,” according to the Barron’s article. Amid “antiques and art,” a pretty secretary worked the phones under the flicker of monitors dense with market data. Investors came in and out. Mobley had several employees. Three were family members.

It all looked like a legitimate investment firm. In hindsight, Johari realizes it was a brilliant cover. “There just couldn’t be nothing going on,” he says. “That doesn’t make any sense at all.”

He recalls arriving one evening to a crowded restaurant in Naples. The wait was one hour. He put the name in as Mobley. “David Mobley?” the host asked. “We’ll find something for you right away. Don’t worry.”

Around 1998, Mobley distributed a slick investment brochure that included ridiculous pictures of key Maricopa staff, enigmatic investment philosophies and quotes from Chekhov and Proust. In the brochure, Mobley’s brother, William, is listed as the president of Maricopa. There is a picture of William Mobley squeezed into a tiny boat while wearing a suit and holding an umbrella above his head.

Johari remembers boarding a flight from Minneapolis to Southwest Florida to pose for his picture. He and the photographer drove out to the woods. The photographer told Johari to hold an abacus in his hand and lean against a tree.

“The most valuable lesson that I got from this: The ones who are most intent on stealing your money are the ones who are most intent on fitting the persona that you want them to fit,” Johari says.

Johari, who says he was in his 20s and naive while working for Mobley, hired a very good lawyer when the SEC finally cracked its whip, and he avoided all backlash. He now runs a company in the Midwest.

“The tragedy, I guess, is that there were signals,” he says.

One irony of the episode is that one of Mobley’s most nefarious investments turned out to be an investment in prison insurance for himself. Mobley bought a stake in Stadium Naples, a $100 million, 12,000-seat, 18th hole coliseum that was never built.

His investors lost $3.4 million in the project. The developers, it turned out, were buying the votes and influence of three Collier County commissioners and the county manager. One county commissioner received 40 free rounds of golf from a lobbyist. You can imagine how complicated such a case can be to untangle and prosecute. For the first time in decades, Mobley proved constructive. (His testimony helped bring down 10 people, including three county commissioners and the former county manager, who negotiated various settlements with authorities.)

In 2004, Mobley asked for eight and a half years off his 17.5-year prison term for fraud in exchange for his cooperation. Judge Steele granted three and a half. “I am disappointed, and I am sure he will be disappointed,” Mobley’s public defender told the press.

But Mobley’s victims were disappointed, too. Mobley showed them no mercy. They wrote letters and came to court for the initial sentencing. “Please do not be affected by his phony show of remorse,” said one investor, Carolyn Quistberg. “For some of us, that money represented a lifetime of hard work and savings.”

Mobley’s restitution is unlikely to be paid before he dies, per usual in cases like this. But there’s always a restitution order, just in case. There are possibly millions of dollars unaccounted for, and some people believe Mobley could have access to the money. The restitution order prevents it from surfacing in the form of another Porsche.

All of the investors were well off, but not all of them had millions to cushion their blows. One investor told me he spent his career building a company in the North, sold it and moved to Florida, where he planned to live off his capital gains. His longtime dentist said he was investing in Maricopa and earning massive profits. Eventually, this investor, who spoke on condition of anonymity, began pulling money from funds where he was earning 18 percent returns. He convinced several family members to do the same.

Now, he says, just as he is reaching retirement age, “I’m working harder now than I ever have.”

Vernon, the Naples attorney, twice met with Mobley in prison. During one of their conversations, Mobley called someone a scumbag. Then he fell silent.

“I can’t really call anyone a scumbag, can I?” Mobley said.

“No,” Vernon said.

Does Mobley recognize his wrongs?

“He’s a sociopath,” Branscum says. “You have to be a sociopath to do what these people do. … He didn’t show any mercy at all. He got everything he could get from anybody he could get it from.”

But if he knows he can’t call anyone a scumbag, maybe he knows right from wrong. Maybe that’s worse. Or maybe that’s a lie, too.

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