Tuesday, January 31, 2012

American Greed

Looking north along Broadway from Spring Street. 1:30 PM. Photo: JH.
Tuesday, January 31, 2012. A sometimes sunny winter’s day, yesterday in snowless New York. Mild is the word.

American Greed. Last week, a friend of mine asked me over to watch the season debut of a television show called “American Greed.” We were interested because the opening segment was based on the life and crime of an accountant named Ken Starr, who had a prosperous business punching numbers until he got too big for his britches and started playing at the Big Casino and making off with a lot of clients’ moneys in nefarious ways. One of those clients was our friend Jane Stanton Hitchcock and her late mother Joan Stanton. And Jane was the one who ultimately put him behind bars. Somebody had to, thank you very much.

You may remember the story, which broke about two years ago. I wrote about it here. Jane broke the story because it personally concerned her: Ken Starr had illegally removed millions from Jane’s mother’s portfolio for his own enhancement and poured other millions into highly speculative, junky investments. It’s called fraud, and as you may recognize, it’s epidemic. At one point there was concern that there would be anything left to even support Joan. As it happened, she died as everything was coming to the fore.

Joan Stanton as Lois Lane.
Joan Stanton was a neighbor of mine. She was 94 when she died two years ago, and although I hadn’t seen her in the months before, she was a peppy lady whose manner belied her great age.

She had been an actress in the prime of her life and worked a lot in radio in its network heyday. She married Arthur Stanton, a businessman who, with his brother, had the bright idea back in the 50s, of importing the Volkswagen to American car buyers. This was a highly innovative and visionary move at that time. It was the first major step of de-Americanizing the family car in America. The Stanton brothers made a fortune.

Three degrees of separation. When Arthur died in the late 80s, he left Joan between 60 and 70 million. He also left her his accountant: Ken Starr. Naturally she trusted him as he’d worked for years with Arthur. The Stantons had also introduced a lot of big name clients to Starr. A lot of famous names and big bucks.

In the beginning of his professional life, Starr had been a hardworking, small time New York accountant. Then he made the most fortuitous connection in his life -- meeting Paul Mellon, the heir of Andrew Mellon and one of the richest men in America. Mellon was not only rich but distinguished, and highly regarded as a philanthropist, art collector, horse breeder and venture capitalist. He and his wife Bunny lived luxuriously in several residences.

Jane Hitchcock, then married to a cousin of Paul Mellon, Billy Hitchcock, heard about how good he was and recommended “Paul Mellon’s accountant” to Arthur Stanton. Well .... Great minds think alike. Or would like to think so. That is how it works in the world of money: someone recommends because money was made by someone, etc. That was the whole secret to Madoff’s success.

Bunny and Paul Mellon. Mr. Mellon died in 1999 at the age of 92.
By the mid-90s, Ken Starr had a blue chip client roster through the Stanton connection, and a big Third Avenue office. He was never the kind of guy you’d associate with a grandee like Paul Mellon, ironically. At least not in style or self-image. But somewhere along the line the former nose-to-the-grindstone pencil pusher got a taste of the Big Life, the Good Life. And he liked it and felt ready to make it his own.

His social life expanded. He began spending time in the areas of social interest to his clients – like the Hamptons; like the better restaurants, like Hollywood, like Vegas. Hanging out with the guys who make things happen. (At least for themselves.)

He began meeting movie stars as potential clients. He met producers, directors. He had something to offer, something they didn’t have. Something Paul Mellon had; two degrees of separation.

Sylvester Stallone signed up, entrusting Starr with a portion of his considerable fortune. So did Diane Sawyer and Mike Nichols. So did Barbara Walters. And after Paul Mellon died, so did Bunny Mellon, Mrs. Mellon was a very special client in many ways because she was very generous with Mr. Starr. She liked him personally. So did her friend Robert Isabell.

Just like the cliché. The show, “American Greed” tells the whole story very well. You can see it online by going to http://www.cnbc.com/id/18057119. You’ll get every detail there. What began as a career of promise ended up in a long jail sentence and a complete public disgrace. Because of greed. Platitudinous but true. It’s a fable more prevalent than ever in these lottery-like times of big money and fast times.

Ken Starr and Diane Passage.
The irony of the story was, had it not been for the tenacity of Jane Hitchcock, novelist and natural mystery solver – born to play the part, so to speak – Ken Starr might still be playing his fake role as “financial advisor to the stars.” I say “might” because although he was fooling all of the people some of the time, he definitely was also an accident waiting to happen.

When Jane realized how he was draining her mother’s accounts – Joan had to take a mortgage out on her East Hampton house one year to pay her taxes – she went to the courts. It was a slow process. There wasn’t great interest in the beginning. She asked me if I could help. I felt, and she agreed, that the story would be best served in Vanity Fair. I had a friend, whom she knew but wasn’t friendly with, named Michael Shnayerson, who writes for VF. I told him the story. He found it interesting and went to Graydon Carter with it. Carter, it turned out, was a client of Ken Starr’s and wasn’t interested. At first.

But wheels were now in motion. Jane went to the DA, and got some interest. The story is spelled out on this American Greed segment and Michael Shnayerson, who eventually wrote the piece on Starr and his business for VF, is the main interview driving the narrative on the show.

The night I watched, there were a number of guests in the room, many of whom were people of means, even people in the banking business, as well as a few heirs and heiresses. They all watched in wonder. And innocence.

From a retrospective assessment, Ken Starr was obviously a kidder, the kind who couldn’t even resist kidding himself. In the course of a few years, and at what would turn out to be the end of his career in the big time, he left his second wife for a much younger woman whom he met in a local club called “Scores” on East 59th Street next to the Queensboro Bridge where she was earning a living pole-dancing.

Then, he left his wife – his second – who worked with him in his office and happens to be afflicted with Multiple Sclerosis – and married the now former pole-dancer, showering with jewelry, clothes, trips. A classic middle-age crisis, Broadway style. Expensive but gritty with glitz.

You could almost think this woman was his undoing. A schlemiel meets hotsy-totsy and can’t help himself. It’s an old story, even kinda sweet depending on who’s playing the role in the picture. He takes money from a client to buy a multimillion dollar apartment to show her what a big deal he is. She believes him, and why wouldn’t she, as he buys her that diamond she sees in the window.

He spent so much on his new life as Mr. Big Time that his “accounting practices” became more rampant, more epidemic. He was behind the eight-ball and getting close to implosion. He had to know it, but he was over his head. (With no Bailout, alas.)

Enter Jane Stanton Hitchcock, novelist of the greed, avarice and the getting-the-money, (“Trick of the Eye,” “The Witches’ Hammer,” “Social Crimes,” “One Dangerous Lady”), Ken Starr finally met his match. Caught, redhanded.

He’s in jail now. His unfortunate wives are left with the eternal question of why they fell for this guy in the first place: he was dishonest all around – not only with them but with everyone else too.

Not all of his clients left him when it first broke that he was extorting funds from clients. Mrs. Mellon stayed on, it seems, until the bitter end. And it was the End, and it was Bitter.
Denoument. The funny thing, and little known fact about the rich is that generally, they often don’t know much about their money. Maybe the overall total value of assets on any given year. Maybe even some of the stocks and bonds they’re holding, or the property they have a major interest in. But in terms of why and how and should you or shouldn’t you, they often don’t have a clue.

The phone number of their money manager maybe. And his wife’s name. That they may know. But otherwise, they get their “reports” regularly – read them or don’t’.  They follow the news on television, and take comfort in that, believing whatever they hear from the talking heads – as long as everything’s intact – and be done with it.  In other words, they are often ripe for fraud.

They’re encouraged to think this way by their advisors and accountants not to worry their little heads. Better for business.
Jane Stanton Hitchcock with her adored Coco-loco in her Georgetown house.
Grandfather or Great-grandfather, or even father who made and left the fortune paid attention, of course. He originally chose the bankers and the lawyers and the money managers. That’s how he got his money and kept it, so why should they change anything?  The mere association of Ken Starr with Paul Mellon was recognized to most basically intelligent people as a kind of channel to the god of Mammon. Money changes people but it’s not known for enhancing financial curiosity.

There’s an enormous industry built around managing Other People’s Money in the world. And another whole industry built around getting one’s hands on it (OPM). All is the business of most banks. Advisors, analysts, lawyers, accountants. And what some people now rightfully call Confidence men. Their job is to get the money -- and they’re often very well compensated for it, so why shouldn’t their clients totally rely on them and leave all the decisions up to them?

That’s the message of “American Greed,” although I had the feeling watching it that night that it remained concealed for most for a variety of reasons, the foremost being: “I would never let that happen to me.”

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