Sunday, April 12, 2009

When people trust wealth

© 2009 Indystar.com website.

April 12, 2009

As Marcus Schrenker's plane crashed, so did his high-rolling imageExperts say those who project wealth, success are too easily trusted.

By Francesca Jarosz

Dave Smith first met Fishers financial adviser Marcus Schrenker in June 2004, when Schrenker flew his plane to Atlanta to discuss Smith's finances.
Smith, a retired Delta Air Lines pilot who lives in Roswell, Ga., was blown away by Schrenker's immaculate appearance, expensive turboprop plane and apparent knowledge of Delta's financial problems.

He decided on the spot to invest with Schrenker, entrusting him to handle about $1.3 million in retirement savings.
"It was like so many times in your life when you think, 'God brought him to help,' " Smith said.

Five years later, Schrenker, 38, is being held at the Escambia County Jail in Pensacola, Fla., faced with federal charges that he tried to fake his own death in a plane crash after being accused of bilking hundreds of thousands of dollars from investors, including Smith.

He is scheduled to appear in federal court April 24 for a hearing to determine his competency to stand trial.

Schrenker's life and the events that led to his arrest are filled with made-for-TV movie details. But experts say how he, and those he allegedly duped, got to this point illustrates a broader cautionary tale about trust and about how so many people are drawn to those in society who project wealth, knowledge and success.
The downfall of Schrenker and others, such as Ponzi scheme artist Bernard Madoff, has provided a fresh look at the corruption that sometimes underlies financial achievement. That awareness, experts say, could create a greater skepticism of wealth and provide a wake-up call about using it as a basis of trust.

"There's a general suspicion of American business at this point -- you'd see the same thing in the 1930s," said Jerald Podair, a professor at Lawrence University in Appleton, Wis., who teaches a course on the Great Depression and the New Deal. "It's the Schrenkers of the world that give people that suspicion. He built this lifestyle that was supposed to project the American Dream, but it was a warped version of it that was built on deceiving people."
On Jan. 11, Schrenker flew his plane from Anderson, bound toward Florida. Hours later, authorities say, he placed a distress call and put his aircraft on autopilot before parachuting into central Alabama. The plane crashed in the Florida Panhandle, and authorities found Schrenker Jan. 13 at a Florida campground, bleeding from a slit wrist.
He is accused of intentionally crashing his plane and putting out a false distress call. His trial is set for June 8 in U.S. District Court in Pensacola.
After that, Schrenker will return to Indiana to face charges that he worked as an investment adviser without being registered. If convicted in both criminal cases, he could face a maximum of 42 years in prison and up to $520,000 in fines, plus restitution.

In a letter sent in March to Indiana officials, his family and media outlets, Schrenker said he'd been mentally unstable and abusing prescription drugs at the time investigators allege he bilked clients out of hundreds of thousands of dollars.

Schrenker said the plane episode was an accident and denied trying to evade authorities or leave the country.

"There is a lot the public doesn't know and soon the truth of what really happened on 1-11-2009 will be told," Schrenker wrote.
He left behind his wife, Michelle, who had recently filed for divorce; Kelly Baker, with whom he'd been having an affair for about a year; myriad lawsuits and civil cases against him and his companies, Icon Wealth Management, Heritage Wealth Management and Heritage Insurance Services.
The plane crash appeared to many as an attempt to flee a life that Schrenker once worked meticulously to create.
Gaining trust

Those who know Schrenker say he worked tirelessly to project an image of success.
He sported suspenders and ties almost every business day and kept his hair cut military-style, said Erick Krauter, a former landlord. He was known for sporting Armani suits, cuff links and monogrammed shirts.
The same care went into the upkeep of his three-story Geist home, where he washed the garage floor every night with steaming hot water, said Tamra Boles, who was friends with Marcus and Michelle in 2005. His office, too, was decked out with security cameras, state-of-the-art electronics, expensive light fixtures and granite tiling in the bathrooms.

"Everything about this man had to be perfect -- his office, his house," Krauter said. "He was absolutely over the top in everything he did."
Schrenker flaunted his wealth to friends, business partners and neighbors -- often talking about his companies' success or how much his cars cost. At his 10-year high school reunion, he handed out business cards with a picture of him and Michelle standing in front of their Lexus and plane.
For Michelle's 32nd birthday party, he hired a local band, flashed names of guests from a projector and ended the night with a fireworks show.

"A lot of people wanted to be him," said Dane Lantz, who took care of Schrenker's plane at Mount Comfort Airport, where many employees frequented the financial adviser's social events. "He had the planes and the cars and the (expensive) house."
Michael Edesess is chief investment officer for Fair Advisors, a Denver-based firm that attempts to ensure advisory work is done ethically. He said potential investors are easily misled by the appearance of wealth.
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"They think, 'That person looks like they know how to make money, therefore they'll know how to make money for me,' " Edesess said. "The logical progression that they don't seem to make is, that person is wealthy, so he knows how to make money from me."
Former clients said Schrenker used his wealth to win them over, buying them artwork and GPS units and taking them out to expensive restaurants. He'd also become close to their families, calling to inquire about their children and to wish them a happy birthday.

Smith said that during his initial meeting with Schrenker, he was impressed by his businesslike talk, laced with statements such as, "We have people inside of Delta, and we know what's going on and it's bad."
But it was Schrenker's cordial, professional demeanor and his well-groomed, athletic appearance that sold him.
"I remember thinking, 'If he takes care of himself that well, he probably takes care of everything that well.' "
Coming out fighting

Schrenker's charm quickly won over clients and friends, but beneath the surface, many said he was a manipulative bully waiting to be unleashed.
Steve Shea, a retail developer who lives in Schrenker's neighborhood, became friends with him in 2002 through mutual acquaintances. They began a business relationship in 2004, when Schrenker became a tenant in one of Shea's retail developments.
Problems soon followed.

Schrenker refused to execute his six-month lease on the property and began finding flaws in the building -- excuses, Shea said, to avoid paying his rent. He sent Shea pages of e-mails with pictures of light switch plates that had screws missing, areas of the carpet where threads were loose and toilet paper rolls, which he said were not replaced each night.

In the e-mails, he warned about the dangers of electrical shorts, falls on the carpet and unsanitary conditions. On one occasion, he brought in Occupational Safety and Health Administration officials to test the building's air quality because someone was smoking in the building.

"It was always positioning to avoid paying the rent," said Shea, who kicked Schrenker out of the building about four months after he moved in. "The way to defend his position was to try to intimidate the other person."
The Kinney family said Schrenker used intimidation tactics on them, too.
Schrenker became close to members of the family, calling them in the middle of the week to check in, and on occasion spending weekends at their lake house.
But when Mike Kinney, a dentist from Roswell, Ga., began questioning Schrenker's handling of his funds after he noticed some money missing, he said Schrenker berated him for bothering him with calls.

Schrenker eventually resigned as Kinney's adviser, saying that he was potentially litigious as a client and that he harassed his staff.
After Kinney's parents, Harold and Margie, locked Schrenker out of their accounts because they also noticed money was missing, Kinney said Schrenker sent the family a letter accusing them of defaming him and issuing veiled threats to sue them.
Kimble Richardson, a licensed mental health counselor at St. Vincent Stress Center, said such defensive tactics are common among people who operate in such a manner.
"When somebody gets too close to the truth, it's like a cat that's backed into a corner," Richardson said. "They come out fighting."
Moving ahead

The national exposure of the Schrenker case should serve as a warning about Americans' high regard for success and wealth, said Jim Rubens, author of the book "OverSuccess: Healing the American Obsession with Wealth, Fame, Power and Perfection." Although awareness is greater, he said, it remains to be seen how much momentum such cases provide for changing Americans' behavior.
For Smith and others, the experience has been a wake-up call.
"I think the whole country has seen you can be taken in a minute," he said.

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