House of Games Talk Magazine October, 2001 by Timothy L. O'Brien It may have been one of the biggest scams in history. Earthlink cofounder and L. Ron Hubbard disciple REED SLATKIN is accused of duping show business luminaries and scores of fellow Scientologists out of hundreds of millions of dollars - all from an office in a Santa Barbara garage. TIMOTHY L. O'BRIEN INVESTIGATES [caption: THAT MR ROGERS TOUCH Reed Slatkin, July 2000. Left, the Scientology Celebrity Center in Hollywood.] Seated in a conference room in a Los Angeles high-rise a year and a half ago, Reed Slatkin, investment guru to some of the nation's wealthiest people and cofounder of former Internet darling EarthLink, held forth on the finer points of Scientology. "Just to quote this from Mr. Hubbard: 'The aims of Scientology are civilization without insanity, without criminals, and without war, where the able can prosper and honest beings can have rights, and where man is free to rise to greater heights'," said Slatkin. "I've dedicated my life to those aims, and I feel that the world, you know, is not a pretty place."

Slatkin, a Scientology minister, might have been addressing just another gathering of adherents of the controversial religion founded by the late L. Ron Hubbard. But on that particular morning Slatkin was speaking to a very different audience: three Securities and Exchange Commission attorneys investigating whether he was breaking the law. And, like Verbal Kint, the artful dissembler portrayed by Kevin Spacey in the film The Usual Suspects, Slatkin ran circles around his interrogators.

By way of explaining how he ran his business and where hundreds of millions of dollars in his clients' funds were located, Slatkin spun convoluted tales about Swiss ban accounts and murky financial transactions, repeatedly wandering into lengthy digressions about Scientology. "People in businesses that are motivated only by money are wobbly people," Slatkin said at one point, quoting a Scientology text. "The primary cause of failure is money motivation."

Today, with anywhere from $230 million to $580 million of his clients' money missing, Slatkin is accused of master-minding one of the biggest investment scams in history. His fall from grace has unraveled the lives of hundreds of people who trusted him with their savings, ranging from Hollywood filmmakers and high-tech entrepreneurs to Santa Barbara socialites and prominent Scientologists. Slatkin's victims also include his own stepfather, the pilot of his private plane, and a quadriplegic who can no longer afford to pay for nursing care or her home.

Where all this money went is still unknown, and there has been much speculation as to its whereabouts. Slatkin's demise has spawned an ongoing U.S. attorney's investigation and has badly embarrassed the SEC, which Slatkin hoodwinked for more than a year while he continued to court investors and apparently steal their money. His actions have also thrown an unwelcome spotlight on the Church of Scientology's practices, with some investors questioning whether some of their money ended up in Scientology's coffers -- a claim the organization denies. The church told TALK it plans to expel Slatkin from the organization if he is found guilty of any crimes.

Among the roughly 850 people on Slatkin's investor roster are Sopranos star Joe Pantoliano, Fight Club producer Art Linson, former Capitol Records president Hale Milgrim, Smith & Hawken founder Paul Hawken, EarthLink chairman Sky Dayton, actors Giovanni Ribisi and Anne Archer, Oscar-nominated composer Tom Snow, Grammy-winning musician Mark Isham, several scions of Pennsylvania's Walton family, CNN commentator Greta Van Susteren and her husband John Coale, the tobacco litigator, Los Angeles art gallery owner Izzy Chait, Dead Poets Society producer Paul Junger Witt and his wife Susan Harris, creator of the Golden Girls, venture capitalist and Hollywood investor Kevin O'Donnell, and even L. Ron Hubbard's own son, Arthur.

Slatkin appears to be anything but a snake oil salesman. A trim 52-year-old with a black toupee and what one acquaintance describes as a Mr. Rogers approach to friends and family, he avoids the limelight, tries to be home by 9 p.m. most nights and apparently enjoys a postcard marriage. But law enforcement officials and investors say that Slatkin's charming, modest demeanor allowed him to win investors' confidence and then apparently pilfer hundreds of millions of dollars. After dodging clients for months, a bleary-eyed Slatkin appeared at a creditors' meeting in Santa Barbara in late July, offering little to the angry group other than to say, "I'm not hiding and I wanted you to know that." Slatkin declined to comment for this story, but his wife Mary Jo has told friends that her husband will be vindicated. The missing millions, she confides, are in the hands of business associates who cheated her unwitting husband.

Slatkin's friends still can't fathom how he could warmly inquire at cocktail parties about the well-being of their families while simultaneously picking their pockets. Although some believe the genial guru has been stealing from them only over the past few years, new evidence suggests otherwise. A key figure in the alleged scam is a convicted swindler and fellow Scientologist named Ron Rakow, who has been Slatkin's friend and business associate for at least 15 years -- leading many investors to conclude that Slatkin intended to defraud them when he first set up shop in 1986.

One Santa Barbara woman, a victim of Slatin's purported schemes, has her own opinion. Reed Slatkin, she says, is "the Ted Bundy of the financial world."

MIMICKING MARILYN MONROE'S BREATHY SERENADE FOR President Kennedy and rising airily from inside an enormous cake at the opulent Biltmore Hotel in January 1999, a scantily clad woman began singing "Happy Birthday" to Reed Slatkin - making Santa Barbara's hottest money manager visibly uncomfortable on his 50th birthday.

Despite reservations about the chanteuse, Slatkin had every reason to consider his birthday fete one of the high points of his life. Other entertainment at the party included a video produced by Armyan Bernstein, a Slatkin investor whose company, Beacon Pictures, had produced such films as Air Force One and Thirteen Days. Film stars Kevin Costner and Arnold Schwarzenegger appeared in the video, ribbing Slatkin about his athletic abilities. And Slatkin was surrounded by scores of affluent, glamorous guests, many of whom were there not merely out of fondness for him but because they believed he was making them richer by the day.

"The birthday party was like a tribute to Reed, the golden boy," says one party guest who, like many of Slatkin's investors, requested anonymity. "As far as everyone there was concerned, he walked on water."

Membership in the Reed Slatkin Investment Club, the title Slatkin gave his burgeoning investment business, was as coveted as that in any of Santa Barbara's exclusive clubs. Slatkin devotees, their appetites whetted by friends' tales about investments doubling or tripling in value every few years, were anxious to hand over their money to the financial wizard. But Slatkin, they were told, was very selective about whose money he took. To be accepted into the Reed Slatkin Investment Club was not only a path to riches, it was also a privilege.

"Reed would always say, 'Arlo, invite people to invest with me who would help you, because I don't need new investors,'" says Arlo Gordin, a Scientologist who began investing with Slatkin in 1986. "Right up until the end he played out his act just as he had for the last 15 years: the perfect guy, perfect father, ethical decision maker, perfect investor ... And promoting Reed as a scarce resource really made people on the periphery anxious to get in. It was a very carefully crafted scheme."

Most celebrants at Slatkin's 50th birthday party probably didn't know that he had no degree in finance and had never held a Wall Street job. Nor would they know, later that year, that the SEC had started investigating Slatkin's activities.

What Slatkin's investors believed was that he was able to routinely beat the stock market, rising each morning at 5 a.m.

and using complex, homegrown computer programs to trade stocks and other securities until 1 p.m., after which he went to the La Cumbre Country Club for a couple of sets of tennis. His apparent investing prowess enabled him to rake in more than $29 million in income in 1999 and to pay about $1.5 million for an estate--now worth $5 million--in Hope Ranch, one of Santa Barbara's toniest enclaves. The Spanish-style main house was stocked with hundreds of jazz CDs, as well as paintings by Thomas Hart Benton and Albert Bierstadt, and featured a pool, a guest house, and elaborately sculptured gardens. He owned a Corvette Stingray, a Land Rover, two Volvos, a BMW, and two airplanes. He also lavished gifts on his two sons, one of whom, Justin, had a nascent music career that Slatkin avidly supported.

On most mornings Slatkin drove to nearby Goleta, where he had transformed a $500,000 three-bedroom house his family once occupied into his trading headquarters. Bill Hutchins, a local doctor, traded for his own account in one of the upstairs bedrooms. (Slatkin touted him to investors, falsely, as a specialist in biotechnology stocks.) A secretary worked in the dining room, while a stock trader and an office manager worked in the den alongside other contract workers. And a converted garage--with eight computer monitors, several fax machines and telephones--was where Slatkin traded, in what he dubbed the "war room."

Slatkin, who was gregarious and had the right joke ready for any occasion, was fastidious, even neurotic, about noise.

Demanding that the war room remain as silent as possible, he kept his network computer behind a garage wall, apart from the monitors, so he couldn't hear the hum, and he turned off the ringers on the fax machines. He also kept the nitty-gritty of his financial transactions almost entirely to himself, according to two people who worked in Slatkin's office.

"He tended to be very secretive about a lot of his business-oriented stuff," Patrick Siefe, a computer programmer who worked in Slatkin's office for eight years, told Talk.

"He also was very meticulous about what the public saw, like the financial statements we gave clients. At the time this didn't seem suspicious, but with 20-20 hindsight, given what happened, it does."

Despite the fact that he was managing hundreds of millions of dollars, Slatkin relied on a bookkeeper in Santa Fe, New Mexico--Jean Janu, a soft-spoken former Montessori schoolteacher who didn't have an accounting degree--to oversee the bulk of his operation's trading records. Even though the way Slatkin ran his business was decidedly odd, none of those working with him or investing with him seemed to mind.

"It just grew, kind of like a family or something," Janu told SEC investigators in a February 2000 deposition in which she discussed Slatkin's operation. "[The investors] were all personal friends of his. He knew them all."

Adding that none of the records she kept for Slatkin over a 10-year period ever showed investors suffering any losses, Janu also told investigators that Slatkin's investing was motivated by a higher calling.

"He explained that he was a member of this church, this Scientology church," she said. "And the way that he assists them is to take their concern off of the issue of their money, so that they can provide other kinds of work in the world."

Scientology has been at the center of Slatkin's life since he was a teenager. The only son of Milt and Mickey Slatkin, Reed was born in Detroit in 1949; he has two younger sisters. When Slatkin was 14 his father killed himself in their garage.

Shortly after Milt Slatkin's suicide, an uncle who was studying Scientology visited the distraught family.

"My uncle helped us through our grief of the loss of my dad, and the way he did that was through the ministering of Scientology spiritual counseling to us," Slatkin told the SEC in a January 2000 deposition. "It offered us a great solace."

Scientology was founded in the early 1950s by an American, Lafayette Ron Hubbard, a former screenwriter and science fiction author who wrote the bestseller Dianetics:

The Modern Science of Mental Health. The book examined mental health problems and offered methods for combating them.

Scientologists believe that people can achieve their full potential if they purge their minds of painful memories, called "engrams" some of which accrue from past lives. Scientologists say they can erase engrams and achieve an emotional state called "clear" by submitting to one-on-one session with an experienced Scientologist known as an "auditor" who uses a device called "electropsychometer" or "e-meter," which they claim measures electronic disturbances that signal the presence of engrams.

Many Scientologists, including stars such as John Travolta and Tom Cruise, have vouched for Scientology's benefits. The group's critics; however, claim that Scientology is a cult that uses mind control techniques to prey upon emotionally needy people who pay large sums for auditing--- making Scientology more a business than a religion. Critics and former Scientologists also say that members who dissent are blackmailed or detained against their will--claims the organization has repeatedly denied, often using aggressive legal tactics and private investigators.

Whatever the public arguments about Scientology, for Slatkin it was a revelation. During his SEC deposition he told how he'd injured a finger several months after his father's suicide and how his uncle cured him using Scientology "processes."

"Almost miraculously, within a couple of days I had full use of my hands again," Slatkin recalled, "And at that point I said, 'Well, I don't know how this works, but it works for me.'"

From then on Slatkin threw himself into Scientology. While still in high school he started volunteering for the church in Detroit; he later traveled to Sussex, England, to study directly with Hubbard. He began auditing other Scientologists, and he enrolled at the University of Michigan at Ann Arbor in 1967.

Friends say Slatkin viewed Hubbard as a father figure, and in the summer of 1968 he joined his mentor, by then in Scotland, to help him recruit new Scientologists. Slatkin told the SEC that he had helped Hubbard establish the most dedicated cadre within Scientology; a group of young volunteers who wear navy-style uniforms and are known as the Sea Organization (named for those who lived with Hubbard aboard a ship during Scientology's early years; today they occupy the organization's most senior positions.) Shortly after that, Hubbard, Slatkin, and other Scientologists were thrown out of the United Kingdom by the British government, which accused them of running a cult.

"We made a decision that 130 of us would fly to Los Angeles, and with the church's assistance a piece of property was rented on Temple Avenue," Slatkin told the SEC, relating how he helped set up a Scientology center in Los Angeles. "We felt like we were pioneers."

Slatkin returned to Michigan from Los Angeles, finished his college studies, and then moved to Berkeley to do graduate work in Chinese languages at the University of California. He studied for one year in Taiwan before permanently relocating to the Los Angeles area in the mid-70s with his future wife, Mary Jo, a fellow Scientologist, and becoming a full-time minister of Scientology. The Slatkins spent the next decade working as volunteer ministers, supported by modest donations from other Scientologists. But Slatkin told the SEC that after his second son was born, in 1983, he became less interested in volunteering and more interested in making money. At that point Slatkin began putting part of his faith in the stock market.

Although Slatkin never went to business school or worked professionally as a financial adviser, he has an unusually quick mind and a sophisticated understanding of complex, even arcane, trading strategies. Starting in 1984, with tutelage from a wealthy Scientologist, he learned the basics of the stock market. A little more than a year later he began accepting money from investors.

All of his early investors---or as Slatkin preferred to call them, "friends" ---were Scientologists. "With his background in the church, we thought he wouldn't steal a candy bar," says Arlo Gordin, the Scientologist who was an early Slatkin investor. "It's like he used the credibility that one Scientologist expects from another and turned out to be a serial killer."

Slatkin quickly evolved into a dexterous financial pitchman, one who was able to craft his message to the needs of whomever he targeted. "His real talent was that he made everyone feel like the special investor," says John Coale, who, like his wife Greta Van Susteren, is a Scientologist and Slatkin investor.

(Unlike many others, Coale says he and his wife actually made money with Slatkin.)

Slatkin launched his career with a hefty boost from his fellow Scientologists. About 20 of them gave a total of roughly $7.5 million to invest, according to Slatkin's deposition, and with that head start he quickly expanded his money management business from his Goleta home.

As far back as the late 1980s Slatkin showed an affinity for technology stocks, apparently scoring on prescient picks like Apple Computer. "It was a pretty good market time. So people started telling their friends about me," Slatkin later told the SEC. "And I started going, 'Wow.....I can really help these people.'"

Slatkin proved quite able to help himself as well. He and his investors survived the 1987 stock market crash unscathed, and by 1993 he had the means to purchase the first of two properties that comprise his Hope Ranch estate in Santa Barbara. By the end of 1999, he told the SEC, he had about 500 clients who apparently had more than 230 million invested with him. He also became one of Scientology's most generous donors, giving money to a variety of the organization's causes.

By the mid-1990s Slatkin was reaching well beyond Scientologists for new clients, and his calling card was his phenomenal success in 1994 as a founding investor of a company called Earthlink. With more than 4 million subscribers, Earthlink is one of the country's largest Internet service providers. But Slatkin's involvement with Earthlink wasn't the result of astute research; it occurred because of a fortuitous meeting at Louise's Kitchen, a Los Angeles restaurant, arranged by venture capitalist Kevin O'Donnell.

O'Donnell, son of President John F. Kennedy's aide Kenny O'Donnell, is also a Scientologist. His son went to the Delphian School, an Oregon boarding school run by Scientologists, with another Scientologist named Sky Dayton.

Earthlink was Dayton's idea, and it established him as one of the young, leading lights of the Internet bubble. In search of financing, Dayton contacted O'Donnell, who convinced Slatkin to join him in the venture. For $75,000 each, a middling sum for both men, O'Donnell and Slatkin together landed up owning 40% of EarthLink. In the following years, as Internet mania gripped the country, Slatkin's Earthlink stake would soar in value to more than $100 million, adding to the aura already surrounding him. But Slatkin himself regarded the EarthLink investment as a lucky fluke. "That was the last thing in the world I thought was going to work," he told the SEC.

O'Donnell, who friends say lost of his savings to Slatkin, did not return Talk's calls. Dayton, who is now chairman of EarthLink, also lost money to Slatkin and declined to be interviewed. But the fact that EarthLink was initially financed and founded by Scientologists has fueled anguished speculation in Internet chat rooms that the company is controlled by the Church of Scientology. Dan Greenfield, an EarthLink spokesman, says very few of the company's 6,500 employees are Scientologists. Asked by Talk of the company is beholden to the Church of Scientology, Greenfield says, "Emphatically, no."

O'Donnell, an investor in Beacon Pictures, also played a major role in introducing Slatkin to Hollywood. Slatkin ultimately invested about $6.5 million in Beacon, and his proximity to Hollywood's elite was yet another star in his crown when he courted new investors in Los Angeles and Santa Barbara. (He promised whopping annual returns of 10 percent to 30 percent, meaning they could double their money every three to four years.) Investors and acquaintances say that after his gala 50th birthday party, Slatkin spent more time mingling with O'Donnell and others in Hollywood and came into his Goleta office less frequently, choosing to trade from his Hope Ranch estate.

Slatkin also looked beyond Hollywood to make money. He diversified into real estate, hotels, shopping malls and other businesses. Among Slatkin's key partners in these endeavors were Doug Neumann, an Ashland, Oregon Scientologist who bought hotel properties with Slatkin, and Richard Levine, a Tarzana businessman who co-owned an insurance company with Slatkin and controlled accounts Slatkin held at several major investment banks.

Another close associate was Ron Rakow, a Hope Ranch neighbour and fellow Scientologist. FBI agents recently searched Rakow's home as part of their investigation of Slatkin - not the first time that Rakow has had a run-in with the law. A former road manager for the Grateful Dead, Rakow was imprisoned from 1987 to 1988 on federal fraud charges related to his role in an $80 million marketing scam. Slatkin began investing money for Rakow at this time - including $300,000 in proceeds from Rakow's scam. That money was funneled to Slatkin from Britain's Isle of Man, a well-known haven for shady financial dealings.

Slatkin's attorney Brian Sun confirms that his client received the money from Rakow but says he played no role in the marketing fraud. "At the time Mr. Rakow invested with Slatkin, Mr. Slatkin was unaware of the source of the funds."

When Rakow was released from prison the two started working together even more closely. They bought and sold art together, and Slatkin loaned more than $1 million to Rakow's girlfriend, an actress named Denise Del Bianco. Rakow, who did not respond to interview requests, eventually started making weekly visits to Slatkin's Goleta offices to help promote the Reed Slatkin Investment Club.

"Ron was the principle agent in helping Reed promote this scheme," says Gordin. "For many of us, Ron was the way you met with Reed, and you were made to understand that Reed's time was very precious. Ron conveyed that Reed was a very rich, very successful guy who had a very humble lifestyle."

Meanwhile, Slatkin kept priming the pumps, telling investors exactly what they needed to hear. "You're going to laugh when I tell you this," says Stuart Buchalter, a Los Angeles attorney representing film producer Paul Junger Witt and television writer Susan Harris, who claim to have lost at least $15 million to Slatkin. According to Buchalter, Slatkin told his clients that he had a trading model that uncovered profitable correlations between corporate insiders' pending stock sales and press releases issued by their companies - hardly a formula for stock market success, but one that Slatkin peddled to na•ve investors.

"The guy was a charmer, he traveled in the right circles, and Earthlink was a real story," Buchalters says, explaining why investors swallowed far-fetched explanations for Slatkin's success. "I think he created the impression that it was hard to invest with him, but it really wasn't. He was taking whatever money he could get."

Slatkin's pitch was always predicated on friendship, as a 1998 letter to Stuart Stedman, a Texas money manager, shows. "You have asked me to do you a favor and invest some of your money,"

Slatkin wrote. "As a friend, I am willing to do this."

Slatkin's reason for putting friendships into writing involved more than amiability. Slatkin told the SEC he considered investors "friends" and payments "gifts," believing this means he didn't have to officially register as a financial advisor.

Remaining unregistered helped him stay beneath the SEC's radar for more than a decade - until the agency began a lengthy investigation that began in 1999 that went absolutely nowhere.

Slatkin's SEC testimony, given in January and February last year, is laced with circuitous explanations of how he was running his "club". He claimed that members wired money into a California bank and that the funds were then transferred, without investors' knowledge, to NAA Financial, a bank in Zurich, Switzerland. He then dictated each investor's supposed profits over the telephone to his Santa Fe bookkeeper Jean Janu, who recorded the information. Slatkin also told the SEC he had a personal bank account containing about $100 million, but it was unclear whether he bothered to separate clients' accounts from his own.

The SEC also accepted Slatkin's repeated promises that he was getting out of the money management business and was returning his investors' funds - Slatkin added that he dreaded the task because his loyal clients felt abandoned.

"I have, you know, a lot of very happy people, and people I've been a stable point for, and I've kept their money really safe," Slatkin told the SEC.

But Slatkin didn't return most of his clients' money. Instead he was actively rounding up new investors until at least February 2001. And, as the SEC would discover to its embarrassment in April, NAA didn't even exist. (When one investor asked Buchalter what NAA stood for, he responded, "Not Available Anymore.) As the SEC also learned too late, Slatkin had paid off some early investors with funds secured from later investors, a common scam known as a pyramid scheme.

The SEC also allowed Slatkin to dither for more than a year, in part because it accepted at face value claims made by Slatkin's attorney Gerald Boltz that client accounts were being liquidated and that NAA existed. Boltz did not return Talk phone calls. The SEC declined to comment on the record. But investors complain that Boltz, the former head of the SEC's Los Angeles office, enjoyed too cozy a relationship with his former colleagues, leading them to place too much trust in the information they received from him and Slatkin. til this spring, when an investor names John Poitras suddenly got suspicious.

"When you start telling Reed something, he could always finish a sentence for you," says Poitras. "He's one of the shrewdest, sharpest, most sadistic people I've ever met."

A strapping 57-year-old Stanford MBA who files his own plane and once raced vintage Lotuses, Poitras was introduced to Slatkin in Santa Barbara around 1997 through a mutual friend, former Capitol Records head Hale Milgram. The three men sponsored a musical series held at Santa Barbara's Lobrero Theatre and met occasionally for dinner.

A retired venture capitalist, Poitras lived in one of Silicon Valley's most coveted enclaves, Woodside, California. Last year, after a corporation affiliated with Netscape founder Jim Clark bought property in the neighborhood for $52.5 million, Poitras considered selling his home and relocating to the Santa Barbara area - a thought that Slatkin actively encouraged. In November, at a party for Milgram at Santa Barbara's Museum of Natural History, Poitras ran into Slatkin.

"Reed, I sold my house for $24.5 million," Poitras recalls telling Slatkin.

"Wow, I have to come up to see this," Slatkin responded.

About two weeks later Slatkin flew to Woodside in his plane to see the house. As the two men sat at Poitras's dining room table, Slatkin, who was telling the SEC that he was liquidating his clients' accounts, began pitching investment ideas to Poitras. Slatkin needled Poitras about being too cautious, and played on his masculinity.

"You're probably a treasuries kind of guy," Poitras recalls Slatkin saying.

"Okay, I'll give you $2.5 million," said Poitras.

"Join the big boys. Give me $5 million," Slatkin retorted.

"All right, Reed, I'll give you $5 million."

At the end of December, Poitras wired Slatkin $5 million. When Poitras returned in February from a trip to New Zealand with his girlfriend, Slatkin convinced him to invest another $10 million.

"As I thought about this I pulled back," Poitras says. "I just had a gut feeling about it and asked him to get my money back to me."

It was too late. As Poitras frantically tried to extricate his money from Slatkin, Slatkin faxed Poitras excuses for why it couldn't be returned. Poitras hired a pit bull of an attorney, Richard Conn, to go after Slatkin, and Poitras told Slatkin in phone messages, "I'm going to hunt you down and squash you like a bug." But Poitras's efforts were futile.

Meanwhile Jack Dirmann, a prominent Scientologist who invested with Slatkin and has mediated disputes involving church members' conduct, made an unexpected appearance in Slatkin's Goleta office. Although Slatkin typically allowed no one else to have access to his files, Dirmann says he spent several and nights examining his own records. According to Slatkin's acquaintances, one person in the Goleta office became so unnerved by Dirmann's presence that she fled. Dirmann says the only reason he was there was to find out what happened to his own investments.

"I was expecting source documents to confirm the status of my investments, but all I was given were internally generated reports that proved nothing," Dirmann told Talk in an email.

"Any information he provided me was not helpful or even, as it turns out, true."

Arlo Gordin told Talk that the Church of Scientology brought Slatkin in around this time to interview him about his financial activities, but that Slatkin repeatedly complained of headaches and said he couldn't answer questions. The church told Talk that it never asked Slatkin to submit to such interviews.

All these behind-the-scenes maneuvers ended on April 11, when Poitras made Slatkin's problems public by filing a lawsuit against him. Panicked Scientologists, now aware that their money might be gone, flooded the church with requests for help.

Mike Rinder, one of the church's highest officials, called and faxed Slatkin for information, efforts that Slatkin ignored.

Other creditors, mostly non-Scientologists, also began demanding information from Slatkin or filed their own lawsuits.

In late April Slatkin's attorneys met with a large group of investors and creditors - telling them that their money, anywhere from $230 million to $580 million, was gone. Slatkin then declared personal bankruptcy. In mid-May the FBI raided Slatkin's Goleta offices and the SEC finally filed a lawsuit against Slatkin himself, freezing his assets and accusing him of fraud.

It still isn't known where all the money is, although more answers should surface in the coming months as the FBI and Slatkin's creditors' committee complete separate investigations. Richard Wynne, an attorney for the creditors' committee, said his team has located $30 million in securities and $100 million in partnerships and real estate held by Slatkin, but that hundreds of millions of dollars are still missing. Hundreds of boxes of Slatkin's documents - including transcripts of confidential counseling sessions Slatkin conducted with other Scientologists over the past 20 years - are in a secure storage room on Pico Boulevard in Los Angeles, awaiting further examination by creditors.

While there is speculation that Slatkin diverted money overseas, people with direct knowledge of Slatkin's finances say there is no evidence of such accounts. "It is entirely possible that he was moving offshore and was ripped off by one of his cohorts," says one person investigating Slatkin.

"Criminals rip one another off all the time."

Shortly after the scandal became public, Bennetta Slaughter, a prominent Scientologist, faxed Slatkin's investors, telling them to funnel all information about Slatkin's dealings through her - leading many investors to wonder if the Church of Scientology was trying to orchestrate how Slatkin's downfall was perceived and whether a large portion of his funds was funneled into the organization. Slaughter didn't respond to Talk's questions about her actions. A Scientology spokesperson, Aron Mason, says that although the church discussed public relations issues about Slatkin with Slaughter, she was acting independently. Mason says the church has not been contacted by law enforcement officials and that the organization has found no evidence that Slatkin diverted large sums of money its way.

"I'm aware of the numbers in terms of what was missing, and nothing like that came into the Church of Scientology," Mason says. "This is not where that money was going."

Some investors think it's possible that Slatkin, emboldened by the inflated value of his Earthlink stock, borrowed from banks and took money from their accounts, thinking he could replace it later by selling some stock - a maneuver foiled when the internet stocks cratered. But an individual familiar with the SEC investigation says Slatkin was scamming people well before he invested in Earthlink.

Slatkin hasn't been arrested, although the U.S. attorney's office in Los Angeles is continuing its investigation. The bankruptcy has forced him to put his Santa Barbara estate, and everything else he owns, up for sale. He still occupies his Hope Ranch home, thoughts wife and children have moved out.

Slatkin tells people close to him that he is surviving on money provided by relatives. Slatkin's attorney Brian Sun says that Slatkin intends to "fully cooperate with both the regulators and investigative agencies."

Some victims, annoyed that Slatkin sill has funds to draw on - and that he funneled more than $3 million to his family "We knew within 24 hours that the accounts in Switzerland didn't exist," says Stuart Stedman, the Texas money manager who independently tried to trace $18.4 million that he says he lost to Slatkin. "Part of the reason the SEC went along with Slatkin was Gerry Boltz. He had practiced with the SEC. It wouldn't have been hard for them to verify that these accounts didn't exist." Nor, of course, would it have been hard for Slatkin's most well-heeled investors to probe more deeply. Most had been tucking their money away with him for a long time and had no reason to question the fat returns they thought they were receiving. They were all friends of Slatkin and they all believed what he was telling them -- just before declaring bankruptcy -- have given him a new first name: Greed. Others are more fearful. "If I'm the only witness who can say in court that these documents are false, that makes me worried about what might happen to me," says Patrick Siefe, Slatkin's computer programmer. "Let me tell you, this guy is smart. He's smarter than the SEC and smarter than the FBI. He has certainly already made fools out of the SEC. He will end up a multimillionaire after all this is done, I have no doubt about that."

One investor, still shell-shocked by his encounter with Slatkin, recently had a dream in which Slatkin is a homeless beggar hovering near the entrance to a movie theatre. In the dream, Slatkin says he never did anything wrong and never meant to hurt anybody. Then he asks to borrow $54,000.

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