Via LearnVest By Michele Lerner, The Motley Fool, for AOL Daily Finance ~
This post originally appeared on AOL Daily Finance.
In 2008, R.P. McCabe and his wife were heading into retirement with a solid financial future that included a $1 million investment in real estate with Right Place Properties and the Red Door Group in Phoenix.
By the end of the year, their money — as well as the investments of roughly 700 others totaling more than $100 million — was gone. The years of statements purporting solid returns were pure fiction. The money they were supposedly making did not come from profits, but from their own funds and money coming in from new investors.
Lawsuits followed, but so far no criminal charges have been filed and the perpetrators claim innocence.
Writing It Out
The money may be gone, but the memories of being a victim of a Ponzi scheme will not soon be forgotten. McCabe reached out to fellow victims and interviewed 200 of the 700 to find out how the scheme had affected their lives.
His research informs the pages of his novel Betrayed, which gives a personal perspective on the fallout from a financial tragedy.
In the novel, McCabe’s characters, Wally and Poppy Stroud, are ready to reap the rewards of 40 years of successful investing and saving for their retirement. When they receive a letter from their investment manager telling them of their loss, the couple’s plans are shattered. Poppy commits suicide and Wally goes into a deep depression until he decides to take justice into his own hands and exact revenge on the scammers.
While the Strouds’ story shares elements of McCabe’s experiences, they are not identical. We interviewed McCabe about what he lost, what he learned from fellow victims, and why he wrote Betrayed.
Q: What happened to you and your wife?
A: Our wealth management company recommended the real estate investment. We liked that there was a social conscience element to the plan because they were taking crumbling inner-city properties and rehabbing them into affordable condos for first-time buyers. The first two cycles paid off nicely; after four years we earned 10 to 12 percent on our investment.
No one knew what was happening, but at some point they started taking money from new investors and paying it out in interest to the old investors. They never completed a project.
We were stunned when we got a letter that told us that the losses were due to the economy and mortgage financing problems, especially because they were never supposed to have been using bank loans in the first place. We lost about $1 million.
All we had left was an emergency fund of about $100,000, which sounds like a lot but it isn’t really when you don’t have an income. I was 65 and retired. We had sold a business and had no real way of starting a new one, especially at a time when the national economy was imploding and Arizona was even worse. I spend most of my time now in Mexico, where the cost of living is cheaper.
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