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06.10.10

More Alleged A-List Ponzi Victims

New charges against Kenneth Starr say the fraud was twice as large as previously believed, and Lauren Bacall and Neil Simon are two of the victims, The Daily Beast's Jacob Bernstein has confirmed. Simon’s alleged loss: $8.7 million.

Add two more high-profile victims to Kenneth Starr’s list.

Revised charges against the A-list money manager allege that the total fraud comes to $59 million, not the $30 million previously believed. And while a federal government filing Thursday tries to mask the names of the alleged victims somewhat, it mentions a playwright and screenwriter “who is in his 80s” as “Victim # 9.” A person familiar with the case has confirmed that victim as Neil Simon, who apparently lost a whopping $8.7 million in the fraud. According to the filing, Starr agreed last year to pay Simon back $4 million, which he eventually did—using money looted from other clients.

In classic Ponzi-scheme fashion, the feds are now charging that the money paid back to Simon was stolen from three other Starr clients.

Meanwhile, “Victim # 11,” another octogenarian and an actress, whom Starr allegedly defrauded or attempted to defraud of at least $100,000, is former Starr client Lauren Bacall, according to the source.

Reached for comment, Bacall said, “I’m not going to discuss Starr.”

But it is the scope of Starr’s alleged fraud with Simon that was Thursday’s biggest shocker, in part because the legendary playwright had initially been thought to have gotten out of the whole mess unscathed.

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As it turns out, there was a lawsuit and settlement between Starr and Simon. According to Thursday’s indictment, in 2009, Starr entered into an “agreement” with “Victim # 9” (i.e. Simon) whereby he would pay back approximately $4 million of the writer’s money that had been invested in Martini Park, a lounge business in Chicago that Starr was helping to peddle. (This happens to have been the same “ female-friendly, upscale, fun dining and lounge destination for locals and business travelers” at which his former stripper wife, Diane Passage, had worked between 2006 and 2008.)

In classic Ponzi-scheme fashion, however, the feds are now charging that the money paid back to Simon was stolen from three other Starr clients. One of these people is “Victim # 3,” who happens to be Jim Wiatt, the former head of the William Morris Agency. The other is “Victim # 8,” a film producer “in his late 70s,” and “Victim # 10,” a wealthy ex-wife of a big investor who has a foundation. Starr is alleged to have stolen $4.5 million from this woman.

This last description would seem to fit Denise Rich, the songwriter and former wife of financier Marc Rich whose parties and charity events Starr frequented. Calls to Rich on Thursday night went unreturned, and the person familiar with the case could not confirm her identity as a victim in the fraud.

Stealing from other clients to pay off Simon wasn’t the only shady thing Starr allegedly did with regard to the famous playwright.

In 2006, the complaint says, Simon was approached about investing in a movie production company. Simon “informed Starr that he did not want to make any investments in the movie company because he thought it was a bad investment,” the complaint says.

But on October 12, 2006, Starr “caused approximately $312,500 to be wired from the bank account of a company controlled by [Simon] to an account of the movie company.”

The following March, Simon “terminated” his relationship with Starr.

Months later, according to the indictment, Simon found out about the $312,500 that had been funneled to the movie production company. So his new financial advisers asked Starr to supply documentation regarding the transfer.

“On or about October 17, 2007, an employee of Starr & Co. sent Victim # 9’s financial advisers a copy of a purported agreement between Victim # 9 and the movie company...”

Simon thought his signature on the document had been “forged,” the indictment says, so his advisers went back to Starr & Co and asked them to provide Simon with the original agreement.

“When representatives of Victim # 9 went to Starr & Co. to obtain the original agreement—which the movie company had mailed to Starr & Co.—they located the unopened envelope that the movie company had sent to Starr & Co.”

But upon opening the envelope, representatives of Simon “discovered that the ‘original agreeement’” was “not signed [by Simon] at all.”

“Indeed, the ‘original agreement’ was not even an agreement between the movie company and [Simon], but was a proposed agreement between the movie  company and a company controlled by [Simon].”

As for Bacall, she allegedly hired Starr in the '90s and then fired him in 2005 “out of concern with the quality of his services.”

Soon after she dismissed him, her files were transferred to a new accountant, who discovered that her retirement funds had been placed in “risky investments without her knowledge.”

“All told, [Bacall] appears to have lost in excess of $100,000.”

Of course, those losses pale in comparison to the amount of money Starr is said to have cost Bunny Mellon, the widow of billionaire banking heir Paul Mellon.

According to Thursday’s filing, she lost a total of at least $18 million.

Plus: Check out more of the latest entertainment, fashion, and culture coverage on Sexy Beast—photos, videos, features, and Tweets.

Jacob Bernstein is a senior reporter at The Daily Beast. Previously, he was a features writer at WWD and W Magazine. He has also written for New York magazine, Paper, and The Huffington Post.