Investors left scrambling in fallout from alleged Rick Siskey Ponzi scheme

Jan. 20--During his three-decade career in Charlotte, Rick Siskey presided over a web of business ventures, including a financial services firm that sold insurance and a host of companies that purportedly made investments.

Now that the FBI has alleged that he was defrauding investors through a fund called TSI Holdings, clients who invested in that fund and other Siskey-related ventures are scrambling to see what happened to their money.

The FBI has indicated that its criminal case is no longer pending after Siskey committed suicide Dec. 28, but an attorney for his wife, Diane, said she is continuing to cooperate with authorities, including the U.S. Securities and Exchange Commission.

Investors, however, remain worried that they lost money in what the FBI alleged was a Ponzi scheme and are wondering whether authorities will help them get repaid. More than 100 investors could be out as much as $19 million, according to an affidavit unsealed last week.

Since the allegations surfaced last month, investors say they have felt betrayed. Sources familiar with the matter said Siskey was assuring investors that everything would work out after he was contacted by the FBI on Dec. 12, and even solicited some investors for more money.

"Until we can meet with an outside, third party, who represents the investors and not the Siskey estate or the many companies he owned, we will never have peace of mind," said one investor who did not want her name used to protect personal financial information. "It would just be helpful to know what to do next."

In a note to investors, Diane Siskey has previously apologized and asked for patience as she cooperates with authorities and works to repay investors. In a statement to the Observer Friday, Thomas Walker, a former federal prosecutor now with Alston & Bird, said his client "remains committed to that cooperation as well as helping the investors of her husband's estate."

The FBI, SEC and U.S. Attorney's Office declined to comment. Authorities have not suggested that Siskey had any co-conspirators.

[Rick Siskey had swift rise in Charlotte -- and sudden fall]

Among those looking for answers is Charlotte attorney Charles Monnett III, who is representing two of the investors, one of whom is a family member. He said he is formulating a plan of action, including potentially asking the court to appoint a receiver to freeze assets and come up with a distribution plan.

Monnett said he's looking to see what role the SEC will play in the case. The securities regulator would have the authority to request the appointment of a receiver to identify and protect assets for investors. Attorneys representing investors could also file lawsuits.

He said it also appears that Siskey had life insurance policies, although it's not clear how much and whether the insurers would honor the polices. Insurance policies typically pay out in the case of suicide if the policy has been taken out two or more years before the death.

"We don't want the assets to be dissipated in any way, and want that the maximum amount becomes available to repay any creditors," he said. "Obviously, we are taking a long hard look at anyone involved in these transactions to see how this could have happened."

On Thursday, according to documents in Mecklenburg County Superior Court, Monnett filed a petition asking the court not to appoint Diane Siskey as the representative of her husband's estate, saying it was a potential conflict of interest. That's because any payments to investors could reduce her share of the estate.

Firms beyond TSI

The FBI affidavit that alleges Siskey was running a Ponzi scheme focuses mostly on TSI Holdings, a fund started by Siskey in 2010. The document, however, also mentions four other Siskey-related entities: WSC Holdings, SouthPark Partners, Siskey Industries and Sharon Road Properties.

The affidavit says from January 2011 through November 2015, money moved back and forth between these four companies and Siskey's personal bank account.

Money paid out of the personal account included $1 million in American Express credit card payments, $800,000 for a high-end wine provider, $700,000 for jeweler Diamonds Direct, $148,000 for a charter flight company, home construction expenses and other personal bills, according to the affidavit.

"After extensive analysis, it does not appear that the majority of investor funds have been used for actual investments," says the affidavit, which was unsealed at the Observer's request.

Siskey was also the founder of Wall Street Capitol, a financial services firm that until last year was associated with MetLife, selling insurance and other financial products. He was no longer registered as a securities broker with MetLife or any other firm after 2004, when he agreed to a two-year ban from the industry because he had not informed his employer of his involvement in a private securities offering.

He left Wall Street Capitol around 2010 or 2011 but was still authorized to sell MetLife insurance until about 2015, said sources who didn't want their names used because they weren't authorized to speak publicly. Diane Siskey was a registered broker with MetLife's securities arm from 2001 until December, according to Financial Industry Regulatory Authority records.

In July, MetLife sold its private client group to MassMutual, but Wall Street Capitol was not part of the transaction, said MassMutual spokesman Mike McNamara. "Richard Siskey was never affiliated in any way with Massachusetts Mutual Life Insurance Company," McNamara added.

MetLife spokeswoman Kim Friedman said the insurance company would not comment "due to the ongoing investigation, with which we are assisting."

Another venture that had been affiliated with Siskey called Siskey Capital changed its name to Stone Street Partners after the FBI investigation emerged last month. Its managing partner, Marty Sumichrast, has said authorities have confirmed that it's not part of the investigation.

'Why they do it'

Richard Myers, a former federal prosecutor who is now assistant dean of the UNC Chapel Hill law school, said it's too early to say how the Siskey case will play out for investors.

In complex financial crimes, authorities often bring a criminal proceeding against an individual as well as a civil asset forfeiture proceeding in which they can seek proceeds from that person or his estate. Usually, the civil proceedings come after the person is convicted, he said.

Concerns about Siskey first emerged Dec. 21 when a federal judge issued an order saying that the Siskeys' prominent SouthPark home could be seized by the government because of an alleged connection to fraud. Such an order, Myers said, was essentially a warning to future purchasers or anyone taking out a mortgage on the property that the government may have a claim, but it didn't necessarily mean authorities would take action.

While some investors may be out money, it's also a possibility that investors caught up in a Ponzi scheme who made money could be asked to give it back, Myers said. That typically only happens if someone should have realized that something fraudulent was going on, he said.

The allegation have left some investors wondering how someone they trusted and who was respected in the community -- the Matthews YMCA branch was named for the family in 1995 -- could possibly commit such actions.

Eugene Soltes, a Harvard Business School professor whose new book is called "Why They Do It: Inside the Mind of the White-Collar Criminal," spent years interviewing CEOs and other white-collar criminals to better understand their actions.

Speaking generally of these cases, he said he found that at the time when these activities are going on the white-collar criminals don't see the consequences of their actions, unlike a street offense where there is intimate contact during the criminal act. The individual may even be seen as a pillar of the community even as they're committing the crime, he said.

"At the end of the day, you get to come home and see that everyone is really happy with what I'm doing," Soltes said. "The investors were probably happy and even giving them more money. It's only when it all comes crumbling down that all those consequences become real for both the individual and the victims."

Researcher Maria David contributed

Rick Rothacker: 704-358-5170, @rickrothacker

___

(c)2017 The Charlotte Observer (Charlotte, N.C.)

Visit The Charlotte Observer (Charlotte, N.C.) at www.charlotteobserver.com

Distributed by Tribune Content Agency, LLC.