by James Carlson.
Cross-posted from 5280.
The spring day had been a warm one, but as Taylor
Romero walked from his Centennial office across the parking lot to the
Embassy Suites, the sun was setting and the air chilled. His employer,
Wayde McKelvy, had been holed up in a room at the hotel for days. Romero
knew this likely meant one thing—well, two things: booze and hookers.
For as long as Romero had known McKelvy, the guy exhibited hedonistic,
self-destructive tendencies. Lately, though, he’d been on a Charlie
Sheen-like tear. The 46-year-old McKelvy had taken to showing up at work
drunk, holding the waist of whichever working girl he’d flown in. He
was so blatant that even his wife, the mother of their twin girls, knew
about it all. By then, late spring 2009, Donna McKelvy had grown
accustomed to her husband and his prostitutes. What she could not abide,
however, was the whore du jour banging up the Mercedes-Benz. She’d
asked Romero to go to the Embassy and get the keys.
Romero took
the elevator up and knocked. The way he remembered it, the door opened,
and there, standing on a floor littered with empty Bud Light bottles,
was McKelvy. The two men were not merely colleagues, they were friends.
They plopped onto a couch, McKelvy dropping his 6-foot-4-inch, 250-pound
frame. Romero learned the keys to the Benz were gone. And sure enough,
so was the girl. While Romero stuck around, waiting, the two men
discussed their dream of making a movie together. It would be dark and
atmospheric; McKelvy had already picked a tagline: What’s the Definition of
Insanity?
Young with long dark hair, Romero is the kind of
computer-programmer dude who wears flip-flops to work. He’d built a
website for the Mantria Corporation, a new green company for which
McKelvy was the lead investment broker and ultimately the sole money
engine. This startup, as McKelvy had put it to anyone who’d listen, was a
revolutionary investment opportunity. Mantria, so went the pitch to
investors, was constructing the country’s first carbon-negative
residential community, where energy-efficient housing would be built
with sustainable materials, and the whole thing would be powered by
alternative energy. As if that weren’t enough, Mantria was also
supposedly on the verge of releasing an unprecedented technology that
turned garbage into usable materials and produced something called
biochar, a charcoal that when used as a fertilizer was carbon-negative.
Operating from his hometown of Denver, McKelvy would raise close to $40
million from hundreds of investors, the majority of them from Colorado.
After
a while, a short Latina woman walked into the hotel room holding a bag
of groceries and the car keys. Slurring, McKelvy yelled at Romero.
Romero yelled back. Something about the family’s car and the prostitute.
From a corner of the bottle-strewn room, the prostitute piped up: “Why
are you talking about me like I’m not here!” She put down the keys,
Romero grabbed them, and he split. Talk about the definition of
insanity: “It was classic Wayde under pressure,” Romero says. “The
bigger things get, the harder Wayde crashes.”
The crash had only
just begun. In November 2009, some six months after that night in the
hotel, the Securities and Exchange Commission (SEC) filed a civil
lawsuit against McKelvy and his wife, and against the Philadelphia-based
owners of Mantria. As far as the SEC was concerned, McKelvy had fleeced
his investors out of tens of millions of dollars in a big, green Ponzi
scheme.
Multimillion dollar white-collar scams are as American as apple pie. See, most recently, Bernie Madoff, who
wormed his way into Wall Street and decimated the portfolios of
thousands of investors to the tune of $17 billion. Sentenced to life in
prison, Madoff has become the infamous face of financial-market
malfeasance nationwide. Coloradans, meanwhile, witnessed their own
high-profile grifter. Denver hedge fund manager Sean Mueller ripped off
65 people, including [Denver Broncos executive VP] John Elway, for some $71 million. Last December,
Mueller was sentenced to 40 years in prison. But whereas Madoff’s and
Mueller’s frauds could have occurred anywhere, during almost any era,
McKelvy and Mantria’s “business plan” was based on a uniquely
contemporary premise, and one that has been especially appealing for
Coloradans.
The United States shouldn’t be dependent on foreign
oil; the country must create a workforce for the 21st century; the
environment must be protected: These are a few of the reasons the
federal government has been nudging industry toward green, or clean,
energy. The national trend has dovetailed nicely with progressive
thinking in Colorado, where conservation and sustainability are rooted
in the mountain lifestyle. Former Gov. Bill Ritter (D) lured numerous
cleantech companies to Colorado, including the world’s largest wind
turbine manufacturer, Vestas. He successfully championed a bill that
required the state to produce 30 percent of its electricity from
renewable energy, the largest proportion in the Western states.
Colorado
is so synonymous with green power that in February 2009, President
Obama chose to announce his $787 billion economic-stimulus
package—filled with “clean-energy” provisions—in Denver. The venue the
president chose was the Denver Museum of Nature and Science, where the
roof is home to a solar-panel field, which was installed by a
Boulder-based company, Namasté Solar. Indeed, one would be hard-pressed
to imagine a place more perfect than Denver to exemplify the confluence
of environmentalism and capitalism (not to mention the venture
capitalism of Boulder). Arguably, no one is more primed for green
investment opportunities—or susceptible to clean-energy con men—than
Coloradans. “If you can show me how to save the world,” as a Denver-area
woman who was one of the first Mantria investors puts it, “sign me up.”
It
was just after Obama’s Denver appearance that McKelvy and his
Philly-based Mantria partner, CEO Troy Wragg, were telling investors
that the company was engaged in promising meetings with the president of
Ivory Coast; that Mantria was hobnobbing with the Clinton Global
Initiative; and that the company was “this close” to selling $240
million worth of its “systems.” To develop their audacious projects,
Wragg and McKelvy needed cash. Mantria investors, according to the SEC,
were offered securities in the form of “promissory notes, stock, limited
partnership interests, and so-called profits interest.” These contracts
promised extraordinary returns over periods as short as eight months.
The
reality, according to the SEC, was that Mantria produced virtually no
revenue in its two years of operation. The purported $240 million deal
vanished. Mantria’s product sales amounted to unloading one bag of
biochar. It went for $97. The facts, so say the feds, show that every
dime investors received was funded by new investors—in other words, a
classic Ponzi scheme. McKelvy was not an employee or corporate officer
of Mantria, but he was a rainmaker, persuading investors to empty their
retirement accounts for the promise of 17 to “infinite” percent returns.
Since
2008, securities officials have targeted at least five alleged scams
involving clean energy, prompting the Financial Industry Regulatory
Authority to release an investor alert stating, “It seems like
everybody’s going green these days—even fraudsters.” And according to
the state and federal paper trail, Mantria is the biggest green scam to
date in the United States: Investors lost some $35 million, more than
all of the other green scams combined. In the SEC complaint, McKelvy is
akin to the Madoff of green—with a touch of Tony Robbins. And there may
be another similarity between McKelvy and Madoff, and, for that matter,
the local Mueller crook: McKelvy appears to be another financial fraud
halted too late due to regulatory bureaucracy.
Troy Wragg, a working-class kid from Philly turned scrappy entrepreneur, created Mantria in 2005 while
in his early 20s. His espoused dream was that Mantria would develop a
carbon-negative residential utopia. Big dreams from a relative nobody
like Wragg needed capital. For about two years, he was in business with
BridgePoint Ventures LLC, a Florida-based real estate management firm.
Sometime around 2007, however, BridgePoint ended its partnership with
Mantria. “We had a pretty unceremonious parting of ways,” says Edward
dePasquale, a BridgePoint vice president. The way dePasquale explains
it, Wragg’s Mantria was overappraising real estate, and BridgePoint
decided “that we didn’t want to deal with him in any way, shape, or
form.” Fortunately for Wragg, one of BridgePoint’s affiliates, Wayde
McKelvy, who ran an LLC called Speed of Wealth, saw an opportunity in
Mantria, and that same year the two began working together.
The
men complemented each other quite well. Wragg was a fast-talking,
youthful city slicker from the East Coast; McKelvy, twice the kid’s age,
was a rugged, charismatic Coloradan. He attended South High School,
then the University of Northern Colorado, where he played offensive
lineman on the football team and majored in business. According to three
of McKelvy’s former UNC teammates, he was the champion of the freshman
beer “chug-a-lug” contest; he had a “screw loose”; and he wasn’t above
eating a handful of worms to get a laugh. Former teammate Don Barlass
remembers that McKelvy “definitely enjoyed school, enjoyed football, and
enjoyed life. If Wayde was around, you knew you’d be having fun.” None
of McKelvy’s old pals would have pegged him as a guy to scam anyone. On
Team Mantria, Wragg rattled off numbers and stats, whereas McKelvy
talked about big-picture-type stuff, in rousing and sometimes blunt
everyman language.
On calls with potential investors in spring
2008, the personalities of the new partnership clearly had found their
rhetorical groove. The two men were soliciting funds for Mantria
Financial LLC, set up ostensibly to finance purchases in the
carbon-negative utopia. According to the pitch, this community, Legacy
Ridge, in Dunlap, Tenn., had everything. Ten miles of streams, 12
miles of bluff lines, a five-star restaurant, and two designer golf
courses—all being built with sustainable materials and powered by
alternative energy. Any investment, Wragg laid out, would earn 17
percent annually for the next two and a half years, and then an
additional half-percent equity stake in the company’s projected profits
($70 million) after another two and a half years. The possibilities were
astronomical. A $250,000 buy-in would bear a $456,250 profit.
Enter
McKelvy: “What Troy and I know,” he said in his folksy Colorado
baritone, “is that if we make you happy with your returns—and that’s our No. 1 priority, by the way—that you will always invest with us and
we will have an ongoing business.” No one on that call questioned
McKelvy’s compensation package. He was pulling 12.5 percent off the top
of every investment he brought in, which is a rate of commission double
that of what is typical for a well-compensated financial broker. And
although the SEC requires broker-dealers be licensed, McKelvy, along
with Wragg, was not.
“For those of you waffling out there,” a
caller on the teleconference said, “quit your waffling and get with the
program. These guys know what they’re doing 110 percent.” Another caller
added: “You can’t get a better education than from Wayde.”
In
one of the calls, the former college football player sounded as if he
were in a locker room at halftime, throwing down a gut-check challenge
to his team: “A lot of things I hear out there. No. 1: ‘It’s too
good to be true.’ The first thing I say is, ‘Well, then shouldn’t you
jump in it right now?’ I’m sure you’ve heard that it’s too good to be
true to get those kinds of returns in this market. Well folks, those of
you who are invested with us know it’s not too good to be true. You get
your checks. We keep coming out with better products.”
A stroll through The Venetian hotel and casino in
Las Vegas is a walk of luxury. Marble pillars and gold-plated fixtures
frame every hallway, painted murals adorn arched ceilings. Every turn
seems to lead to the casino, where you’re enticed to ooh and aah at the
pretty possibilities; never mind the odds—bet big. It was here, at the
Venetian, in December 2008, that Mantria investors gathered for what the
partners described as a “big, end-of-year boot camp.”
They packed
100 to 200 strong into the ballroom, where projections of the Mantria
logo—a large, oddly shaped M—were on every wall, looming over the
audience. According to a handful of investors present for the gathering,
McKelvy lurked in the back of the room while Wragg stood on stage in
the spotlight. Mantria, he began, had undoubtedly delivered to investors
unparalleled opportunities. None, however, were better than what he was
about to present: What if you could help solve the climate crisis and
eliminate the need for landfills? What would that look like for America?
What about the world?
Well, after scouring the country, Wragg
had discovered just such an opportunity. Mantria, he announced, was
partnering with a company to develop technology that would produce
biochar. What’s more, the technology would transform waste into usable
products. It was a concept tailored for marketers. As Wragg repeated
throughout his talk: “Trash into cash.” Romero, the computer programmer
McKelvy had hired, noticed McKelvy standing at the back of Wragg’s
presentation. To no one in particular, McKelvy repeatedly interjected
his own version of the slogan he originally coined. “Shit into cash,” he
kept saying. “Shit into cash.” Romero could tell that McKelvy was
drunk.
After the presentation, audience members lined up to give
video testimonials. “It’s been a mind-blowing experience,” one said.
Another exclaimed, “I’m, like, having to take sleeping pills because I
can’t sleep at night! Because I am so excited about what they’re talking
about in our investment opportunities!”
Romero saw that McKelvy
wasn’t as enthused. At dinner that first day, McKelvy appeared with a
beer in hand, continuing to drink. Having seen his theatrics at Wragg’s
speech, and now drinking into the late afternoon—Romero saw this as a
possible sign of trouble. Romero was still in high school when a contact
of his stepfather’s introduced him to McKelvy. It was the early 2000s,
and McKelvy asked the kid to build a website for his wife’s insurance
business. Romero jumped at the chance. Up to about 2003, he was paid
well to develop the site. But then Romero watched McKelvy
implode—drinking heavily and eventually filing for bankruptcy. Romero
remembers McKelvy one day coming to him and saying, “Hey, we’re out of
money.” Romero left for San Diego, where he remained until McKelvy wooed
him back in 2008. Now, in Vegas, there was something in McKelvy’s
demeanor; something of that old Wayde that Romero saw in the new Mantria
Wayde.
Romero and other employees rode the strip of bright
lights in stretch limos. At a VIP club, they were escorted past long
lines into roped-off areas where, as Romero puts it, “top-shelf liquor
is flowing like the nearby waterfall. It. Was. Crazy.” To employees like
Romero, the party seemed a deserved celebration of the past year’s work
and the future’s infinite possibilities. “We were going to save the
planet,” Romero says, “and we were having a blast doing it.”
McKelvy
didn’t attend the party on the strip. By the last day of the three-day
boot camp, he was gone. He didn’t even show for his planned
presentations. Outwardly, he had plenty of reasons to party and stick
around. He had millions of reasons. He was becoming rich off of the
commissions. He was well on his way to making $6 million over
two and a half years.
Business at Mantria boomed in the new year,
2009. The company was supposedly working on deals with New York and
Colorado; the governments of Congo, West Africa, Liberia, Nigeria, and
Ivory Coast; and with corporations like Cowboy Charcoal and John Deere.
After standing on stage with Bill and Hillary Clinton in New York that
year, Wragg employed what may have been stunningly transparent phrasing
when he told investors, “It only adds another aura of credibility to
what we’re doing.” McKelvy had already raised another $27 million.
Experts
say Mantria’s technology could have achieved something similar to what
was reported. But only with years of further tweaking. Hugh McLaughlin,
the director of biocarbon research for Alterna BioCarbon in British
Columbia, recalls witnessing Wragg tell a renewable energy conference
that Mantria’s technology could generate biochar at a rate that would
exceed scientific limits. Mantria’s promise, simply put, ridiculously
outpaced reality. “Every fact about this thing,” McLaughlin says, “was
exaggerated beyond any reasonable technical standards.” Yet only a few
weeks after Vegas, during a January webinar with investors, McKelvy and
Wragg projected a 53 percent annual return on a buy-in to the
carbon-diversion systems.
Whatever melancholy—or was it pangs of
conscience?—McKelvy might have been feeling in Vegas was gone. Never
mind the odds—bet big, was essentially what he told his investors: “I
want you to go to your [401(k)] administrator tomorrow and ask them what
it would take for you to roll out all your money. Don’t worry about
anything they tell you. They’re going to try to frighten you. Don’t
worry about that because [in] the mega-Webinar on February 10 I’m going
to blow your mind.”
The mind-blower, investors learned on a
teleconference, was that the U.S. Department of Agriculture was set to
offer loan guarantees to Mantria, an FDIC-like endorsement backing
investors’ money. A month later, in March 2009, Mantria announced a
supposed letter of intent with the state of New York. But there were no
deals with the Department of Agriculture and no letters of intent with
any state governments.
That was right about the time McKelvy
started living life as if he were the star of a Girls Gone Wild video. A
source familiar with the McKelvy family says, “As soon as this guy
smells money, he gets ready for alcohol and a bacchanalian orgy.” He
also seemed to be the unhappiest man on the planet. McKelvy told Romero
that he was being asked to raise more money than his original goal.
McKelvy wanted investors to get their money back and to be done with
this. But, he told Romero, “I’m at the point of no return.”
During
this period, McKelvy’s bank account seemed as bipolar as his moods.
Between January and September 2009, the account showed nearly $3 million
in deposits. That account’s balance at the end of September 2009 was
just $1,325.98. As he once said to his investors, “Bottom line is: I
love cash flow. I like lifestyle.” There were stays at the Bellagio in
Las Vegas, the Beverly Wilshire, and other high-end hotels. One bill
alone, for the Wynn Las Vegas Resort, totaled $9,628.22. The VIP
treatment at clubs. A BMW. A $7,000-a-month oceanside condo in Miami. It
wasn’t just him: Donna McKelvy was routinely making $20,000
withdrawals, though it was Wayde who doled out the biggest bucks. In one
three-day spree in Las Vegas, he spent nearly $25,000 on three pieces
of Cartier jewelry, which, Donna has said, weren’t for her.
McKelvy
and Donna met in the late 1980s at a party in Denver, just after
graduating college. The two married not long after and had twin girls.
Donna went into the insurance business, while he launched a string of
business flops.
By the time of the jewelry purchases in summer
2009, his and Donna’s marriage had disintegrated. McKelvy had moved to
Miami full-time. There’s a good chance the jewelry was for McKelvy’s new
girlfriend, a woman named Angela. Obviously years younger than McKelvy,
the woman had platinum-blond hair, fake breasts, and a backside so
pronounced that people close to him speculated it was enhanced with
implants. McKelvy’s friends whispered that there was something about
Angela that was … no one could seem to quite put their finger on it.
Meanwhile,
on investor calls, every offering was better than the last, each a
galactic chance at wealth—and possibly the final one. In a summer
teleconference, what McKelvy called his “heart-to-heart,” he talked
about how a new deal netting 55 to 100 percent annualized return was the
“biggest, most generous offer we’ve ever made … You guys are sitting
there with Mantria on the cusp of greatness, in my belief,” he said
softly, sounding on the verge of tears. “In my heart of hearts, I
believe that. We’re on the cusp of greatness here.”
A few months
later, in mid-September 2009, McKelvy told investors that Mantria had
secured somewhere between $250 million and “over $1 billion” in
financing, and it was the happiest day of his last five years. One
caller was—at last—skeptical, and asked, “Is [the biochar technology]
generating any revenues at this point?” Wragg skirted the issue, and
when McKelvy jumped in, he finally admitted, “Right now our biochar
sales are not explosive … but we do have a lot of orders.”
McKelvy
implied that he’d heard similar concerns before, and that he was sick of
it. “It’s time people get off the fence,” he said. “You know, I preach
and preach and preach. I teach people strategies, but it always comes
down to action. People say there are the haves and the have-nots in the
world. That’s not true. It’s the wills and the will-nots. The people
that do. And the people that do nothing.” It would be one of the last
investor calls. A few weeks later, an Oct. 7 letter from the SEC
notified McKelvy that he and Mantria were under investigation.
“I probably shouldn’t talk to you,” McKelvy told me,
“but that’s just who I am.” It was last February when he called, and
since I’d left several messages for him and heard nothing, the call was
unexpected. He sounded as if he were resigned to being the subject of
the SEC lawsuit. He sounded almost as if he understood the reasons for
it. And he seemed to shrug it off: “It’s the game I love,” he said. “I
could care less about the money. My love is the game.” There’s evidence
in McKelvy’s past that he views business as a game, and, to hear it from
some of his former clients, he doesn’t play fair.
While Donna
built a career in insurance and her husband opened that string of
businesses, between 1995 and 2005, they owed the federal government more
than $420,000. They were also named in a number of lawsuits. One
lawsuit against McKelvy involved Conifer, Colo. residents Cathy Reynolds and
her husband Pat. Beginning in 2000, Cathy says, McKelvy called her
numerous times out of the blue, claiming the company holding her
mortgage was going out of business; she should stop sending payments.
Not to worry, though; he was seeking a solution. McKelvy, as Cathy
recalls, was direct but comforting. He played up his family, talking
about his wife and daughters. According to Cathy’s 2002 suit filed in
Jefferson County District Court, McKelvy told Cathy she “was just a
number to the bank, not to call because they didn’t care about [her] and
that he could help resolve her situation.”
Cathy says that if
her home wasn’t going to be foreclosed on before McKelvy persuaded her
to stop making payments, it certainly was after. Through a series of
convoluted maneuverings—and what the Reynoldses say was a forged
document—the mortgage was transferred numerous times. (At one point, it
filtered through Jaguar Group LLC, whose head was himself recently
convicted of a $3.4 million Ponzi scheme.) In the end, the Reynoldses
and McKelvy agreed to disagree and the case was dismissed. Along the
way, the couple filed for bankruptcy to halt their home’s public auction
and reclaimed it by signing a mortgage double the amount of their
original.
In researching their case, Cathy says, they came across
other people who had been stung the same way. The suit may have been
the first record of McKelvy being at the center of a muddled transaction
that he initiated and from which he likely profited. “If he was covered
in gas in front of me,” Pat Reynolds says, “I’d provide the match.”
By
the mid-2000s, McKelvy had moved on to form an investment club called
Retirement TRACS. It was at one of its meetings that Louisville,
Colo. resident Mary Phillips met McKelvy. Phillips is a self-assured
woman with a Ph.D. in American studies. When she picks up a call, she
answers, “This is Dr. Mary Phillips.” At the workshops she attended,
McKelvy was a man of “simple American humor” and a bit brash. (He once
yelled at a seminar, “What’s wrong with you folks? You expect change but
you don’t change!”) Nonetheless, he struck her as a guy giving
middle-class Coloradans a chance at investments usually reserved for the
rich. Phillips and her husband lost a total of $500,000 to McKelvy and
Mantria.
It’s tempting, perhaps, to characterize Mantria’s
investors as unsophisticated suckers, but research says otherwise. Most
are like Phillips: college educated, higher income, and more financially
literate. With some investment knowledge, people tend to overestimate
their ability to smell a raw deal, which researchers believe makes them
vulnerable to scams. They also happen to be more prone to emotional
pitches. Besides, Phillips points out that her husband went to Tennessee
to see the Mantria-owned property; he saw the machine that made
biochar, and even received a bag of the stuff. (Real in that it existed,
but was nothing more than a facade.) As Phillips says when asked why
she believed in sky-high returns, “Wouldn’t we all just like to catch a
break, get something really good? It’s the American dream.”
At
TRACS investment club meetings Phillips attended, McKelvy tapped into
that desire. To play with the big boys, he preached liquidating all
traditional funds and buying a universal life insurance policy, which,
of course, he would sell. This plan acted as a sort of self-lending
system, from which people could borrow at a relatively lower rate and
invest in higher-return opportunities. What opportunities, exactly?
Well, McKelvy had the scoop on some deals. On his advice, the club would
roll $11.4 million into corporate bad debt and real estate in Mexico,
the Dominican Republic, and even Granby, Colo. McKelvy would bring a
deal to the club and say the returns were between 12 and 50 percent.
Then he’d tilt his head back and crack a sly smile as if to say, Wait
till you see what you really get. Running TRACS, McKelvy himself did
well enough that Donna could leave her job in insurance. She came to
work with him as his secretary. Meanwhile, to the club’s consternation,
none of the investments panned out or paid out.
Of all McKelvy’s
TRACS-proposed deals, none were as ludicrous as the $250,000 expenditure
on a supposedly rare pink diamond. According to what McKelvy told his
members, they could double their money over a year by purchasing the gem
and flipping it to one of the potential buyers. He whetted the club’s
appetite when he mentioned one particularly interested party: Jennifer
Lopez. McKelvy told investors that TRACS purchased the diamond, but no
members ever saw it, and it never sold. One investor refers to it as
the “diamond boondoggle.” Nearly all of the $11 million invested under
the auspices of McKelvy’s TRACS was never seen again.
In 2007,
after he met Troy Wragg, McKelvy presented an incomparable invitation to
his TRACS members: A chance to get in on the ground floor of a growing
green company. This wasn’t just about wealth—it was about investing in
the future of humanity. Incredibly, some of the club members followed
McKelvy’s new advice. However, several other folks had seen enough, and
filed complaints with the Colorado Division of Insurance. The SEC was
brought in. (The SEC declined to comment on the record for this story.)
McKelvy’s explanation comes by way of what he told his investors: “The
SEC brought me forward in 2007 and dismissed it.”
A year later, on
May 30, 2008, the Colorado Division of Insurance notified the Colorado
Division of Securities that a new complaint was filed against TRACS. At
this point, McKelvy was devoted to raising money for Mantria. It wasn’t
until Jan. 30, 2009 that a state securities investigator, Jerry
Lowe, asked the insurance division for the emails sent from McKelvy to
the initial complainant.
In those emails, investigator Lowe read
about green technology with the potential for gigantic returns. Five
months after asking for the emails, the investigator attended two
seminars. During one, Lowe listened as Wragg raised the prospect of
“hundreds of percent rates of return.” That seminar occurred on May 21,
2009, almost a full year after the Division of Securities first received
the complaint. The SEC, according to court testimony, wasn’t brought
into the Mantria investigation until about five months later in “late
September, early October of 2009.”
Miles Gersh, a local
securities lawyer, says the SEC is efficient after charges have been
filed. But “as far as [the SEC’s] ability to stop wrongdoing before the
fact, though, they are a bit like traffic officers: many intersections,
relatively few cops.” Regulators at all levels tend to be zealous
guardians of their work product, Gersh says, which is a polite way of
saying all of the state and federal investigative bodies are territorial
and each wants to make the bust. Competency isn’t the problem, he says,
it’s “unwarranted, counterproductive secrecy.”
“The primary
reason” the SEC is tapped to help, says Colorado Securities Commissioner
Fred Joseph, “is when multiple states are involved.” The Mantria case
certainly fit the bill. The company was registered in Delaware, based in
Philadelphia, selling projects in Tennessee, and raising funds out of
Colorado. Yet it’s reasonable to conclude that if the state securities
division had bothered to scratch the surface of Mantria, it would have
brought in the SEC sooner.
When the SEC did initiate an
investigation in fall 2009, it acted quickly. Within a month and a half,
it filed its lawsuit and froze the assets of Mantria, Wragg, McKelvy,
Speed of Wealth, Donna, and Wragg’s partner, an Amanda Knorr. For every
Mantria investor, it was too late. By that time, investors had poured in
more than $54 million.
On Nov. 16, 2009, the news broke of the SEC’s
filing against McKelvy and company. The news release said
representations by McKelvy and Wragg were “laced with bogus claims.” At
that point, as McKelvy himself has said, “I sat down and started
reinventing myself at that moment.” Wayde McKelvy soon re-emerged as
Clint Brashman, now apparently up to some of the same old business—and
with a pornographic twist.
In the wake of the SEC’s filing,
numerous websites popped up exhorting Americans to rid themselves of
traditional investments, and were registered to a man named Clint
Brashman. A search for that name brings up multiple videos offering
marketing advice. One was posted on June 5, 2010, by “thebrashman,” and
opens with a guy speaking directly into a camera. He’s thinner now and
has grown a goatee, but there’s no mistaking it: It’s McKelvy.
“The
Brashman” hasn’t restricted his pursuits to marketing and financial
sites: He’s tied to a porn site as well. The Brashman’s email is listed
as the administrative contact for a pornographic blog, where on the
first page viewers see another familiar face, this one framed with
platinum-blond hair dropping past fake breasts. It’s Angela. On the
website she reveals she is a transsexual. She writes on her blog that
her boyfriend “lost all his money” at the beginning of 2010 and “drinks
too much.” Nonetheless, he’s done a lot for her, and she loves him
still. They’ve been together in Miami for two years.
Initially,
McKelvy told me he has nothing to do with that blog or an accompanying
site that recruits other transsexual folks to produce pornography. He
denied this, even though the recruiting site is registered to his old
business, Retirement TRACS Seminars. Confronted with these connections,
McKelvy then said he’s made no money from his pursuits as Clint
Brashman. “Why should I legally make any—that’s going to come out
wrong—why should I make any income? What good does it do for me to make
any money? The [SEC] is just going to take it.”
Speaking in the
slight drawl that fed his image of a good-hearted Coloradan, McKelvy
said that he may have done some things wrong. As far as Mantria, he
admitted to the definition of a Ponzi scheme while bafflingly denying it
was a Ponzi scheme: “I don’t care what the lawyers at SEC tell you;
when you invest in mortgage-backed securities, they take money and go
loan it to John Doe to buy a house. Doe makes payments and it flows back
to me…. What I’m trying to say is that new money is always replacing
old money in any investment.”
He rambled during the conversation,
one minute saying those who lost money are the true victims; a minute
later he lamented his crumbling reputation and compared those upset
about losing their savings to homeowners complaining about their
subprime mortgages. They could have asked questions, he said, done their
own due diligence. “Not to sound like an asshole, I think it’s time
Americans start taking some responsibility. I get that from my ex-wife
now. Everything bad in her life is my fault.”
A few days after
our phone conversation last February, McKelvy signed an agreement with
the SEC in which he neither admitted nor denied the SEC’s allegations.
However, according to the Order of Permanent Injunction, McKelvy “will
be precluded from arguing that he did not violate the federal securities
laws as alleged,” and furthermore, will not “take any action or to make
or permit to be made any public statement denying, directly or
indirectly, any allegation in the Complaint or creating the impression
that the Complaint is without factual basis.”
According to the
SEC resolution, fines still could, and likely would, be levied against
him on behalf of Mantria’s investors. And this SEC settlement agreement
does not preclude the possibility of related civil actions, or, say,
criminal charges that might come from the FBI. (Wragg, Knorr, and
McKelvy’s ex-wife, Donna, signed similar orders.)
To date, no
criminal charges have been filed against anyone involved with Mantria,
but a couple of investors have been contacted by the FBI. Agents want to
know what claims investors heard, what they were promised, and how much
they lost. It’s unclear whether agents know about a guy named Clint
Brashman.
“All of us have our own life lies that we tell
ourselves,” Mantria investor Dr. Mary Phillips said about McKelvy. “Who
we are, what we stand for. For Wayde, he wanted to be the ringmaster. He
wanted to sway public opinion. Maybe he was lying to himself about what
he was doing.”
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