Photo: Jeff Rovner
Ron McCabe did everything right.By the time he hit his early 60s, the San Francisco native and his wife had sold off the successful janitorial company they ran together for 35 years and were on their way to a golden retirement. It was just before the stock market crash, and flush with $1 million from the sale, they decided it was time to switch gears.
It was the wealth management firm they worked with for 26 years that referred them to Right Place Properties, a boutique developer and real estate brokerage with a stellar track record in flipping apartment buildings.
The McCabes went all in, joining the company’s cache of some 1,000 investors.
“For a couple of years, the interest checks and the sellouts on the properties were going along just fine,” McCabe told Business Insider. “We got our quarterly reports and they read beautifully.”
But just before Thanksgiving in 2008, the checks stopped coming. Within a year, the company went under and the truth came out. In lawsuits filed against the company, investors claim the firm stopped working on properties in 2004 and used funds supplied by new investors to pay off older ones ––a textbook ponzi scheme worth $100 million.
McCabe lost everything.
“When this thing began to unfold, I became horribly depressed,” McCabe said. “I just saw my life just ebb away.”
In the years since, McCabe has penned a novel, “Betrayed,” based on his experience and hundreds of one-on-one interviews with other victims.
In a candid interview, McCabe opened up to BI about the aftermath of the scheme and how he’s managed to recover. Our conversation has been edited slightly for clarity.
Business Insider: You and your wife essentially lost your entire retirement fund in this scheme. Recently, you decided to separate. How have you coped with everything?
RM: The rug was pulled out from under us. I did have an emergency fund on hand. I always kept about $100,000 available. It’s a lot of money when your life is intact and your income and assets and resources are full, but on the day that’s all interrupted, it isn’t a lot of money at all.
I hit the ground running many mornings at 4:30 a.m. and put in a lot of work so that my wife and I would have a dignified life in our golden years. I didn’t want to be reliant on government funds, friends, family, or anyone else. It’s too late in life to start a new business. I spent 40 years building up what I had. I wasn’t rich by any means.
BI: When things turned ugly in the housing market, you were the first investor to question Right Place Properties’ strangely unfazed business. How did they react?
RM: I came straight down and started poking around their offices. When you’re an investor, you have certain rights but one of them doesn’t include marching into the office and asking the CEO to see their records. The more they stonewalled me, the more I knew something was wrong.
So I went to the county’s office and I called people across the country and told them this wasn’t a temporary thing, and we were about to be had big time. Many people accused me [of lying]. I took a lot of heat at first.
I said look at the picture. Look at what you’re seeing here. They’re lying to us. They had not actually built the properties out since 2004 and the only way we were getting paid was from new investments from new investor dollars that had now dried up.
BI: What happened when the truth eventually came out?
RM: Some of those clients that got burned in this were so stunned you could not believe the looks on these people’s faces. One guy was treated to a $16 million loss. If you think I felt suicidal, this guy told me he thought about crashing his aeroplane over it. It was devastating. It caught us all completely off guard.
BI: What did your wealth management firm have to say?
RM: Our wealth manger was taken just as much as we were. There was a big constituency of clients that lost their shirts out of that. It was ugly. [Right Place representatives] would appear at the offices of our wealth management company with a presentation on their newest project. You would sit in a beautifully paneled giant conference room with walnut walls listening to this glowing story and look at statements of a project you just received your check from and here’s a company that for 26 years you’ve been trusting and they’re saying it was golden. So we went right on in again.
BI: You spent years trying to build a solid class action case. What ever happened?
RM: I put in thousands of hours with the Arizona State Attorney General’s office, with the FBI, with everyone who would listen to our story. I hired a law firm in Arizona and I brought as many of the investors as I could find. I cannot tell you how difficult it was to find the investors I found. They used a privacy clause in their contracts to prevent us from knowing who was in investor in the project. It took me six months to come up with 60 or 70 investors.
We fought. We did everything we could. We filed complaints. We were deposed by the FBI. We tried with the SEC. The SEC said it was a state regulated investment. It was one agency after another passing the buck. It still makes me angry to this day.
BI: Recently, you decided to cut your losses and call off the litigation pursuit. Are you OK with moving on?
RM: Finally, my attorney said to me we can keep going, but they’ve got very deep pockets and they have deep pockets because they have your money and other people’s money. You can spend every last dime you’ve got, but even if we prevail, you’re going to get nothing. You will have spent the rest of your life living this nightmare.
You will either be bitter and filled with rage or you will turn the energy you have to some positive pursuit and find a way to live out the rest of your life.
BI: You decided to write a book based on the experience, and you interviewed other victims to help flesh it out. What was it like hearing their stories?
RM: I’m 65 and some of these guys were 80 and some even older. It isn’t just a matter of, “Do we have the resources?” or, “Do we have the will [to fight this in court]?” You’re talking about the rest of our lives. This is a consequence of a financial fraud. Financial fraud does this thing to people and it’s particularly insidious for people who are at the end of their work career. Just imagine yourself being 85 when this happens. Where do you think you’re going to turn? You’re gonna find yourself handing out pamphlets at Walmart.
BI: Before all this, you were a world traveller and had huge plans for your retirement years. How has all of that changed now?
RM: I sold off everything, right down to my pickup truck and my computer. I live a comfortable life. I’m not inviting you to Tuscany this year to drink wine and cook with me and … I would have loved to go back to China and spend another month there. I love travelling and that’s been taken from me. I sit quietly and enjoy what I do have. I’ve had to refocus my life that way.
I moved my life in a direction that’s still open to me. Nobody took my mind. They just took my money.
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