Heat's on Celeb $$ Guru

New York Post/May 17, 2001
By Brad Hunter

Earthlink co-founder and investment guru Reed Slatkin glided easily among Hollywood hotshots and the gilded rich of Santa Barbara. But, investigators say, the devoted Scientologist was not just networking - he was swindling hundreds of millions of dollars from church members and Tinseltown titans.

Now, the 52-year-old multimillionaire has had his fortune frozen by the Securities and Exchange Commission and is facing a civil suit that claims he operated a $230 million Ponzi scheme - using money from new investors to pay off earlier clients.

Although an unqualified investment banker, Slatkin allegedly pretended to invest money on behalf of 500 clients - many of them Hollywood denizens hooked on Scientology, including "Saving Private Ryan" co-star Giovanni Ribisi. Slatkin spent the bonanza bolstering his high-flying, but fiercely private lifestyle, which included two Santa Barbara mansions (one for his gardeners) and a private jet.

At his ritzy 50th-birthday party held at Santa Barbara's Biltmore Hotel in 1999, superstars Kevin Costner and Arnold Schwarzenegger sent videotaped greetings - although their publicists now deny the stars know Slatkin. Federal investigators have located just a sliver of the money Slatkin controlled, and claims in a suit launched by disgruntled investors could hit $600 million.

Those who lost out are still reeling. "It's not the money that bothers me. That happens," said former friend Patrick Siefe, Santa Barbara computer consultant who lost $100,000. "What surprised me and the way I feel cheated is that a friend has betrayed me." One investor, whose husband was dying of cancer, turned to Slatkin to be the custodian of her mortgage money after her savings had been decimated by experimental treatments, says Siefe. It has all disappeared.

Another, Alice Wintz, who was paralyzed in a 1993 car crash, said she entrusted Slatkin with her insurance money and children's college fund - $1.5 million - and now fears it, too, is gone. "It was everything I have," Wintz said.

Like many others Slatkin, an ordained Scientology minister and avid money-markets investor, was dramatically propelled into the big-time by a fellow church member.

In 1994, he was approached by Scientologist Kevin O'Donnell who knew a young man named Sky Dayton who wanted to start a business that would make it easier to get on the Internet. Slatkin bit, and invested $75,000 in Earthlink Networks. By February 2000, his stake's worth had leaped to more than $122 million.

"There's no question he came across as a full-scale insider," Rohit Shukla of a California networking group told the Los Angeles Times. "He was not just a fabulous investor, but also close to a successful company. The combination of the two was stellar."

Riding high on an Internet buzz, Slatkin's tentacles began reaching into Hollywood because of his Scientology connections, and pal O'Donnell's investment in the movie production house, Beacon Communications - which made Harrison Ford's thriller "Air Force One," Costner's "For the Love of the Game" and the Schwarzenegger film "End of Days."

Slatkin began investing for a group of fellow Scientologists, and they were told their cash would be pooled with other investor funds to buy stocks, SEC documents claim. The account statements showed steady growth, and the investors entrusted more and more money to Slatkin. They also encouraged others to put their money with the neophyte investor.

Some of the players dropped $10 million or more. Slatkin's cut was usually 10 percent, say the SEC documents. "He cast an aura of someone who knows everyone worth knowing and is in play with the big people," Siefe said. "But he usually kept to himself."

The Detroit-born Slatkin, who embraced the religion as a teen, lived with his wife, Mary Jo, and two sons, Brad and Brett, in tony Santa Barbara, about 100 miles north of Los Angeles. "Hope Ranch is quite beautiful, very exclusive. He even bought the house next door, where he kept the gardeners and other workers," Siefe said.

"He wanted his house to be clean of all that stuff. To buy one of those houses takes serious money, but he bought two of them." Although he's known Slatkin for at least 15 years, Siefe said the limelight-loathing impresario remains an enigma.

"He was fanatical about his privacy, he kept to himself and didn't like things in his name or his address known. There aren't any pictures of him," Siefe revealed.

As SEC investigators closed in April, Slatkin resigned from Earthlink's board of directors and filed for bankruptcy protection a few days later. He listed debts of more than $100 million and assets of $50 million to $100 million. Slatkin and lawyers acting on behalf of the investors did not return repeated calls.