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By Applelinks Senior Editor John H. Farr
Reed Slatkin, co-founder of the Internet service provider EarthLink, was sentenced yesterday to 14 years in prison for running a fake investment service that bilked over 800 customers for 15 years, according to USA Today. No EarthLink assets were involved in the operation, which attracted the participation of celebrity investors such as actor Joe Pantoliano and model Cheryl Tiegs.
Slatkin was also ordered to make personal restitution of up to $240 million to investors. The scheme operated by promising to purchase securities which were never paid for. Instead, Slatkin pocketed the money and paid certain clients with money taken from other investors.
Comments: The wonder is that this scam operated for 15 years, though not without controversy. Slatkin and associates successfully fended off an SEC probe several years ago by filing false documents and lying to investigators. The Church of Scientology is at least peripherally involved in this tale as well, with Slatkin (a former member) claiming to have arranged for his "investors" to contribute between $25 and $50 million to the church even after he had been expelled from it. His reason? He was afraid to end the setup. An attorney for the Church of Scientology present at the sentencing called this allegation "outrageous."
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