For a while there, life was pretty sweet for Ed Molz III. The financial start-up he formed last August was doing great business, and while his office staff fielded calls from investors around the world, he lived the good life, with shopping for sports cars and getting plastic surgery by day, and dropping a thousand bucks a night at Dallas strip clubs.
The investors whose investments paid for his lifestyle, though, knew him as "Frank Sullivan," and while few ever met him in person, he talked a good enough game to lure hundreds of investors into the sham operation he named 3rd Street Financial.
For $3,000 to $6,000 up front, the company supposedly sold "aged" corporations with lines of credit up to $400,000 -- a quick way for small business owners to get credit for their start-ups at a time when banks aren't lending like they used to. "We are having a 99.9% success rate right now even in these crazy economic times," the company's website claimed, according to an FBI investigator's affidavit.
Filed along with a motion for forfeiture for the $65,000 house Molz bought in Irving, the affidavit recounts the bureau's four-month investigation into 3rd Street Financial, which ended last week in Molz's arrest. Not before he'd taken hundreds of customers for over $1 million, much of which he blew on a 40-foot Silverton boat, a Maserati, a Corvette, a BMW 650, a Lamborghini Murcielago and a $65,000 house in Irving. He blew another $20,000 on travel and over $25,000 on plastic surgery, according to the affidavit. (Read it in full after the jump.)
Brenda Champan, who lives in Richardson, says she paid $6,500 for one of 3rd Street Financial's top-tier corporations, to expand her business (which happens to be a clearinghouse for reviews of passive investment operations). "I was told by a couple of other business acquaintances about this," Chapman says. "I went on the word of somebody else and they went on the word of somebody else, who went on the word of someone else."
Chapman says she knows of around 500 investors who got roped into 3rd Street Financial, but that she was one of a relatively small number who visited him in person, at a meeting in the company's office space at LBJ Freeway and Webb Chapel Road.
"He was not sleazy at all, he presented himself to be very professional, very knowledgeable, didn't hesitate on anything," Chapman recalls.
"The bad thing about this," Chapman says, "is everybody's in a credit crunch right now, nobody's lending, and you have this guy coming along saying, 'We've nurtured these companies from the beginning.'"
She says she invested in 3rd Street Financial on the word of a Canadian investor who told her he'd already been paid. She says the Canadian had signed on as a broker with 3rd Street, and hoped to see a cut of the back-end profits if the scheme did well. When he admitted as much to her back in May, she says, "we knew immediately it was a scam."
James Lambert in Marion, Ga., is one of many more who piled onto a 3rd Street Financial scam report forum. Lambert says he'd been looking for a loan to buy cattle to start a dairy business. After hearing about 3rd Street Financial from a broker in a nearby town, he put in $3,500. "He said it was a new one," Lambert recalls. "He was saying, due to the way everything is right now with the credit crunch, banks weren't turning out them big loans like they used to do... We just assumed everybody knew what they were doing."
The U.S. Attorney's office has a month to bring charges before a Grand Jury; Molz could face up to 20 years in prison and $250,000 fine for each count of mail or wire fraud.
3rd Street Financial FBI Affidavit
