In the News Los Angeles Times

You Won, Now Give it Back

Investment manager Reed Slatkin cheated investors out of $240 million over 15 years. Like many investment frauds that depend on paying initial investors so that others will take the bait, Slatkin's was no different. Typically, the investors that come out ahead in these schemes are confronted with demands that they return their tainted profits under threat of lawsuits by the trustee, creditors, or losing investors.

In rulings dating back to the 1920s, courts have held that people can be required to return investment money paid by fraud artists, even if they were unaware of the deception, says Alexander Pilmer, partner at Kirkland & Ellis LLP and counsel for the trustee. A few investors have voluntarily returned profits, but most have chosen to battle it out in court. Two years after Slatkin surrendered to federal custody and admitted his fraud, many of the cases are still playing out. According to Pilmer, about 100 claims remain against winners in the scam, totaling more than $100 million.

This article appeared in its entirety in the May 20, 2004 issue of the  Los Angeles Times.