Nell Greene wasn't looking to get rich quick.
In 1981, the legal secretary invested $3,963 in a real estate deal offered by Missman-Kaplan Associates Ltd., a thriving San Fernando Valley-based company recommended by a friend. Greene, now 68, saw it as a financial seed. Nothing spectacular, she thought, as the money apparently grew and she invested more. Just enough for a modest retirement.
She was wrong. Last week, the Los Angeles County district attorney's office filed a 117-count complaint against former Missman-Kaplan owners David and Karen Missman of Lancaster, charging them with grand theft, forgery and securities violations in defrauding Greene and 34 other investors.
Investigators say a two-year investigation shows that the Missmans may have bilked as many as 5,000 victims out of up to $30 million using fraudulent real estate loans and promissory notes. The Missmans, who are accused by a former associate of using investor money for luxury cars, property and far-flung travel, each face up to 10 years in prison and $250,000 in fines. They and their attorney have been unavailable for comment.
Some victims lost hundreds of thousands of dollars. Beverly Hills resident Jack Schaps, the retired former owner of a number of Midwestern department stores, has filed a $5-million damage suit accusing the Missmans of bilking him, his wife and others out of at least $500,000 over about four years.
Other investors, many of them active or retired schoolteachers and San Fernando Valley residents, lost much less than Schaps. But in cases such as Greene's, the losses meant much more.
The experiences of Greene and Schaps, authorities say, demonstrate how the Missmans operated during nine reckless years of running a massive "Ponzi" scheme, paying new investors with money from previous investors. Investigators say the Missmans exploited gullibility and in some cases greed to convince victims that they were earning handsome returns when, in reality, the money existed only on paper.
Comparing the cases of Schaps and Greene, Deputy Dist. Atty. Robert M. Youngdahl of the office's Major Fraud Unit said: "Missman was a snake-oil salesman, and he was good at it. . . . It shows you that someone who can earn millions of dollars in a business and retire to California can be just as much of a sucker" as a financial neophyte.
Greene lost $49,000 that she was led to believe that she had accumulated when she retired in 1987. She has been forced to return to work part time. She has taken in a boarder to help pay rent on her first-floor apartment with burglar bars in a graffiti-splattered neighborhood near Lafayette Park in Los Angeles. She can't afford the new car that she needs to go to work. Her dreams of frequent travel have dissolved.
"I guess I got started off on the wrong foot in Sunday school when they taught me that if you are nice to people, they will be nice to you," said Greene, a divorcee and Kentucky native. "Money has not been a subject I've found fascinating. I always thought it was one of the least interesting things to talk about. I didn't even start saving until I was 50."
Youngdahl said many victims were drawn in because they trusted the Missmans' top salesman and company secretary-treasurer, Henry Springer, a former United Teachers-Los Angeles president. Springer has not been charged and has cooperated with authorities, detailing the Missmans' activities in a sworn statement.
Greene was introduced to Springer in 1981 by a longtime friend, a teacher who suggested that she and Greene invest in second deeds of trust at the 15% interest offered by Missman-Kaplan. The company acted as a broker for investors whose loans for home improvements were backed by the deeds, according to the criminal complaint.
"Betty said Hank's got this great outfit going," Greene said. "He was a very charming guy. Don't forget he had convinced the teachers to elect him union president."
Greene never met Missman, who she said had a reputation as "the money expert." She said Springer told her that Missman-Kaplan offered a high rate of return because the company dealt with borrowers who might not qualify for loans with large banks, but who were not risks because their real estate backed the loans.
And the monthly checks came regularly during the first years. Greene was pleased enough that, over the next several years, she invested another $12,000 in two more deeds of trust.
Then, after encouragement from the company, she decided not to touch the money. She reinvested her earnings, along with money she had saved for retirement, into promissory notes for "factoring" accounts.
Factoring was a practice in which Missman-Kaplan purchased and paid off debts owed to contractors by Southern California Gas Co. for energy conservation work. The work was financed by company loans to consumers. Missman-Kaplan used investor money to purchase the debts at a discount and was subsequently reimbursed by the gas company. It was to credit investors each month with the principal and interest agreed to in a promissory note.
Greene said her monthly statements showed that her money was making money. She planned to retire in 1987, and she was counting on augmenting her Social Security checks with monthly interest checks of $500 from Missman-Kaplan.
"I wasn't even going to touch the principal," she said. "I was going to leave it to my daughter."
Like Greene, Schaps was introduced to the Missmans in 1983 by a friend who knew Springer and Nathan Glazer, another company officer and former teacher. Like Greene, Schaps invested in deeds of trust. But he operated on a grander scale, investing $50,000 during the first year and purchasing at least 19 deeds of trust.
"I was not experienced in second-trust deeds, but I did check out their track record," said Schaps, who retired and came to California eight years ago. "As far as I could ascertain, it was excellent. I believe it was a fairly legitimate enterprise in the beginning."
After several years, Schaps bought the sales pitch and began reinvesting the bulk of his earnings on trust deeds into the factoring of utility loans. Hundreds of other investors reported similar experiences. Investigators say the Missmans cultivated investors by paying them promptly at first, then urging them to reinvest the earnings.
The illusion of a well-run, prosperous company crumbled after May, 1987, when the state Department of Corporations cracked down on the Missmans. Authorities say they discovered that company employees, including Missman relatives and in-laws, were forging investor names to resell deeds of trust repeatedly, rendering the loans worthless. Missman-Kaplan was running out of cash, according to a sworn declaration filed by Springer.
Greene said the first sign of trouble came shortly after she retired in April, 1987. The monthly checks from her retirement account began arriving late, then began to bounce. Her phone calls to the Northridge offices of Missman-Kaplan were answered by a harassed secretary who was being deluged by angry callers.
"I was scared," Greene said. "Something was going terribly wrong."
Meanwhile, Schaps had similar difficulty with monthly payments, he said.
"The minute that the first check doesn't come, you begin to worry," he said. He said his questions did not get answers, so he made numerous visits to the company offices, confronting David and Karen Missman.
"They had a million excuses," he said. "I did manage to collect some monies, but there was a lot missing."
During this period, Missman was living in a $1.3-million Chatsworth house and driving a Rolls-Royce, a Maserati and a Ferrari, according to court records. But Springer said Missman told him in January, 1988, that lawsuits by investors were piling up and might force the company into bankruptcy, court records show.
Shortly afterward, investigators from the Department of Corporations and the district attorney's office raided offices belonging to several Missman companies. The couple were forced into involuntary bankruptcy proceedings by creditors. Angry investors held group meetings to discuss legal action as they realized that their money was gone.
"I went into a deep depression," Greene said. "I felt like such an idiot. You blame yourself."
Youngdahl said a bankruptcy trustee who has seized the Missmans' assets reports that there is only about $300,000 left to distribute among victims. But if the amount stolen from investors approaches $30 million, as investigators theorize, Green believes that authorities may discover more money if they dig.
Despite the considerable loss Schaps alleges in his lawsuit, the retired businessman said, "my life hasn't changed."
Greene cannot say the same. Still, she was philosophical, even good-humored, as she sat in her apartment last week.
"I've been gullible," she said. "But you can't sit and moan and groan forever. I wouldn't want to change places with anybody named Missman. Not now and not ever."