In Hollywood, pigeons don't fly. They walk.
Stars, writers, directors and even producers with a dazzling knack for making money often discover that hanging onto it is another matter.
The reason? Unscrupulous Hollywood business managers sign all their clients' checks, bank their salaries, make their investments, chart their estate planning, and then suddenly disappear, leaving their victims dead broke.
"It is primarily a trust relationship," said Allen Field, director of special operations for the Los Angles County District Attorney's Office. "That's how they can embezzle from you. Every victim I know feels foolish. They trusted them. I hear this story every time."
Consider the tale of Marty Ingels and his wife Shirley Jones. In 1979, Ingels received a phone call, cold, from Abraham Joseph Landau, who wanted to be his business manager. Landau claimed to have a business management background.
Ingels, after checking one shaky reference, hired Landau to handle his financial affairs, as well as those of his wife and stepson, Patrick. Ingels even tossed a party for Landau that included Hollywood pals like Lee Remick, Phyllis Diller and Ernest Borgnine. Four years later, Ingels was in court claiming Landau had embezzled nearly $500,000 from his family, and left a large debt owed to the IRS. Landau was sentenced to five years in prison but was released after 18 months.
"It's like the Old West used to be," said Robert Youngdahl, former deputy D.A. who prosecuted Landau. "People ought to be warned before they come into town."
Among the victims bilked over the years are Johnny Carson, Red Skelton and Doris Day. "Candid Camera" creator Allen Funt charged his business manager with stealing $3 million, leaving him in debt for $750,000. Steve Allen's business manager took off with $550,000 every penny the entertainer had saved.
"These people pay your bills, they make your investments, they hire and fire the gardener, they take care of your vacation home after you leave," said Youngdahl, who for years headed the D.A.'s entertainment-industry task force. "They sign all the checks. (Celebrities) turn over the entire business side of their life to someone they trust."
Sometimes celebrity clients become victims of their own greed by signing on with a business manager who claims to be able to beat the Internal Revenue Service. The schemes generally don't work and often hobble the gullible client with years of back-tax payments and penalties.
"(The clients) don't believe in banks or blue-chip stocks," Youngdahl said. "They believe in the inside deal and the business manager with a nice car and plenty of flash. Greed comes into play. They say, 'Why can't you put me into something where I can keep (the income).' Tax avoidance can be very tricky."
Many, if not most, business managers are considered above-board. The Los Angeles District Attorney's Office currently has no pending cases against any Hollywood business manager. But when a case does break, its connection to a celebrity often creates screaming headlines. That kind of publicity taints the profession.
Part of the problem is that anyone can be a business manager in California. Unlike certified public accountants, attorneys, talent agents and financial planners, business managers are an unregulated industry.
"In California, it's harder to own a dog than be a business manager. At least a dog has to be licensed and have shots," said Arnold Bernstein, a business manager and CPA who has represented Sylvester Stallone, John Travolta and Roseanne.
Youngdahl recalled one celebrity getting a recommendation from a hairdresser.
Such examples point up characteristics of many celebrities that can make them more vulnerable than the typical client to the wiles of an unscrupulous business manager.
"There is, in the personality of most performers, especially musicians, a childish quality, a naivet & #233;," said Sondra Taggert, a Beverly Hills-based financial planner. "But they are extremely egotistical. They cover up the fact that they don't understand business. They turn to a business manager just like they would turn to a chauffeur. It's like having a servant. My business manager will take care of it."
Adding to their vulnerability is the explosive financial nature of fame.
"There is more sudden wealth in Los Angeles than in other cities," Field said. "One day you're a nobody, the next day you're a somebody signing a big deal. The opportunity to steal from people who don't have a background in finance is much greater here."
Field added that celebrities, like many lottery winners, rarely have the sophistication to handle sudden wealth. That could leave the victims at the mercy of smooth-talking business managers.
Celebrity clients often don't check their books and even if they did, the complexities of Hollywood accounting can boggle the mind of even the finest CPA. Some don't even have formal contracts that spell out the terms of their arrangement with their business manager.
One element that befuddles and frustrates the authorities, Youngdahl said, is a code of silence in Hollywood. Many celebrities don't prosecute an embezzler. "There is an unwritten law in Hollywood," he said, "why turn to law enforcement?"
One reason, of course, is bad publicity. Another is that a lawsuit or criminal action might mar their relationships at country clubs, private schools and even restaurants that the victim and the embezzler frequent.
In Hollywood, Youngdahl pointed out, "social relationships are as important as money."
Common scam: A business manager embezzles funds from a client by skimming relatively small amounts over time. This often involves the manager kiting checks paying bills from a bank account that doesn't have sufficient funds, but ultimately will, as funds are deposited from different clients.
How it works: Like a pyramid scheme, the embezzler cobbles assets from unsuspecting clients, paying off one set of bills with new income skimmed from different accounts. There is always fresh money coming in to the business manager from multiple sources, which keeps him ahead of his clients' creditors.
How it's detected: Usually by the victim accidentally stumbling upon some financial discrepancy a bill left unpaid, a bank account suddenly closed, an employer saying payment was made when the client knows he never received the income.
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