A quiet crime spree
Matthew Hattabaugh had a simple scheme for getting rich: He opened up a fake bank and started taking deposits. $650,000 later the feds caught up with him. But apparently felony charges didn't even slow him down.
By G.W. Schulz and A.C. Thompson
Act I: The Potemkin bank
The building at 90 Athol Ave. in Oakland doesn't look much like a bank. There's no signage on the facade, no lobby, no row of tellers, no vault guarded by a huge steel-slab door, no security guards. In short, there's none of the usual bank stuff. That's because it's not a bank. It is, in fact, a four-story cinder-block-and-stucco apartment hive, a contemporary number with spacious balconies and a sweet view of Lake Merritt.
But Matthew Hattabaugh's marks didn't know that.
They thought Hattabaugh was a banker the president, CEO, and treasurer of a legitimate, FDIC-backed institution called Pacific American Capital Holding Inc. and believed the Athol Avenue address was the firm's headquarters.
In reality, Hattabaugh was just a guy who lived in apartment 3F. His "bank" was bogus, a fiction, a complete sham. It was an utterly audacious and hugely profitable scheme, a remarkable con that stands out in the deception-filled annals of white-collar crime. By the time the feds pounced on Hattabaugh, in 2003, he'd already heisted more than $650,000 and had arranged for $4.3 million more in "deposits."
Most swindlers target the easy victims: the old, the unsophisticated, the desperate. Hattabaugh did the opposite. He convinced a number of investment pros, people who had plenty of experience handling large sums of dough, to place their money with him.
And it was, apparently, just the beginning. The Bay Guardian's three-month investigation built on numerous interviews and court records and other documents uncovered a multistate trail of wreckage left in Hattabaugh's wake. After he got popped in Oakland, Hattabaugh was released on bail and headed to Oklahoma, where, law-enforcement records show, he continued his quiet crime spree ripping off his own mother, stiffing a restaurant for $2,500, and forging car-loan documents. He's also, we've found, playing a role in an online pyramid scheme.
He hasn't been charged for any of these offenses. In fact, as far as we can tell, the online scam is still live.
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In his mug shot, Hattabaugh's lips are pressed in a slight smirk over his stout chin. His eyes are naturally squinty, and his close-cropped, sandy blond hair is beginning to recede from a sloping forehead. Hattabaugh would not speak to us, and much about him remains a mystery. We know he was born in Indiana and was apparently raised in Oklahoma, before moving to the Bay Area in 2001, where he rented apartments in Oakland and San Francisco's Noe Valley.
From what we can tell, Hattabaugh doesn't have a legitimate background in banking or a college degree, though he did work for Ameriquest, an Orange, Calif.-based mortgage dealer, before becoming embroiled in financial crime.
One of Hattabaugh's former friends, who asked to remain anonymous for fear of retaliation, paints him as a consummate con artist, saying, "He's one of the most intelligent people I've ever met. He dressed well. Everything about him made you believe he had money and had had it for a long time."
The scam was relatively simple. Hattabaugh said he was the main guy behind Pacific American Capital Holding Inc., an infant bank that was in the process of buying the FDIC charter of a small San Francisco-based outfit called California Pacific Bank. He fabricated a letter from the appropriate person at the FDIC saying as much. He also told prospective clients his firm was backed by a large Japanese bank and created bogus documents to that end.
In an era when identity theft is rampant, Hattabaugh upped the ante: He essentially heisted the identity of California Pacific, an existing, operational bank with employees, an office on Montgomery Street, and $96 million in assets.
To raise cash for his Potemkin bank, Hattabaugh claimed to be selling CDs, or certificates of deposit, an investment instrument typically offered by banks or savings and loans. When a person buys a CD, he or she invests a fixed sum of money for a specified period of time it could be six months or six years and receives interest on the CD. When the CD reaches maturity, the investor gets his or her dough back, with any accrued interest.
In the financial world, CDs aren't particularly glamorous. They work in a simple and straightforward fashion. They generally offer very modest returns, rarely more than a few percentage points. And CDs are super-low-risk because they're insured by the FDIC for up to $100,000, just like a normal bank account.
Looking to unload his nonexistent CDs, Hattabaugh, in late 2002, contacted CD brokers, people who connect banks with institutional investors credit unions, pension funds, mutual funds, and the like looking to sink their money into something safe and conservative.
Con artists usually promise outrageous improbable profits. Hattabaugh didn't. His bogus CDs appeared realistic to the brokers because they offered the same meager interest rates as genuine CDs.
Hattabaugh, says Susan Badger, one of the federal prosecutors who took him down, offered "a very modest" interest rate on the CDs, between 3 and 3.5 percent. "It wasn't inordinately large, so it didn't set off any alarms with prospective investors," she explains. "He was savvy enough to fool some very smart people, and part of his savviness was never to be over the top."
According to Badger, he conducted all his dealings with the brokers, who were in Florida and southern California, via phone, fax, and e-mail. None of them ever met him in person. Despite the lack of human interaction, and despite Hattabaugh's lack of verifiable banking experience, they bought his spiel. "He had a way of speaking authoritatively and was extremely knowledgeable," says Badger, who tried the case with fellow prosecutor Christina Hua. "Everything sounded so reasonable and legitimate."
(If these people had bothered to run a background check on Hattabaugh, they would've learned he'd been sued by a Tulsa, Okla., bank, in 2001, for writing nearly $9,000 in bad checks. The court ultimately ordered him to pay Arvest Bank $11,000, a bill sent to Hattabaugh's Oakland apartment.)
In short order the brokers lined up a bunch of buyers willing to place fat orders. The city of Clovis, Calif., a Central Valley town of 86,000, snapped up $99,000 worth. The BP Federal Credit Union, a Houston-based credit union for employees of the BP oil corporation, parted with $100,000. Investors in Florida poured in $469,000. All the money was wired to a Bank of America account held by Hattabaugh.
But one of the brokers, a Florida man named John Basila, got suspicious and started making inquiries. "He contacted the FDIC and ascertained that there was no Pacific American Capital Holding that had an FDIC charter. He also contacted California Pacific Bank, and they said they'd never heard of Matt Hattabaugh," Badger recalls.
Basila called the Federal Bureau of Investigation, who swooped in on Hattabaugh, raiding his Oakland apartment and seizing his computers and paperwork, in late November 2002. At the time of his arrest, he was awaiting the arrival of another $4.3 million in payments for bunk CDs. After he was busted, Hattabaugh posted a $200,000 bond and headed for Tulsa. The feds eventually indicted him on 12 felony wire-fraud charges.
Act II: Put it on my tab
Out on bail, Hattabaugh lived the high life. He became a regular at Abruzzi Italian Trattoria, an upscale restaurant in south Tulsa. Nestled in one of the city's premier shopping zones, Abruzzi caters to the well-heeled, boasting pricey cabernets, pasta with delicate clam sauces, the freshest lobster you can get in the middle of the country, and crisply breaded eggplant, all prepared from family recipes.
Abruzzi owner Rob Aloisio thought Hattabaugh was an ideal customer, the kind of patron he was hoping to attract when he opened the place, in April 2004 not an alleged felon.
Shortly after the joint opened, Hattabaugh began showing up two to three times a week, sometimes spending hundreds of dollars in a single visit. He often appeared with friends, clad in flashy clothing, and Aloisio says he led restaurant employees to believe he was a multimillionaire.
"He was very, very intelligent, business-wise," Aloisio says. "He's real articulate when he speaks."
Aloisio also describes him as friendly and intimidatingly smart, a "quiet" and "persuasive" character.
After about three months, Hattabaugh asked Aloisio if he could establish a house account. Aloisio consented, figuring that giving this regular customer a tab would keep him happy. Dining on credit, Hattabaugh displayed a taste for fine dishes and drinks, indulging in $22 rib-eye steaks, espresso martinis, white Russians, and cream cakes.
From time to time Hattabaugh would disappear, failing to show up at Abruzzi for up to a month. When the waitresses asked where he'd been, he'd inform them he was a CIA operative and had been carrying out secret missions in Afghanistan. He'd send text messages to one waitress, Aloisio says, telling her that he was riding camelback through the desert and that he "couldn't disclose his location."
In truth, he was in the Bay Area dealing with the considerable legal fallout from his fake-bank stunt.
Another source, Hattabaugh's ex-friend, says, "He told us bullshit story after bullshit story, like how he worked for the CIA."
With the BS piling up, Aloisio wondered if he'd ever see a dime of the $2,500 in unpaid charges Hattabaugh owed him. Hattabaugh, however, is nothing if not resourceful. In late February 2005, he attempted to pay the tab with his mother's credit card, which he allegedly stole. It was a brazen move for a guy a week away from standing trial on federal wire-fraud charges.
Hattabaugh's mom, Dorothy Hattabaugh, who lives in a Tulsa suburb called Broken Arrow, caught on and called the cops, law-enforcement records show. The Broken Arrow Police Department abandoned the matter when she refused to press charges. (She declined to comment for this story.)
In March the "banker" finally faced a jury. After a three-week trial in the courtroom of San Francisco judge Samuel Conti, Hattabaugh was convicted on all 12 felonies; he's facing up to 240 years in prison, though given the reluctance of judges to truly slam white-collar felons, its highly unlikely he'll get the maximum. After all, Enron's Andrew Fastow only got 10 years for engineering one of the biggest frauds in the history of capitalism.
While the feds have recovered most of the money about $88,000 is still missing Badger says some of Hattabaugh's victims have been irreparably damaged. One CD broker, she says, "was completely ruined." After inadvertently steering clients to a con man, the guy "can no longer work in the business." Execs at the BP credit union and at the city of Clovis would not comment for this story.
Hattabaugh's San Francisco attorney, Randall Knox, has an interesting take. "Matt Hattabaugh didn't reap any significant benefit," he says. "The overwhelming majority of the money went to other people who testified against him at trial" a CD broker, a business partner, and an attorney. "I'm hopeful his conviction will be overturned, as I'm sure he is."
After the jury rendered its verdict, Hattabaugh went back to Tulsa, still free on bail.
That changed when we caught wind of Hattabaugh's escapades at Abruzzi, which prompted us to make a call to the US Attorney's Office to see if the prosecutors were aware of his activities in Tulsa. The feds, in turn, did a little research. What they found did not please them.
In June 2005 prosecutors filed a motion asking the court to revoke Hattabaugh's bail. The prosecution brief and attached declarations portray the guy as a sort of crime tornado. According to the sworn declaration of one FBI agent, in addition to trying to pay his restaurant tab with mom's MasterCard, Hattabaugh ran up $4,000 in unauthorized charges on the plastic, and, using his mother's identity, fraudulently bought a new $32,225 Mazda RX-8 for a stripper.
The stripper told the feds she'd been the beneficiary of the $4,000 charge. She "stated that she had known Matthew Hattabaugh for several months and that he has given her equivalent sums of money in the past and often buys her expensive items," according to the declaration.
On June 20 Judge Conti issued an arrest warrant, and shortly thereafter Hattabaugh was caged without bail, locked in a Tulsa County jail cell before being shipped to an Alameda County correctional facility. At press time he remained incarcerated.
The story doesn't end there, though.
Act III: Cease and desist
When we started poking around, we learned Hattabaugh had allegedly gotten involved in another shady business venture while in Oklahoma, an Internet company called HundredFold, on the Web at www.hundredfold.us.
The site sure looks like a so-called multilevel marketing operation, or, to be less euphemistic, a pyramid scheme and Oklahoma authorities have already tried to shutter it.
HundredFold presents itself as a "Service Membership Organization." The company encourages customers to pay for the opportunity to enroll other customers in the program. The site claims customers, dubbed "independent sales representatives," can earn "up to $15,000 per month!" in commissions solely by signing up new members.
"This thing raises all the red flags," says Det. Scott Wanzer of the Tulsa Police Department's Cyber Crimes Unit.
The site also offers access to some sort of very dodgy-looking virtual "TradingFloor" that enables members to buy and sell something called "units."
The closest the site comes to selling actual tangible goods is a "Membership Package" for $100 that includes a debit card, a "personal account," and $10 worth of "units" for the TradingFloor. For $495, the customer gets something dubbed the "HundredFold Flash Builder," apparently for producing online advertisements. The "Business Builder Pak" "maximizes earnings potential" for a mere $995. What you're actually supposed to sell is totally murky.
Aloisio says Hattabaugh visited his restaurant with two characters linked to HundredFold. One is a Norwegian man named Gier Age Nystrand. The Internet domain name www.hundredfold.us is registered to Nystrand, according to www.whois.net, a site that tracks Web site ownership.
Hattabaugh's ex-friend, who says Hattabaugh hung out regularly with Nystrand, also thinks he was involved in running the HundredFold business.
The other Hattabaugh associate is Martin Duncan, whom Aloisio says dined with Hattabaugh at Abruzzi. Credit card receipts we've obtained show Duncan paying part of Hattabaugh's restaurant tab.
An elderly California woman named Guinivere Jones tells us Duncan personally encouraged her and seven of her friends to sink their money into HundredFold.
(When we contacted Duncan in June, he claimed to have only visited with Hattabaugh on a few occasions and not to have been involved with HundredFold.)
But Jones insists she sent her HundredFold investment directly to a Tulsa bank account with Duncan's name on it.
"I live in Los Angeles, but the other seven persons live in Texas," Jones says via e-mail. "We were all told that the investment was to have a return by December 2004.... When there was no prospectus mailed, or no account statements for the filing of income taxes, I knew that something was badly wrong.... My money was mailed from Los Angeles, CA, to Tulsa, Oklahoma, by bank wire."
Jones says Duncan claimed the $4,000 she invested would be used as "venture capital for a church."
As we Hoovered up evidence about HundredFold's questionable, possibly criminal, activities, we came across a more concrete connection to Hattabaugh. We spoke with one Tulsa woman who says Hattabaugh convinced her to invest $6,000 in HundredFold and is unsure whether she'll be able to retrieve the dough, or the promised profits. The woman, who spoke to us briefly, asked that we not identify her.
We also uncovered another thread tying Hattabaugh to the scheme. On the Web, www.hundredfold.us links to hundredfold.onechancetoact.com/hundredfold.htm, another dubious-looking site, which promises to teach you "how you can sign up your first new member." The latter site is registered to Hattabaugh and a Tulsa chiropractor named Honey Karr, who, court records show, put up the $20,000 used to secure Hattabaugh's bond.
At Hattabaugh's trial, the feds explained that Hattabaugh was planning to buy a swanky $775,000 Tulsa home owned by Karr and her husband. The prosecutors suggested Hattabaugh was trying to raise money through the banking swindle to purchase the house.
In the opinion of Oklahoma state authorities, HundredFold is operating illegally. In the summer of 2004, the Oklahoma Department of Securities began investigating www.hundredfold.us and Nystrand.
By early 2005 the state issued a cease and desist order against HundredFold for transgressing state securities laws. In its findings of fact, the order indicates Nystrand bamboozled a trio of customers out of more than $2,000 while promising to make them "very rich." Despite the order, the sites are still live.
We'd love to know what Hattabaugh thinks of all this, but he's rejected our repeated requests for an interview. Exhaustive attempts to reach Nystrand by phone, by e-mail, and in person at available addresses all failed.
"I think they're involved in a lot more than [HundredFold]," Hattabaugh's former friend opines. "I think that's a front. There's some things I can't discuss because of the FBI."
We asked Badger if the feds are looking into HundredFold. She had a predictable response: "We can neither confirm nor deny the existence of an ongoing investigation."
G.W. Schulz, a staff writer for Urban Tulsa Weekly, reported from Tulsa. A.C. Thompson reported from San Francisco.
E-mail the authors at gwschulz(at)urbantulsa.com and acthompson(at)hushmail.com.