Posted: April 2, 2010 - 12:09am
By RICHARD PRIOR
There are few new lessons to be mined from what appears to be a local financial meltdown of epic proportions.
There is, however, an old reminder about what reportedly is happening to Lydia Cladek Inc., the company's estimated 1,300 investors and "untold millions of dollars."
If a deal sounds too good to be true, it probably is.
"If a company is willing to pay you a 15 percent return on your money, they've got to be charging up to 25 percent to make money themselves," said Alan Bratic, a financial adviser with ThompsonBaker Agency in St. Augustine.
"If you're willing to go into something like that," he added, "my advice would be to put in a small amount.
"Or you could go to Vegas and have some fun with it."
Agents with the FBI blocked off Cladek's business in the Sea Grove Town Center on Wednesday and removed files, file cabinets and computers. They then moved on to search Cladek's oceanside home in Sea Colony, also at St. Augustine Beach.
Several investors and others familiar with the investigation said Cladek is believed to have cost clients as much as $200 million by making high-interest loans to car buyers with bad credit histories.
Investors provided money for the loans, with interest rates as high as 29.5 percent, in exchange for "guaranteed" returns of 15 to 18 percent.
"Whenever people talk 'guarantee,'" Bratic said, "you need to pause and ask who's guaranteeing."
Nick Lazos, a retiree who lives in New Jersey, said he thought he'd done his homework. But he got fooled, he said, along with a lot of other people.
"You know, there's past history. You talk to people," he said. "But people there have been praising the situation for years. They've been getting regular monthly checks for a long time.
"Logic should have prevailed. But based on what I heard from other people, it didn't sound like a bad deal."
Lazos said he invested $20,000 with Cladek's business.
It's the personal connection that keeps a business like Cladek's going, said Bratic.
"You have friends working with friends, recommending proposals to friends," he said. "You should look at it. People need to do research. Don't rely on friends alone."
Robert Brooks, who lives in Frederick, Md., said he signed two agreements with Cladek. The first one was about two and a half years ago. The second came shortly afterward.
"She has $125,000 of my dollars," said Brooks, who has hired a St. Augustine lawyer to start the paperwork for a lawsuit against Cladek.
"As time went on," he explained, "she seemed reliable. I talked with her several times on the phone. She seemed trustworthy."
For a time, Brooks received monthly checks for $1,415. The December check was late.
In mid-January, Brooks said, "She called and said she wanted to send me 25 percent of what she had been giving me. ... I never saw any of it."
Insisting that Cladek has "quite a far reach," Brooks said he knows people in Pennsylvania who invested with the company. One man, he said, put in $400,000.
"Given the economy we have and the publicity and the public outrage ... I'm sure she's in trouble," he said. "Which is fine with me, frankly."
The depressed state of the economy may have persuaded a lot of people to put their money in an admittedly risky venture, Bratic said.
A refresher course in history could have saved them.
"A lot of these investors are people who have gone through the Great Depression," he said. "They saw their parents lose everything.
"But people forget. They want to make a big return on their money. And they don't want to go into the stock market again.
"People like that are ripe for picking. They'll say, 'This is different. My friend has done it, and he's made money for years.'
"But it's not sustainable."
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