No one in their right mind enjoys feeling like they’ve been duped — or, worse yet, actually being duped.  But, I’m here to tell you that it happens to the best of us, sometimes even after doing our due diligence and checking all the right boxes.  This is the second article in a 3-part series in which I share my experiences and invaluable lessons learned as a result of having invested in a seemingly-profitable, winner-of-an-investment-deal gone bad.  If you haven’t already read Part 1, be sure to start here!

So, the saga continues…

This is how I felt after sending in my $250K check!  But that feeling of triumph didn’t last long.

After John and I happily sent in our checks (if you’ll recall, mine was for $250,000), we were invited to attend an orientation at the company headquarters in Phoenix, Arizona.  I knew that there was going to be plenty to learn, so I took my assistant with me to make sure I didn’t miss a beat.  Once at the orientation, we met with other investors who had purchased a license with CORF Licensing Services, and together we learned how to set up the facilities and fill it with clientele.  I was on fire!

Things got even more exciting when we were introduced to a new addition of sleep therapy centers which could be part of our CORF facilities.  I remember hearing that another investor in Kansas City had bought six licenses, and I was so jealous that he had six!  We finished our orientation in Phoenix and waited to learn the next steps.

That’s when the email bomb dropped.  It wasn’t the type of bomb that detonates right away, but before long, one little mistake in the sender’s email would eventually lead to the explosion (or implosion) of the entire operation.

About 200 or so owners (myself included) received a group email from CORF that was supposed to be sent as a BCC (blind copy), hiding everyone’s identities.  Ordinarily, 200+ people in a group email is annoying at best, and at worst, well, think of a time that you intended to BCC recipients for anonymity purposes, but you ended up sharing their addresses and perhaps their issues with basically the entire world.  (And this company, as it turns out, had a lot of issues, so this was a big deal!)  Yep, instead of sending the email via the safety of BCCs, as they apparently had been doing for some time, on this day, that poor sender forgot to click the BCC field, and all hell was about to break loose.  Immediately understanding the implications, the sender quickly tried to recall the email, but in those days, you couldn’t do that with emails; the sender could only notify the recipients that they wanted to recall it.  Now that everyone could see the others’ email addresses, the floodgates opened, and all of the owners began communicating.  And, as you may have guessed, it wasn’t all roses.

At the time that the group email came through, I was still very excited about the opportunity and was lining up real estate and people to join me on the project.  Although I started to notice a steady trickle of emails from other owners talking about problems they were having, I didn’t really have the context yet to understand what they were experiencing.  Plus, I was so happily focused on starting my new, profitable business, I discounted them as random complainers, knowing that there are always a few people who are unhappy no matter what.

One day — on my birthday, no less — I got the phone call from a CORF Licensing Services representative calmly explaining to me that there is already a CORF owner in Reno, and that Reno is not big enough to handle two.  Furthermore, the representative said that the CORF owner in Reno was struggling, so would I consider going to another city?  I sat stunned, struggling to comprehend what this woman was telling me.

Now things were starting to click.  I understood the issues I had read about in the emails from the other owners, and I began contacting them.  An owner in Roseville, Calif., who had opened his facility about 12 months prior, told me that his facility was about to go bankrupt.  He had spent more than $700,000 and was out of money.  He literally begged me to take over his CORF — he just wanted out.

I talked to one owner after another, and the stories were all the same.  Those whose facilities were open were struggling to stay afloat, and those who were trying to open a facility were encountering a host of problems with CORF.

Meanwhile, I was still trying to figure out if there was a chance to save my own $250,000 when my very smart wife looked at me and said, “Would you really want to do business with those guys even if you could figure it out?”  She was 100 percent right.  Why was I even trying?  Even if I came up with the greatest plan in the world, it wasn’t worth doing one more day of business with those guys.

While I felt confident I had made the right decision to sever ties with the company, knowing I might never see $1 of my $250,000 again cut like a knife.  I can still feel the sting of it as I write this today, 16 years later.  Wallowing in pain and helplessness has never been an option for me, though, so I decided to try to do something about it.  My assistant and I put together a timeline and compiled all the materials that we had.  We gave our best effort to prevent this from happening to anyone else.

We hired a private detective to record the company’s presentations, because, astonishingly, they were still advertising, presenting, and taking people’s money!  It wasn’t easy to put this to a stop.  I even called Nevada’s Assistant Attorney General, whom I knew personally.  He bid me good luck but said he couldn’t do much about it.  He basically told me that if I were an elderly grandmother who had been swindled out of $100, they might have been able to help, but I was just a businessman who made a bad choice.  Yeah, thanks!  At least he could have told me something I didn’t know.

We submitted multiple binders full of material to be used as evidence to the Arizona Attorney General’s office, but we never received a response.  A group of us hired an attorney to go after CORF Licensing Services, part of which entailed hiring someone to track the company’s money which we suspected was being held offshore.  After about a year, we did receive a small payment from CORF as compensation; if I remember correctly, it was just enough to pay for the attorney.

Around three years later, I received a phone call from a federal prosecutor who was working a case against CORF Licensing Services and its four owners.  Finally, we learned that all the material we had meticulously and painstakingly put together and submitted was an important contribution to the case.  They asked if I would be willing to take the stand as a witness.  I immediately said, “Of course!” and I let them know that I would do whatever I could to see justice served up on a platter to these crooks.

I was flown to Phoenix the day before the trial in order to meet the prosecutors and prep my responses for the next day.  This part seemed easy; however, when I entered the courtroom to take the stand, it was intimidating.  I was not allowed in the courtroom until it was my turn, so when I entered to take the stand, it was my first exposure.  The jury was right there, staring me down, just like they do on television, and since this was a federal courtroom, it was larger and grander than any I had been in before.

I was on the stand for about 45 minutes, then we took a recess for lunch, and I was brought back on the stand for another 20 to 30 minutes before I was excused.

Believe it or not, nearly nine years later, I was called back to testify against the president of the company.  There was some measure of justice after all, as three out of four of the owners were incarcerated for a few years, with the president being sentenced to 36 months in federal prison.  The company brought in $40,000,000 in this scam.  I still don’t think the majority of their employees really knew that the owners were so crooked.  My guess is that the business didn’t start out that way, but, at some point, the owners had to know that they were not going to be able to fulfill any of the promises they had made.  Instead, they continued to take people’s money, knowing full well it was never going to pay off.

As I try to finish this, I realize there is so much more that I haven’t told you about what I learned during this experience and how this company that took in tens of millions of dollars was able to keep their criminal operation up for so long.  I guess I’ll have to make that Part 3 of this series.  Keep an eye out!

Read part 3 here!