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CONNECTIONS: Bamboozled Berkshires (Part Two)

We are nice people. Nice people have trouble imagining the worst-case scenario. We have a propensity for pipedreams and a paucity of due diligence. History teaches we might reverse the two.

[Author’s Note: I apologize for confusing one or more readers in Part One. To clarify, three major real estate ventures have used the 1980’s concept “other people’s money,” now called “crowdfunding.” Crowdfunding is only a bamboozle when not carefully explained. It is not a bamboozle unless the parameters are unclear and the investors are led to think it is a sure bet. The purchase of restaurants in Lenox was not done via crowdfunding, nor was it a bamboozle. However, our government tells us that the bamboozle was the way the money was made. I think that answers everything, and so on to Part Two.]

We are nice people. Nice people have trouble imagining the worst-case scenario. We have a propensity for pipedreams and a paucity of due diligence. History teaches we might reverse the two.

Bamboozled in Stockbridge (1983)

An odd and unexpected scene played out on Prospect Hill Road, one of the last places one would imagine a man dragged out of a beautiful home and carted off to jail. There were law enforcement agencies here and abroad competing for the collar. His name was—or perhaps it was not—Thilo Rethmann.

Mr. Rethmann was from a wealthy German family. He was awaiting a multimillion-dollar inheritance. He wrote a screen play, rubbing shoulders with movie-land elite. He was waiting for the release of his first film, and while he waited, he solicited backers for his next movie. Or not.

Busy, busy Mr. Rethmann saw Wheatleigh, and while Mr. and Mrs. Linfield Simon had just purchased the property for $500,000, he wanted it. He offered $2 million. It was an irresistible flip, and the Simons accepted. They waited for their money.

As everyone waited, Rethmann was wanted in Los Angeles for grand larceny, and he was wanted by U.S. Immigration for bearing false witness on a federal document and for overstaying his VISA. Interpol wanted him but refused to say why. No one wanted him back in the Berkshires.

Bamboozled in Lenox (1986)

Betsy and Jonas Dovydenas brought suit against Revered Carl Henry Stevens and his congregation, Bible Speaks. They were seeking to recovery of $5.5 million. The Dovydenas’ alleged that Stevens used undue influence to wrest the money from her.

The judge ruled in their favor and wrote in part: “testimony revealed an astonishing saga of clerical deceit, avarice, and subjugation” by Stevens, who “abused the trust of the claimant as well as the trust of many good and devout members of the church.” The Bible Speaks declared bankruptcy and lost the property in Lenox.

When Stevens died in 1987, his followers praised him as “a man of honesty and convictions.” Perhaps he was one conviction short.

Baboozled in Lenox (1993)

Same property, different grift. The Music Foundation moved from Florida to 63 acres in Lenox with the expressed purpose of building a $30 million music center. Eighteen years later, it was proclaimed a boondoggle that wasted $3.6 million in public funds. In the interim, elected officials and the Berkshire businessmen sang the praises of the Foundation and stood for celebratory photographs.

The Foundation letterhead included the names of famous musicians, as well as music promoter Dick Clark. It declared its intention to build a performance center, music museum, and retirement home for American musicians. The Foundation’s mission was to celebrate American music from classical to pop. Letterhead and a mission statement, however, do not a corporation make.

Beyond glomming government funds, they did little else. The wheels came off in 2010 when the Foundation was unable to raise the matching funds required by a $2.5 million grant.

In a 26-page report on January 11, 2011, Massachusetts state auditor Joe DeNucci said the National Music Foundation in Lenox “misled public officials and misused government funds.” DeNucci accused the nonprofit of spending government grant money for “extravagant expenses that had no apparent business purpose.”

The back slapping and dreams of a second Tanglewood died. The pontificating about job creation and creating a magnet for tourists, the rich, and the famous was replaced by an equally loud demand for recovery of the money. Not one dime was ever found.

Bamboozled in Pittsfield (2006–2011)

All the dreams for “1,000 new jobs in Pittsfield” and a business “as big as GE” ended in a U.S. district courtroom. In October 2008, Michael Armitage, power company executive, was indicted on charges of bank fraud, money laundering, tax evasion, and making false statements (to almost everyone he ever spoke to).

Before his fall, his rise was meteoric. EV (Electric Vehicles) Worldwide was going to revolutionize movement. If a car, train, bus, or bicycle moved, it could be powered by hydrogen. EV Worldwide DBA ElectraStor LLC would manufacture the battery that stored hydrogen. They would manufacture it in Pittsfield.

Then-Chair of the Transportation Committee John Oliver hustled through a $1.35 million federal grant. That was followed by another federal grant in the amount of $800,000. With special irony, Mayor Jerry Doyle granted $250,000 from the GE Economic Development Fund.

When the announcement was made for the new venture, everyone who was anyone jockeyed to be close to Armitage and partner Christopher Wilson at the photo op.

Newspapermen, politicians, and pontificators said the company was a “potential major employer.” It would revitalize Pittsfield. The hydrogen batteries were “the wave of the future”. The comparison with GE in the last century was irresistible. Then the bubble burst; the key players went to prison; and the boosters were eerily silent.

Grifters are charming, plausible liars. They lie for money. No morals or ethics slow their pursuit of your wallet. They never plead guilty because they never feel guilty. When Armitage was sentenced, he vowed “a comeback.” Oh dear.

Why do we fall for it? All good con men offer what we want most. In the Berkshires that means more jobs, a rejuvenated economy, and lower taxes. If he came back, would we be taken in again? Maybe. We are nice people.

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But Not To Produce.