Pyramid Scheme

Men boasting CIA and FBI ties met in Newport Beach to convince a mysterious billionaire to buy into a secret economy, and nothing was what it seemed

The background investigation revealed that no known criminal enterprises created Tarpinski's wealth. If the two sides now could agree on a confidential deal, the billionaire real-estate developer would join an elite group that included "past [U.S.] presidents" (both Bushes), "the president of Italy" and the "royal family of Saudi Arabia." They even bragged about ties to former Secretary of State Colin Powell and Microsoft founder Bill Gates.

But the group wasn't a social club. It focused on making money. The men told Tarpinski that if they allowed him into their top-secret economy, he could expect annual interest payments "between 300 percent and 600 percent."

Minimum to play? The group preferred clients to invest no less than $5 billion. In Tarpinski's case, however, they'd agreed to a rare exception. He would see profits shortly after he put $1 billion in cash into a "deployment account" based in the Channel Islands off France.

Dennis J. Clinton
John Gilhooley
Dennis J. Clinton
William Joseph Ferry
John Gilhooley
William Joseph Ferry

It sounded farfetched, but they told the billionaire not to laugh. They encouraged him to rigorously investigate their credibility. "Do your due diligence," they repeatedly asserted. They were, after all, smug about their successes. For example, they'd recently taken another investor's $1 billion and rapidly turned it into $30 billion.

The investment opportunity should have sounded too good to be true. But then, as the criminal case that emerged from their meeting would reveal, so should the investor.

* * *

American history is replete with conspiracy theories about secret societies that wield enormous, unchecked, self-serving power over the U.S. government and world institutions. According to this mindset, unfettered democracy and capitalism exist only as a figment of mass delusion. Many of the theories espouse that elite men—it's always men—control the affairs of nations for ultra-wealthy and highly secretive financial interests.

Dozens of books describe how individuals with insider knowledge of financial-market intricacies can, especially with at least tacit government approval, brazenly steal billions of dollars. One relatively recent case underscores that view. With federal agents watching but refusing to intervene, Bernie Madoff stole $65 billion during a multidecade Ponzi scheme that crashed in 2008—a fortune that largely remains missing.

At the core of the often-mystifying mix of government and banking is the U.S. Federal Reserve system, a 1913 Wall Street-inspired government creation that is controlled by individuals tied to elite banking interests and operated largely in the dark. Elected representatives of the people can summon a presidential-appointed Federal Reserve chairman to Congress to answer questions, but they have no power to alter his decisions. It's also true that even minor Federal Reserve tinkering with, say, interest rates can have trillion-dollar implications.

In 2009, media outlets discovered that in the midst of the nation's 2008 financial crisis, the Federal Reserve secretly lent $1.9 trillion to well-connected corporations at a sensationally low interest rate of 0.01 percent. Fed officials deemed the transactions covert and therefore initially refused to provide details to the public. That stance prompted watchdog groups to blast the move as further evidence elites operate in a lucrative, clandestine world.

But U.S. government entities including the Treasury Department, Securities and Exchange Commission (SEC), FBI, and Department of Justice (DOJ) maintain that allegations of a secret, government-sanctioned economy are absurd. Treasury officials, for example, note that "fraudsters" seeking to steal investors' money use "a mix of fact and fiction" to confuse potential victims about something that does not exist.

"There are no 'secret' markets in which banks trade securities," declares one Treasury Department announcement on the topic of no-risk, high-yield investment programs. "Representations to the contrary are fraudulent."

The SEC issued its own warning, advising investors to be extremely cautious if promised "astronomical profits and the chance to be part of an exclusive, international investing program" sanctioned by the Federal Reserve.

DOJ officials didn't mince words either: "Such programs do not exist as legitimate investment vehicles."

But despite strenuous government stances otherwise, the Fed's enormous power and impenetrable operations make it an ideal villain for people who believe there is a parallel economic universe for elites.

* * *

In the days prior to their Marriott Hotel meeting with Tarpinski, the group reserved a specific conference room. Before the session, however, the front desk staff announced the room wasn't available. The group was switched to another location, the Emerald Cove room.

This third-floor room is at the farthest corner of the hotel from the lobby and at the end of a narrow hallway. No passing foot traffic guaranteed privacy. If the last-minute switch frustrated the men, they didn't suspect anything odd.

The Emerald Cove room has the best perch of any conference facility in the hotel. The view allows occupants to conduct business while overlooking a hilly, lush golf course. A bit farther but less than a mile away, they could see multimillion-dollar beachfront homes and the sparkling, blue Pacific Ocean.

The alluring sights helped ensure nobody noticed a high-tech, pinhole camera and microphone had been installed at about belly-button level in a bookcase less than four feet from the picturesque window. Someone in another location controlled the camera, including the ability to pan the room, by remote control. The moment Tarpinski and his personal assistant, Will Edwards—a suspicious man with an NFL tight end's physique—entered the meeting, every word would be recorded.

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