By Chris Hansen Correspondent
Dateline NBC
updated 4/5/2010 2:03:55 PM ET 2010-04-05T18:03:55
transcript

CHRIS HANSEN reporting: In most investment scams, victims don’t realize what’s happened until it’s too late. But when the woman you’ll meet tonight became suspicious about a financial opportunity she’d heard about from her mother, she saw a chance to go from investor to investigator. The problem was, to help expose a multimillion-dollar fraud, this daughter would have to risk something far greater than money.

(Voiceover) Becoming a pop superstar isn’t easy. Talent helps and looks never hurt, but short of winning “American Idol,” the best career move may be to find a wealthy sponsor who believes in your potential, someone with money to produce your first CD, follow your every move with cameras.

(Celebrities at Grammy Awards; photographers; limousines; music videos;

Adrienne Lau walking)

Ms. ADRIENNE LAW: (“Adrienne’s Pop Reality”) And right now I’m going over to Hong Kong to promote my new album.

HANSEN: (Voiceover) And hire an entourage to make you look good in the videos. That was exactly the case for a handful of lucky hopefuls in Los Angeles. They’d been signed to a record label that seemed to have no shortage of cash to lavish on its up-and-coming talent.

(Lau getting hair done; music videos)

Ms. RUTH PINKEL: They flew in...

(Voiceover) ...choreographers from New York.

(People dancing)

Mr. CARLOS DEMARO: I just thought he was filthy rich.

HANSEN: (Voiceover) But as with just about everything you’ll hear in this story, it sounds too good to be true, well, it probably is.

(Music videos)

Ms. KIM FLANIGAN: They’re master manipulators.

Unidentified Child: (In kitchen) Mom?

Ms. FLANIGAN: (In kitchen) What?

HANSEN: (Voiceover) Kim Flanigan and her family live 1,000 miles and a universe away from those aspiring pop stars in LA. The unlikely tale of how they’re even remotely connected and of how a simple business venture threatened to pit a mother against a daughter begins back in 2003. At the time, Kim lived in Kalispell, Montana, with her husband, sons and recently widowed mother.

(Kim, David Flanigan and family in kitchen; photo of Kim and Debbie Loveless;

Kim and David walking; Flanigan family photo; photo of Kim and Debbie)

Ms. FLANIGAN: We had gone through a really rough fall as a family.

HANSEN: (Voiceover) A difficult time, Kim says, because her stepfather had been killed in a car accident, and her mother, Debbie Loveless, had shattered an ankle during a church retreat and needed lots of help.

(Kim looking at photo album; photo of couple; scrapbook photos)

Ms. FLANIGAN: (Voiceover) She’s a wonderful grandmother, and she’s always been there for my children and her other grandchildren, as well.

(Scrapbook photos)

HANSEN: (Voiceover) After a few months under the same roof, Kim and her husband, David, saw Debbie’s spirits begin to lift, but at first they weren’t sure exactly why. All they knew was that she’d been spending a lot of time on the phone, sometimes for hours a night.

(Photos of Loveless; photo of Kim and Loveless)

Ms. FLANIGAN: Finally, David and I asked her, ‘Who are you talking to?’ And she just said, ‘You know, it’s—I’m just so excited. You know, I just have this wonderful thing.’

HANSEN: So she was starting to pull out of this funk...

Ms. FLANIGAN: Yes.

HANSEN: ...from losing her husband and the injury she had suffered?

Ms. FLANIGAN: Yes. Yes.

HANSEN: And that’s a good thing.

Ms. FLANIGAN: It was a good thing. We were just curious. And so she said, you know, ‘Kim and David, I can’t explain it to you, but if you want to know what’s going on, we’ll set up a conference call.’

Unidentified Tri Energy Representative #1: (Conference call) Hello? Hello?

Unidentified Woman: (Conference call) Can you guys hear me?

Tri Energy Representative #1: (Conference call) Do we have anybody else here?

HANSEN: (Voiceover) Turns out Kim’s mother had been dialing in to a conference call for updates on a financial investment she’d bought into. Also on the line was another member of Kim’s family, a cousin Kim calls Aunt Millie.

(Photo of Loveless; phone; photo of Mildred Stultz)

Ms. MILDRED STULTZ: (Conference call) Yeah, Henry?

Dr. HENRY JONES: (Conference call) Yes, ma’am.

Ms. STULTZ: (Conference call) This is Millie.

HANSEN: (Voiceover) Aunt Millie had introduced Kim’s mother to Tri Energy, a company that owned coal mines and had investments in gold. Kim and her husband agreed to hear the pitch.

(Photo of Stultz; phone; Tri Energy logo; mining equipment; gold bars)

Mr. DAVID FLANIGAN: So we were like, ‘OK, yeah. You know, we’re game to listen.’

Tri Energy Representative #1: (Conference call) First of all, I want to thank everyone for coming on tonight. And what we are going to do is give you a presentation of our opportunity.

Ms. FLANIGAN: They outlined a coal mining operation, you know, of which I knew nothing about, coal mining, But throwing out numbers of tons this and tons that.

Unidentified Tri Energy Representative #2: (Conference call) We’re looking at about nine million tons of coal mining in the next 12 months.

HANSEN: (Voiceover) Tri Energy representatives said that the company was about to make a killing with state-of-the-art clean coal.

(Tri Energy logo; conveyer belt)

Tri Energy Representative #1: (Conference call) You don’t have to worry about the toxic emissions from the sulfur because it’s under 1 percent sulfur.

HANSEN: Did they sound like they knew what they were talking about?

Ms. FLANIGAN: They absolutely did.

Tri Energy Representative #1: (Conference call) Coal prices are 50 to $55 a ton.

Mr. FLANIGAN: He seemed to have some data. He seemed to know what he was talking about.

HANSEN: (Voiceover) The company just needed some cash to buy new mining equipment. The Flanigans were told they would double their money in 60 days.

(Tri Energy logo; David and Kim walking)

Tri Energy Representative #2: (Conference call) And that’s one of the reasons why we’re still going out and talking to friends and family, and friends of friends.

HANSEN: (Voiceover) But there was much more to Tri Energy than making money, Kim learned. Once they were paid out, the investors, Kim’s mom included, planned to use a big chunk of their profits to launch charities around the globe.

(Coal miners; money; photo of Loveless)

Unidentified Investor #1: (Conference call) All of us in this group are about creating a new world.

HANSEN: (Voiceover) It was a good idea, endorsed by the company leaders.

(Tri Energy logo)

Tri Energy Representative #1: (Conference call) If you do something to create the abundance, you can actually go do these projects yourself and effect change.

Ms. FLANIGAN: You have just normal people that want to do good in the world and believe that they have found a way to do that.

HANSEN: And make money at the same time?

Ms. FLANIGAN: And make money at the same time.

HANSEN: (Voiceover) Tri Energy seemed to be something rare, a business with a soul.

(Tri Energy documents; Tri Energy on computer screen)

Ms. FLANIGAN: There was a lot of talk about religion and about faith and about God.

HANSEN: (Voiceover) Kim and her family are Mormons, but the investors cut across many faiths.

(Kim and boys in kitchen)

Unidentified Investor #2: (Conference call) It is an answer to prayer, God.

And we are so thankful that you are directing the affairs, Lord.

Unidentified Investor #3: (Conference call) This is bigger than all of us.

This is God’s project. He’s providing. He’s bringing us through.

HANSEN: (Voiceover) The opportunity struck a chord with Kim’s church-going family. Her sister invested $5,000. Another cousin put in 10. But there wasn’t much time for the Flanigans to think or do any research.

(Photo of Kim and Loveless; photo of Loveless and woman; family photo; David and Kim looking at photos)

Ms. FLANIGAN: They were basically saying to us that these deals were closing. They were...

HANSEN: So, ‘Get in now.’

Ms. FLANIGAN: Get in now.

HANSEN: ‘Otherwise you’re going to miss this opportunity’?

Ms. FLANIGAN: That’s right. ‘And we really don’t need any more funds for this to close, but because of your relationship’...

HANSEN: ‘We’re going to let you in.’

Ms. FLANIGAN: ‘We’re going to let you in.’

HANSEN: (Voiceover) But, at the time, the Flanigans didn’t have much extra money to invest, so Kim and David borrowed $10,000 from Kim’s mom, who had just gotten a big life insurance payout. They wired it the next day.

(Kim and David walking dog; photos of Kim and David and Loveless)

HANSEN: Were you nervous about borrowing $10,000 from your mother-in-law to make this investment?

Mr. FLANIGAN: I had access to funds in a 401(k) if I really got in a pinch and had to pay it back to her. We could have come up with it, but it wouldn’t have been easy.

HANSEN: You figured if your mother was set with it, if your Aunt Millie was set with it...

Ms. FLANIGAN: Mm-hmm.

HANSEN: ...if these guys were confident in it...

Ms. FLANIGAN: Mm-hmm.

HANSEN: ...why not take a chance?

Ms. FLANIGAN: Yeah. I mean, we thought, ‘Well, let’s roll the dice and see what happens.’

HANSEN: (Voiceover) Kim and David took a gamble, but it wasn’t long before they got a sinking feeling something wasn’t right.

(Kim in field)

Tri Energy Representative #1: (Conference call) You just could ask him, you know, whatever you’d like.

Unidentified Investor #4: (Conference call) Where’s the money?

HANSEN: (Voiceover) Coming up, a vaguely queasy feeling becomes a harsh reality.

(House at night; Kim)

Ms. FLANIGAN: We just said we’re going to owe my mom $10,000.

HANSEN: (Voiceover) When Too Good To Be True continues.

HANSEN: (Voiceover) Kim Flanigan admits that she and her husband didn’t have much investing experience when they put 10 grand into a mining operation called Tri Energy.

(Kim at desk; Tri Energy logo)

HANSEN: Did you have a lot of extra money to invest at that point in your life?

Ms. FLANIGAN: No. Definitely not. We were a fairly paycheck to paycheck family.

HANSEN: (Voiceover) But the deal had come highly recommended by Kim’s own mother. And the company seemed to be an open book, updating its hundreds of investors with regular conference calls.

(Photo of Kim and Loveless; Tri Energy logo; telephone)

Ms. FLANIGAN: You would dial into a number, and you would listen to updates.

Tri Energy Representative #1: (Conference call) So everything is starting to look very bright for the coal.

HANSEN: (Voiceover) Like Kim, most of the investors on the line had been recruited by family and friends.

(Photo of Kim)

Ms. FLANIGAN: They got to know one another.

(Voiceover) People knew that my mom was a widow.

(Photo of Loveless and family)

Unidentified Investor #5: (Conference call) We prayed for every member of this group.

HANSEN: (Voiceover) Investor Angelina Encarnacion heard about the deal from Kim’s Aunt Millie. Angelina once worked as a financial planner, and at the time was buying and selling real estate in Northern California.

(Angelina Encarnacion speaking phone; realtor’s license)

HANSEN: How much did you initially invest?

Ms. ANGELINA ENCARNACION: Initially they only asked for 5,000. Whatever wealth that’s going to be accumulated out of this deal was supposed to be used for something good.

HANSEN: (Voiceover) As investors listened in, they learned that Tri Energy had two executives on salary. One led the nightly call.

(Telephones; man)

Tri Energy Representative #1: (Conference call) Bob, you want to just tell them a little bit of what we’ve got going now?

HANSEN: (Voiceover) The other also happened to be a pastor at a small church in California. And there was a third man they introduced to Kim and the other investors. His name was Dr. Henry Jones.

(Photo of man; telephone; photo of Henry Jones)

Tri Energy Representative #1: (Conference call) He’s quite a guy. He’s a very interesting guy.

HANSEN: (Voiceover) The investors were told that Dr. Jones was already engaged in the kind of international good works they aspired to. He had a relationship with Nelson Mandela.

(Photo of Jones; Nelson Mandela)

Tri Energy Representative #1: (Conference call) He was doing humanitarian symposiums around the world. He co-chaired three of them with Nelson Mandela.

HANSEN: (Voiceover) And they said Jones had important connections in the Middle East.

(Mosque and sun)

Tri Energy Representative #1: (Conference call) His friendships range from the prince of Jordan to the head of Israeli intelligence.

HANSEN: (Voiceover) Angelina remembers Henry Jones dropping in on the conference calls between meetings with very important people.

(Encarnacion speaking on phone; photos of Jones)

Tri Energy Representative #1: (Conference call) Let’s just see if Henry’s there. Hold on.

Ms. ENCARNACION: At some point he tried to reach him and he’s a hard fellow to reach him. And, wow, he’s finally here.

Tri Energy Representative #1: (Conference call) He’s not at a place where he can really talk, but say hello, Henry.

Dr. JONES: (Conference call) How you guys doing?

Unidentified Investor #6: (Conference call) Hi there, Henry.

Unidentified Investor #7: (Conference call) Hey.

Ms. ENCARNACION: Yeah, just such a busy person talking to the big buys, big players.

Dr. JONES: (Conference call) The top ministers for the G-8 countries are meeting in Europe.

HANSEN: (Voiceover) But what Henry Jones was doing with Tri Energy and how he fit into the coal mining business was a mystery to Kim Flanigan.

(Photo of Jones; Tri Energy logo; Kim)

Dr. JONES: (Conference call) They were supposed to get back to us before 9 AM our time with respect to whether or not the price was right.

HANSEN: (Voiceover) Jones was apparently brokering a complex international gold transaction.

(Gold bars; money)

Ms. FLANIGAN: Some kind of gold transfer.

HANSEN: Transfer.

Ms. FLANIGAN: Yes.

HANSEN: From where to where?

Ms. FLANIGAN: I have absolutely no idea.

HANSEN: You didn’t get it. And did they say on the conference call how much gold was supposed to be involved?

Ms. FLANIGAN: A lot.

HANSEN: A lot?

Ms. FLANIGAN: Yes.

Tri Energy Representative #1: (Conference call) This transaction would put us in the billions.

HANSEN: (Voiceover) The deal was supposed to move 20,000 metric tons of gold from Israel to a wealthy Arab buyer. Jones just needed cash for lawyers and banking fees. And when the deal closed, they said Tri Energy would make $200 million, enough money to expand its mining operation and pay out all the investors who could then launch those global charities. Kim and her husband, David, however, were growing more than a little skeptical.

(Gold bars; outside building; aerial view of city; money; Tri Energy logo; coal; Encarnacion; Stultz; Loveless; photo of Kim and David)

Mr. FLANIGAN: They talked about the gold transfer and my initial response was, you know, no way.

HANSEN: (Voiceover) But the real test of faith came one night when Kim dialed into the conference call and caught what sounded like an investor rebellion in progress.

(Kim in house at night)

Tri Energy Representative #1: (Conference call) First of all, everybody, Henry has indicated that the transaction is very much alive.

Unidentified Investor #8: (Conference call) A lie or alive?

Tri Energy Representative #1: (Conference call) Alive. A-L-I-V-E.

HANSEN: (Voiceover) A few investors were questioning the legitimacy of that gold transaction.

(Gold bars)

Unidentified Investor #9: (Conference call) Hi, Henry.

Tri Energy Representative #1: (Conference call) Well, go ahead, everybody.

You just could ask him, you know, whatever you’d like.

Investor #4: (Conference call) Where’s the money?

HANSEN: (Voiceover) And now the Flanigans’ hasty investment gamble was seeming like a foolish bad bet.

(David and Kim)

Ms. FLANIGAN: David and I looked at each other and we just said we’re going to owe my mom $10,000.

HANSEN: (Voiceover) But what happened next, along with a choice Kim Flanigan made, would put her mother and their relationship at risk.

(Kim with tape recorder; photo of Kim and Loveless)

HANSEN: How painful was that?

Ms. FLANIGAN: It was hard.

HANSEN: (Voiceover) What else was hard: facing the fact that her family was being ripped off, and they weren’t alone.

(Kim in field; photo of Kim and Loveless)

Ms. FLANIGAN: It became not about my mother. It became about other people, as well.

HANSEN: (Voiceover) But what exactly could she do about it? When DATELINE continues.

HANSEN: (Voiceover) At first Tri Energy had looked like a win/win proposition, a lucrative return on investment with profits going to charity.

(Tri Energy logo; coal; gold bars; money)

Ms. FLANIGAN: There was a lot of prayer. There was a lot of talk about this investment being deistically inspired.

Dr. JONES: (Conference call) Faith is not a possession of man. And if you have it the size of a mustard seed, you’ll move mountains.

HANSEN: (Voiceover) But to Kim Flanigan, the whole deal began to stink to high heaven.

(Kim reading paper)

HANSEN: Most of the investors were issued promissory notes guaranteeing a two-to-one return in 60 days. The payout would be even more if the gold deal closed before the promised date. But for many investors, the deadlines came and went. They were told there were problems at the coal mine and that cash was tied up in that international transaction.

Unidentified Investor #10: (Conference call) We were due payout. How come we’re, you know, we’re stalling here again?

Dr. JONES: (Conference call) All I have to tell you is basically the deal will be complete.

HANSEN: (Voiceover) The company executives tried to reassure the skeptics.

(Tri Energy logo)

Tri Energy Representative #1: (Conference call) The kind of power and spirituality is within the group. We cannot believe that we’ve all come together here like this not to emerge triumphant.

HANSEN: (Voiceover) But Kim and her husband were now convinced that Tri Energy and the deal being brokered by Dr. Henry Jones were a sham.

(Kim and David walking; gold bars; Jones)

Ms. FLANIGAN: It was a financial soap opera.

HANSEN: So during that conference call...

Ms. FLANIGAN: Mm-hmm.

HANSEN: ...when these investors revolted...

Ms. FLANIGAN: Mm-hmm.

HANSEN: ...that’s when you thought, ‘Uh-oh.’

Ms. FLANIGAN: Mm-hmm.

HANSEN: ‘We got taken.’

Ms. FLANIGAN: Mm-hmm. I just remember thinking it kind of served us right, you know, and that it was naive and stupid.

HANSEN: (Voiceover) Kim now saw that the investment story had been farfetched all along, the promised returns simply too good to be true. And while most of the investors seemed to have their hearts in the right place, Kim now wondered where their heads were, her own mother included.

(Kim working with calculator; photo of Kim and Loveless)

HANSEN: Did you express your concerns to your mother?

Ms. FLANIGAN: Yes.

HANSEN: And how did she respond?

Ms. FLANIGAN: She didn’t want to lose faith. She was still a believer.

HANSEN: (Voiceover) It was a difference of opinion that turned into a widening rift. Kim was worried that her mother, who invested a total of $75,000, would pour all her retirement money into Tri Energy. But her mom thought Kim was being meddlesome and unsupportive. She moved out of Kim’s house, and they saw each other less and less.

(Kim at computer; photo of Kim and Loveless; gold bars; coal equipment; Tri Energy logo; photo of Loveless and family; Kim looking at scrapbook)

HANSEN: Did things get testy between the two of you?

Ms. FLANIGAN: Eventually, yes.

HANSEN: (Voiceover) Kim says the simmering feud came to a head when, even after voicing her doubts, she learned that her mother was pitching the scheme to friends at their church.

(Kim in field; photo of Loveless; Book of Mormon; empty church)

Ms. FLANIGAN: I was at a church function, and a mutual friend leaned over to me and she said, ‘Your mom was talking to me about this investment opportunity. What do you think of it?’

HANSEN: And you said what?

Ms. FLANIGAN: I said, ‘Don’t touch it with a 10-foot pole.’ I didn’t want anybody else to get involved. And I didn’t know how to stop it.

HANSEN: (Voiceover) After that conversation at church, Kim says she and her sister, who’d also invested money, tried in earnest to convince their mother that Tri Energy was probably a scam.

(Trees; photos of Loveless and woman; gold bars; Tri Energy logo)

HANSEN: Did you actually have to stage an intervention?

Ms. FLANIGAN: Yes. We tried. It was my sister and I and David. It didn’t go well.

HANSEN: What happened?

Ms. FLANIGAN: My mom just wouldn’t hear of it. It started a spiral in our relationship.

HANSEN: (Voiceover) But Kim wasn’t about to stand by and just watch as the company drained her mother’s savings and lured in more innocent victims.

(Kim speaking on phone)

Ms. FLANIGAN: I was angry. I kind of started a slow burn in my gut as I watched what was happening.

HANSEN: (Voiceover) Looking for help, Kim called the authorities in Montana who investigate financial fraud. But there wasn’t much they could do. The company was operating outside the state’s jurisdiction and Kim didn’t have any proof of wrongdoing other than a very good hunch.

(Outside government building)

Mr. FLANIGAN: The authorities didn’t have a lot of evidence to go off of.  There—it was—it was, you know, according to them, very hard to just get involved and bring it down without some tangible evidence. So Kim went on a mission to find some tangible evidence.

HANSEN: (Voiceover) Kim’s mission against Tri Energy began right back where it all started, on the phone, except now she was an interloper with a secret agenda.

(Kim looking at documents; telephone; Kim and recording equipment)

Ms. FLANIGAN: And I started listening in on conference calls and recording conversations.

HANSEN: So you, in effect, began your own investigation?

Ms. FLANIGAN: Yes.

HANSEN: (Voiceover) But there was a complication. Those state authorities had shared something with Kim, and it meant her moves to bring down Tri Energy could have serious consequences for her own family.

(Kim writing and using recording equipment; photo of Loveless and children)

Ms. FLANIGAN: They said to me that any investors can get in trouble by offering it to other people.

HANSEN: They could come after your mother at some point?

Ms. FLANIGAN: Yes, absolutely.

HANSEN: (Voiceover) But Kim had chosen her path, and there was no turning back.

(Kim looking at documents)

Ms. FLANIGAN: I worried about all the other people that continued to put in money if it didn’t stop. It became not about my mother. It became about other people as well.

HANSEN: (Voiceover) Kim didn’t know where her investigation would lead. And completely in the dark about all of it were those wannabe singers in LA. How could they know that a woman in Montana was about to help throw a serious wrench in their fledgling careers?

(Kim looking at documents; music videos; Kim and recording equipment; music video)

HANSEN: (Voiceover) Coming up, Kim Flanigan’s family plays hardball with Tri Energy.

(Money)

HANSEN: What does your brother say?

Ms. FLANIGAN: Threatens.

HANSEN: Threatens in what way?

Ms. FLANIGAN: To go to the authorities unless they returned our money.

HANSEN: (Voiceover) When Too Good To Be True continues.

Unidentified Man #1: (Conference call) Well, that’s...

Unidentified Man #2: (Conference call) We’re covering the 50K.

HANSEN: (Voiceover) Tri Energy had been pitched to Kim Flanigan as a blessing, but it had turned into a curse. Not only was her mother pouring money into a business that Kim thought was a scam, she was now recruiting other investors.

(Telephone; person speaking on phone; Kim speaking on phone; cell phone; telephones; photo of Loveless; money; person speaking on phone)

Ms. FLANIGAN: I had to do something to help stop it.

HANSEN: (Voiceover) But to Kim the company was still nothing but a jumble of voices on the phone. To learn more, she began secretly dialing into those nightly conference calls, recording her mother and the other investors as they talked.

(Kim in house at night; telephone pole; person using telephone; Kim in house at night; tape recorder)

HANSEN: Does she have any idea you’re recording all these calls, these conference calls?

Ms. FLANIGAN: No. Not at that time. And she was not as much a part of our life as she had been before.

HANSEN: (Voiceover) Kim took notes on the other potential victims and listened for clues about what the leaders were up to.

(Kim looking at documents; Kim listening to conference call)

Ms. FLANIGAN: I felt like I needed to find out who some of these people were.

HANSEN: And how long did you record these conference calls?

Ms. FLANIGAN: For months. It was an obsession.

HANSEN: What did you think when your wife decided to mount her own investigation?

Mr. FLANIGAN: Oh, I know I couldn’t stop her.

HANSEN: (Voiceover) As she recorded, Kim heard what she thought was a masterful scam in progress. The Henry Jones deal grew more complex, with new fees to pay and world events to be concerned with.

(Tape recorder; Kim; tape recorder; gold bars; document; mosque)

Tri Energy Representative #1: (Conference call) You’re talking about large amount of funds from the Middle East.

HANSEN: (Voiceover) The investors were repeatedly told that a huge payout was around the corner.

(Tri Energy on computer screen; documents; money)

Dr. JONES: (Conference call) I would say we’re talking about days and not weeks.

HANSEN: (Voiceover) And yet new people, with new cash, were being brought in, some like Kim’s own relatives.

(Telephones; photo of Stultz)

Tri Energy Representative #1: (Conference call) Richard and Fred, two people who’ve come through Millie, that we met through Millie.

Ms. FLANIGAN: There was always new people. It was like a moneymaking machine that just wasn’t going to stop.

HANSEN: These people were generally not wealthy folks.

Ms. FLANIGAN: No. I think that there’s a lot of people that were older...

HANSEN: The investors.

Ms. FLANIGAN: ...that had, you know, retirement accounts. And, you know, once their money was already invested, they would recruit and invest more to secure their initial investment because it hadn’t closed yet. But it was always so close, just around the corner. Just a little bit more and it’ll be done. They were master manipulators.

HANSEN: (Voiceover) Investor Angelina Encarnacion was fully caught up in that financial roller coaster ride. Her initial $5,000 commitment snowballed.

(Encarnacion speaking on phone)

HANSEN: All in, how much did you invest?

Ms. ENCARNACION: About 200.

HANSEN: Two hundred thousand dollars?

Ms. ENCARNACION: Yes.

HANSEN: That was a little hard for you to say there.

Ms. ENCARNACION: Yes.

HANSEN: (Voiceover) With so much new money flowing into Tri Energy, Kim and her siblings thought they should try to get their own money out. They got on the phone with the company leaders and decided to play hardball. Kim recorded the call, while her brother Sean, a certified accountant, grilled the Tri Energy executives about what Dr. Henry Jones was up to.

(Money; Tri Energy logo; photos of Kim and family; photo of man and woman; telephone; tape recorder; photo of Sean; photo of Jones)

SEAN: (Conference call) Dr. Henry Jones, is he acting as the broker in this whole deal?

Tri Energy Representative #1: (Conference call) Yes.

HANSEN: What does your brother say?

Ms. FLANIGAN: Threatens.

HANSEN: Threatens in what way?

Ms. FLANIGAN: To go to the authorities unless they returned our money.

SEAN: (Conference call) Is he licensed through the National Futures Association and the CFTC?

Tri Energy Representative #1: (Conference call) I don’t—you know, what we’d like you guys to do is to just submit everything to us in writing.

SEAN: (Conference call) It’s a simple question. I think if it’s not in their bank accounts tomorrow, I think I’m going to go chat with the state.

HANSEN: (Voiceover) That threat got a swift reaction, and not the kind you’d expect from a company that had nothing to hide.

(Documents; Tri Energy logo on computer)

Tri Energy Representative #1: (Conference call) If that money is returned to you guys, will you cease and desist from all the kinds of things you’re talking about doing?

HANSEN: You got the money?

Ms. FLANIGAN: Yes.

HANSEN: And you reported them anyway.

Ms. FLANIGAN: I made no such promise.

HANSEN: (Voiceover) Kim thought she now had something authorities could work with. She turned all her tapes, including that incriminating call, over to state regulators, who were by now were in touch with federal investigators at the Securities and Exchange Commission. And in May of 2005 the SEC cracked down on Tri Energy, freezing the assets of the company and of Dr. Henry Jones.

(Kim; tape recorder; outside government building; US Securities and Exchange Commission building; document; photo of Jones)

Mr. STEPHEN COHEN: We investigated this thoroughly, and there was no evidence that anything these people were saying was true.

HANSEN: (Voiceover) Stephen Cohen is a lead trial attorney with the SEC. He says that Kim Flanigan wasn’t the only investor to complain about Tri Energy, but she was the most aggressive. A federal investigation had, in fact, been under way, and the SEC says the case had all the hallmarks of a classic Ponzi scheme.

(Stephen Cohen in office; Kim looking at documents; photo of Kim and Loveless; document; Cohen in office; Tri Energy document)

Mr. COHEN: If someone’s telling you they can get you huge returns that you can’t get anywhere else, it’s not true.

HANSEN: (Voiceover) Cohen says the leaders were using a common ploy, gathering like-minded people in order to further the con.

(Tri Energy on computer; photo of Kim and family)

Tri Energy Representative #1: (Conference call) The kind of power and spirituality that’s within the group.

HANSEN: (Voiceover) It’s called affinity fraud.

(Telephone)

Mr. COHEN: What might seem outlandish or unbelievable is more believable when somebody you know and trust comes to you. What’s really egregious about this case is how far the people went playing the religion card.

HANSEN: (Voiceover) And the affinity con worked on the Tri Energy victims just as it worked in the biggest Ponzi scheme in history, Bernie Madoff’s.  Madoff’s scheme targeted Jewish investors, who in turn spread the word among family and friends. And investigators say that while tens of millions had poured through Tri Energy, the true cost of this fraud can’t be measured in dollars and sense.

(Bernie Madoff surrounded by people; gold bars; mining equipment)

Mr. COHEN: Sometime toward the end of the scheme there was an investor who committed suicide.

HANSEN: Committed suicide?

Mr. COHEN: Correct. It was close in time to this person discovering that Tri Energy was really just a big fraud.

HANSEN: (Voiceover) Kim later learned that the investor who committed suicide had also recruited friends and family into the scheme, the very cycle she’d been so desperate to stop.

(Kim holding cup at table)

Ms. FLANIGAN: The guilt that you would feel knowing that you were responsible for bringing those individuals and possibly even draining them financially, that’s an awesome responsibility.

HANSEN: (Voiceover) Investigators were now on the case, trying to answer the most pressing questions of all: Where was the money, and where was Dr. Henry Jones?

(Securities and Exchange Commission building; money; photo of Jones)

HANSEN: (Voiceover) Coming up, Dr. Henry Jones looking less like a friend of Mandela and more like a Jay-Z wannabe.

(Photos of Jones; MIG Records title; music video)

Mr. DEMARO: It was like they’re performing at this place. This one needs a new photo shoot. We’re doing a video tomorrow.

HANSEN: (Voiceover) When DATELINE continues.

HANSEN: (Voiceover) With the help of Kim Flanigan and her tape recordings, the feds were now all over Tri Energy. But the investigation she helped initiate had also ensnared those closest to her. Kim’s mother was now in legal hot water.

(Kim and recording equipment; Kim looking at scrapbook; photo of Loveless)

Ms. FLANIGAN: It was devastating to our family.

HANSEN: (Voiceover) Montana regulators sued Kim’s mother, Debbie Loveless, in civil court for promoting securities without a license. The story made the local news.

(Documents; newspaper)

Ms. FLANIGAN: It’s what my son woke up to with his alarm clock that morning, you know, his grandma’s name on the radio.

HANSEN: What did you tell your son?

Ms. FLANIGAN: That grandma was making some bad decisions.

HANSEN: (Voiceover) And in a civil suit, the SEC accused Mildred Stultz, the cousin Kim calls Aunt Millie, of participating in the fraud by recruiting investors. Members of a family that had once been so close were now barely speaking. But what about the money Kim’s mother and so many people had poured into the scheme? FBI agent Craig Mason and federal prosecutor Ruth Pinkel joined the SEC in trying to untangle the fraud.

(Photo of Stultz; documents; photo of Kim and Loveless; family photo; photo of Loveless; money; Craig Mason and Ruth Pinkel looking at documents; Pinkel and Mason walking in hallway)

Ms. PINKEL: It’s very complicated. They do it on purpose because they don’t want you to really understand what’s going on.

HANSEN: (Voiceover) Investigators discover that Tri Energy did have a coal mine in Kentucky, but it was no state-of-the-art clean coal facility...

(Tri Energy logo; mine and equipment photos)

Tri Energy Representative #2: (Conference call) You don’t have to worry about the toxic emissions from the sulfur.

HANSEN: (Voiceover) ...far from it.

(Mine opening)

HANSEN: So there was one coal mine, but it really was just a hole in the ground?

Mr. CRAIG MASON: Correct.

HANSEN: And wasn’t producing anything?

Mr. MASON: Correct.

HANSEN: (Voiceover) And the feds say that gold transaction was, on its face, absurd. The deal supposedly involved 20,000 metric tons of gold. But that’s nearly five times all the gold in Fort Knox.

(Gold bars)

HANSEN: Was there a gold deal in the Middle East?

Mr. MASON: As far as the evidence showed, there was no gold deal.

HANSEN: (Voiceover) In all, federal investigators tracked $32 ½ million from Tri Energy investors. They say the two company executives together paid themselves more than $800,000 over three and a half years. Some money did go into running the coal mine, and a good chunk was used to pay back early investors. But investigators say the overwhelming majority of the cash, more than $21 million, went straight to Dr. Henry Jones, the international humanitarian, diplomat—and media mogul? That’s right, the same Dr. Jones who was said to travel the world brokering complex deals was also playing the part of a Hollywood entrepreneur, producing movies and music videos. We found his credit on dozens of clips.

(Money; graphic of where money went; photo of Jones; Dr. Henry Jones title;

Jones; photo of Jones; excerpt from movie; music videos and credits)

TEXT:

Tri Energy Inc.

Investors

$32.5 Million

$588K

$253K

$2.5 Million

$7.9 Million

$21.17 Million

Humanitarian

Diplomat

Dr. JONES: (“Secret Love”) Well, well, well...

HANSEN: (Voiceover) Here he is making a cameo in a music video he directed.

(Music video)

Dr. JONES: (“Secret Love”) She’ll be singing about it.

HANSEN: (Voiceover) And this is a movie Henry Jones made starring Martin Sheen’s brother Joe Estevez.

(Excerpt from “Mr. Jinx”)

HANSEN: (Voiceover) He talks about a relationship with Nelson Mandela...

(Nelson Mandela waving)

HANSEN: ...all these charities that he’s involved in. Was any of that true, as far as you could tell?

Mr. COHEN: We found no evidence that any of these things were true.

HANSEN: All lies.

Mr. COHEN: All lies.

HANSEN: (Voiceover) The truth was that Jones spent of his time and money supporting a handful of unknown artists at an entertainment company he called MIG Records.

(Music videos; MIG Records title)

Unidentified Man #3: (Advertisement) MIG Records presents six new artists.

HANSEN: (Voiceover) Rappers, pop singers and even a duo featuring his own wife, a Russian fashion model. That’s her posing in a diamond-covered dress.

(Lethal Konsequenzez; One Kiss; music video; photo of two women)

Ms. PINKEL: It was a $3 million dress.

HANSEN: A $3 million dress?

Ms. PINKEL: You know, it was a very different world than what was presented to the investors on the conference calls.

HANSEN: (Voiceover) And Dr. Jones seemed to enjoy hanging out with famous ex-cons. Madam Heidi Fleiss turned up in a rap video, and that’s Mike Tyson boxing with Jones’ wife.

(Music videos)

Mr. DEMARO: (Looking at clothing) Versace, no wonder why I like it.

HANSEN: (Voiceover) Carlos Demaro is a freelance Hollywood fashion stylist.

He dressed the singers at Jones’ label for more than two years.

(Carlos Demaro looking at clothing)

Mr. DEMARO: He had me so busy from when I first met him. It was like, ‘They’re going to this state and performing at this place, this one needs a new photo shoot. We’re doing a video tomorrow.’

HANSEN: Did he seem like a big-time record promoter or talent promoter?

Mr. DEMARO: He was charming. He was funny.

(Voiceover) He had a big entourage around him.

(Music videos)

HANSEN: (Voiceover) And Demaro says he ran his business like an empire.  There were fancy cars for Jones and his favorite singers, $10,000-a-day shopping sprees in Beverly Hills, not to mention the generous budgets for tours and video production.

(Photos of Jones; vehicles; Rodeo Drive sign; Louis Vuitton store; music videos)

Mr. DEMARO: It was always done well. He was never cheap on any of that, ever.

HANSEN: (Voiceover) It was a good gig, especially for the singers, some of whom may have had potential. Others...

(Music videos)

HANSEN: Did you ever think to yourself, ‘Wow, this guy is pumping a lot of money into people who just aren’t that talented’?

Mr. DEMARO: Yes. Every day I worked with him. I just thought he was filthy rich. Who am I to question where his money comes from?

HANSEN: (Voiceover) Investigators say they know where the money came from and it wasn’t record sales. In fact, they say Jones had to pay clubs to let his artists perform, not the other way around.

(Money; CDs; inside nightclub)

Mr. COHEN: What we found was that none of these performers’ albums were selling, and it didn’t appear to us that people were willing to pay for these people to perform.

Ms. PINKEL: The fact is that his business made no money. So everybody who got paid, every lunch that was paid for, every dinner, every music video was paid for with money from investors.

HANSEN: (Voiceover) The singer Jones seems to have lavished the most money on was this woman, Adrienne Lau, whom he dubbed the Chinese Britney Spears. Here she is a cappella in a clip we found from the Web site Fashion News Live. Lau got the most elaborate music videos and a billboard on the Sunset Strip.  Jones even filmed a reality show about her fledgling career...

(Music videos; Fashion News Live clip of Lau singing; music video; billboard)

Ms. ADRIENNE LAU: (“Adrienne Pop Reality”): I met Dr. Henry Jones. He offered me a record deal.

HANSEN: (Voiceover) ...all of it funded by unknowing investors like Kim’s mother and Angelina Encarnacion.

(Photo of Loveless; Encarnacion and Hansen)

HANSEN: I mean, the money was spent op billboards promoting her.

Ms. ENCARNACION: It’s terrible.

HANSEN: (Voiceover) While he was making music and movies, Jones divorced his Russian wife. That’s apparently when singer Adrienne Lau took center stage.

(Music videos)

HANSEN: She’s widely been described as Henry Jones’ girlfriend. Does that seem consistent with what you witnessed?

Mr. DEMARO: I mean, it was either she had a personal relationship with Dr.

Henry Jones or maybe he believed she was really talented.

HANSEN: (Voiceover) Or, according to investigators, maybe she was a pawn in his scheme.

(Music video)

Mr. COHEN: Henry Jones was using her as a conduit to funnel money to keep the scheme alive.

Ms. PINKEL: At a certain point Henry Jones instructed people to send money to her.

HANSEN: Under the guise of what?

Ms. PINKEL: That she was supposedly his attorney and he needed money for attorneys’ fees.

HANSEN: (Voiceover) Federal prosecutors thought that they had strong evidence to prove fraud. While they’d been building their case, Jones left Los Angeles and headed west.

(Recording equipment; FBI seal; airport)

Ms. LAU: (“Adrienne’s Pop Reality”) We’re outside LAX and right now I’m going over to Hong Kong to promote for my new album.

HANSEN: (Voiceover) Jones was arrested on an Interpol warrant in Hong Kong in the summer of 2007. He was brought back to LA to face charges along with the two Tri Energy executives. Soon a jury would hear his side of the story, and so would we.

(City buildings; document; airplane; empty courtroom; telephone)

HANSEN: Hello, Mr. Jones. It’s Chris Hansen with DATELINE NBC. How are you today?

KEITH MORRISON reporting: (Voiceover) And coming up in our second hour, The Family Secret. They started as a happy blended family. Mom and her kids, dad and his. Then he disappeared, seemingly left his wife and his heartbroken young children.

(Title graphic; photo of Lloyd Ford; photos of Ford family; trunk; The Family Secret graphic; family photos)

Ms. SANDY BURKE: (Voiceover) The person that you thought you were closest to in the whole world had just turned and walked away.

(Photo of Ford)

MORRISON: (Voiceover) But is that what really happened? One child knew the truth.

(Outside house; photo of Kimberly)

KIMBERLY: Still burned in my memory.

MORRISON: (Voiceover) Knew what she was made to do.

(Trunk)

KIMBERLY: She swore me to secrecy. Made me promise.

MORRISON: (Voiceover) A dark deed kept secret for 27 years.

(Fence; shovel)

KIMBERLY: (Voiceover) You just stuff it deep inside and try to be normal.

(Trunk; Kimberly)

MORRISON: (Voiceover) We all have secrets.

(Photo of Kimberly)

KIMBERLY: (Voiceover) I was going to have to betray her.

(Court in session)

MORRISON: (Voiceover) But not like this.

HANSEN: (Voiceover) The Tri Energy fiasco had already shattered Kim Flanigan’s relationship with her mother. But until our interview, she and her husband hadn’t seen what the government says Henry Jones did with $21 million of investors’ money. So we showed them a sample of Dr. Jones’ work.

(Photo of Kim and Loveless; Kim at table; music videos; Kim and David looking at music videos)

Ms. FLANIGAN: It makes me a little sick.

HANSEN: Not something you’d invest in?

Mr. FLANIGAN: No.

HANSEN: And probably not something the other investors wanted to get involved in.

Ms. FLANIGAN: It’s not something I would even let in my house. It’s an awfully long way from humanitarian projects.

HANSEN: (Voiceover) Henry Jones and the two Tri Energy executives were indicted on charges of securities, mail and wire fraud. In their defense, the company executives say they were victims, too, duped by Henry Jones. One pleaded guilty to a single count of fraud and got nine years in prison. The other was convicted at trial and is serving 12 years while he appeals. While Jones, accused of bilking hundreds of investors out of millions of dollars, took the stand and insisted that the gold transaction had, in fact, been real.  In court, prosecutors told jurors about the music business Jones ran with investors’ money. Angelina Encarnacion, who had hoped to do some good in the world, was called to testify. Angelina lost her home as a result of her $200,000 investment.

(Documents; photos of men; photo of Jones; empty witness chair; Jones; empty courtroom; music videos; Encarnacion walking; document; outside house)

Ms. ENCARNACION: I have to move on, but I still suffer the consequences of that experience, and it’s a very, very painful experience.

SEAN: (Conference call) Dr. Henry Jones, is he acting as the broker in this whole deal?

HANSEN: (Voiceover) The jury also heard hours of investor conference calls, many recorded by Kim Flanigan.

(Empty courtroom; recording equipment; photo of Kim and Loveless)

Dr. JONES: (Conference call) All I have to tell you is basically the deal will be complete.

HANSEN: (Voiceover) In the end, Henry Jones was convicted of fraud and sentenced to 20 years in the federal prison at Lompoc, California. That’s where we caught up with him on the phone.

(Prison)

Dr. JONES: Hello.

HANSEN: Hello, Mr. Jones. It’s Chris Hansen with DATELINE NBC. How are you today?

(Voiceover) We didn’t know which Henry Jones to expect, the international diplomat or the Hollywood media mogul. Turns out he admitted to being a little of both. He didn’t deny spending cash from investors on his entertainment business, but told us it was part of a legitimate deal he had with one of the Tri Energy executives.

(Jones; photo of Jones; Jones; music video; money; photo of Jones; Tri Energy logo)

Dr. JONES: My contract was he would underwrite my movie and music endeavors in exchange for my setting up international markets for coal.

HANSEN: (Voiceover) Jones says he calls himself doctor because he has a PhD in business from Kensington University in California. Our research found that Kensington was shut down for selling bogus graduate degrees in 2003.

(Jones; documents)

HANSEN: Some people would consider that a diploma mill.

Dr. JONES: Most of the world’s accomplished people never saw the four walls of a university—Shakespeare, for instance.

HANSEN: (Voiceover) What Jones really wanted to tell us about was a film he’d produced about the invasion of Iraq. He claims it’s the real reason he’s behind bars.

(Excerpt from “The Rise & Fall of Saddam Hussein”)

HANSEN: So you’re saying that the government didn’t like your documentary “The Rise & Fall of Saddam Hussein,” and that’s why you were prosecuted?

Dr. JONES: I do believe, yes. And this is my theory.

HANSEN: (Voiceover) He also talked about his friendships in Washington and in governments around the globe.

(Capitol building; flag)

HANSEN: If we were to contact these people, would they confirm that you know them, that you’ve had dealings with them?

Dr. JONES: Well, the best confirmation would be from R. James Woolsey, President Clinton’s first director of central intelligence.

HANSEN: Sure.

(Voiceover) James Woolsey told DATELINE he’s never heard of Henry Jones. As for the allegation that he used singer Adrienne Lau’s bank account as part of the fraud, Jones says that was an innocent mistake. Lau wasn’t charged with violating the law, but she agreed with the SEC to turn over more than $200,000 to a fund that will go to investors. She declined our requests for comment, but her Web site says she’s working on a new album. And she was recently photographed outside the Grammy Awards. And finally, those audio tapes that helped send Jones to prison? He claims they might have been tampered with by the FBI.

(James Woolsey surrounded by press; music video; documents; music video; photo of Lau; music video; recording equipment; FBI building)

Dr. JONES: My trial was based on tapes that were doctored. My voice sounded...

HANSEN: Doctored? So you’re saying the tapes were doctored?Dr. JONES: Yes!

HANSEN: But the fact of the matter is, Mr. Jones, is that you would get on these conference calls and talk about this gold deal. The evidence shows that, in fact, there was no gold deal, that you were lying the entire time in order to get money out of these people.

Dr. JONES: Well, you know, with all due—with all due—with all due respect, even if I was arrested in China, I was still intermediating, trying to bring closure to the gold transaction.

HANSEN: (Voiceover) Henry Jones has fired his defense attorney and is filing his own appeal. Throughout our conversation, he insisted that he’s an innocent man wrongly accused.

(Jones; telephone; Hansen speaking on phone)

HANSEN: What do you say to Henry Jones today?

Ms. FLANIGAN: You are where you should be, and that’s serving time.

HANSEN: (Voiceover) Kim’s relative Millie Stultz settled her civil case with the SEC without admitting wrongdoing. And while she was ordered to pay money to a victim’s fund, the court found that Millie had been wiped out by the scheme. As for Kim’s mother, Debbie Loveless, in the end the government saw her more as a victim than as a perpetrator. She also settled her case with the state of Montana without admitting any wrongdoing and by agreeing to stay out of the investment business. And Kim and David have paid her back that $10,000 loan.

(Photo of Stultz; documents; photo of Loveless; government buildings; Kim and David walking dog)

Ms. FLANIGAN: I knew in my heart that although my mom had disagreed with me, that she raised me to choose the right, and I knew that what I had done was good.

HANSEN: (Voiceover) Kim’s mother didn’t want to be interviewed on camera, but she told us that the worst part of the investment saga was what it did to her family relationships. Her daughter couldn’t agree more.

(Family photos)

Ms. FLANIGAN: The saddest thing for me was the time that I lost with my mom, the relationship that was so strained for so long.

HANSEN: (Voiceover) Today their bond is on the mend, and Kim’s mother is back in her grandchildren’s lives.

(Photo of Kim and Loveless; photo of Loveless and boys)

Ms. FLANIGAN: (Voiceover) We don’t talk about Tri Energy. It’s still kind of an off limits thing in our relationship.

(Photo of Kim and Loveless)

Ms. FLANIGAN: So it’s hard. I know that she loves me. I know she knows that I love her.

HANSEN: (Voiceover) Kim and her family found out the hard way that things aren’t always what they seem.

(Flanigan family in kitchen; Kim; music video)

Ms. FLANIGAN: When it comes to investing, anything financial, be skeptical, especially of family and friends.

HANSEN: (Voiceover) But it’s not too late for those who trusted Tri Energy to get a little bit of their money back. The government, and a court-appointed receiver, have recovered close to a million dollars that will be returned to investors, possibly by the end of this year.

© 2013 MSNBC Interactive. Reprints

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