Still, in mid-2010, Villarreal went ahead — why not? — and invented a third fraudulent fund, which he called the Standard Asset Management (SAM) fund, the scratch for which, Villarreal claimed, would be pooled and then traded in securities of companies listed on the Mexican stock exchange. That fund attracted $3.7 million from nine investors between 2010 and 2011, over and above the $9.2 originally invested in WW Capital III.
Also during that time, Villarreal acquired two high-rolling "Advisory Clients" (one of whom, though not officially named, the NEOMG's Mark Naymik suspected was former Cavs president James Boland) who wanted to invest in the SAM fund, but didn't want their money pooled with the others. They gave Villarreal $5.5 million to invest, plus additional compensation for managing their money.
Villarreal lost 83 percent of the SAM investments by May 2012, the SEC reported.
In his correspondence with investors, he deployed some of the business community's favorite buzzwords: He spoke of the "strategic partnerships" his shell companies were forming with energy and infrastructure concerns in Mexico. He spoke of the "corporate face lift" inherent in a new business plan for the company he claimed his investors partially owned. Twice, he even accompanied investors to Mexico to make them feel comfortable about their investments: once in 2007 and again (when red flags had been raised) in 2013. On the first trip, Villarreal put on a terrific show, guiding his targets around in armored SUVs and leading them to a steel company with "significant inventory."
Perception was everything, he'd clearly learned, and until August 27, 2013, when an armada of Cleveland's elite held a meeting at the Union Club to get some answers, the perception was rosy. At that meeting though, "at the advice of his lawyer," Villarreal refused to answer almost everything his investors asked of him. "He made no substantive comments."
By early 2014, Villarreal's attorney John McCaffrey wrote to the NEOMG, Villarreal had repaid all monies invested in both WW Capital III and SAM, in excess of $12 million.
"At that time," wrote McCaffrey, "Mr. Villarreal and the investors resolved any issues to their mutual satisfaction and the terms of that settlement are confidential."
"Exclusivity. Legal latitude. Greed." That's how one observer from the local business community diagnosed investor motives. "The Cleveland elite love the idea of being elite," he said. "And the idea of being part of a very exclusive investor group was attractive to them, absolutely. Also, these investments were in Mexico, where regulations were perceived to be more lax."
But both of those motives may have paled in comparison to the enticement of a 30-percent return on investment within 12 months. "I don't think there was anything noble about it," he said.
And that's likely another reason why this community of lawyers and CEOs, traditionally behind-the-scenes types anyway, would prefer to keep all this as confidential as possible. It's not only that they look like fools; they look like greedy fools.
Still, at least one former Villarreal associate told Scene that the investors didn't deserve the runaround to which they'd been subjected.
"I know these people are rich and there's some schadenfreude going around," he said. "But they're also good people. They're the real philanthropists of this community. I hated to see it."
Dan Meyer, an attorney based in Columbus who specializes in investment fraud, said that smart, wealthy people aren't immune to this sort of Ponzi scheme just because they're smart and wealthy, "particularly when an outgoing, bright con artist who is effective at promotion is able to break into an inner circle and convince a core group of members to invest with him/her. It's a classic affinity fraud," Meyer said. "It's easy for targeted victims to let the research slide when they hear the recommendation from someone they trust."
Meyer also appended the fact that though the victims may have been "Cleveland business leaders," that doesn't, self-evidently, mean that they know how investments work or how to properly research an investment opportunity. Indeed, with the exception of the handful who allowed themselves to be conned by a fully realized performance in Mexico, most of Villarreal's investors had been convinced of Villarreal's merits without much research at all.
Interpret as you will, but one emergent takeaway is that, at least in Cleveland, "business leader" is not necessarily coterminous with "savvy businessman."
A theory: When Villarreal was being hailed as a rising star in 2005 and 2006, one personal characteristic which was hyped as much as his business IQ was his obsession with Cleveland.
When asked by Crain's his favorite place to go around town, he described driving down to Edgewater, "looking at downtown for a few minutes ... just thinking about how ridiculous Chicago is going to look before I'm 30." (The implication was that within a decade, Cleveland would have surpassed Chicago in "coolness" or some such.)
In his "Twenty in Their 20s" write-up, Villarreal claimed to want to "recruit" entrepreneurs to Cleveland.
"That's been one of my biggest accomplishments so far ... " said the then 21-year-old. He was, at that precise moment, describing a fake company he said he'd started and the fake employees he said he'd hired, "...stealing someone from Chicago."
It's that very same aggressive (almost militant) Cleveland boosterism over which the corporate community tends to salivate. They've been preoccupied with the perception of Cleveland, in many cases to the exclusion of the improvement of Cleveland, for decades. And this is still very much the case: Have a look at the 2014 Young Professional Senate, when Destination Cleveland gathered "bright young minds" to brainstorm creative ways to promote the city. Have a look at how giddy Joe Roman and the Greater Cleveland Partnership or Terry Egger and the RNC Host Committee get when they talk about the expected media frenzy at the RNC, at the opportunity to influence the perception of Cleveland nationwide and around the globe. Have a look at political leaders holding aloft, in official remarks, Fodor's and the Boston Globe (though not for long), and Business Insider for labeling Cleveland a "best place to visit" or a "most romantic town." The corporate community calls all this "changing the narrative."
This is age-old, and it's the story of Cleveland narrated through corporate marketing campaigns, adopted to varying degrees by locals and the national press: The Comeback City! The New American City! #ThisIsCLE! It's all about perception.
Which is why, in many ways, Oscar Villarreal was Cleveland's most perfect and poetic criminal. All he was guilty of, at root, was following the very same instructions he'd witnessed by those in power, by those who, energized by his Red-Bullish regional optimism, had deigned or decided to become his mentors.
Perhaps he'd heard them say that if people perceive Cleveland to be a cool place to live and work, then the poverty and the police and the population loss won't matter. And then perhaps he extrapolated: If Oscar Villarreal (because he seems to operate exclusively in third person) is perceived to be a charismatic business expert with international bona fides, then the fact that he is stealing powerful people's money and shuffling it around E-trade might not be important to them. Maybe, in their eyes, the fact of the scheming won't matter at all.