Dentist Runs Affinity Fraud Scheme in Austin

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[00:00:01] Bob: This week on The Perfect Scam.

[00:00:05] Neill Slater: He wasn't slickly dressed. He, he dressed like I did. Just kind of a guy in their, at the time, mid-40s, that is moderately successful but not over the top, and he came across as being confident and, but he was charismatic. He seemed like a very likeable man. But I think if, if he would have been slicker, I think my guard would have been up.

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[00:00:34] Bob: Welcome back to The Perfect Scam. I'm your host, Bob Sullivan. One of the big themes on The Perfect Scam is that anyone can be a victim. If you've heard me say it once, you've heard me say it a thousand times, but today's story is going to really bring that home, because today's victim is not only an accomplished cool-headed ER doctor, he's also a seasoned investor and entrepreneur. His story will really make you think especially because Neill Slater is very open about what happened to him, and he's also a bit of a casual expert on behavioral science and cognitive biases. That's one of my pet topics too, so today you're going to learn about something called survivorship bias which I'm sure you'll be able to use in your own life right away, and you'll also learn about affinity fraud which, well, it just means that even when you trust your friends, you should always do your own research before getting involved in any investments. Now, let's meet Neill.

[00:01:35] Neill Slater: I live in Austin, Texas, and I'm a board-certified emergency medicine physician that works in kind of rural west Texas.

[00:01:44] Bob: So what's an emergency medicine physician?

[00:01:47] Neill Slater: I'm the guy that's at the end of the ambulance. So if you catch a ride to the hospital on an ambulance to the emergency room, or walk into the ER, whether you're hurt or sick, I'm going to be the doctor that's there at the end of that journey.

[00:02:00] Bob: So you must see a lot of different things.

[00:02:03] Neill Slater: I do. Yeah, good things, bad things, things I don't want to talk about, things I don't want to remember, but a lot of good things as well.

[00:02:10] Bob: I know one really critical element of what you do is you have to be able to keep a level head even in crises, right?

[00:02:16] Neill Slater: Yes. That's, that you know the number one rule is just don't panic. No matter what happens, you have to stay cool so that somebody is in charge and directing traffic so to speak. So you really have to keep your wits about you.

[00:02:31] Bob: Yeah, and that, that's a special skill that just not everybody has.

[00:02:34] Neill Slater: Yeah, I don't know if it's innate or it can be trained. I think most of the time it can be trained. It's just once you see, you know the first time you see somebody having a seizure, it's very distressing for anybody, but the thousandth time you've seen somebody having a seizure, it just becomes routine, I think so and, and that goes for almost anything.

[00:02:52] Bob: Hmm, then it's your job.

[00:02:54] Neill Slater: Yes, it just becomes your job.

[00:02:56] Bob: Neill's been working under ER stress for decades now, and he loves what he does, but years ago he made a decision that makes him a little different from any other doctors. He decided to invest in the business of healthcare.

[00:03:10] Neill Slater: In the past it's been very common for physician to own their own practices and I think that people still believe that that's common, but currently, right now, 74% of US physicians are employees, and over the last uh, couple of decades, there's been a lot of consolidation in the industry where big companies are buying up physician groups, individual physician practices, hospitals, uh and a lot of these are backed by private equity funds uh, and some have become publicly traded companies. So that's something that I tried to work against, actually that's sort of the gist of how all of this came about. The physician today has a lot of stress, and you know, look. I, nobody, nobody feels bad for doctors, right? That's what, this is why I think a lot of times this doesn't become more public. There's a lot of things that happen behind the scenes, but, you know, it, it doesn't look good for a doctor to go on television or a radio podcast or anything else and say oh, woe is me, I'm not getting paid as much as I used to, or whatever. People look at us and say, oh, these people make a lot of money. And we do. Uh, what I think that the general public doesn't see is that we take on a lot of debt. You know we; we have some detrimental aspects to the way the system works in that most physicians are several hundred thousand dollars in debt by the time they graduate med--, from medical school and finish their residency. The system has become very complicated when it comes to financial reimbursement through insurance companies, government regulation, and so the path of least resistance for a lot of physicians is to become an employee. Let somebody else handle the billing and the coding and the overhead and hire nurses and hire your front desk staff and I can just do my job and then go home. But again, you're giving up something when you go that route, the financial return, and you're also giving up autonomy, which I believe is equally as important because again, corporate owned medical entities you know -- private equity has a playbook. And that, that playbook is to increase profits so that they can sell later, and there's only so many ways you can increase profits in a medical setting; see more patients or charge more per patient, and that is, like I said, subtly or not so subtly, transmitted down to physicians many times. And I, I feel like it interferes with our autonomy which is bad for us, bad for the patients, and so that's what I try to, you know, encourage people to, to get into entrepreneurship, own their own practices, and uh at least learn about money and finance and business so that they know what they're getting themselves into.

[00:05:45] Bob: So Neill believes it's his duty, not just to his own financial well-being but to the well-being of his patients, that he invest in healthcare ownership. And he's an advocate for other physicians getting involved in this too. That's part of why he's speaking to us today as you'll see. So what exactly does Neill invest in?

[00:06:06] Neill Slater: Even though I'm an ER physician, um, I own a emergency medicine practice group with some partners that we started I think 16 years ago now. And so we staff ERs. So I'm a, a business owner in that respect. We hire other physicians and advanced practice providers to staff ERs, and then I also own a chain of urgent care and family practice offices that I manage uh with some partners. And we have bought the land under several of those facilities as well.

[00:06:34] Bob: And as is true of every entrepreneur I know; Neill is pretty constantly networking and that's how Neill met a fellow medical practitioner and an entrepreneur named Clinton Herzog several years ago. They were introduced by Neill's good friend, Jerry, who is also an ER doc and is Neill's business partner in the urgent care business.

[00:06:59] Neill Slater: And Jerry is a very good guy to know, which is why he's my business partner. He knows everybody, meets everybody, very affable, long roots in Texas where I live, and he's kind of the opposite of me. I'm not going to be the guy going out and meeting everybody. I'm kind of an introvert um, and he isn't. So I meet a lot of people, friends, business uh partners, you know, these sorts of things through Jerry, because he's that guy. So he's introduced me to a lot of people that have done really good things.

[00:07:31] Bob: And so one day, Jerry decides to bring Clint into their networking circle. Jerry says to Neill...

[00:07:39] Neill Slater: "Hey, I met this guy and I've worked with him for a little bit and he seems to be somebody you should meet. He's about our age, and he is an entrepreneur, he has started multiple dental practices, and his business is expanding, and he is taking outside money to grow his chain of practices." And at that point we had a few urgent care locations, but um, we were interested in growing as well. And so he thought it would be a, a good meeting for us to meet somebody that also lived in Austin; again, maybe a friend, maybe a, somebody to bounce ideas off of, uh it was not really set up to be an investment meeting. It was more of a, let's meet this guy. Maybe he can help our business. Maybe we can bounce ideas off each other, you know, that sort of a meeting.

[00:08:30] Bob: Clint already owns a few dental offices that Neill knows about. In fact, Jerry had already invested in them.

[00:08:38] Neill Slater: There were already a few open around town. This was not just a idea that came out of nowhere. Jerry had already, at this point, invested in his practice previously and had actually sent a prospectus to me I think the year before asking me if I wanted to invest because you know we, I, I get a lot of emails and calls like, hey I'm going to do this. Are you interested? And I looked at it. I was very busy. I had a lot going on, and I just didn't feel like it was something I wanted to participate in. But Jerry and some other friends of ours did get involved and had already invested money. And living in Austin, I knew of at least two dental locations that he had. And I knew of his brand...

[00:09:23] Bob: So naturally, Neill takes the meeting with Clint.

[00:09:26] Neill Slater: Yeah, we met in person, we met at a bar in Austin and had a, sat down and had a beer and talked for maybe two hours, and he seemed like a very relaxed, affable man. He was very honest about some of his past transgressions, so to speak. You know, because one of the first questions I have, I'm not a very trusting person most of the time. I'm going to ask people, why are you taking outside money? Why aren't you just growing organically? Um, why are you in the position that you're in? And he was very honest about he had grown a practice in the Dallas area previously, a dental chain, that he told me had been very successful, but he was married at the time and was cheating on his wife and kind of got into a, a nasty divorce and states that he lost the practice during the divorce. And then he was very remorseful about that, very honest about, like I said, his transgressions and that he was kind of starting over. He had to wait a two-year period for some non-competes when he sold his business and he was just starting over again after those two years had ended and was going to start building medical practices in Austin.

[00:10:45] Bob: Clint is an impressive man. And certainly seems successful. But he doesn't flaunt it.

[00:10:52] Neill Slater: He was, I would say, of average build. He was, I don't, he wasn't a tall man. He was, you know, maybe 5'10", medium build. He wasn't overweight. He was charismatic uh whether he was handsome or not. I mean I; I think he was a, not an unattractive guy. He wasn't slickly dressed. He, he dressed like I did, you know, or that Jerry did. Just kind of a guy in their, at the time, mid-40s, that is moderately successful but not over the top, and he came across as being confident and, but he was charismatic. Uh, you know, he seemed like a very likeable man. But I think if, if he would have been slicker, I think my guard would have been up um, because I, you know, when people are too slick, too well-dressed, have fancy jewelry on, when everything's too perfect, my, my guard goes up. And I think he was flawed enough that he seemed real. He seemed like a, a normal guy I would meet that is about my age, that's not perfect, and uh, yeah, he, he seemed very relatable.

[00:11:59] Bob: And they get along great in a low stress kind of way. Clint doesn't pitch Neill on anything.

[00:12:06] Neill Slater: He did not ask me for any money. We did not talk about investing together. We had a conversation about just life and business and, and growth and ideas for branding, and growth of business. So when I left, I was thinking, hey, he seems like a nice guy. Somebody that I could be friends with. Somebody that I could bounce ideas off. He seemed to be ahead of where I was, or we were at the time in terms of branding and growth. So I was like, yeah, this is somebody that I could maybe bounce some ideas off and, and be friends with. That, that was really the thought.

[00:12:42] Bob: And that was that until a few months later when Clint reappears in Neill's life in a simple enough way. Another friend who had invested in Clint's business comes to Neill with a straightforward opportunity that doesn't involve Clint, not directly anyway.

[00:12:59] Neill Slater: Well what happened was my friends that, that had invested, uh one of them wanted to get out of the investment. And he was getting married, they were having a big expensive wedding and a big honeymoon, and he kind of, he said he needed some cash and he wasn't selling out all of his stake, uh, but he had, he wanted to sell $25,000 worth of his shares in their LLC. And since I knew everybody in it, I had looked at the prospective as I had said the year before, and from what Jerry was telling me, they were profitable and already receiving some distributions. I knew where the location was, it was in a, a new big shopping center complex with hotels and called The Domain in Austin. And I thought, yeah, this is great. I missed it the first time, I can get in now. So I, it gave $25,000 to the acquaintance, not to Clint, but he had nothing to do with this. He had already, you know, I just bought into that investment group with $25,000.

[00:14:06] Bob: But that $25,000 investment, well that seems to get Clint's attention.

[00:14:13] Neill Slater: Clint then contacted me shortly thereafter within, within a month uh with the pretext of, "Hey, I heard you bought out some shares that you had invested. I'm starting a new location. Would you be interested in investing in that location?" And, and that location that he was supposedly opening was in south Austin, which is where I lived, it was an established dental practice that he said that they were going to, he was going to buy the existing practice and rebrand it. He sent over, you know, a prospectus and information about it. I drove by; I knew where the site was supposed to be. And so it seemed like, it seemed like uh, something that I would want to invest in, uh, again with the, with the context that the other one that I knew about seemed to be doing well and had been receiving distributions.

[00:15:05] Bob: All the paperwork looks good, the location looks good, and so Neill wires the $50,000 to Clint and figures he's taking a good step towards diversifying his portfolio, and then he goes on with his busy life.

[00:15:20] Neill Slater: And I didn't hear anything after that. And again, I'm busy. I'm, I'm working clinically in the ER, I had these businesses that I'm running, and so time passes and it just sort of after a while I was like, hey, I really haven't heard much.

[00:15:34] Bob: It's a little strange, but again, Neill is very busy until eventually the silence becomes a little concerning.

[00:15:43] Neill Slater: So within about three months, I mentioned it to Jerry. I was like, "Hey man, I haven't heard from Clint really at all since I invested that money." And, and he happened to mention, well yeah, we haven't, we sort of stopped getting monthly reports and updates as well. We just weren't getting the same level of communication that we were before.

[00:16:07] Bob: As the investors chat about their concerns, they decide to nominate Jerry to talk with Clint.

[00:16:13] Neill Slater: Jerry called him on behalf of everybody and wanted to set up a meeting. And he took Jerry's call. He was apologetic, said that he had been busy, and he scheduled a meeting for the next Monday.

[00:16:29] Bob: And so they agree to set up a conference call. Neill readies his list of concerns, but also it seems like a good sign that Clint is so willing to meet them all. Neill calls in on Monday; so do the other investors and then five minutes go by, 10 minutes go by...

[00:16:47] Neill Slater: Maybe 15 minutes, you know, I mean it, it happens. You get on these calls and technology doesn't work or somebody's running late, and so we were texting and uh, and we were all in different areas, it wasn't like we were together. So we were texting amongst ourselves and texting him and um...

[00:17:03] Bob: And then, as the partners text off the call, maybe Clint's just late. Maybe he has no cell service. Did he just forget? But when it becomes obvious that Clint is a no-show, the group starts openly discussing a darker possibility.

[00:17:20] Neill Slater: But it, it seemed pretty obvious that something was wrong, like 'cause you know there'd been the weirdness such as why we took the call to begin with, and then he didn't show up. So I think we all sort of knew something was off at that point. I don't think we were; we'd been defrauded. I really don't, because again, most of the people on that call were from the previous group and had already received some money from him. And I, so I think that they thought he, alright, maybe he's just late or he's being flakey. I had a, I think personally, I probably had a more deeper concern just 'cause I hadn't really heard much at all since I gave him the, the 50,000, and I, I don't know. I just, something was triggering in my head that this really didn't seem right.

[00:18:06] Bob: Something doesn't seem right, and that makes Neill think about something else that's been bugging him.

[00:18:12] Neill Slater: You know we, 'cause I hadn't rece--, usually if you're going to invest in something you're going to get some sort of a paperwork afterwards, some operating paperwork to sign. I didn't really get anything, I didn't follow up, and just kind of trusted and I, I'd had a pretty sinking feeling at that point that whether we had the formal conversations or not, I can't remember, but I, I certainly really felt something was not right.

[00:18:39] Bob: And so the group of investors hangs up, but they decide to organize themselves.

[00:18:47] Neill Slater: I didn't know what to do. We waited, we tried to reschedule a call. Again, I didn't have any clear evidence that something had happened, but just the bad feelings. And so we started talking more, set up an email group. We tried to contact him a few more times and at that point it was radio silence. We got nothing. So at that point we all started talking about what to do.

[00:19:13] Bob: Eventually what to do is pretty obvious; legal action, though that it hardly Neill's first choice.

[00:19:22] Neill Slater: So at that point we got a lawyer and, and filed suit. To be honest, I was, if it had just been me, I probably would have let it go. I would have not filed suit uh or got a lawyer involved. I think I realized at that time that this was a fraud, that if it is a fraud, the money's gone. There's not anything that, you know you don't, you don't hear about people getting busted for these kind of frauds and having the money in a bank account somewhere. They're usually spe--, you know it doesn't seem to be that way. They never recover the money. And I was, I was embarrassed, um, I didn't, you know, again, maybe laziness. I didn't want to go have to deal with all of this. It just seemed like a lot to deal with for no return. Uh, I didn't, like the money, I'm not going to get it back, that was sort of what I was thinking. But speaking with my friends and the other folks, they really wanted to, and I think rightly looking back, they wanted to pursue it, even if it was just to prevent him from doing this to somebody else. And, and I think ultimately that's the right approach. And so we, we agreed to do, we, we had to put in some more money to pay for the lawyers so we all kind of grouped together, put in some money, and got lawyers involved to file a complaint. I don't know all the details of who they file what complaint to, but we at least con--, they contacted the government, the police about there being something amiss and it seemed at that point we found out that there were other groups; he had been doing this to other groups as well. And that there was another lawsuit or complaint or whatever it was that came in about the same time from an unrelated group.

[00:21:03] Bob: Clint has done this to other investors, taken the money and disappeared. So a civil case against him is relatively straightforward, but...

[00:21:12] Neill Slater: Jerry spearheaded it, and I think it's because he, whether he felt guilty about kind of bringing everybody in or he was just the one that took charge, uh he was the one that sort of spearheaded it speaking with the lawyers, kind of organizing everybody. And at some point, we did take him to court, and they sort of, my understanding was that they successfully sued him for a particular amount of money, and there was a judgment placed to where if he had any assets, we would be, we could get those assets uh and we won that case. But nobody knew where he was, and nobody knew if he had any assets. So it was sort of an empty victory. But after that, that was really the last I had heard of it.

[00:21:57] Bob: They win a judgment but there is no assets to seize, so that judgment isn't worth very much. It's frustrating, but it's not as frustrating as what the group finds out on social media later one.

[00:22:10] Neill Slater: But we would hear updates occasionally you know some, one of the guys in the group would call or text and say, hey, I saw something on his Facebook account, and he is in ... wherever he was, Puerto Rico, or the Dominican Republic or someplace somewhere offshore. And he sent a, you know he posted a picture that he's having a party and in this island. But nobody ever saw him in the States again, so I'm assuming he was out of the country for most of that time.

[00:22:36] Bob: Okay, so you know this guy's done all this to you and you see him having fun somewhere overseas. How does that make you feel?

[00:22:43] Neill Slater: Not happy, obviously.

[00:22:46] Bob: Neill tries to put the whole thing out of his mind. $75,000 is a lot of money. He thinks about his dad who was a coal miner, but Neill is fortunate enough in that this kind of a loss doesn't impact his ability to feed his kids or keep a roof over his head. But the crime certainly does impact him.

[00:23:07] Neill Slater: Having the conversation with my wife was probably the worst part. Just, you know she lets me deal with all the money. It, it's what I like to do. I like to invest, I like to, you know I'm into business and so she trusts me to take care of the finances. And, and this didn't affect our lives in any meaningful way. But it's still you know I, I had to tell her as, as I joked; I didn't want a letter from the, the FBI to show up at my, at the house or something, you know. That would look a little weird. So um, I told her and, and you know having that conversation was humbling. So that was probably the worst part.

[00:23:42] Bob: As time goes by and Neill writes off the experience as a costly lesson. Years pass, he almost forgets the whole thing, and surprise, one day...

[00:23:53] Bob: You do actually get a letter from the FBI, right?

[00:23:56] Neill Slater: Yes, we were getting, once we had kind of filed a complaint; again, I don't know where it goes, if it was to the local police and they bumped it up. I don't know the legal details. But at some point, we started hearing from the FBI that they at least were on the case.

[00:24:11] Bob: The letter is welcome but Neill still doesn't expect anything to come of it. But...

[00:24:18] Neill Slater: Didn't hear anything for a long time and then I got a letter in the mail about it saying that they had basically apprehended him and that he was going to go to trial and that they wanted some testimony, information about what had happened. I think Jerry actually wrote one for everybody, like kind of together and sent it in. And then, again, didn't hear anything for a while.

[00:24:44] Bob: They don't hear anything for a while because a federal prosecutor named Gabriel Cohen is working hard on the complex case putting all the pieces together trying to make sure he can prove that Clint isn't just a bad business owner, he's a man who defrauded his investors and ran a Ponzi scheme. And this situation is a little unusual.

[00:25:07] Gabriel Cohen: I think one thing that was interesting about this particular case is that there, unlike some other Ponzi sche--, type schemes or investment type schemes, there were actually functioning dental practices here in Austin. They were quite common. There were some on the, there was one on one of the main streets in here in downtown Austin.

[00:25:27] Bob: Building a case like this takes a lot of time.

[00:25:31] Gabriel Cohen: So in my experience, a case like this is a whole different than say a typical violent crime case, for example of bank robbery or something like that. Um, in this case, one thing that's sort of an interesting distinction is in say a bank robbery case, the question is usually, who robbed the bank, you know. There's no dispute that it is a bank or that a bank was robbed, or that a firearm was used or something like that; those are all relatively straightforward things to determine on the basis of surveillance video, interviews, and things like that. White collar and fraud cases are I think, are a bit more complicated in that although they frequently share similar characteristics, these schemes are frequently quite different in so there has to be quite a bit of fact development, just learning what happened in a way that is um, more difficult than in say a violent crime or a drug case. So, and there's obviously, you know, a significant amount of paper evidence, bank records, and things like that, um, investment agreements, various communications that are reviewed as part of the law enforcement process.

[00:26:36] Bob: What I'm hearing is when a, a bank is robbed, it's obvious that a crime has happened, but maybe it's not completely obvious at first in a situation like this. Maybe it's an investment gone bad or was there really fraud? A little harder to determine that at the beginning, right?

[00:26:48] Gabriel Cohen: No, I agree with that completely, yes.

[00:26:51] Bob: After all the stories from victims pour in, and all the bank statements come in, it's obvious that Clint was selling and reselling the same shares in his business over and over again using more recent investors to pay off early investors, at least as long as the money lasted. A classic Ponzi.

[00:27:10] Gabriel Cohen: Sure, I think in summary, the allegations which were similar, were di--, that Mr. Herzog was diverting investor funds for his personal use, and um, purporting to sell multiple interests, or rather the same interests, in a business or a business organization to multiple people. So if, for example, uh, Mr. Herzog entered into an investment agreement with one person, he would on day one, he would do the same, purport to sell the same interest to another person on day two. And so on and so forth. And uh, we have a number of documents that showed that we thought we could prove that at a trial, that he was, you know, diverting money from his investors, from so-called investors, unfortunately, for his, basically for his personal use.

[00:27:59] Bob: Clint receives what's called a target letter. Then he comes in for a conference with prosecutors.

[00:28:05] Gabriel Cohen: And we met for maybe an hour, two hours.

[00:28:09] Bob: And did you have any general impressions about him?

[00:28:12] Gabriel Cohen: Um... nothing that stands out. He's a, obviously it seems to me, and this is my personal impression, is he has been a successful person in many respects. It's not, it's not hard for me to see why he could be a successful salesman.

[00:28:28] Bob: After Clint sees the evidence that's been developed against him, it doesn't take long. There's no trial. Clint Herzog pleads guilty to defrauding investors out of hundreds of thousands of dollars from 2016 through 2018. And in 2024, we told you these cases take a long time, he is sentenced to 36 months in prison and $2 million in restitution. Neill can finally put all this behind him.

[00:28:58] Bob: How did that feel for you?

[00:29:00] Neill Slater: There was definitely some closure there. Again I, I had almost forgotten about it, you know I, I think maybe that is part of the ER doctor thing is that you have to, I, I am pretty good at compartmentalizing bad things. And I just, you kind of have to just move on and not think about them. So it wasn't something that was on my mind. You know, especially after we, we got the judgment and then I didn't hear anything else. I just thought it was over and then getting these periodic updates from the FBI, it was like, oh, that's interesting, they, they finally caught him. Honestly, I was somewhat detached from it. I, it was never like a feeling of victory or, there was some closure, okay, I don't have to really think about this too much anymore. But I was happy that he wasn't going to be doing this to anybody else. I think that there was some relief that, you know, maybe justice does, maybe the legal system does work and there is some justice and he's going to go to jail for a while, and you know maybe, hopefully turn his life around. I think that would be the ideal scenario.

[00:30:02] Bob: Do you have any opinion about the 36-month sentence?

[00:30:07] Neill Slater: (sigh) I, I don't know how, how, you know again, I'm not a lawyer, what's fair. If, if more than that is too much, I'm not sure. This was you know what I worry about with, with this kind of crime would be the taking people's retirement monies and people losing their homes. When I look at myself personally, it didn't affect my life a whole lot, and the people that I know that he stole money from, it didn't affect their lives a whole lot either. Now you know stealing is stealing, but as far as I know, nobody lost their homes, their kids didn't get to go to college, they lost their retirement savings, and so I don't know. It's a tough question to answer.

[00:30:59] Bob: Well he owes $2.1 million in restitution, some of which is your money, I'm sure.

[00:31:04] Neill Slater: That's what it is, yeah, 2.1 million. So you know three years and 2.1 million dollars, which I'm assuming they'll garnish his wages for the rest of his life if he works. Um, I'm okay with that. I'm okay with that.

[00:31:18] Bob: The conviction gives Neill a bit more chance to think about everything that's happened from the very beginning.

[00:31:24] Neill Slater: I think he was probably grooming me is what I think. Looking back on it, the timing. You know I think in all these, the circumstances led it to go a certain way, but if I had not bought into that, the $25,000 investment with a friend and then bought his shares, I still think he would have called me. It was, it was pretty soon after that, I think that was an excuse, but I think he would have found another excuse. It all just happened too fast and it looked like, looking at the timing later on, that he was kind of throwing lines in the water trying to see who would bite in multiple areas, and took investments from multiple people for that site that he proposed to me. So I think he was probably playing the game even then.

[00:32:12] Bob: Playing a long game, but we'll never really know as the prosecutor said, there were real dentist practices, so that makes this an unusual Ponzi scheme.

[00:32:22] Neill Slater: So my assumption based on that was that he at least, whether it was more of a Ponzi scheme at the beginning or whether he legitimately had these medical practices. Because again, I, I know where they were. You could drive by and see them and they were operating. So the initial ones were real, uh so whether he just got behind or whether this was his plan, or, or where he sort of jumped the shark, I'm not sure.

[00:32:48] Bob: And what are Neill's feelings about Clint now?

[00:32:51] Neill Slater: This guy was a dentist that seemed to have a lot going for him. It's like you don't understand why people would do this. You could just work as a dentist and own a practice and make money. I mean it, it's, it's there for the taking, so why somebody would want to steal and do this, I'm not sure. I, I wasn't happy, but honestly, I was more perplexed than anything else. I just, why would you throw your life away, you're going, you know I was just thinking, you're going to get caught eventually. You're going to run out of money. You're going to get caught, why would you throw your life away on something like this.

[00:33:23] Bob: Well this sounds like that very level-headed ER doc to me, because I'd be pissed off.

[00:33:28] Neill Slater: (laughs)

[00:33:30] Bob: And so, Neill took that emotion and that analytic mind and has tried to put it to good use. We told you at the beginning of this episode that he not only invests as a physician entrepreneur, he also advocates for other physicians to do the same. So he's vowed to make this story a learning experience for all other potential investors. He shared the entire experience recently in a detailed essay and he has a lot of advice for medical professionals, well for any investor really.

[00:34:03] Bob: A big theme of this podcast is that anyone could be the victim of a crime. It's, it's just a matter of timing when they get you, your frame of mind, all that sort of thing and that's one reason I was really excited to talk with you, and I keep stressing you're, right, experienced, successful, level-headed. I'm sure you're, you're a good judge of character. You've seen a lot of things and yet something like this happened to you.

[00:34:23] Neill Slater: If you read the article that I wrote about this that led me to you was specifically titled, "How This Financially Literate Doctor Got Scammed Out of $75,000." Like I'm not, I was not naive, I was not unaware of fraud. I had some business and financial education. I have an MBA. I, and I still got scammed. So it, it really can happen to anybody, I believe that. And uh so that was really the impetus for writing the article that I did and, and doing this podcast is letting people know that uh, that it can happen to anybody. You know physicians and, and other professionals, we have some, some holes in our armor so to speak that we tend to get scammed quite a bit. You know we are busy, which leads you to not do the due diligence you should be doing. Uh we tend to be overconfident. And I always tell people, just because you're good at one thing doesn't mean you're good at anything else. But we tend to believe that hey, we're educated, we made it through these years of training, we're successful. People, you know, in the hospital or wherever we're working, look up to us for answers and so we feel confident when it comes to investing and other things, and we haven't deserved that confidence. We haven't earned it. So we're overconfident.

[00:35:43] Bob: Also, even with decades of education, Neill feels like he was never prepared for these kinds of financial situations.

[00:35:52] Neill Slater: I, I went to 24 years of school, so 12 years through you know, high school, and then I did 12 years of school after that, and that doesn't include my MBA that I did which is another, you know, two years. But 24 years of medical training, uh, 24 years of school all in public schools or state institutions, and I did not have one single class, not one, in business management, personal finance, or any financial education. And that is not unusual for physicians and other medical professionals. They teach us a lot about what we're supposed to be doing and we're, we're going to earn these incomes, but we get no training on what to do with the money, uh, how to invest it, any of these things. And that, that puts a big target on our backs. Physicians and other medical professionals also send, tend to have an outsized trust of professionals, so we really respect those letters behind your name because in a hospital, that matters, right, we understand that if you have an MD from an American medical school, you went through a certain level of training and we would expect that you'd be able to, you know, have some degree of knowledge and experience, and so we tend to overly trust people that have initials behind their names as well, and not, and just sort of not do the research on, do they really deserve that trust? And we become, we kind of fall into money, you know by the time we're 30 years we've been broke the entire time. We have hundreds of thousands of dollars of debt, and you literally go from one day making near minimum wage as a resident to making a few hundred thousand dollars a year. Literally from one day to the next that changes. But we're not ever taught how to deal with that. And so, again, all of those things really puts a big target on physician's backs. Physicians are sort of colloquially known to be bad investors.

[00:37:42] Bob: So are journalists by the way for what it's worth. Um, but yeah, so I, if we could just talk one more minute about overconfidence, because I think that's a really important factor. Exactly the quality that makes someone good at making decisions in a crisis, you know, I mean we want our doctor, I want my brain surgeon to be really, really confident, right. But that, that also opens up a vulnerability, doesn't it?

[00:38:02] Neill Slater: Yes, it does. Absolutely, yeah, you know in the ER there's a saying that we get paid to make decisions. We, we get paid to make decisions with incomplete information. You don't have time. Somebody's having a heart attack in front of you. They maybe can't give you all the information you need. Their family's not there yet or whatever it is; you have to make decisions with incomplete information. And so it may be the right decision or the wrong decision, but you have to make one then, and you have to go with it. And that, you know, the, the education, the level of confidence and this having to make decisions I think puts people in a bad decision when it comes to falling for scams like this and, and investment problems. Because you know one of the, one of the ways you can protect yourself is to not act quickly, not be pressured to acting quickly, and we tend to, we tend to act quickly. Um, so yeah, I think we're, there's a reason that doctors are targets. It's a) we have money, but a lot of it is b) we don't have the experience and we're overconfident about it.

[00:39:01] Bob: You mentioned in your piece a couple of terms that I want you to talk a little bit about too. Um, survivorship bias. What is that, and how does it apply?

[00:39:08] Neill Slater: Well, what I was speaking about was it, it might seem unusual to some people that hey, I would just meet a dentist and give him $50,000 or invest $25,000 in this other uh dental office that I didn't have a lot of research on. But we hear a lot and among other doctors and among other professionals about the successes that they've had. So you hear, I have a friend that made literally, somehow made a million dollars off of some uh mosquito spray company. He invested in it early, and it grew really big, and you know he, he made a bunch of money. And I know another, uh, doctor who made money on hotels, investing in a bunch of small hotels that got bigger. And so you hear about these when you're in the doctor's lounge or working with people. But you never hear about those who lost money. And it's the same thing with just stock investments. So you hear about people who invested early in Nvidia. Now you know anybody who's invested in Nvidia, you hear about it, or somebody that invested in Tesla really early; they're very happy to talk about it around the water cooler so to speak. But you don't hear about the people who invested in FTX, right, before it went down. Or, or something else that went down previously. So that's the survivorship bias. You only hear about the winners. You don't hear about the losers, because most people aren't in the locker room talking about how they lost a bunch of money, but they're happy to talk about their winners. And uh that's the survivorship bias. And you know I've, I fall prey to that as, I mean everybody can. It's, it's a natural, a natural bias.

[00:40:46] Bob: Doesn't everybody come, come home from Vegas either, oh yeah, I won big, or you know I ended up even.

[00:40:52] Neill Slater: Yes. Yes. You wonder how they pay for all that up there.

[00:40:56] Bob: And there's on other term, uh which I think is really important to this story which is affinity fraud. Tell me what you mean by that.

[00:41:01] Neill Slater: Affinity fraud is getting close to a group of people, sort of infiltrating a group of people that have some like characteristics. So it could be somebody is at your church, somebody is a, a veteran and you're a veteran. Somebody that has the same ethnicity, the same hobbies, the same profession. And you tend to have a, an immediate affinity with them. Oh hey, I went to this school as well. I root for this football team. I was also a veteran, and oh, and hey, I deployed to the same place. And so they, these con artists infiltrate your group of people and you have an affinity for them because they have like characteristics. And you tend to then trust them more than you should because you feel camaraderie, you feel a closeness with them, you feel like they are like you when they're really there with malintent.

[00:42:06] Bob: And there's a related principle here which um, in the computer security world is sometimes they call it third-party verification where you trust something because someone else says, a third-party says, oh, you can trust this person. So instead of analyzing that person completely yourself, you say, well, Bob, Bob likes him, so that's good enough for me.

[00:42:25] Neill Slater: Absolutely. I, I, when I looked at these, aside from all the, you know kind of basics of ways to protect yourself, I think the big three mistakes that I made and this was one of them, and the way I referred to it was transferring trust. So because Clint was introduced to me through Jerry, that buys you some trust, right? You just assume that I'm, I'm transferring the trust that I have to Jerry through, you know, 20 years of, of business and friendship to somebody that he knows because he introduced us. If somebody came off the street and introduced themselves, you'd automatically be a little put back. But if your friend introduces you, they automatically have some trust that they didn't earn. And it doesn't mean you're going to give them money immediately, but this happens all the time. Hey, you know, Bob's a good guy. Your friend tells you that. So you just believe it. Yeah, Bob's a good guy. My friend must know that he is. He's hung out with him before, he knows him, he's worked with him. Must be a good guy. And so you transfer that trust to somewhere that it's not deserved. The second mistake I made was fear of missing out, you know, kids call it FOMO, which is really subtle, but I think very pernicious where I didn't invest with the group on that initial dental office. And when they started making money and talking about it, and it gets into your psyche that hey, I missed out on this, right? You don't want to be the guy that I would say, you don't want to be the 5th Beatle that nobody remembers, right? You don't want to be the guy that left the group right before it went uh went very popular. And so you start thinking and a lot of this is even subconscious, but it's like, hey, if this could really take off, there could be dental offices all over Austin, all over Dallas. And then they go to Houston, and man, this could be national. This could be a huge thing and I could be on the ground floor. I don't want to miss out on that because my friends are invested. And so I, I think that was a big part and then number three on my part to be frank was just laziness. I have always prided myself on being a hard worker. I, I worked all through college, I actually had a full-time job my first 18 months in medical school. I moonlighted, I, I worked really hard to build businesses when I got out of school. I still work hard. And so this is the one that hurts me the most is I just didn't do the due diligence that I should have done. I fell; you know I can blame it on being busy, I can blame it on whatever, but ultimately, I just didn't do it. I didn't do the work that I should have done. I should have, you know you should always check references. In this case I'll forgive myself because I had references. I knew all the people that had already invested with him, but I didn't look for anybody outside my own group. I also didn't even do basic things like a, like a Google search or you know talk to the Better Business Bureau or, or get involved in any government agencies and, and do queries on their sites. And if I had, I would have found clues that would have given me pause. And so that's the one I think that hurts the most and um, I think you just, you have to go through those steps, no matter who it is.

[00:45:35] Bob: You have to go through these steps. Take your time, trust, but verify, even if you're working with a close friend. That's good advice. Gabe has some advice to offer too, and it begins with talking to someone if you've invested in something and things just don't feel right.

[00:45:55] Gabriel Cohen: I would say if you're having uneasy feelings, it can never hurt to contact law enforcement and the agency and describe the factual situation that they're involved in to them. That doesn't mean that they are going to determine if there was a, if there is a fraud or that a crime has been committed, but certainly it never would hurt to ask and to provide that information and um, to be prepared to just summarize what happened, which really is what all this, this is about. What are the facts? What happened? And uh, I'm sure you can, wherever you live, you could call the FBI office or local police, uh, and ask for someone involved in white collar crime or something like that, or investment fraud, and say I think this person may be doing thus and such, and here's why it seems to be wrong. And I think, uh, that is, there's certainly nothing wrong with that if you're uneasy about a situation you're in.

[00:46:52] Bob: Gabe sees victims all the time who thought they were too sophisticated to get involved with something suspicious, just like Neill.

[00:47:01] Gabriel Cohen: Reading his article and sort of mulling it over and uh, reading some of the comments and obviously having had the experience prosecuting this invest--, helping with the investigation, prosecuting this particular case, yeah, I think it's, unfortunately, entirely possible for people of even very sophisticated people to be the victims of a fraud or a financial crime like this. It's easy to want to believe that something is a great idea. It's easy to develop a personal relationship with someone who's, you know, charismatic, and, and seemingly, or in fact, at the time successful.

[00:47:43] Bob: What are the red flags that potential investors should look for?

[00:47:47] Gabriel Cohen: If there are promises of you know outsized returns, and if, if something seems too good to be true, it probably is too good to be true. It doesn't mean it is definitely, because obviously there are, you know, massively successful business ventures. But I would say that was a red flag. I don't think it’s; the importance of due diligence can be stressed enough. I think uh, in this particular case, if someone had really sort of done a deep dive into the books and records of these various companies, it would not have been a pretty picture, and that would have probably given potential investors pause. Um, as I said before when we were talking about um, whether this was clearly a fraud or not, I think if there's comingling of money uh that should be a large red flag, or if there's some suggestion that money from their business is being used for personal use, that should also be a big red flag. And I think another thing that is important as a potential red flag are, and sort of across the spectrum of different kinds of crimes, is um, sort of signals from lifestyle and showing, you know, outsized spending, people driving incredibly fancy cars, having very expensive jewelry, taking lavish vacations, things like that, living way above one's means, is I'd say a major red flag. So if someone you know is, purports to be making X, but they're living a lifestyle that's you know 10X or 20X, that money has to come from somewhere. Or that somebody's paying that bill ultimately. And I'd say that's something to be very careful of.

[00:49:27] Bob: I'm glad you brought that up because you know something like comingling of funds for example, that, that might not be obvious, and certainly the...

[00:49:32] Gabriel Cohen: Sure.

[00:49:32] Bob: ...the criminal's not going to admit it to you if you ask.

[00:49:36] Gabriel Cohen: No, and they might give you fake records or something like that too.

[00:49:38] Bob: Yeah, yeah, but if they drive up in a different red, fancy red car at every meeting, maybe, maybe there's something to think about.

[00:49:43] Gabriel Cohen: I think that's a great, yeah, if someone has a brand new car every six months, or you know is always buying a new house or is you know just essentially spending massive amounts of money, and then when you talked about the business they say something to effect of, "Oh yes, it's going fine," but you know, certainly not something that would support that kind of lifestyle. And look, of course you never know. Maybe you know someone has other resources from some other source or something like that, but it's certainly to be wary of, I think.

[00:50:16] Bob: So every one of us needs to go through that due diligence every time. When it comes to money, overconfidence is not your friend. For The Perfect Scam, I'm Bob Sullivan.

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[00:50:35] Bob: If you have been targeted by a scam or fraud, you are not alone. Call the AARP Fraud Watch Network Helpline at 877-908-3360. Their trained fraud specialists can provide you with free support and guidance on what to do next. Our email address at The Perfect Scam is: theperfectscampodcast@aarp.org, and we want to hear from you. If you've been the victim of a scam or you know someone who has, and you'd like us to tell their story, write to us. That address again is: theperfectscampodcast@aarp.org. Thank you to our team of scambusters; Associate Producer, Annalea Embree; Researcher, Becky Dodson; Executive Producer, Julie Getz; and our Audio Engineer and Sound Designer, Julio Gonzalez. Be sure to find us on Apple Podcasts, Spotify, or wherever you listen to podcasts. For AARP's The Perfect Scam, I'm Bob Sullivan.

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