An Affinity for Fraud

Investor Bradford Bleidt built a reputation as a trusted friend to his Masonic brothers -- all while he was stealing their savings

When his financial adviser died suddenly in 2003, Edward J. Yaeger, a retired oil company salesman, thought he knew whom he could trust to manage the $335,000 in his 401(k) plan. Yaeger, a longtime member of a Masonic lodge in Lynn, Mass., called Bradford C. Bleidt, a local investment manager and, for two decades, a fellow Mason. For years, Bleidt had managed the funds of three local lodges as well as the personal savings of many other Masons.

He and Yaeger had socialized often at the 126-year-old Masonic Hall on Market Street and -- with their wives along -- at theater and other outings. "'Who could be better than Brad?' I thought," Yaeger, now 72, recalls. "He kissed [my wife] Evelyn and said, 'I'll take good care of your money.'"


  Instead, Bleidt stole Yaeger's money -- and millions more. Early last year, Bleidt pleaded guilty in U.S. District Court in Massachusetts to 115 counts of mail fraud and one count of money laundering after confessing to running a 20-year Ponzi scheme. He had channeled money from new investors into accounts of existing investors, creating the illusion of solid returns in portfolios. Prosecutors say Bleidt was using client funds in an effort to keep his other businesses afloat. On Dec. 5, Bleidt received a sentence of 11 years in prison for bilking $27 million from 125 investors, many of them fellow lodge members.

Bleidt's deception represents an unusual twist on the typical affinity fraud. Investment schemes that prey upon members of identifiable groups are on an upswing, law enforcement officials say (see BW Online, 3/27/06, "The Fraternal Order of Fraud Victims"). But such swindles often target tight-knit ethnic and religious communities, zeroing in on investors who are neither affluent nor well-educated. Perpetrators play on the insularity of the groups and their victims' sense of isolation from mainstream society. Victims often don't seek help from authorities until their money has vanished.

The Masons' mishap demonstrates that affinity fraud crosses class lines. "Perpetrators play to the people they know, exploiting their trust," says one senior staffer at the Securities & Exchange Commission, which brought civil charges against Bleidt. "Whether you are a member of high society or aspiring to the Great Society, you have those kinds of vulnerabilities."


  That should give prospective hedge fund investors pause, the SEC official says (see BW Online, 1/16/06, "Hedge Funds: Do-It-Yourself Due Diligence"). Hedge fund advisers, who cannot market their funds publicly, work their own social networks to reel in investors. The defrauded Masons in Massachusetts didn't have the same level of wealth most hedge fund investors do. But many were white-collar workers and retirees who thought they could trust one of their own.

"Brad insisted on coming to my house [to get the check] to meet my family, so that if anything happened to me he'd know who to turn the assets over to," recalls Michael N. Tenney, 54, a disabled former plant manager and Mason who entrusted his $300,000 retirement savings to Bleidt in early 2002. Tenney had heard Bleidt at a financial seminar at a local lodge and liked his low-key pitch and conservative approach to investing.


  "He never guaranteed high returns but said he would invest the money as though it was his own," Tenney says. His and Bleidt's wives had gone on a number of Masonic ladies' nights out together.

Bleidt regularly sent investors financial statements that listed stocks and other securities and looked legitimate. But the statements lacked account numbers and came from Bleidt's office rather than from the brokerage firms that supposedly held investors' accounts.

Authorities think most of the money Bleidt stole is gone. Victims may recover some funds under a tentative $6.3 million agreement reached between a court-appointed receiver and two brokerage firms that Bleidt used. Yaeger thinks he may recoup $60,000 -- if he's lucky.