Bernard Madoff's investor fraud took the Ponzi scheme to a new level, but it wasn't so long ago that Connecticut had its own infamous fraud case tied to some of Hartford's most well-known real estate: Colonial Realty Co.
And in the two decades since Colonial's collapse, Robert Ficeto's memory of being one of Colonial's 6,800 burned investors is still fresh.
"They were already established, and they had turned real estate deals that had made money," Ficeto said, in a recent interview. "What we found out later, it was only good if they could sell the next deal."
Colonial's monumental unraveling came just one deal after Ficeto took a $50,000 stake in an office building at the corner of Asylum and High streets in downtown Hartford.
"Then came Constitution Plaza that they couldn't sell," Ficeto said. "Then the house of cards came down."
Throughout much of the 1980s, Colonial three partners — Jonathan N. Googel, Benjamin J. Sisti and Frank M. Shuch — sold $350 million worth of shares in various real estate syndication deals. Colonial would purchase the properties with bank financing, then seek investors. In return, investors would earn dividends and, in theory, could sell their shares in a specified number of years.
What investigators later found out was something quite different: The deals were designed to generate commissions and bank loans for Colonial's top brass, but not profits for investors.
Colonial paid too much for the properties, squeezed out too much in fees, borrowed too much from banks — and then kept repeating the pattern to cover other losses. Colonial falsified financial statements and those of its investors to keep the cash flowing.
The investments were never meant to be sold to truck drivers, school teachers and landscapers — or to people like Ficeto, then business manager for Waterbury's school system. Buyers were supposed to have annual incomes of $200,000 and net worths of at least $1 million. But many did not.
Multiple attempts to reach Googel and Sisti for this story were unsuccessful.
In retrospect, Colonial's promises of guaranteed returns of up to 300 percent now sound dubious, Ficeto said. But remember, he says: Donald Trump was among the investors, and Arthur Andersen & Co., then the world's largest accounting firm, deemed the investments reasonable.
"Colonial Realty was king," Ficeto said.
A $1 Billion Real Estate Empire
In the late 1980s, Colonial Realty and its partners became known for their lavish lifestyles, including fancy cars, parties that spared no expense, Italian designer suits and, in Sisti's case, the building of a $2.7 million, 31-room mansion on 21 acres in Farmington. In today's dollars, the Sisti house — now owned by rapper 50 Cent — would have cost nearly $6 million.
Sisti entertained on a 93-foot yacht, named "Family Ties" with four plushy carpeted staterooms, three Jacuzzis and a bar stocked with Dom Perignon champagne. The boat cost $2.5 million.
Beyond real estate, Colonial owned a 37 percent share in the Hartford Whalers hockey team.
Colonial became so high-profile that the city of Hartford closed down Lewis Street during rush hour in 1988 to accommodate the company's annual Christmas party. Colonial needed the street to park "20 or so" stretch limousines to shuttle guests to the now-demolished Parkview Hilton two-tenths of a mile away.
A Hartford real estate broker who attended one of Colonial's Christmas parties described the event as outrageous.
"I've never seen so much food stacked out in my life; it was appalling," the broker told The Courant in 1987. "It must have cost in the six figures."
But what caught the most attention were Colonial's deals.