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Suicide pact ends Bernstein brothers' scheming ways

`Consummate con men' bilked investors, banks, died together in a Jaguar

Published July 9, 2000 at midnight

It was 2:33 p.m. Tuesday, June 27, and the inseparable Bernsteins - the flamboyant, money-flashing Jerome and his soft-spoken younger brother Lawrence - were no-shows in Denver District Court.

A sense of alarm spread through the courtroom.

"I'm truly concerned about the welfare of my clients," attorney Gary Lozow told Judge Herbert Stern. The Bernsteins, convicted felons confronted by a new round of criminal charges in the bilking of at least $2.6 million from investors and banks, had never before failed to make a court appearance.

And they had had dozens of opportunities.

Prosecutor Phil Parrott knew something was wrong. Alice Barmore, the bail bond dealer who'd posted a $275,000 bond for the brothers, stepped out of the courtroom to summon her bounty hunter, Duane "Dog" Chapman.

"Go find them," she said into her cell phone. But as she reflected later, she said, "Right then, I knew."

But no one knew for certain until the following day, when Denver firefighters found the brothers in the garage of Jerry's Denver home.

The two men described as "alter egos" and "joined at the hip" were found dead, sitting side-by-side in the front seat of Jerry's gold Jaguar sedan. The engine of Larry's matching Jag, parked alongside, was still running. Jerry's beloved golden retriever, Max, was in the back seat.

The Bernstein brothers, charismatic con men who lured clients with chartered planes, expensive cars and promises of double-digit returns on phony investments in real estate and oil leases, died as they had lived.

Inseparable.

Jerry, 48, and Larry, 44, left behind a dark parade of victims and grieving family members: people who vilified them and people who loved them.

"They were the consummate con men," said Larry's wife of seven years and the mother of the couple's three young children.

Together, the Bernstein brothers amassed a house-of-cards empire of 26 investment entities, mostly limited liability companies with largely worthless paper assets.

Prosecutors alleged the companies were used to hoodwink scores of investors in a rolling Ponzi scheme that the brothers, after running short on new investors, struggled to keep afloat by writing bad checks from personal and business accounts they set up at half a dozen banks.

Those counting themselves as victims include friends, relatives, accountants, secretaries, lawyers, real estate moguls, nonprofit foundations and even the Denver / Boulder Better Business Bureau, headquartered on the same floor as Bernstein Brothers Oil & Gas Co. at 1780 S. Bellaire St.

"It's too painful for me to even talk about it anymore," said William Leverington, 54, a Denver architect who invested nearly $1 million in failed Bernstein ventures from 1997 to 1999.

In one small piece of the elaborate scheme, the Bernsteins cross-deposited more than 1,400 checks from three accounts at a Denver KeyBank in just one month, totaling more than $10 million. And all the while, they paid themselves handsomely at $10,000 a month each.

"I wanted it to end, but not that way," said Gerald Quiat, a prominent Denver businessman, who was a Bernstein victim and a relative by marriage.

"They had a lot of potential. If they had aimed it in the right direction and conducted themselves honestly, they could have been real success stories," Quiat said. "Now they're in the ground."

Investigation unravels schemes



Parrott, a chief deputy in the Denver district attorney's office, was in Courtroom 16 that Tuesday and was as surprised as everyone else that the Bernsteins didn't show.

"They've made more court appearances than anyone I know who's not a lawyer," he said.

Parrott and white-collar crime expert Gary Pangus had launched a new investigation into the Bernsteins in February 1999, after Michael Caldwell, a vice president with KeyBank, had come to them to detail the bank's $870,000 in Bernstein-related losses.

Classic check-kiting, Parrott said, and a Denver grand jury indicted the brothers for felony theft and conspiracy. A trial was set for January 2000.

As the case proceeded, Parrott's office found pockets of individual investors who said they, too, had been bilked by the Bernsteins.

"KeyBank was not the beginning but was at the end of all that was happening," Parrott said.

Further investigation into the KeyBank case confirmed two other large-scale banking check-kiting operations, described by prosecutors as among the largest in Denver history.

Investigators found a year-old complaint filed with the Federal Bureau of Investigation in which Norwest Bank claimed it had lost $625,000 through bogus checks written by the Bernsteins.

Although the Bernsteins' paid back Norwest, the bank's investigator charged the full repayment was accomplished by illegally withdrawing at least $200,000 from KeyBank in a series of confusing cross deposits involving three other banks.

But the Bernstein brothers weren't just preying on banks. Investigators also discovered many bilked individual investors.

According to court documents, the Bernsteins promised Leverington, the architect, up to 42 percent annual returns on money he invested for short-term bridge loans to a handful of major oil companies. In 1999, when the Bernsteins failed to make their monthly interest payments, Leverington learned from authorities that the companies had no records of doing business with the Bernsteins.

Denver businessman Kelly Noonan, who leases a small office two floors below the Bernsteins' corner suite, said he was "hosed" for at least $100,000 in a similar oil scheme.

"They sold me oil wells they didn't even own," he said.

Another victim, Denver engineer Richard Lesnick, said he started investing with the Bernsteins after accompanying them on several business trips in which they scouted for hotel properties in New Mexico and Missouri.

As always, the Bernsteins paid for the chartered plane that flew their entourage of lawyers, real estate brokers and accountants to seal the biggest out-of-state deals.

"Jerry Bernstein was probably the most masterful negotiator I've ever met," Lesnick said. "He would work magic at that table."

Alan Hendrix, another Denver attorney who with his wife invested $35,000 in nonexistent Bernstein oil wells, said, "Jerry was the talker, the front man, and Larry did the numbers. They were like two peas in a pod."

Lesnick said the Bernsteins let him leaf through a portfolio of their investments that they claimed were worth more than $50 million. Among their purported holdings: Three motels in Branson, Mo.; a Ramada Inn in Santa Fe, N.M.; a Super 8 in Albuquerque; and several oil wells in Wyoming, Kansas, Oklahoma and Texas.

Authorities now say most of the Bernsteins' real estate "holdings" didn't even include titles to the properties. In many cases, contracts the Bernsteins signed with property owners simply provided leasing options with a right to buy in the future.

"They essentially were selling something they didn't have," said Dan Wake, a Denver attorney whose clients include some of the Bernsteins' most heavily damaged investors. "They would get money from anybody they could, and they didn't (separate) one investment from the other. Once they had control of it, they would spin it anywhere they wanted."

Gerald Quiat's son, Dan, had his own beef with the Bernsteins.

Dan Quiat, 35, said that the brothers attempted to extort $1 million from his company, The Marcus Corp., after threatening to tie up in court the purchase of a tourist railroad service through the Royal Gorge in Canon City that Quiat had been pursuing since 1995.

"They said give us $1 million or we will kill the project," Dan Quiat said.

After the Marcus Corp. was awarded the bid to acquire the 24-mile scenic rail route, the Bernsteins claimed a $750 payment they made to Marcus months earlier gave them a 50 percent interest in the $3 million project.

"It was an extortion scheme . . . and we wouldn't pay it, but they had the power through their threats to kill the deal," said Quiat, who ended up suing the Bernsteins in Denver District Court in 1998.

The still-pending suit alleges the Bernsteins' threats spooked investors and forced Marcus out of the project after it had already invested more than $230,000. "That railroad was my dream," Dan Quiat said. "I was devastated."

Small-time pair talked a big game



Ultimately a bitter dispute between the Bernsteins and Gerald Quiat, a former Denver deputy district attorney, forced the brothers into U.S. Bankruptcy Court just months after they were served with their first check-kiting indictment.

Quiat, whose niece is Larry's widow, sued the brothers in 1997 for the return of $234,000 he invested in five Bernstein hotel companies. The Bernsteins agreed to settle the case out of court. But when they came up short of cash, Quiat obtained a charging order against the Bernsteins' income.

In October 1999, the brothers' twin petitions for Chapter 13 bankruptcy reorganization put at least some unsuspecting investors on notice. Documents estimated the Bernsteins' combined assets at roughly $700,000. Total liabilities came to about $1.4 million.

"They talked grandiosely, and there's no question some people were seduced by how big they talked," said attorney Wake. "In fact, they were a couple of small-time operators who talked a big game."

As of February, 93 pages of creditor claims had mushroomed the Bernsteins' total liabilities to nearly $3 million, throwing their twin petitions into Chapter 7 liquidations.

Joseph Rosania, an attorney hired by the bankruptcy trustee assigned to the case, said the Bernsteins told him there were no hidden assets and that they had simply made a series of "cash-draining bad investments."

"I'm not painting a picture of choir boys," Rosania said. "But from our perspective they cooperated with us, and we were shocked to hear of their suicides."

But even as their many businesses lay in shambles, the Bernstein brothers didn't stop. To the amazement and chagrin of prosecutors, individual investors claimed they had been duped while the Bernsteins were under prosecution for the the June 1999 KeyBank indictment.

"That is not typical in a white-collar crime," said chief deputy D.A. Parrott. "Usually people have a respect for us - or fear - that they don't do it anymore."

The investment fraud the Bernsteins' new clients outlined had striking similarities to an oil and gas-related scam that led to the brothers' first run-in with securities regulators in the late 1970s.

In 1981, the brothers pleaded guilty to mail and wire fraud involving the sale of unregistered company stocks. According to their sentencing documents, they were ordered to spend six months in a "jail type institution" and placed on probation for five years.

The KeyBank indictments in June 1999 came as a shock to clients who had invested with the Bernsteins for years without being told of their felony convictions. But as with the earlier bad news, this lastest round apparently went unnoticed by some investors.

A month earlier, restaurateur Charles Parks had signed a contract with the Bernsteins giving them control of his East 17th Avenue Mexican eatery, Carlos, formerly known as Juanita's.

The Bernsteins, tipped off by Parks' banker that he was looking for an investment partner, offered to purchase the restaurant for $1.2 million. But until financing could be secured, Parks handed them the restaurant's management, in a contract that held them responsible for the mortgage, taxes and worker's wages.

"They said they had extensive expertise in the hotel and restaurant industry and that they would pay all the bills," Parks recalls. "I was probably a little overly eager, but I had a district attorney I know well in Kansas check them out and their earlier convictions, for some reason, didn't show up."

Over the next three months, Parks said he was forced to stand on the sidelines, waiting for the loan that never came through, as the Bernsteins milked the restaurant's $60,000 to $80,000 in monthly revenues.

"It became pretty obvious that they were not running a business," Parks said. "They were just ripping the place off - not paying the vendor bills, writing bad checks to employees and skipping the mortgage payments."

By the time Parks was able to reclaim the property, he'd been soaked for unpaid employee taxes and vendor bills. "I lost all the income for three months plus I got stuck with their bills." Parks said. "But the biggest hurt was being forced to sell the building to cover all my losses. That place was my retirement plan."

David Irey, vice president of Dunton Realty, a commercial real estate firm that sometimes did business with the Bernsteins, said the brothers seemed unphased by the criminal indictments.

"You'd run into them, and it was like no big deal," Irey said. "They just felt they would beat all the charges."

Luxurious lifestyle a facade



The cars, clothes and chartered planes were a flamboyant facade for two brothers who lived relatively modest private lives in $300,000 homes in south Denver. They lived high for their clients. But they had grown up in a 1,176 square-foot home in Aurora, bought by their parents, Philip and Sylvia, when the family moved from New York City to Denver in the early 1960s.

Sylvia Bernstein drove her sons to school in Aurora every single day, relatives would recall at Larry's memorial service. The boys both graduated from Hinkley High School while Philip worked as a mail carrier at the U.S. Post Office and moonlighted as a sales clerk at a men's clothing store.

Sylvia died unexpectedly from an adverse drug reaction in 1973 when Larry was 17 and Jerry was 21. The Bernstein men were devastated, family members said.

Larry and Jerry were always tight, "like twins," family said, remembering their surprise that both brothers married in their 30s. Jerry's two marriages ended in divorce, one in 1990 and the other in 1994. Larry married in 1993 and by all outward appearances seemed content with his family life.

"He'd drive in, and his kids would run for him," said neighbor Carolyn Schmitt. "Those kids adored him."

In a sense, Larry's wife says she was deceived more than anyone.

"All I know is he chose to align himself with Jerome rather than his wife and children, and I find that devastating," said Mrs. Bernstein, who asked that she not be identified by her first name.

"I can't explain it. I don't understand it. I don't know if it's a loyalty thing or something pathological. Why go down with his brother? I can't answer that as I look at these beautiful children of ours."

Even when the brothers were apart, with Larry at home, she said, they were constantly talking by cell phone.

At the signing of her husband's death certificate, she discovered Larry and Jerry had lied about graduating from business school at the University of Denver. Neither held a college degree, she said.

Mrs. Bernstein said she learned for the first time of the brothers' 1981 convictions last year, when they were indicted for check kiting.

As for the check-kiting charges, she said Larry told her he would be vindicated by his attorneys. "He said he would have been written up in the Guinness Book of World Records to pull off all they were accused of doing."

"He just was not forthcoming. He wouldn't discuss it with me at all. He became hostile when I pressed, so I learned not to press."

She theorizes the looming threat of a prison sentence drove the brothers to their suicide pact. "Larry couldn't face the reality of prison. He knew he got in over his head and he couldn't find a way out."

Neither their lawyers nor prosecutors will be specific, but all hint that the brothers' close relationship may have made their legal problems even more difficult. They suggest Larry might have opted toward a lesser punishment, since victims and others viewed Jerry as the leader.

But no cooperation was forthcoming from Larry.

"The Bernstein brothers were closer in their relationship than any individuals I've ever met," said Stan Marks, a lawyer who represented Larry until February.

Marks resigned as Larry's lawyer in part, he said, because he was frustrated by "the inability to resolve the cases so it could work for both of them.

"They just had a devotion and commitment to each other that may have been to their individual or collective detriment," Marks said.

'If you ever stop, it's all over'



Ponzi schemes, the vehicle commonly deployed by the Bernsteins, according to Parrott, "become an incredible gluttonous monster.

"You just have to keep feeding them money in ever increasing amounts," he said. "The scheme takes on an incredible need of its own. Because if you ever stop, it's all over."

Most investors didn't suspect anything was amiss until their interest payments stopped coming. And many acknowledged they didn't do proper due diligence because the Bernsteins appeared so successful, and they did business with their well-to-do friends.

"I feel pretty stupid. I was a former banker," said James Wilbanks, 53, a Bernstein client. "We usually do exhaustive due diligence. It turns out when you don't, you pay."

The brothers responded to the Denver grand jury's superceding June 22 indictment as they always had: call the lawyers, show up in court, find more money.

But this time, the money came from another source, and went for the specific purpose of keeping them out of lockup. The Bernsteins went to Alice Barmore, owner of Free As A Bird Bail Bonds, and her bounty-hunter business-partner Dog Chapman, who wears handcuffs on his jeans and a peace officer badge around his neck. Printed on Chapman's calling card: 'Over 5,000 fugitives . . . returned to justice."

The blue-suited Bernstein brothers were face-to-face with a man named Dog who would hunt them down if they skipped on Barmore's money. They talked about that, Barmore said, Jerry wondering if Dog would track him in his size 12 leather boots.

Jerry also asked Dog about prison, a place Dog has seen firsthand.

Chapman remembered Jerry shaking "all over" at the prospect.

The Bernstein brothers spent much of the last five days of their lives talking to Barmore and Chapman, telling their story and signing papers that put liens on their father's home as collateral for the bonds. They had to check in from time to time, and they brought Phil Bernstein, 78, and other family members to meet Dog.

"We liked them," Barmore said. "This was really a family that was going to stand together or fall together. They were facing it."

But that ended at 2:33 p.m. on June 27. When Chapman got Barmore's call from court, he hit the road in his pickup, checking Denver International Airport and Centennial Airport, where the Bernsteins had often chartered planes for their on-site business trips. He went to both brothers' south Denver homes, Phil's home in Aurora and finally the brother's 7th floor offices in an aging high-rise a block from South Colorado Boulevard.

Finally, after hours of Chapman's searching, Barmore got word at midday Wednesday that Denver firefighters had responded to a security firm's call on a carbon monoxide alarm at Jerry's house at 3375 Tulare Court, near the Tamarac Square shopping center.

When Chapman and Barmore arrived, the Bernstein brothers had already been pulled from the Jaguar. Police arrived. Parrott drove up. A couple of the brothers' victims came up to the curb. Barmore called Lozow.

Notes from the brothers were found in Jerry's sparsely furnished bachelor home. A half-empty scotch bottle was on the counter, though later toxicology tests showed no alcohol had been consumed by either brother.

Jerry's note was long. He had written instructions on how to care for Max, the diabetic dog he had rescued years ago from a Denver animal shelter.

His care for the dog was amazing, say those who read the note. Insulin shots, cooked rice, a lengthy list of things to do every day.

But in the end, Jerry must have decided that Max would need to go, too.

As they waited in the front yard of Jerry's home, Barmore suddenly thought of Phil, the brothers' elderly father. He had assured Barmore repeatedly during those last frantic hours, "My boys haven't run."

So Barmore and Chapman along with Bernstein relatives went to Larry's home, where Phil had been staying. They gave the awful news to the father.

"Both of my sons?" the father responded. "Both of them?"

A very frail Phil Bernstein attended Larry's memorial service. Larry's wife said the brothers wiped out Phil's life savings in the last four months, more than $75,000.

"They took every cent he had," she said. "The poor man is destitute."

Barmore said she didn't have the heart to take her cut. She returned Phil Bernstein's money and released his home back to him.

Larry and Jerry Bernstein were buried at the family plot in Nebo Cemetery in Aurora. It was a graveside service with only about 20 people in attendance. The crowd was so sparse that pallbearers had to be recruited on the spot, including Dog Chapman.

In perhaps a final reminder of the family's closeness, there's already one large headstone there for the parents and their two sons - no room for wives or children, or anyone else.

Each of the four family members has a personal inscription, each inscription paying homage to the love of family. Their family.

The patriarch and sole survivor has the shortest inscription of all.

Under the name and birthdate for Philip Bernstein is this engraved legend: "My life is my family."

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