Shel Solow talks about his role in the PayTel phone case on CNBC’s program American Greed: The Fugitives
The CNBC program American Greed: The Fugitives recently chronicled the PayTel phone scam of the 1990s in the episode “Phony Phone Calls/Heavy Metal Fraud,” made timely by the fact that one of the main conspirators, who had escaped from house arrest, was recently found in Serbia. Chicago businessman Slobodan Lunic and his partner Scott Holmberg founded a company in which investors were promised that they could own their own pay phone and reap the profits earned via calls that were made from the phone. However, while PayTel’s promises looked genuine at first, the company was not what it seemed.
Kaye Scholer Bankruptcy & Restructuring Partner Shel Solow served as bankruptcy trustee in the case, and in the episode talks about how the scheme was able to hoodwink so many investors. Solow points out that many of the investors were elderly, as well as “rural, where there was no cell service when these phones were being sold sometime in the 1990s...it made sense, or appeared to make sense to a lot of older folks, that this would be a cash cow.”
The episode details how Solow was assigned to the case after the FBI realized that while Lunic and Holmberg had sold more than 7,000 phones, the company only actually owned about 1500. Lunic and Holmberg, meanwhile, were using the money to live extravagant lives that according to Solow, were “far beyond the means of someone who is running a reasonably successful payphone network.”
Solow discovered that some phones had been sold to up to five different investors, and that “they simply had a record of who had given them a certain amount of money, what phone it was assigned to, and they arbitrarily gave them returns on a periodic basis, informing them that that is what the phone had earned.”