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Investors ignored their suspicions about troubled pilot

  • Story Highlights
  • Retired pilots are among investors allegedly duped by businessman
  • Marcus Schrenker was popular among retiring pilots, known for his smooth talk
  • Investors said they long suspected that Schrenker wasn't being honest with them
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By Ashley Fantz
CNN
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(CNN) -- About six years ago, the hottest name on a Web site set up by retiring Delta pilots was Marcus Schrenker.

The six-seat plane crashed Sunday night in East Milton, Florida, with no one aboard, authorities say.

Michael Kinney, a Georgia dentist, says he was duped by financial manager Marcus Schrenker.

"We had this site so we could all talk to each other for advice on retirement options, company news and mainly what to do with our money," said Joe Mazzone, 57. The Auburn, Alabama, pilot was looking for the right person to invest the nest egg he and his wife had spent decades growing.

"Go with Marcus, that's what I kept seeing. You could trust this guy. He was a pilot, and he understood us," said Mazzone, who gave Schrenker several hundred thousand dollars. "Talk about a regret."

Schrenker was found Tuesday night at a Florida campground with deep cuts to his wrists in an apparent suicide attempt. He had been on the run from federal authorities for three days.

The 38-year-old Indiana financial adviser is accused of trying to fake his death Sunday by making a bogus call to air traffic controllers that the window on his six-seater plane, which he scheduled to fly from Indiana to Destin, Florida, had imploded and he was bleeding, police say.

Pilot's friend on 'King'
A friend of Marcus Schrenker's talks to Larry King about what may have driven the pilot to an apparent suicide attempt.
Tonight, 9 ET

Schrenker had actually switched the plane to autopilot and parachuted out of the aircraft. The Piper PA-46 crashed in the swamps of Milton, Florida, not far from homes. No one on the ground was hurt.

Schrenker has been charged with unlawful acts by a compensated adviser and unlawful transaction by an investment adviser. He could face more federal charges. He is being guarded at a Tallahassee, Florida, hospital, and the court has issued an arrest warrant and set bail at $4 million cash. It's unclear if Schrenker has retained a lawyer. Video Watch how the case unfolded »

In the months before the alleged stunt, the state of Indiana was investigating Schrenker on fraud allegations, and a Maryland court issued a $500,000 judgment against a company listed in his name. His wife had filed for divorce on December 30.

On Monday, a judge in Indiana froze Schrenker's assets, as well as his wife's assets, said Jim Gavin, a spokesman for the Indiana secretary of state.

"Marcus caused such difficulty in our family, so to look up and see his life, as bad as it apparently was, falling apart on national TV, well it was quite something," said Elsie Reese, whose 85-year-old husband Thomas Reese is named in an Indiana state complaint alleging Schrenker defrauded them.

"He needs to take this time to come to grips with what's he's done, that he's lied and cheated and been dishonest," she said. "I prayed for him this morning."

The Reese family and others heard about Schrenker through word-of-mouth among a small and trusted inner circle of commercial pilots. Those CNN spoke with used the same words to describe the money manager: Young, handsome, confident, smooth talking.

A picture making media rounds this week shows Schrenker standing in front of a silver Mercedes. Next to him is his petite blonde wife.

Schrenker appreciated the power of the first impression, investors say.

"His modus operandi is, he flies into your city dressed up in a thousand-dollar suit and sits down with you, buys you lunch, and the next thing you know, he has you on his side and you move your money to his Heritage Wealth Management," Mazzone said.

Schrenker kept his clients' doubts and complaints at bay with gifts including free airplane trips and artwork, Mazzone said. Schrenker gave him two $1,000 aviation headsets, he said.

"He once offered to fly from Indiana to where I live in Alabama and pick me up to take me to Chicago to look at an airplane I was thinking about buying," Mazzone said. "I'm thinking, 'Wow, this guy is willing to spend his time and all that money in fuel just to help me out?' "

That kind of over-the-top gesture helped build Schrenker's reputation in the late 1990s as the go-to guy among pilots who wanted to invest their savings, retired pilot Charles Kinney said.

He met Schrenker in 1996 through another pilot and forged a friendship that lasted more than a decade.

Around 2003, Kinney suggested that his parents and his brother, Michael Kinney, a Georgia dentist, consider letting Schrenker manage their money. Schrenker told Kinney's parents that their money was going to "various insurance products" even though Kinney said it was never really clear what Schrenker meant.

His parents handed over $2 million in assets.

"He said this is a safe place to put money, to avoid all the world's dangers like terrorism and impending doom and gloom associated with it," Kinney said. "In that climate, back then, you bought it. You believed him that he would protect your money."

It would be easy for the average person to fall for Schrenker's pitch, Michael Kinney said.

"Good talking, slick tongue, very intelligent sounding," he said. "Now, once you know what he's talking about, then you know that a lot of what he says makes no sense. But if you don't know what he's talking about -- if you don't know these products fairly well as I do now -- then boy, it sounds pretty good.

"I have never in my life seen anybody that could tell dishonest untruths that he told over and over again and expect you to believe him," Michael Kinney said. "I guess that's one thing that caught me by surprise in my dealings with him. I've never dealt with anybody with that level of dishonesty."

Charles Kinney feels deeply betrayed.

"To find that someone you would basically call a cousin is robbing you and lying to you blind? It's staggering," he said. "I have no sympathy for him."

The Kinneys, Reeses and Mazzones told CNN they suspected numerous times that Schrenker wasn't being honest. They were suspicious when Schrenker told them they would receive only one statement a year describing returns.

Charles Kinney and Joe Mazzone said Schrenker promised to send them contracts which they say they never received. "I called him up every time I had a doubt, and he was able to give me a plausible explanation," Kinney said.

Although he often had nagging feelings that he should stop doing business with Schrenker, Mazzone ignored them. "Marcus just had an explanation for everything, and so I just went with it, trusted him," he said.

The men said Schrenker assured them he was not making commissions on their investments and the pilots and their families would receive only one statement each year showing returns.

"Turns out he was making 12 to 18 percent commissions on $100,000 annuities," Mazzone said.

Eventually, the investors returned to where many of them first heard about Schrenker -- online. They began posting messages in a chat room asking if anyone else had been having trouble with the businessman. Soon, investors were sharing emails and documents with the group.

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"It was pretty clear we'd all had similar experiences," said Charles Kinney. The group filed complaints in Georgia and Indiana about Schrenker in 2007.

"This was a process of wading through a creek and slowly turning over rocks," he said. "And every time it's a shock and a fabrication and a lie."

CNN's Kathleen Johnston and Drew Griffin contributed to this report.

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