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Duluth prison inmates share cautionary tales with UWS students

The Federal Prison Camp in Duluth. (Federal Bureau of Prisons photo)

Augie, a man about 60 years old, has never seen a smartphone. He's never been on Facebook or LinkedIn.

He's told he can learn anything he wants to know from YouTube — but first he needs to figure out how the video service works.

He's been behind bars for 12 years — first at the Federal Correctional Institution in Sandstone, and for the past eight years at the Federal Prison Camp in Duluth.

In fact, when he visited with business students, faculty and members of the public Thursday at the University of Wisconsin-Superior, it marked his first trip out of Minnesota since 2005.

"When I leave prison, I'm going to be overwhelmed," he said. "Just going to Denny's is going to feel like Christmas."

Augie and a fellow inmate, Ron — both of whom went without last names at the behest of prison administrators — delivered cautionary tales of the white-collar crimes that landed them on the wrong side of the law.

Both came from supportive family structures. Both went to college and received a quality education. Both went into financial investment careers.

And both say they didn't set out to commit the crimes that sent them in prison.

"Very few investors wake up one day and say, 'I'm going to go and steal a bunch of money today,' " Augie said. "Most white-collar crimes are the cover-ups that come after a bad decision."

Ron is a Michigan native who earned a master's degree in business administration. He forged a career as an investor before starting his own hedge fund in 2006, using relationships to easily recruit clients willing to invest.

Then the recession hit. As the financial industry crumbled, his investments took significant blows.

Ron failed to disclose the losses. He wrote personal checks to the fund, thinking he could recover the losses and balance it out in the long run.

"My biggest fear was my reputation," he told the students. "I didn't want to be a failure."

Ron's lies to investors swelled and he said he got to the point where he "didn't know what the truth was." Eventually, the Federal Bureau of Investigation showed up at his Kansas City home.

"I hurt my clients," he said. "I hurt my friends. I forever changed my family."

Augie's story is different in that it is one of gain — to the tune of $6 million over four years. But he, too, said he was thrown into a spiral of lies and crime after a bad decision.

Augie started his own financial services and consulting business in Chicago at age 26. He started taking on venture capital projects and his firm grew to more than 40 employees.

He ran into trouble when he was introduced to a man from Atlanta with a proposal to get involved in transactions with foreign banks. Even though he admits he knew little about the deals, Augie said he decided to give it a try — and made more money over the course of a few days than he typically made in a year.

As the money rolled in, he lived a luxurious lifestyle, frivolously spending the newfound revenue. His clients started to complain that their investments were not paying off, but he was told to stonewall them and hide behind the contracts they had signed.

In hindsight, Augie said, he should've recognized the scheme as fraud.

"I found myself in a position where I was prospering at my clients' direct expense," he said. "Rather than trying to remedy the situation, I continued. I didn't want to give up the lifestyle and I didn't know where to turn for help."

It went on for three years years until he was indicted by a grand jury, convicted at trial and sentenced to a long prison term.

Both men warned the potential future business leaders at Thursday's gathering to encourage open communication in the office, surround themselves with employees who aren't afraid to disagree and to avoid any opportunity that sounds "too good to be true."

"I shut everybody out — everyone I could've gone to for help," Augie said. "Anything I could've done to fix it would've been better than 190 months (in prison)."

Both said that anyone in the financial industry is susceptible to white-collar crime if they don't establish and follow a set of ethics.

"I probably looked a lot like you when I was sitting in a classroom at Michigan State," Ron told the students. "I can see myself in your position 25 years ago."

Augie said his family has been fractured by his crimes and his assets have been lost to forfeiture. His prison wages have been garnished and he'll continue paying restitution for the rest of his life.

He's currently working toward a master's degree and, once released from custody, said he hopes to teach others in college and business settings how to avoid the same mistakes he made.

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