Take the Money and Run

The three-story Victorian house in the Humboldt Street Historic District looks like something out of a fairy tale: Balconies jut out from its upper floors, a turret flanks one side of the century-old red-brick mansion, and the surrounding grounds are fortified by a wrought-iron gate. For a short time in the early 1980s, it was Jay Schlaks's castle. And he lived a life befitting a man of such means. The inside was adorned with fine art and expensive carpets, and when Schlaks pulled out of the courtyard behind his home, he did so in a top-of-the-line Jaguar.

While the recession of the 1980s forced many people in Denver to default on home loans and move out of state in search of work, Schlaks was living the good life. But his lavish lifestyle wasn't made possible by the oil boom of the 1970s or by mining, cattle ranching or any other traditional method of making a fortune in the West. No, his ability to buy and renovate this grand old house near Cheesman Park -- and three others that share a common courtyard -- was made possible by one of the oldest professions in the book: Con artistry. It was a trade that Schlaks had down to a science.

Schlaks, though, didn't seek out his victims like a gigolo in search of a wealthy widow. His victims came to him, wooed by newspaper ads for "insured and secured" land investments in Colorado and New Mexico that promised an annual return of between 13 and 16 percent. The mostly middle-aged and elderly couples and individuals who flocked to Schlaks's posh office at 1801 Broadway were greeted by well-dressed, professional-sounding "account executives" who presented all documents on thick-stock paper with the name of Schlaks's company -- First Territorial Mortgage -- embossed in gold. The investors were never shown any photographs of the land, nor were they presented with any architectural plans for the proposed residential development. They simply bought into the charm of the people representing First Territorial Mortgage. Unfortunately, charm was all they had to offer.

The company, in theory, acted as a middleman. It would collect the cash from investors -- a minimum of $5,000 for a minimum period of six months -- to fund the ventures of property-development companies and then see to it that the investors received monthly interest payments. Investors were also promised that if the developers defaulted, ownership of the property, in the form of a deed, would revert back to them. If the developments were successful, however, the investors would reap handsome rewards.

The account executives even produced slick brochures assuring investors that their money would be insured. "All documentation is prepared in accordance with well established banking and insurance standards," it read.

Had the investors actually traveled to New Mexico to see the land in which they were investing, they would have discovered that it hadn't been subdivided and that it had no roads, no water and no utilities. Most important, they would have learned that the land consisted of steep mountainsides habitable only by goats and that there were no "developers."

David, a 76-year-old resident of southern Colorado, wishes he'd done more homework before investing in First Territorial Mortgage. When he had the misfortune to come across Schlaks's ad back in 1983, he was feeling the brunt of Colorado's economic bust. In fact, he was perusing the Denver Post classifieds in search of a job when he saw the ad and its promise of a guaranteed investment with an annual return of 14 percent "paid monthly." To a man in a desperate situation, taking desperate measures to earn money came naturally.

"I was taking any kind of work I could after a long and spotty career in higher education," says David, who was living on the Western Slope at the time. "I did just about everything I could find to do. I even took a job selling hearing aids on a commission basis. At one point, I delivered newspapers just to get by." By the time he answered the ad, David, who asked that his last name not be used to protect the privacy of his family, was working as a counselor in a developmental-disabilities program and was making what he calls a "semi-salary."

"I was in a position of vulnerability," says David, who lost $7,000. "I look at it that way -- not out of any personal remorse, but to understand the dynamics of how I got taken. I felt like I needed to get out on top, and I was more hasty than I should have been. I was looking for an exceptional deal. The old adage 'If it looks too good to be true, then it probably is' applies here. Our investment was a relatively insignificant amount by today's standards. But the meager amount we had to invest all went into First Territorial Mortgage."