PITTSBURGH — Robert Atkinson understood railroads, having once worked for Conrail in the company’s abandoned track division, reports the Pittsburgh Post-Gazette.
He also had the gift of gab.
“He knew the lingo, he knew the business, he knew what was out there in the railroad yards,” state Attorney General Mike Fisher said yesterday. “He was a premier salesman.”
But he was selling a fraud, according to a state grand jury.
Atkinson, 55, of Brackenridge, was arrested yesterday and charged with orchestrating a scam in which, the attorney general’s office says, he swindled 116 people of more than $7 million by persuading them to invest in salvaged railroad equipment that he said would be resold for huge profits in South America.
According to the grand jury, Atkinson used a team of five salesmen to entice investors in eight Western Pennsylvania counties to pay him for old railroad tracks, ties, switches and other equipment. He said he could resell it for returns ranging from 5 percent to 300 percent.
But investigators said he never had any salvage to sell and merely used payments from earlier investors to pay off those who came in later in what amounted to a Ponzi scheme. He paid investors some of the money in returns, but in all, the 116 victims lost $7.2 million between 1991 and 2000, according to the grand jury.
Investigators said yesterday they haven’t determined exactly what Atkinson did with the money that he didn’t use to pay off investors.
He didn’t live lavishly and doesn’t have a lot of assets to seize.
“I would say the money is gone,” said Fisher. “It’s been dissipated.”
Atkinson is charged with more than 300 counts of securities fraud, theft, deceptive business practices and operating a corrupt organization. Agents arrested him yesterday morning at his house in Brackenridge, and he was being held on a $50,000 bond at the Butler County Prison.
He is the only person to be charged in the scheme.
His salesmen — Henry Goglowski, Barry Carle, Ronald Courchene, William Scalera and James Di Palma — testified before the grand jury after receiving grants of immunity.
Senior Deputy Attorney General Paul von Geis, who will try the case, said the salesmen apparently believed that Atkinson was legitimate, at least until the end.
According to the grand jury presentment, this is how Atkinson operated:
Passing himself off as a “preferred vendor” with Norfolk Southern and CSX railroads, he explained that he was a broker of railroad salvage and had negotiated agreements with the railroads to sell scrap and old equipment.
None of that was true. Although he had worked for Conrail for 15 years, until the mid-1990s, he was never a supervisor and didn’t have authority over disposal of track. None of the railroads Atkinson said he dealt with had a record of him buying or selling scrap, either.
But investors didn’t know any of that, so they signed loan agreements, or promissory notes, with Atkinson and turned over their money to him thousands of dollars at a time.
Sometimes Atkinson dealt directly with investors; sometimes he used middlemen to negotiate investments. In the mid-1990s, he hired the five salesmen.
Typically, he initially paid the investors some of their principal with interest as promised. But the payments would fall into delinquency over time and eventually stop. Atkinson would then move on to another group of investors and the pattern would repeat itself.
Some of his victims gave him huge amounts of money. One couple gave him more than $256,000 in 1996 and 1997. Atkinson paid the couple back $85,452, but they lost the rest.
Another victim lost $1.1 million. He told authorities that, in 1995, Atkinson told him that he had a $5 million deposit with Conrail for an option to buy the Conway rail yard in Beaver County. The man rolled over all of his investments with Atkinson, a total of $1.5 million, in exchange for Atkinson’s promise to return $2.25 million to him in five years. He only got $354,120 of his money back.
Authorities first became suspicious of Atkinson in April 1998, when disgruntled investors called state police complaining about not getting paid. The Pennsylvania Securities Commission began an investigation and turned it over to the attorney general’s office in November 1999.
Atkinson will be prosecuted in Butler County Common Pleas Court.