Swindle in Swanton, VT
Wolfe checked the land records in Vermont and discovered that Byors didn’t even own the Swanton quarry. It belonged to the Barney Marble Company, which was leasing the quarry to Byors.
The president of Barney Marble was Oliver Danforth of Rutland, who had been in the marble business for 40 years. Wolfe called Danforth and identified himself as a lawyer for someone who was thinking of investing in the Swanton quarry. Danforth “gave the impression that Byors was a competent quarry operator,” Wolfe later wrote in an affidavit.
The year before the $130 million appraisal, Wolfe learned, Danforth had purchased the quarry for only $75,000, and then leased it six weeks later to Byors, with an option to buy it for $4 million. Wolfe studied the appraisal that had valued the quarry at $130 million in 2001. The papers supporting the appraisal were suspect. One bore the signature of a man who had died some time ago. Another, from a Boston architect working on a project in South Korea, was only a quote.
The project was never built. The architect told Wolfe that Byors had shown him tiles of Swanton Red and that the marble was of very high quality but too expensive; developers on several projects had rejected the architect’s suggestion to use it. Wolfe unearthed a Vermont business journal article from 1999, quoting Danforth that higher labor costs made Vermont marble more expensive than stone from Europe or the Far East.
In the summer of 2005, Wolfe hired an investigator, who went to Swanton and saw that the quarry was inactive. Wolfe checked with the Canadian processor who was supposed to be holding the marble blocks that Byors had pledged for collateral; the processor hadn’t received any stone from Swanton in nearly three years. The marble blocks weren’t worth what Byors had claimed, Wolfe concluded, and even if they were, they were either fictitious, gone, or pledged as security to other investors. Late in 2005, Akerley sued Byors and some of his associates, including Danforth’s company, charging a massive Ponzi scheme to defraud investors.
“The reason for the lack of quarrying activity was well known to the defendants,” the lawsuit charged. “The costs associated with extracting, processing, and shipping marble from the Swanton Red quarry were simply too high to be competitive in the global marketplace.”
Still, they wanted to believe. The allure of all that marble was just too seductive. Some of Byors’s creditors — including Richard Hearn, Mark Pasquale, and Burlington restaurateur Copey Houghton, who along with family members had loaned Byors more than $1 million — believed that Byors was sitting on a gold mine. He was disorganized, not dishonest. He needed financial discipline, tighter controls, a good bookkeeper.
Hearn, a retired management consultant, had met Byors in 2002, when Byors rented Hearn’s house in Williston and then signed an option to buy it. He started borrowing additional m oney secured by land around the Swanton quarry. Hearn, a Yale and MIT graduate who had consulted for the Pentagon, found himself entangled in Byors’s affairs. He recommended a Washington-area consultancy firm to help straighten out his sloppy books so that he could qualify for bank financing. When Hearn saw paperwork showing that Byors had promised some investors a 100 percent return, he figured it was “loan shark money.”
Later, in a court hearing, Wolfe asked Hearn how he had squared Byors’s grandiose talk of Dubai with the fact that he couldn’t pay his rent. Hearn attributed the incongruity to the typical travails of cash-starved startups. “What would you do if you found a diamond mine in your backyard?” Hearn testified. “Even though you don’t have a track record of running a business, you oughta do something with diamonds in your backyard.”
Wolfe asked the appraiser, Fred Blais, whether he’d been troubled by the discrepancy between the $75,000 that Oliver Danforth had paid for the quarry and the $130 million at which he’d valued it. “No, we were not troubled by that,” he replied. “You buy a business, it’s failing. Your name is Bill Gates, you just bought IBM [sic], and 20 years later you’re giving away $38 billion. Not million, billion. That’s the Great American Way.”
Early in 2005, Hearn and Houghton attended a meeting of frustrated investors with the Washington consultants in Burlington. It was eye-opening: For the first time, Byors’s creditors were realizing how many of them there were. Houghton says they identified more than 100.
Even more alarming were the reports that came that spring from a new consultant who had spent time with Byors, trying to sort out his books: Byors basically had no books. He didn’t know how much money he’d borrowed from whom, no marble was being sold, and there were few assets. The chance of the Dubai deal going through, the consultant said, was less than 1 percent.
Byors had put at least $150,000 down on a Florida estate, furnishing it with a grand piano, and another $150,000 toward buying a $695,000 house in Ogunquit, Maine. He had also renovated the house he was leasing from Hearn, installing a Jacuzzi and redoing the kitchen with marble countertops. He’d purchased four horses for his wife, who liked to ride. He’d bought a Hummer and a Mercedes.
“I didn’t know better than to spend company money on personal items,” Byors told the consultant, according to court papers. Byors acknowledged that other consultants had advised him that his actions resembled a Ponzi scheme; he apologized, saying that it was unintentional. He wanted to pay everyone back, make everything right.
The consultant also visited the quarry, where frustrated workers said that hardly any marble was being quarried anymore. One stonecutter, 72-year-old Winton Patnode, who had worked at the Swanton quarry in the 1940s, had quit in disgust, convinced that Byors didn’t know what he was doing. Workers said Byors had told them they needed to just hang around and look busy when he’d bring a potential investor by for a tour.