Issues → January/February 2008 → Features →

Swindle in Swanton, VT

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(page 5 of 8)

Furious, Bonnie Akerley vowed to sue. Her case found its way to Bob Wolfe, a Vietnam-era graduate of Hamilton College who jokes that he takes the cases that other lawyers don't want. Wolfe had also developed condos in Boston in the 1980s and knew something about marble.

"When I was a developer, I wound up on the mailing list for a stone magazine," he says. "Every month I would read how the stone industry was getting creamed by cheaper imports from China, Pakistan, India. Now here I have a client who comes to me, having invested all this money, and my first question is: 'How could this be -- how is Byors doing it?'"

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."