I’M GONNA NEED the whole shootin' match, but before I try to tackle that, why don’t you just give me the straight skinny.” Al Loughman was one of NSA’s top guns when it came to ferreting out the truth. He and his research assistant, Paul Salzeger, had worked together for almost twenty years.

     “You want the prosecution’s side or the defense?” Salzeger asked.

     “Let’s start with the prosecution. That’s what they did at the trial,” Loughman said.

     “OK.” Salzeger organized his notes. “The prosecutor tells the jury he’s going to show them that the defendant ran a Ponzi scheme from September 2004 through December 2008, when the government shut everything down.

     “Says the defendant bilked 140 investors out of more than $16 million. To substantiate that claim, he produced charts and graphs that, among other things, showed that the defendant lost money in forty-nine out of fifty-one months of trading, losing an average of more than five percent each month. At the same time, the defendant tells his lenders that he’s averaging gains of more than five percent each month.

     “The prosecutor further claims that the defendant told investors he was putting their money into the stock market, when, in fact, only half of it went into Ameritrade. The other half went into a nonfunctional website, a condo, a new car, and a couple of motorcycles while he made numerous trips around the world visiting Japan, Thailand, Hong Kong the Philippines and China.”

     “I’m just guessing here,” Loughman interjected “I would assume the defendant painted a somewhat different picture.”

     “That he did,” Salzeger said. 

     “He says he came up with an investment strategy that required no speculation, that made an instant 10 percent profit each month every time. He said he didn’t get to keep all of it, but that if he even lost half of it, he would earn enough to be able to pay his lenders the five percent a month that he promised them in their promissory notes.

     “He says he specifically told them he could not invest their money in the stock market for them because he wasn't a licensed broker. But he could borrow money from them at a fixed rate of return, and -- as his lawyer so eloquently put it: ‘If you’re dumb enough to take money you borrowed and play it on the stock market’ -- well, that might be damned stupid -- but it’s legal.”

     “Is this guy some sort of market guru or something?” Loughman asked. “I mean, what made him think he could make 10 percent on the market in the first place?”

     “No,” Salzeger said. “In fact, he told lenders and potential lenders that he couldn’t understand how the market even worked until a few years back.”

     “Then what business did he have investing anything at all?” Loughman asked.

     “Said he used to listen to Wade Cook infomercials on the radio for several months in Hawaii who wanted $3,000 to attend a one-week seminar,” Salzeger explained.

     “On his radio program, Cook would explain one or two strategies in easy-to-understand terms. For the first time, Ruskjer began to get a basic understanding,” Salzeger explained. “Later, he found where he could get video of the entire seminar for $150 and watched the whole thing several times.”

     “So from this seminar he found his goof-proof strategy?” Loughman asked.

     “Not exactly,” Salzeger clarified. “He did learn how to buy calls. Apparently he borrowed money from his mom, employed Cook's strategy and actually tripled his money in less than six months! 

     "Then he lost it all -- which is fairly typical for people who buy calls.”

     “That should have been enough to make him gun shy,” Loughman said.

     “It was,” Salzeger noted. “He didn’t touch another stock for several years.”

     “And yet,” Loughman said, “we’re here, having this conversation.”

     “Well, according to Ruskjer, his mother called with a tale of woe about losing a third of her meager holdings with Fidelity Mutual in less than two years and asked him what he thought she ought to do," Salzeger elaborated.

     “Wait, don't tell me,” Loughman said. “He came up with this cockamamie strategy to save the day.”

     “Not at first,” Salzeger said. “He first remembers a very simple strategy from the Cook seminar that pretty much guarantees half to one percent a month. In a nutshell, it consisted of selling calls on a big flat stock, like Walmart, that doesn’t move very much, but does allow for the sale of calls--”

     “I thought he lost his and his mother’s shirts selling calls and decided not do do that anymore,” Loughman interrupted.

     “That was buying calls,” Salzeger explained. “This is just the opposite. This is selling calls.

     “Long story short, he tells his mom he can get her 6 to 12 percent a year using this flat stock strategy. 

     "She’s not a numbers person, nor is she very trusting. So, according to Ruskjer, she says, rather sternly, ‘Are you sure?’ 

     "Being the devoted son, he promises to check it out.

     “Takes him six weeks to hand-check thirty thousand stocks -- 

       first to even figure out what their stock symbols were, 

         then to isolate the three thousand or so stocks that allow for the sale of calls, 

           then to analyze these stocks to see which one was the flattest.

     “While he’s doing this last pass, he runs across a stock with the symbol AGIX. It’s a pharmaceutical company that purports to pay 17 percent on the sale of its calls instead of the meager half to one percent most of the other stocks are paying. It is this discovery that launches his strategy.”

     “If that’s true, that’s a long way from designing a Ponzi scheme,” Loughman summarized.

     “That it is,” Salzeger agreed. “Ruskjer's version is consistently a long way from the government’s,” Salzeger said.

     “They say he lost 22 percent on his first day of trading. 

     "He says he made 33 percent.

     “They say he lost money in his first thirty days of trading. 

     "He says he made more than 77 percent on $100,000 during that same time.

     “He says he made more than $1.3 million net in one month just four months before they shut him down. 

     "They say he lost money in that, and forty-nine out of fifty-one other months.”

     "But any of those claims,” Loughman interrupted, “by either side, should be readily proven or disproved by Ameritrade’s documentation, shouldn’t they?”

     “Well,” Salzeger said, “you’d think so. As it turns out, Ameritrade is at odds with itself.

     “Ruskjer maintains that all gains and losses are documented in what Ameritrade calls its Daily Activities Report. 

     "The government ignores that report entirely relying entirely on Ameritrade’s monthly statements. Both source documents seem to agree but for one number on each statement.”

     “And what might that be?” Loughman asked.

     “According to the man from Ameritrade, called by the government as one of its witnesses,” Salzeger explained, “there’s a number on each statement -- at least for clients who sell calls -- that says how much it would cost if someone bought back all of his outstanding calls on the last reporting day of that statement. Some CPAs deduct this number from the cash and stock value of an account to come up with a more intrinsic value -- one that doesn’t count its chickens before they hatch, so to speak.

     “This number on Ameritrade’s statement is called a ‘contingent liability,’ although that term was never mentioned at trial. Super conservative CPAs don’t want to give credit for monies gained through the sale of calls without taking a worst-case scenario, where the seller might buy back all of those calls before they expire.”

     “You’re hurting my brain,” Loughman complained.

     “Now,” Salzeger quipped, “you’re thinking like a juror.

     “According to one of the government’s financial experts, it doesn’t do any real damage treating these contingent liabilities as losses, since it will all come out in the wash in the net month’s statement.”

     “So what’s the problem?” Loughman asked.

     “Ruskjer says it never does come out in the wash,” Salzeger explained. “In fact, he claims that it compounds with each successive statement.”

     “Here’s my problem,” Loughman clarified. “I’ve got to make a recommendation to the president regarding what went down and whether any games were being played by either side -- and I don’t want to be wrong.”

     “I’ll give it my best shot,” Salzeger said.

     “I know you will,” Loughman said. “I just need you to know that your best shot has to be right. No pressure,. Just don’t screw this up.”

     “I understand.” Salzeger gathered up his notes.

     “And did I mention,” Loughman added, “that I need all this, like, the day before yesterday?”

     “I think you covered that pretty thoroughly.” Salzeger waved over his shoulder as he left the room.