When asked about investment options, Mr. Scott usually outlined two plans. The first was the so-called "15 percent account." Mr. Scott claimed that Goldie's had unique expertise in appraising coin collections, and would buy them from estates and then resell them at a profit. "If we have a reliable source of ready cash," he wrote in a letter to the school, "we can bid on collections where others cannot. We are easily able to pay you 15 percent in good times and in bad." The other plan was the stock option, with Mr. Scott picking the stocks to invest in and taking a commission on the transaction.
The finance committee, which included an accountant and a lawyer, was convinced, and the school chose the 15 percent account. Initially, the school invested its $29,000 endowment fund with Mr. Scott, and later added a $450,000 gift from the Clancys to expand its facilities.
But most gnawing to the Clancys is the $100,000 they gave Mr. Scott to start a college fund for the children of Gerald and Debbie Carroll. Gerry Carroll and Tom Clancy met in an English class at Loyola High School in Baltimore and remained close even as Mr. Clancy grew in fame and fortune and came to number people such as General Powell and actor Tom Selleck as friends. Mr. Carroll, a Navy pilot, died in 1993.
"He was my best friend, I promised to take care of his kids," Mr. Clancy says. "That's what I'm really angry about. He knew what that money was for."
With their millions the loss is easier to take, at least financially. "This thing with Richard, I guess we are the most prominent people involved," he says. "A lot of people are hurt considerably more than us. We can afford to take this hit -- I'd just as soon not take the hit -- but other people are going to be hurt more."
And yet in one way, the Clancys are no different from Mr. Scott's other investors.
"It was a genuine friendship," Mr. Clancy says. "When a friend sticks it to you, that makes it really bad."
Two who were suspicious
Perhaps it was the physical distance that gave them perspective, but the only investors to become suspicious were on the other side of the country, in Northern California.
They are Katherine Robinson and James SanSouci, two officials with Mr. Clancy's Kyle Foundation, a nonprofit group that supports seriously ill children and their families. It is named after and inspired by a young boy, Kyle Haydock, whom Mr. Clancy befriended shortly before the boy died of leukemia in 1991.
The Clancys referred Ms. Robinson and Mr. SanSouci to Mr. Scott in the spring of 1993. Although the two investors refused to comment on the case, they detailed their experience with Mr. Scott in affidavits provided to the state last fall.
Ms. Robinson and Mr. SanSouci wanted to invest in high-tech companies and frequently visited and tracked the developments Silicon Valley for possible investments. That is how they came across a company called General Magic, a Silicon Valley start-up much like those that in recent years have created frenzies on Wall Street when they go public and investors dream of buying into the next Microsoft or Netscape.
The company is developing technology for the next major gadget, the hand-held computer and personal communications device, and its initial public offering, or IPO, of stock was considered a risky yet intriguing opportunity.
Ms. Robinson and Mr. SanSouci learned from General Magic employees that the company would go public in early 1995, and told Mr. Scott they wanted to buy shares in the IPO. With several relatives, they pooled about $41,000, and, when the IPO was released in February, Mr. Scott said he managed to buy the eagerly sought shares.
Later in the day, though, as Ms. Robinson and Mr. SanSouci followed the stock's progress through an on-line service, they saw it heading south -- and fast. The next day, and for weeks thereafter, they asked Mr. Scott to sell, but he continually rebuffed them.
Finally, in April, they called Mr. Scott's stockbroker at PaineWebber, Jacqueline Willens. She shocked them by saying she knew nothing about the General Magic IPO and denied purchasing any shares for Mr. Scott. The stockbroker put them on hold, apparently to call Mr. Scott, and soon he was on the phone to Mr. SanSouci and Ms. Robinson.
Mr. Scott confessed that he hadn't been able to buy the General Magic IPO but was too "embarrassed and upset" to admit it, Mr. SanSouci said.
"He apologized continually. I suspected that he was drinking, as he occasionally slurred his speech. He indicated he was calling from a Las Vegas hotel room. He called back several times during the day. During each call, his speech seemed more impaired."
Mr. Scott offered to repay them for the stock he had told them he purchased, Mr. SanSouci said, and each of them soon received a check in the mail.
Feeling the impact
It appears, however, that none of the other investors had reason to suspect anything was amiss, at least until last fall.