Straw man

Jeff Reinitz

Jul. 13, 2008 (McClatchy-Tribune Regional News delivered by Newstex) -- WATERLOO -- As Charles Millard Johnson settles into retirement, the little repairs around the house become an ominous task.

He wants to replace the carpet, and the driveway is starting to crumble.

But the former hairdresser and nurses' aide only gets $680 a month from Social Security and has a few thousand dollars in savings.

"I have this little bit of money, and it doesn't stretch," Johnson, 66, of Waterloo, said.

His retirement account -- about $28,000 in funds he saved himself and a gift from the family of a deceased home health client -- disappeared after he invested it with Financial Benefit Services Corp.

Financial Benefit Services, also known as Benefit Services, was one of the companies operated by Jack Straw.

Straw -- a former Dunkerton resident who moved Cedar Rapids -- lost his insurance license for life last year after state regulators began investigating allegations that he altered and misrepresented policies, misled clients, forged signatures and made unauthorized withdrawals from clients' accounts.

Authorities with U.S. Postal Inspection Service and the Federal Bureau of Investigation have talked to people who invested money through Straw.

Straw's attorney, Leslie Stokke of Cedar Rapids, declined to return phone calls, but in January Stokke said in civil court records Straw had been receiving in-patient psychiatric care since September and was unable to defend himself.

No one has been charged with a crime in connection with the missing money.

Authorities remain mum.

In the absence of charges and funds, Straw's clients are wondering if they will ever see any of their investments again. Or if anyone will be held accountable for the loss.

Investigators said a number of complaints about Straw came from elderly residents, and the amount of money in the balance is staggering.

"The investigation indicates Mr. Straw had engaged in these activities over a period of several years resulting in the loss to his clients in excess of $1 million," Tina Lathrop, a postal inspector in Cedar Rapids, said in court records.

Child care center folds

The number of clients involved is still unknown.

Those contacted by The Courier said Straw came off as a man who could be trusted -- he's a retired Buchanan County sheriff's deputy, a former high school football coach and his wife is a pastor.

"He was such a smooth talker and such a persuasive person," said Dawn Best, president of the Dunkerton Child Learning Center.

"He pulled the wool over a lot of people's eyes. He had a lot of people's hopes up real high," Best said.

The Child Learning Center, a nonprofit organization, had been operating on a short-term Department of Human Services license with about 20 to 40 children and had planned to build a new facility and seek a permanent license. The new site would allow for 54 children.

In the interim, the center was housed at the Dunkerton church Straw's wife oversaw, and Straw approached the group with a plan to line up a portion of the money to erect the building.

He told organizers about $130,000 was available from investors, some of it through a group in Des Moines, Best said.

Center officials came up with $85,000 in grants on their own. Local contractors were ready to do the work at cost, and the center hired an architect.

As the project progressed, center officials found it difficult to nail down how much money they had and the status of funds they gave him to invest.

"When we would ask him for reporting sheets and stuff like that, he was very, very vague," Best said.

Eventually Straw produced written statements about the center's account after repeated prodding, Best said. And then it was only about two typewritten sheets.

"They might have been legitimate accounts, who knows," Best said.

In August 2007, Straw called to say he had the money, Best said, and learning center officials opened a capital improvement account at a bank at Straw's request.

But the promised funds never materialized, and other money he was investing for the group disappeared, Best said.

The center closed last year when its state license for the temporary site ran out.

Best said they planned to go back into operation when the new building was constructed.

But the lack of funds has made that impossible, and the $85,000 in grants, which were never handed over to Straw, will be returned.

In Cerro Gordo County, Raynor and Janelle Johnson had turned to Straw and Benefit Services for advice regarding their retirement.

Straw had them liquidate $97,750 they had in an IRA through Allianz and put it in alternative investments, court records allege. Another $87,000 followed from a liquidated State Farm life insurance policy and other sources.

They never received an accounting of the money, court records state.

Raynor Johnson died in March 2008, and his wife is one of three parties who filed claims against money federal investigators seized from Benefit Services bank accounts.

Leonda and Velmaline Tschetter have also filed claims.

Jeffrey Holmes of Waterloo took Straw to court over $25,000 he paid to start a company with Straw. The suit is still pending.

Back in Dunkerton, Larry Steinbronn had invested money through Straw. He said the funds are safe, although their growth was slower because of how they were administered.

The curious part of his contact with Straw was the insurance he bought. Steinbronn signed up to pay for four life insurance policies with the premiums being deducted from his checking account.

But at one point Steinbronn noticed he was paying for eight policies. After a number of messages, he was finally able to get the extra four stopped.

He later learned the policies were for Straw's relatives, Steinbronn said. He doubts the family members knew he was paying for the policies.

Tax prep

Ora Carey's family got off light.

She learned of Benefit Services when the company set up at Bertch Cabinet where she worked and offered tax preparation for $35.

Her co-workers reported having their tax returns double under Benefit Services.

But after handing over her financial information for 2006, communication with the company became spotty and dropped off as the filing deadline approached.

It wasn't until June 2007 that Carey, after leaving several messages, received a copy of the filing.

"I don't think he ever filed it," she said.

More suspicious was how her dependant son was listed.

"They had a daughter. I don't even have a daughter."

The name for the daughter entered on the tax form was "Child Carey." The Social Security number started with 123-45. The balance was all 6s, Carey said.

She ultimately took her taxes to another business.

Free lunch

Johnson met Straw at a free lunch seminar Benefit Services had at a Waterloo buffet restaurant in 2003.

Straw's profession of faith attracted Johnson, a born-again Christian who saved little in his younger years.

"I thought, 'Wouldn't it be nice to have a Christian person to help with my finances,'" Johnson said.

He cashed in his Securities Corporation of Iowa account and invested it with Financial Benefit Services.

For awhile he received monthly divided checks of $160 a month.

When he approached Straw about withdrawing more money to pay for a new roof, Straw wrote him a $2,300 check out of his own pocket.

"This way it made him look like he was being nice to me so I wouldn't need to touch my money. And all along there was nothing there to touch," Johnson said.

"It's tough. That was my life savings. I'm blessed because house is paid for," Johnson said.

Contact Jeff Reinitz at (319) 291-1578 or jeff.reinitz@wcfcourier.com.

Newstex ID: KRTB-0150-26626942