Home

THE HIGH LIFE AND TIMES OF RUDOLPH KRETZ by Allan Cairns, Toronto Toronto Sun
Published July 7, 1996

He rode the fast lane, but now he's in jail wanted for $16M in fraud

AURORA - The riddle of how hundreds of Germans were bilked out of more than $16 million on the world's largest futures exchange is unraveling in this small town.
    So, too, is the bizarre tale of how a local private eye hired to save the alleged conman's life could be compelled to jail him.
    Rudolph Kretz is in the Metro West Detention Centre facing extradition to Germany and the chance of a 10-year jail term.
    York Regional and Metro police are so concerned about Kretz's three years in Canada they've asked in a press release that anyone who had any dealings with him (Kretz) to contact them.
    An arrest warrant from the Stuttgart prosecutor's office alleges 304 investors lost $5.5 million supposedly invested by Kretz in the Chicago futures market from 1989 to 1994. Kretz issued false profit statements to German investors while at the same time using their money "for his own purposes--as he had intended from the start," the warrant states.
A separate civil suit launched in Illinois district court claims 261 investors were defrauded of US$8.9 million.
    Dortmund investor Roger Heick estimates 600 more investors and at least US$15 million has disappeared. Some investors won't complain because it is "black" money that wasn't declared for tax purposes, Heick said.
    Yet, just before his June 25 arrest, Kretz, 43, was on welfare and owed $7,000 in back rent.
Kretz claims he did nothing wrong. That he was the victim of business deals gone awry; that he's the 'classic patsy' for a German investing duo who are the real "bad boys." But at an immigration bail hearing last week, Judge Sylvanna Gratton said Kretz's story lacked credibility and ordered him held in custody.

    Private eye Micheal J. O'Brien, who for 18 months helped hide Kretz from a parade of thugs and creditors, believes jail is the best place for Kretz.
"I told Kretz at our first meeting, in January 1994, that if he ever used me to shield him while he does crime I would become his worst nightmare--I would be a compellable witness at his trial," says O'Brien.
    "Any life this man touches is changed forever...he looks at people only to see how he can use them."
    Kretz, it seems, is in debt to almost everyone who met him.
    Interpol says Kretz embezzled 5 million Swiss francs ($6 million Cdn) from his Swiss company, Phoenix, in the 1980s.
    In 1989, Kretz lured German money into Profitex of Switzerland, primarily through German money raisers Aspacher and Stuhler. The cash was supposed to be put into foreign exchange transactions in Chicago. Germans are keen on American markets because profits are tax-exempt.
Aspacher and Stuhler were probed by police in the spring of 1990, Interpol says, but no action was taken.
    After Kretz moved to Chicago in 1990, German investors were advised the average monthly growth was 2%.
    Interpol says Swiss bankers liquidated Profitex in spring 1992 upon learning of Kretz's role in the company.
    So, in July 1992, Kretz encouraged Profitex investors to transfer their capital to the Portman Group, three companies based in the British Virgin Islands and the Cayman Islands.
The arrest warrant notes Profitex hadn't done deals for months and Portman Group "did not even start" transactions.
    In the civil suit, Chicago-based lawyer Bill Anthony alleges Kretz transferred money from Swiss and German accounts into Profitex and Portman accounts and to Chicago broker Rosenthal Collins Group. The suit alleges a Rosenthal Collins floor trader knowingly misled German investors.
A probe by The Sunday Sun has learned Kretz and his wife made a bundle in Chicago. For the first six months of 1990 Kretz took 27,500 Swiss francs ($30,730 Cdn.) commission on a-franc-per-trade on Profitex accounts. Similar numbers exist for 1991 and 1992.
    Records also reveal the First National Bank of Chicago frequently transferred funds directly from Profitex's account to the Kretzs' personal account. For example: May 13, 1991, $15,000; June 3, $126,600; Oct. 18, $13,000; Nov. 5, $10,000.
    Still, while Portman's accounts dwindled rapidly, investors were told of great profits.
Upon meeting Kretz in Basel, Switzerland, investor Roger Heick found him "quiet-spoken and polite and believable." Kretz appeared well schooled and dignified.
At first, Heick invested small amounts, getting small amounts back in supposed dividends. Buoyed by success, Heick gave Kretz 500,000 Deutschmarks ($450,000 Cdn.).
In late 1993, the statements stopped and Kretz vanished.
    Heick complained to Chicago's Commodity Futures Trading Commission to no avail.
Heick formed a consortium of losing investors and hired a private detective to find Kretz. During one conversation, Kretz told him "Aspacher and Stuhler are the bad boys."
Canada granted Rudolph Kretz and Ingrid Kretz landed immigration status Dec. 26, 1993 as "independent". But they had arrived in Canada much earlier, bringing $125,000 with him.
    While some acquaintances say Kretz had long wanted to live in Canada and "its wide-open spaces," Kretz's ex-wife, Ingrid Wagner of Newmarket, told police he fled the United States knowing of the fraud probe.
Interpol says because of his 'close business links' with Aspacher and Stuhler, it is assumed Kretz knew of the probe. In fact, Kretz was advised of German search warrants by Aspacher and Stuhler before he came to Canada.
    Kretz told the immigration bail hearing he came to Canada not to evade the Germans but because Canada's "school system is better". He also said he feared for his children's safety because "Chicago is not the nicest city on the planet."
    Kretz didn't live in Chicago but in the well-to-do suburbs of Napierville, which boasts one of America's best school systems, and Lisle, where he had a five bedroom mansion.
Shortly after arriving in Canada, Kretz, his former wife Ingrid Wagner and their two children moved into a large brick house at 17 Whispering Pine Trail in Aurora, paying $2,400 in monthly rent. He bought a sailboat, a yacht and joined a golf club.
    But Kretz's new-found good life came crashing down. On Jan. 3, 1994, Kretz contacted O'Brien and told him he was being followed. "My first inkling was that Kretz ...had done wrong elsewhere and it was catching up with him," recalls O'Brien.
    But Kretz said his life was in danger; he said he was a broker and had lost the "dirty money' of Russian, German and Italian "bad guys." O'Brien's job was to hide and protect him and make the men "go away."
    "Kretz appeared sincere in his misery. He was extremely affable, friendly, articulate and very intelligent. He was scared and a little bumbling. It all pointed to him being legitimate...quite genuine," said O'Brien.
    Kretz gave O'Brien a $5,000 retainer. Surveillance on Kretz's house revealed people were spying on him. One day, one of O'Brien's workers was accosted by three "burly' and "mean" men outside 17 Whispering Pines. They threatened harm if he didn't let them by, then left when he threatened arrest. O'Brien followed the men to a bar and questioned them. The vague answers they gave him about supposedly phony investments by Kretz convinced O'Brien that Kretz's story was true.

    We moved him, we hid him. He had no (traceable) telephone number, nothing filed, no credit. He completely disappeared,' said O'Brien.
    The Kretz's were spirited to 53 Autumn Way in Aurora.
On another occasion, a 6-foot-2 Panamanian named Joe came looking for Kretz. O'Brien talked him into leaving.
    One night, O'Brien returned to his office to find a burly man breaking down his inner office door. The man ran at O'Brien, snarling in German. O'Brien says he hit the man in the nose. The man reeled back, then came again, kicking at O'Brien's head. Again, a wallop in the nose. Another retreat, another attack, another punch in the nose. Then O'Brien used pepper spray.
    After giving up, the stunned man uttered "Kretz" but little else. O'Brien packed the bleeding man into a cab. O'Brien later learned the man was German private eye Wolfgang Ufer, a former kick-boxing champ. Ufer told a German TV crew he was attacked on his Canadian mission by six Indians with tomahawks (O'Brien). He is now in jail for bilking clients.
    But while O'Brien kept Kretz secure, Kretz secretly set about his business, putting together Darlington and Associates International Management Inc. (D&A) The D&A brochure says the company uses "proprietary mathematical and statistical models that since 1987" have ' an excellent record of correctly predicting directional changes...of interest rates and currencies.
    Fred Darlington's name is noted as the president, but Darlington says Kretz just used his name as a front.
    The D&A brochure named Kretz as the "Chief Portfolio Manager" and the system developer. It boasted about his expertise and knowledge in 14 years of financial portfolio management in Germany. The bio names three European companies, including Profitex of Liechtenstein and Finch management of Panama, but there is no mention of the failed Phoenix, Profitex of Switzerland or any Portman companies.
    Despite his self-styled credentials, Kretz let mood, not logic, control him. Daniel Johnson, a trader who worked with D&A for four months, said he traded the Chicago markets using German cash solicited by Kretz. Records suggest Kretz played the markets with US$300,000.
    "At first we made a little bit, but then Rudi had a pretty severe blow-up one day and we lost the biggest percentage of it...about $700,000," Johnson recalled.
    Darlington and Johnson soured on Kretz and left. Johnson is still owed three month's wages.
In all, six Germans invested with Kretz in Canada. One of them, Johann Roesner saw his money dwindle from $300.000 in early 1994 to $24,179 in five months. Roesner didn't join German investors chasing their loses. Shown the Roesner account, one expert said there are "many, many" trades, meaning Kretz was taking large commissions.
    Meanwhile, O'Brien went about his job. Trying to throw thugs off the track, he had a make-up artist make Kretz appear as if he had been badly beaten. A photograph of Kretz, all cuts and bruises and scrapes and missing a few teeth, was sent to Heick and others to try to quell their anger.
    On May 1, 1994, First National Bank of Chicago closed out Kretz's Finch Management account due to "irregular activities."
    But Finch was alive and well in Canada. On July 5, 1994, $9,990 was deposited into Finch's CIBC account in Stouffville. Another $128,000 was deposited in the next four months.
O'Brien had his own beefs with Kretz: He had only been paid $40,000 of a $128,000 bill.
    Kretz's lawyer, Erik Polten, is also rumoured to be owed as much as $100,000 by Kretz. Polten told The Sunday Sun he could not reveal client records, but "I can't say I've ever made any money...he can't pay, it's as simple as that.
    In June 1995, Kretz left his wife, Ingrid Wagner and his children. O'Brien helped Ingrid Wagner find subsidized housing, a car, welfare.
    Others came for Kretz and Wagner, among them investigators from American Express, Revenue Canada, a bank and two German private eyes, Harry Kruegel and Josef Junginger.
    Documents show O'Brien wrote to the Kretzs May 18, 1995, warning them they were "at risk" of being charged in Germany, Canada and the United States and should keep records.
    Three weeks later, O'Brien told Kretz German Police have told German media they will extradite him. O'Brien urged Kretz to cooperate with authorities.
    Junginger and Kruegel entered an accord with O'Brien on June 12, 1995, setting out an agenda for a meeting in which Kretz could settle the Profitex and Portman matters by trading inculpatory information on Aspacher and Stuhler. Otherwise, the agreement said, the two private detectives will "cooperatively surrender their substantial files and testimony to police."
    Kretz later signed a promissory note agreeing to pay O'Brien $1,000 a month over 10 years to settle the $84,800 bill.
    It came with a General Security Agreement giving O'Brien sweeping powers if Kretz failed to pay. He didn't, not a penny.
    Kretz complained to the Ministry of the Solicitor General, claiming the lien was false and O'Brien had no right to seizure.
    On Jan. 11, 1996. O'Brien Seized Kretz's goods--truck, furniture and business files--and put him into receivership.
    "I knew exactly what I was doing. I made sure he was not going to stiff anyone else in Canada," said O'Brien.
    Kretz says he has started a $750,000 lawsuit against O'Brien and his ex-wife Ingrid Wagner.
Harry Kruegel wrote the court, saying O'Brien "successfully hid Mr. Kretz from us and all other comers" for 18 months and did an excellent job...We know of specific instances where...Mr. O'Brien has saved Mr. Kretz's life for certain."
    Junginger wrote to the solicitor general: "The only purpose of his stay (in Canada) is to hide from the (prosecutor) and the ruined investors. He is a master in convincing and manipulating people and a born liar."
    Breaking from O'Brien in September 1995, Kretz moved in with a Richmond Hill man, James Robson. Kretz now owes Robson $7,000 in rent arrears. Still. Robson has stuck by Kretz and lets him use his name to get credit.
    When Kretz was arrested last week, he had Robson's Bell calling card on him. Four months ago, Kretz went on welfare and has received payments of $520 each month. About $325 was earmarked for the rent he hasn't paid.
    Earlier in 1996, Kretz set up another company to sell computer software he purported could instantaneously call up any market in the world and effect trades.
    This month, Kretz tried to solicit cash from Canadians.
In trying to sell shares for his Scalfic Ti endeavor, Kretz has provided letters from some of Chicago's top brokers, including Tom Church, trader in the ill-fated Roessner file.
On June 24, an Aurora couple gave him two cheques totaling $2,000 for two $1,000 class A shares. They would be directors in the new company. Kretz, of course, was top dog.
Immigration prosecutor Andre Rustja suggested at last week's bail hearing Kretz has hidden himself so police and creditors cannot catch him. He noted Kretz had created a business address, when in fact it was a postal box at Mail Boxes Etc., Richmond Heights plaza. Rustja referred to "suite 198." Kretz also used a "suite 228" address.
Rustja also noted that despite being on welfare, Kretz had a pager, a cellular telephone and $586 cash when arrested.
Kretz's current lawyer, Dave Snider, told court he had given Kretz cash to pay a phone bill and resume his business.
The only reason why Kretz doesn't use his real address is to hide from O'Brien, Snider said.
Robson said he had given Kretz his bank account and credit cards because Kretz could not get credit in his own name.
Snider said O'Brien had Kretz sign the August 1995 agreement "without independent legal advice" and has since "proceeded to haunt Mr. Kretz."
In his submissions, Rustja asked how Kretz has a cell phone and pager: "I'm working, and I can't afford them!"
He went on: "Why? To conduct his fraud!"

Legal