Monday, October 22, 2007
After Derrich Pollock died in a plane crash in Lago Vista in February, the 43-year-old father of four was compared with Jesus.
"Derrich was most like Jesus in that he gave," the funeral program at Great Hills Baptist Church in Northwest Austin said of the man who attended weekly Bible studies and flew relief supplies to hurricane victims.
But since his death, lawsuits have flooded the probate court in Austin claiming that what Pollock really did was take.
Sixty-two lawsuits have been filed against Pollock's estate, his wife and a few of his friends, painting a portrait of a man who used his charm to bilk friends and fellow believers out of millions of dollars. Most of the suits say he used a scheme called System Five involving big promises and enormous amounts of life insurance that he began buying in 2004.
The Texas State Securities Board, which is investigating the case, said Derrich Pollock bilked investors out of more than $4 million, according to a lawsuit. And bankruptcy records filed by his wife, Julee Pollock, show that more than 100 investors are owed more than $7 million. The bankruptcy records include not only the amount people invested, but also the profit that investors claim they would have earned.
In the lawsuits, investors say they should be paid back with the $9 million in life insurance that Derrich Pollock took out on himself because, they say, he used their money to pay the insurance premiums.
He had promised investors that if anything happened to him, they would be paid back from the life insurance policies, according to lawsuits and a letter from the state securities board to an insurance company lawyer. The beneficiaries of the insurance policies were his wife of 20 years and at least two friends, who have all declined to comment.
One of the beneficiaries, Rod Watkins, is an associate minister at New Life Family Fellowship Church in Caddo Mills, about 40 miles northeast of Dallas. The church has also filed a lawsuit against Pollock's estate claiming that it lost $885,000 in investments.
Investors were motivated by trust.
Pollock, who was born in Brownwood, moved to Austin in 1970 with his parents, his funeral program said. He graduated from Austin High School in 1980.
Pollock's father, Elvin Leroy Pollock, was killed in 1986 by a business partner trying to collect on life insurance, said Austin attorney and former state Rep. Terry Keel, who was the prosecutor in the case.
Derrich Pollock's full professional history is unclear, but according to the lawsuits, he had, among other things, studied one year at Blinn Junior College and worked at an auto parts store before starting System Five in 2002.
His investors included friends he knew from Great Hills Baptist Church, where he had been a member since 1986, and other Christian groups.
"I invested with him because he had been my best friend for 17 years, and I trusted him like I have trusted no man before," said Randy Rowley, president of the Fellowship of Christian Sportsmen, a hunting and fishing club. "Many of Derrich's investors were close friends of his. His optimism and confidence in his system were contagious."
Rowley did not say whether he lost money by investing with Pollock, but Rowley's name appears on a list of people who have filed claims against Pollock's estate, according to records filed in U.S. Bankruptcy Court for the Western District of Texas.
"Derrich was exactly like the rest of us, a sinner who rebelled from a holy God and fell far short of his glory," Rowley said.
As a member of the sportsmen group, Pollock participated in many fall and winter dove retreats and hunts and left behind a lot of good memories, Rowley recalled saying at Pollock's funeral.
"Derrich delighted in talking about 'Dad' (as he lovingly called the Lord)," Rowley said in a statement. "Others had opinions; Derrich had rock-solid beliefs. He was so conservative that he made Rush Limbaugh look like a liberal."
Pollock, an amateur pilot, had been flying for 10 years.
He flew supplies to storm-battered towns in Louisiana and Mississippi after Hurricane Katrina hit in 2005. He also flew for Challenge Air, a ministry that provides trips for children with disabilities.
On Feb. 19, he was flying from Lago Vista to Sugar Land, near Houston, in a Cessna 210 that belonged to Bob Gloris.
Gloris, who could not be located for comment, also invested with Pollock and has filed a claim against his estate, according to bankruptcy records.
It's still unclear what caused the plane to crash into a wooded area near RM 1431 and Bar K Ranch Road near Rusty Allen Airport in Lago Vista, which is west of Austin on Lake Travis.
A preliminary report by the National Transportation Safety Board said Pollock had reported a problem with the plane's auto-pilot system to authorities at the Sugar Land Regional Airport.
He turned around and headed back to Lago Vista, where he made several approaches to the airport before crashing, the report said.
The final report about the cause of the wreck won't be ready until November, said Craig Hatch, a safety board investigator.
System Five said to be Ponzi scheme.
The wreck and the lawsuits that have ensued have begun to reveal information about Pollock's business dealings.
Beginning in 2002, Pollock conducted a Ponzi scheme offering and selling investments in System Five, according to lawsuits and the securities board letter. A Ponzi scheme involves the use of money from new investors to pay previous investors.
The System Five name was picked by Pollock as a spur-of-the-moment thing, said Ron Greening, an attorney for one of the plaintiffs. "It was not anything of importance connected to investment strategies," he said.
Pollock convinced people that he could make money for them by buying stocks low and selling high, Greening said, adding that he did not know any more details about Pollock's investment business. Other lawyers representing plaintiffs in the case declined to comment about how Pollock ran his business.
"Apparently, he was very persuasive and backed it up with what appeared to be authoritative spreadsheets that were updated daily and appeared to provide completely transparent reports on the performance of the investments," Greening said. "He knew he was misrepresenting things because he was reporting to people that he was making enormous returns and he wasn't," Greening said.
According to securities board records, Pollock deposited investors' money into his and his wife's bank accounts and used some of it to buy life insurance.
One lawsuit alleges that he violated state law by offering and selling securities without being registered as a dealer or agent with the securities board.
Financial aftermath.
Negotiations are under way between the plaintiffs and representatives of Pollock's estate. The administrator of the estate, Glenn Karisch, a court-appointed lawyer, said Probate Judge Guy Herman authorized him this month to hire a mediator to handle the claims against Pollock's estate. "Most of the parties wish to mediate the case to try to resolve it," Karisch said.
Julee Pollock filed for bankruptcy Sept. 7. Her lawyers say she can't be held responsible for her husband's investment business because she didn't know anything about it.
"She was a stay-at-home mom and pretty much as surprised as anyone to learn about this," said one of her lawyers, Steve Sather.
"Julee Pollock's goal in the bankruptcy is to make sure that investors receive a significant distribution, but at the same time, she's not wanting to be left destitute herself," Sather said.
Julee Pollock home-schooled her four children, and Derrich Pollock was gone most of the time because he was involved in numerous organizations and activities, said another one of her lawyers, Steven Dowd. The Pollocks have two sons, aged 13 and 17, and two daughters, aged 11 and 16, bankruptcy records say.
"The Pollocks did not have an extravagant lifestyle and did not enrich themselves," Dowd said. According to bankruptcy records listing personal property, the Pollocks own three vehicles worth about $41,000, a $15,000 boat including its motor, more than $7,000 in furniture and clothes, $3,000 in art, $41,000 in a checking account, and a dog, two cats, a rabbit, three fish and six crabs.
Two million dollars of the insurance money was paid into the registry of the probate court, and $1 million was paid to Julee Pollock, who has been forbidden to spend it by a temporary court injunction.
An additional $6 million in life insurance is pending while Derrich Pollock's case is under investigation, lawyers said. The insurance company that holds the policy, ING, declined to comment about why the company hasn't paid off the policies.
The securities board is also requesting, in a lawsuit, that all proceeds from Pollock's life insurance policies be placed in a trust operated by the state for the benefit of investors in System Five.
"It's very unusual to have life insurance (payments) pending," Greening said.
Greening said he did not know why the life insurance was pending in Pollock's case. In general, possible reasons that life insurance payments would not be made immediately after a death include unresolved questions about who the proper beneficiaries of the policy are and what the cause of death was, Greening said.
Hatch declined to comment on whether suicide was being investigated as a possible factor in the crash.
"At this point, I don't have anything to say it is or it isn't," he said.
In the months since Pollock died, the allegations against him have surprised those who trusted him. Investors have been "dumbfounded," said Austin lawyer Will Wilson Jr., who represents some plaintiffs.
"They thought he was smart and that he knew what he was doing. He was honest and was a Christian," Wilson said.
Great Hills Baptist Church declined to comment about the allegations against Pollock or his involvement in the church. Pollock was part of a Tuesday morning study for many years, said Rowley, who is trying to understand the friend he had trusted.
"No, Derrich didn't stop sinning after he became a Christian," Rowley said. "The difference between him and other sinners was he was simply a sinner saved by God's grace."
cosborn@statesman.com; 445-3871