Larry Dean Starchman didn’t start out with the idea of bilking more than two dozen friends of hundreds of thousands of dollars, one of his victims said.
He got caught up with marital problems and inattention to his day-trading business, which plummeted four years ago when technology stocks went into the Dumpster.
His mistakes cost him a $20,000 state fine, the loss of many friendships and now a jail sentence.
Starchman was sentenced Tuesday to four months in the county jail and an equal amount of time under electronic home monitoring. The jail time will start in early 2006, giving the former Monroe resident time to finish his last quarter of college.
He pleaded guilty to fraudulent securities sales and selling securities without being registered by the state, both felonies. The maximum term he could have received was a year in jail for losing $450,000 in other people’s money.
Investors shouldn’t be too quick to jump into a deal that looks lucrative, deputy Snohomish County prosecutor Tim Geraghty said, even if they know the person.
Starchman took “advantage of the relationships. People have to be careful, and he promised huge rates of return,” Geraghty said. “They all bought into that.”
Starchman, 54, who now lives in Woodinville, promised investors the risk would be minimal because he would close out all stock trades at the end of the day, Geraghty said
He offered some capital contributors to his business, LDS Securities, a 40 percent return on company profits. A second type of investment was a fixed-rate return of 25 percent a year to be paid in monthly installments.
“That’s a pretty big red flag,” added Leslie Pearsall, investigator with the state Department of Financial Institutions, which pursued the case. “That’s a very high return.”
Simply investing in a day-trading operation is risky, she added.
For two years, during the high rise of technology stocks in the late 1990s, Starchman performed for his investors, said Brian Schuh, 41, a former Monroe resident who moved to Michigan after losing $125,000 in the scheme.
After losing the money to Starchman, Schuh was left with three mortgages to pay off at once. He said he was forced to take another engineering job in Michigan because of higher pay and a signing bonus.
Schuh said he had full confidence in Starchman until he went to collect what was supposed to have been a 60-day investment intended to buy property for a new home.
“Four months later, we found out we would not be getting our money back,” Schuh said. “It was pretty stressful for the family” of four.
Most of the affected 27 investors were his friends and members of the Methodist church he attended.
Starchman’s lawyer, public defender Kathleen Kyle, said that her client “made a tremendous error. It was very humbling for him to appear in court” for sentencing.
She told Snohomish County Superior Court Judge Thomas Wynne that since his financial world crumbled in 2001, Starchman has taken college classes with the hope of becoming a teacher.
He also has worked two minimum-wage jobs at the same time to pay his child support.
“He really tried to do what he’s supposed to do,” Kyle said. “He sank himself with everybody. He just didn’t know what he was doing.”
Wynne will make Starchman pay restitution, but Schuh isn’t counting on getting anything back.
“I don’t believe Larry maliciously tried to steal or embezzle the funds,” Schuh said. “It was a case of mismanagement and bad timing.”
He wishes Starchman no ill will, but no longer considers him a friend. Schuh also is a wiser investor now, and no longer believes in deals that seem too good to be true.
“I’ve learned a lot since then,” Schuh said. “It’s not a mistake I would make twice.”
Reporter Jim Haley: 425-339-3447 or haley@heraldnet.com.
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