The first of many elderly investors who claim to have lost a combined $20 million in what Sonoma County prosecutors are calling a vast Ponzi scheme testified Friday they gambled their life savings on word-of-mouth recommendations and the promise of 12 percent returns.
Some, like Hyam Liebling, 86, of Oakmont in Santa Rosa, testified they plunked down their money with Aldo Baccala, 71, of Petaluma, despite being unclear about who he was and how the money was secured.
"I just trusted the guy," said Liebling, who walked to the witness stand with the help of a cane. "And I trusted the information I got from a friend who invested in him for many years."
After a brief meeting with Baccala in 2008, Liebling said he wrote him a check for $30,000, eager to begin collecting generous monthly interest payments. A few weeks later, he shelled out $25,000 more, increasing his total investment to $55,000, he said.
The money was going into mobile homes owned by Baccala's Petaluma real estate company and later, assisted living centers, he said.
But in November 2008, Liebling testified the monthly payments stopped. He received a letter from Baccala telling him he'd run out of money.
Liebling and other investors sued Baccala in civil court but have since received nothing, despite a settlement promising repayment.
Asked about the impact on his life, the elderly man said, "Well, we're retired."
Liebling was the first to testify in a preliminary hearing expected to continue next week. Prosecutors said there are 55 victims, many of them elderly, who were cheated out of their money.
Baccala, who was arrested in June, listened to their stories from the defense table. He's charged with 164 felonies including grand theft, securities fraud and elder financial abuse. If convicted, he faces life behind bars.
Baccala remains in custody on $2 million bail.
He's accused of running one of the biggest Ponzi schemes in county history.
Prosecutors said he offered investments in a portfolio that included the southeastern nursing homes, a Nevada car wash and a Colusa mushroom farm. People paid between $25,000 and $2 million.
But detectives said Baccala lost millions in the stock market and started using the money to cover his debts. Eventually, he went broke, leaving his investors empty-handed, prosecutors said.
One of those people was Gary Degraffenreid, 74, a retired firefighter from Petaluma, who testified he gave Baccala $100,000 in 2000.
He said he was happy with the monthly supplement to his city pension, which he described as "sparse." Then, in 2008, the payments stopped.
"It was the only investment I had," he said.
Baccala has denied trying to defraud anyone. His lawyer, Steve Gallenson, suggested the men made a risky investment and lost.
He asked each about their expectations and what they did to make sure their money was safe. Liebling testified he lost $300,000 in an unrelated investment a few years earlier.
"I took the man's word," Liebling said. "I trusted Mr. Baccala."