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How did Baccala gain trust?

A week after Petaluma real estate agent Aldo Baccala, 71, was arrested on charges of perpetrating a $20 million-plus Ponzi scheme affecting more than 50 people, Petalumans are still trying to understand how a longtime member of their community was allegedly able to swindle so many of his friends and neighbors.

Despite the community's shock, some who were close to Baccala say this wasn't the first time that the outgoing, enigmatic man got his friends and neighbors to invest in a scheme that went bust, and that he had a special talent for eliciting trust.

In 1994, Baccala and his wife Karen were sued by people they recruited to invest more than $3.2 million to convert a Kentucky bourbon distillery into an ethanol production plant. Lawyers for the investors said that the Baccalas falsely misled them into their investment in the plant, and the investors eventually settled with Baccala.

While most who had invested with Baccala declined to comment, citing embarrassment over the situation, one couple who invested in the ethanol plant agreed to tell their story. They asked to remain anonymous for fear of criticism from other community members and out of embarrassment.

"He was very affable and intelligent," said Andrew Martin, who along with his wife Sue Martin (not their real names) became close friends with Baccala after he sold them two homes and a building lot. They were impressed early on by his intelligence, ability to explain real estate transactions, and talent for putting deals together.

"A lot of people recommended him, he had roots in Petaluma that dated back" to his parents, who had a business in town, Martin said, adding that was part of why people were inclined to trust him. "He was part of the fabric of Petaluma."

"We were best friends," Sue Martin said, but added after a moment of reflection, "but then, everyone else was too."

The Martins said they initially declined to invest after Baccala introduced them and dozens of other well-to-do Petaluma residents to the prospect in a lavish presentation at a downtown restaurant. Eventually they agreed to invest more than $100,000 after he persisted for months, presenting them with a brochure that they said in hindsight gave misleading information about the nature of the investment and the plant's production.

Shortly after they invested, Baccala informed them that the plant had been shut down, according to the Martins, and they remember being devastated to learn that someone they'd considered a close friend had misled them.

They and three other parties sued Baccala in bankruptcy court, finally agreeing to settle with him, and they recouped about 75 percent of their investment.

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