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.

Even after the plant went bust, Sue Martin remembers many friends of Baccala defending the man and criticizing them for filing suit. Some of those same friends became victims in the next scheme, she said, adding, "People still wanted to believe in him."

Andrew Martin acknowledged how easy it had been to do just that. In retrospect, he says that he should have had someone double check the information Baccala had presented to him. He didn't because he trusted Baccala as a friend, Martin said.

"In his life, he did make some good deals and investments, he made money for people. I didn't lose out on my real estate investments," Andrew Martin said. "When a deal came up, he thought it was going to make a lot of money not just for him but for everyone else. He was very confident in himself, but he had a blind spot."

Martin added, "He was captivated by greed to a fault. He's hurt a lot of people in the process."

Baccala now faces 131 counts of securities fraud, 23 counts of grand theft, nine counts of defrauding elderly persons and one count of using a scheme to defraud, all of which are felonies. Most of the charges are based on his allegedly raising millions of dollars from investors for East Coast nursing homes and a car wash but never actually using the funds as promised, according to a statement by District Attorney Jill Ravitch and Attorney General Kamala Harris, who are jointly prosecuting the case.

News of the scheme shocked many in Petaluma.

"For people who have lost money, it's a tragedy," said Mayor David Glass, who said he couldn't speak specifically about Baccala's deeds, as there is the presumption of his being innocent until proven guilty. "But to tell you the truth, the idea that something like this has happened in our community makes me sick to my stomach."

Baccala made his first court appearance on June 7, delaying a plea until Friday, June 15. Until then, his bail is set at $2 million. If he comes up with the money, he must disclose the source.

Baccala's lawyer Steve Gallenson did not return multiple calls for comment, but he told the Press Democrat that the fact that some of the parties named in the criminal complaint were also part of a 2009 civil settlement with Baccala could pose problems for the criminal case.

"The civil case I'm not familiar with, but it shouldn't have any bearing on the criminal case," replied Sharon Harris, spokesperson for the California Attorney General's office. "The district attorney is the one who decides what constitutes criminal charges and civil settlements wouldn't have any bearing on those decisions."

(Contact Jamie Hansen at Jamie.hansen@arguscourier.com)