By 1981, FTC had a new 67,000-square-foot headquarters with racquetball courts, a steam room, a swimming pool and a constantly ticking stock-market machine. With its new fleet of 44 planes, the company could rightfully claim to be the seventh largest charter outfit in the country. Rubin signed an exclusive deal with the West Indies island of Montserrat to develop and operate its only airport for 99 years and build a 221-acre resort, complete with condos, shops, a hotel, a golf course, a boardwalk and a yacht club. He worked out a $3.7-million deal with the Cayman Islands government to build 22 executive vacation homes and 200 condos. The company owned property in eight U.S. cities, with plans to build stopover hubs for refueling and maintenance. The numbers looked incredible. The company’s revenue rocketed from $3.1 million in 1979 to $71.2 million in 1982. During the nine months prior to March 31, 1982, earnings jumped 400 percent and sales 450 percent. Plus the company had rock-solid underwriting. When FTC went for its second stock offering in March 1981, worth $7.2 million, it did so with the backing of the esteemed Fifth Northwestern National Bank of Minneapolis. When the company went for another offering in March 1982, worth $6.5 million, it got endorsement from three major Wall Street firms: Laidlaw Adams & Peck; Alstead, Strangis & Dempsey; and Drexel Burnham Lambert. For outside accounting, it hired the well-known Denver firm Fox & Company. The business press was paying close attention to the rising star in Minnesota. For two years in a row, Inc. listed FTC as a top 100 fastest growing company. In its April Fool’s Day 1982 issue, Financial World published a glowing profile of the twosome at the top: “To date, nearly everything Rubin and Karki have touched has turned to gold,” it read. In the article, Rubin predicted the company would have half a billion in revenue by 1983. On June 3, 1982, FTC brought out a $25-million stock offer. On June 14, the underwriters at Moseley, Hallgarten, Estabrook & Weeden increased the company’s stock issue of 650,000 shares by 10 percent. That was four days before it all collapsed. On June 18, 1982, a suit of attorneys from the U.S. Securities and Exchange Commission stormed the Taj Mahal — Rubin’s affectionate nickname for the company’s lavish Eden Prairie headquarters. Two hours later, FBI agents showed up and confiscated more than 60 boxes of documents. Inside, investigators found all the makings of a fake company, including an IBM Selectric typewriter along with a huge array of typewriter balls, handy for making documents appear as if they had been typed on different machines. They found piles of forged documents, including one from the Cayman Islands government declaring FTC the exclusive air charter company to the Caribbean archipelago. “They had a big white board, and they had written all of these phony flights on it, so if
a banker asked where a certain plane was, they could say, ‘Oh, it’s in New York right now,’” says Oberdorfer. Investigators found 24 separate bank accounts under Rubin and Karki’s control. The truth was, FTC didn’t really do any business. The numbers, the deals, the condos — it was all a mirage. In reality, Rubin and Karki used the money from the stock offerings to buy cars and jewelry. During the three-and-a-half year investigation, federal agents uncovered the truth about the duo. Rubin was never a pilot for United; he was the son of a button salesman and a college dropout. Karki, born Eva Lu Wagoner, came from a tough background in central Iowa. Her father was a part-time boxing coach and fight promoter who owned a bait shop. Her mother was a traumatized housewife who filed for divorce on the grounds of inhumane treatment. When she was 16, Eva Lu gave birth to a baby girl who was raised by her mother. Her brother spent five years in prison for assault with intent to commit rape. Before coming to Minnesota, she had been a bartender, not an accountant. Rubin and Karki’s charade might have gone on longer if not for Charles Aune, FTC’s chief pilot, who says the smell of rotten fish was all over the place. “Bill and Janet would come back from the Caymans in the middle of the night, and the next day, she would be wearing a big diamond ring on every finger,” he says. Aune was glad to see them go down, especially Karki: “Janet would blow her top all the time. One time, she threw a phone at me, and the only reason it didn’t hit me was because it was hooked into the wall.”
Rubin and Karki’s trial started November 4, 1985. They faced charges of fraud (totaling some $52 million), check kiting and inflating revenues. Assistant U.S. Attorney Tom Heffelfinger knew the pair would shock the Northern sensibilities of the jury, and he poked that nerve every chance he got. He detailed Rubin’s exotic car collection: his Porsche, five Corvettes, 1946 Rolls Royce and 20 others. He took the jury to see the Taj Mahal, including the upper-level suite with its sliding wall between Rubin’s office, Karki’s office and a bedroom. The luxe sanctum had a king-size bed with a mirror above it, plush beds for Karki’s poodles, a hidden bar, and “one of the best views in Hennepin County,” says Heffelfinger. Even though Rubin was married with three young sons, the pair made no secret of their fling: “We all knew they had a big bedroom that connected their offices,” says Aune. After tickling the prudish sensibilities of the jury, Heffelfinger went to work on the lies. He put United’s vice president of personnel on the stand to testify that Rubin had never worked for the airline. Rubin just shook his head and said the company must have lost his records. “The first person Bill Rubin deceived was himself,” says Heffelfinger. “He was one of those people who told lies so many times they became real in his own mind.” In their defense, Rubin and Karki said they weren’t schemers; in fact, they themselves were swindling victims. The defense argued that James Bodden, a major party leader in the Cayman Islands, had stolen
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