Naples businessman testifies he was victimized by Pentz

"No, sir, that would be fraud," Brown flatly said to federal prosecutor Bob Barclift during the fifth day of testimony in Pentz's fraud and money laundering trial in U.S. District Court in Fort Myers.

"These mortgages have been in my fire safe since (they were opened), and I have not been paid for them," Brown testified.

Pentz faces eight felonies that allege he duped Brown out of roughly $8 million. Brown bankrolled mortgages, only to have Pentz resell them to various lending institutions and pocket the money, prosecutors say.

After five years of a business relationship with Pentz's Waterford Mortgage Bank Corp., Brown was left in April 2000 with millions of dollars spent on mortgages he'd funded and 113 forged notes he thought backed up those loans, Brown testified.

The extent of Brown's loss has fluctuated, depending on who's speaking. Pentz is charged with thefts totaling around $8 million. Brown's family has alleged the total is closer to $14 million, and actually more if interest is calculated.

But the figure Brown used Monday, the first time he's publicly discussed the case, was $16,619,226 in mortgages for which he never received payment.

His testimony was dry and unemotional as he sorted through the minutiae of his business agreements with Pentz and Lauri Smith, Waterford's original co-owner who died in April 1998 of mysterious circumstances in San Diego.

Brown, who made his money in successful nursing home ventures in Indiana, described meeting Pentz and Smith when the three had offices on the same floor in a building on Fifth Avenue South in Naples. Brown had retired and had money he wanted to park somewhere.

That somewhere was Waterford. And for a while, he enjoyed the money he received from Waterford for interest on the money he lent the company. But in April 2000, he learned mortgage notes he thought he owned had been sold to other lending institutes, in some cases even before he paid out money for them, he testified.

"That would not have been allowed," under Brown's contract with Waterford, Brown said.

The day in court was the first time Brown has seen Pentz since discovering the frauds. Brown took his oath to tell the truth, sat on the witness stand and, after gathering his bearings, the 70-year-old man looked at the defense table, his eyes stopping on Pentz. The two appeared to make brief eye contact, then Brown turned away.

But so far, Brown's testimony has been marked more by its lack of acrimony than by any kind of obvious dislike for Pentz. Brown spoke in a soft, matter-of-fact voice, describing how he was initially impressed by Pentz's and Smith's work ethic as Waterford morphed into a well-to-do enterprise through the mid-1990s.

"They were working on what looked to me like a rented computer. They were sitting at a rented desk. They were wearing shabby clothes. But eventually they were in multiple offices as they grew. They looked successful," Brown said.

Smith and Pentz were "my kids," Brown testified, and they strategized together often as Brown's line of credit with the business grew from $1 million initially to $8 million to $15 million. It was when Brown got too wrapped up in the time-consuming mortgage business, a venture with which he had no prior experience, that the bottom fell out of the relationship.

Brown testified he wanted to reduce his line of credit to $10 million. And he became suspicious when money owed on the principle wasn't forthcoming from Pentz.

Pentz's attorney, Russell Rosenthal, in his opening statements blamed the situation on Smith. He said Pentz repaid Brown several million dollars, and Brown cried foul only when he began to have tax problems.

For his part, Pentz -- facing up to 65 years in prison and $2.5 million in fines if convicted of three wire fraud and five money-laundering charges -- didn't seem troubled to see his former protg testifying against him. Pentz laughed several times as Brown recollected Waterford's early days as a successful enterprise.

Pentz certainly seemed to have lived off the fruits of that success. FBI agent Bret Hood, the lead investigator in the case, showed jurors charges to Waterford's corporate American Express credit card in 1998 and 1999 totalling tens of thousands of dollars.

Pentz spent $26,700 at a Beverly Hills plastic surgeon. He spent well over $30,000 on airfare to cities such as Boston, Chicago and San Francisco. He stayed at four-star hotels and relied on limousine services. He bought an $8,667 diamond engagement ring and a $6,457 pair of earrings, Hood testified.

Pentz wrote about $300,000 in checks as repayment for condominiums for Waterford. About 90 percent of those funds bounced, Hood testified.

The trial continues at 9 a.m. today with Brown resuming his testimony. The prosecution may rest its case today.