WATERTOWN (WITI) -- A small town insurance agent is accused of running a $10 million Ponzi scheme. For the past few weeks, victims in this multi-million dollar scheme wondered if the man who lied to them about their investments was really dying. This week, they found out his health problems were real.
It's a fair bet Bernie Madoff has never set foot on the banks of the Rock River. But a Watertown insurance agent did a pretty good impression.
"You would not think that would happen here," said Wendy Lippert, a Watertown resident who is worried her retirement savings may be gone.
What happened was Loren Holzhueter. He was a local farmer and pillar of the community, who served as treasurer in the Town of Ixonia for years.
Until recently, he owned a chain of insurance companies and tax services across Wisconsin, under the names Insurance Service Center and Quality Tax and Accounting.
In 2008, federal investigators say he started "exploiting his network of clients," raising millions of dollars from people with whom he'd built "relationships of trust."
"My dad, on his death bed, said 'if anything happens money-wise, you go to Loren,'" Lippert said.
Wendy Lippert didn't know Holzhueter personally, but her father had vouched for him.
"He so totally and completely trusted this man," she said.
Lippert works in a nursing home. Her husband is a blue collar laborer. They set aside whatever green they could spare to save for retirement. In all, they gave Holzhueter nearly $50,000.
"Loren promised us. He said, 'I can do better than what the banks do,'" Lippert said.
According to federal court records, he never put their money into stocks, bonds or mutual funds. Instead, he used their money -- and that of more than 120 other investors -- to fund the rapid expansion of his insurance enterprise, and to personally benefit himself, his wife and his son to the tune of hundreds of thousands of dollars.
"I asked and he gave me the impression it was invested," Lippert said.
Holzhueter never showed Lippert any actual investment reports -- just a vaguely labeled "earnings statement." She had no idea anything was wrong until the IRS came knocking at her door.
"He told us there was an investigation," she said.
The feds had found her name when they raided the Watertown headquarters of Insurance Service Center -- or ISC.
"About 30 guys came in and told everybody to stay where they were," Michelle Brandt, a former ISC employee said. "The IRS doesn't just wake up and raid a business because they feel like it. I knew something was going on."
No one would say why the raid happened or what investors should do.
"'Is our money safe? Should we take it out? What should we do?'" Lippert recalls asking the IRS agent who came to her home. "He said, 'I can't tell you that. I can't advise you.'"
That was the last Lippert heard of it for another eight months.
"Out of the blue, we get a call from Loren," Lippert recalls. "And he said, 'I have another deal for you.'"
After the raid, Holzhueter started asking clients for more money -- another $25,000 each.
"I said, 'I'm sorry. I don't feel comfortable with this,'" Lippert said.
Lippert didn't bite, but others did. In October of last year, he got $403,000 from other investors.
Concerned that more people might be victimized, the feds decided to unseal previously secret documents -- prompting front page articles in the Milwaukee Journal Sentinel and the Watertown Daily Times.
The records accuse Holzhueter of operating a $10 million Ponzi scheme. That is, a scheme in which money from new investors is used to pay back old ones.
"How could he do this to us? How could he look us in the eye? How could he lie to us?" Lippert said.
In December, Lippert wrote Holzhueter a certified letter, demanding her money back.
"He looked my husband and me right in the eye and he said to us, 'You know, you are the only people that have asked for their money back,'" Lippert said, her voice quivering with emotion.
In truth, other investors were trying to cash out, too: a plumber, a nurse and a retired school teacher. But it was too late. The Ponzi scheme had run out of cash.
"Generations of people that he's lied to, that he's let down," Lippert said.
In January, the Securities and Exchange Commission filed a federal lawsuit accusing Holzhueter of fraud. They froze his assets and banned him from seeking new investments. And that's when the silver-haired farmer disappeared from public view.
On Tuesday, April 21st, Loren Holzhueter passed away after a battle with pulmonary fibrosis. And it seems he knew this was coming for quite some time.
Lippert recalls a conversation more than a year ago, in which Holzhueter spoke of his own mortality.
"He says, 'I am worth more dead than I am alive,'" Lippert recalled.
He went on to assure her that her money was safe, no matter what.
"'I have my life insurance set up so that if something would ever happen, my debts would be paid,'" Holzhueter said.
Those policies could mean victims will get some of their money back, but it doesn't mean the criminal investigation is over.
"His son is in the business with him," Lippert said.
According to court records, Aaron Holzhueter is also a possible target of the criminal probe. For years, he has been on the payroll of ISC. And, for the past three months, he's been CEO.
One couple says it was Aaron who encouraged them to invest with his father back in 2012, because "he charged lower fees than other companies" and "those investments did quite well."
And in 2013, a company registered in Aaron's name bought a million dollars worth of land, right next to the family's Ixonia farm.
Six months later, when the IRS raided ISC, they weren't just looking for Loren Holzhueter's records. They were looking for Aaron's too.
While the feds sort out the mess, Bob and Wendy Lippert are putting off plans for retirement.
"We're not rich people, you know? We were counting on that money," Lippert said.
She's just glad her father isn't around to see what happened to the man he urged her to trust.
"My dad always said 'a man's word is a man's word. Without that word he is nothing,'" Lippert said.
When the government froze Loren Holzhueter's assets in January, it ordered him to continue paying his life insurance premiums. And those insurance companies are under a court order not to disperse any funds until directed.
It's unclear, however, just how much those policies are worth and how much victims can hope to recover.