Ronald Cohen made millions for some of his investors. He also masterminded the largest stock fraud in Dallas history.

A CASUAL OBSERVER might have thought it a rather touching letter that prisoner Ronald Alvin Cohen wrote on March 31, 1980, asking U.S. District Judge Sarah T. Hughes to reduce his two-year sentence at the Federal Correctional Institution in Seagoville.

“I told the court at sentencing how sorry and ashamed I was for what I had done,” Cohen wrote. “I’m sure you know that prison is no fun, but Judge, this has had a deep and lasting effect on me. The shame, embarrassment and pain of being here will stay with me for the rest of my life. Judge Hughes, I want you to know that I have learned my lesson well.”

Although prisoners often “learn their lesson” quickly when the drudgery of prison life sets in, Cohen could have easily been mistaken for sincere. Not only was this the former stockbroker’s first time behind bars, but people respected in the community were also willing to write letters asking Judge Hughes to give Cohen another chance. Like postal inspector Al Teel, who said he believed Cohen’s “involvement in criminal activities was not for personal gain, but an attempt to please others.” Or Rabbi Gerald J. Klein of Temple Emanu-el, who had presided at Cohen’s wedding. He told Judge Hughes that Cohen’s motion for a reduction of his sentence “deserves serious consideration.”

Federal records, which often tell only a minuscule part of the story about a man’s crime, reported that the only thing Cohen had done to deserve his two-year sentence and $5,000 fine was in 1976, when he devised a scheme to pass an $875 bad check to First Texas Bank of Dallas. Even so, it probably came as no surprise to the short, stocky federal prisoner that his request was quickly denied; the carefully composed letter had been received by a tough-minded federal judge who was convinced that Cohen needed more time to learn his lesson.

Judge Hughes didn’t consult a crystal ball, but as it turned out, Cohen never did learn that lesson. On the contrary, a few years later, federal and state investigators discovered that not only did Cohen play the stock market while he was a prisoner at Seagoville, he established many of the contacts that further down the road would assist him in masterminding the largest stock fraud in Dallas history. Today, the 38-year-old former owner/operator of RAC Investments-a man with an uncanny ability to pick profitable stocks-is once again behind bars. This time, he’s serving an 11-year sentence at the Federal Correctional Institution in Fort Worth for defrauding an estimated 150 wealthy investors of roughly $20 million. While in federal prison, Cohen will concurrently serve a 15-year state sentence as part of a plea bargain with the Dallas County district attorney’s office, which last June filed three felony cases against him for violating state securities statutes.

Although Cohen has been sentenced, his story is far from over. From his cell, he is cooperating with federal investigators who are digging into the financial affairs of his former investors-some of whom, investigators believe, may have been trying to hide their investments from the IRS by using Cohen. Although federal law requires stockbrokers to file Form 4789 with the IRS when their securities transactions are in excess of $10,000, Cohen never reported his transactions; therefore, his investors could profit without paying taxes on their gains.

Sources say criminal investigators with the IRS have evidence that a number of Cohen’s investors evaded taxes. The Dallas IRS office has already forwarded a prosecution report to its Washington office and is awaiting the formal approval of both the IRS and U.S. Department of Justice prior to filing criminal tax evasion charges, the sources report.

Cohen performed “investment counseling” services for a strange mix of people that included suspected narcotics traffickers, the convicted leader of a stolen-car ring, several Dallas attorneys and businessmen and a former University of Houston professor. Another individual who solicited Cohen’s investment advice was Jim Rolfe, now U.S. attorney for the northern district of Texas. Rolfe dealt with Cohen while Rolfe was in private practice, but as a former federal prosecutor, he knew that Cohen’s conviction had barred him from acting as a stockbroker. But like so many others, Rolfe was seduced by Cohen’s uncanny ability to pick the winning stocks.

“I’m quite upset with him,” says Rolfe. “I basically trusted the guy. He was the last person in the world I would have ever thought was going to violate the law. I knew he had been to Seagoville, but he always told me he’d rather be working in a restaurant waiting tables than ever go back to prison. He said he liked breathing free air.”

And the list goes on. “Who didn’t Cohen give advice to?” asks one federal investigator. “The man was absolutely brilliant when it came to the stock market. He made a lot of people downtown a lot of money.”

IT WAS EARLIER this year that Vickie Farris, Cohen’s former secretary, told investigators with the Dallas County district attorney’s specialized crime unit about the strange occurrences in the illicit stockbroker’s office (suite 602 in an office building located at 9400 North Central Expwy). In interviews, the secretary told of visits by men with briefcases stuffed with cash, cashier’s checks drafted in alias names picked up by young women and storing shopping bags filled with cash in the trunk of her car.

Cohen essentially served three types of investors: Some simply paid him a fee for stock market advice. Others opened brokerage accounts at reputable trading firms, gave Cohen the authority to buy and sell their stocks, but never allowed him to handle any money. However, most of Cohen’s investors-the victims-handed him cash to purchase stocks for them in his own name. Many of his investors were guaranteed an unusually large 17 percent return on their investment every 30 days, according to knowledgeable sources.

Cohen used what is called a “Ponzi scheme”-robbing Peter to pay Paul-to betray many of his unsuspecting investors. Essentially, he told his investors he was making specific stock purchases on their behalf, but in his name, when in fact he was either pocketing the money or investing it on his own. Near the end, caught in a serious cash-flow crunch, Cohen was paying off earlier investors with the money he acquired from new investors, a scheme that eventually backfires on even the best con men. In Cohen’s case, it took his investors a few years to catch up with him. Investigators estimate that from December 1980 to July 1983, Cohen was given a total of $35 million to invest in the stock market. Many of his investors watched their stocks rise each day in the paper, not realizing that Cohen hadn’t made the purchases he had promised. Not only did Cohen fail to provide the majority of his investors stock certificates, but he kept no investment portfolios or stock ledgers and thus left virtually no “paper trail” behind him. Often, he would confirm a sale with a simple note on his company stationery. Apparently, many of Cohen’s investors weren’t picky about his methods as long as he was producing.

Although Cohen has gone to the penitentiary for his crime, the lack of a paper trail has made it nearly impossible for federal and state investigators to follow the millions of dollars invested with him. Dale Wooten, the court-appointed trustee of Cohen’s bankrupt estate, filed documents indicating that Cohen maintained 25 separate brokerage accounts; Wooten reported that determining the source and application of funds constituted a “substantial accounting problem.”

Some investors speculate that Cohen was able to transfer some of the money into secret foreign bank accounts. Wooten alleges that Cohen “dumped” a large sum of money to a number of investors just before he filed for bankruptcy in August 1983, although preferential treatment of any bankruptcy debtor is a violation of the bankruptcy code. The trustee says he is preparing “preferential payment” lawsuits totaling $10 million to recover some of the cash transfers, but he will not name the investors who will be the targets.

“I think he carried off a bunch of money and put it in foreign banks,” says Marion Jenkins, a diamond wholesaler who invested $400,000 with Cohen. “I think he planned this whole thing. I think he figured he’d get caught, do a few years in jail, and then get out and pick up the money. His investors can’t find anything out about where their money is. We go around in circles trying to find out what really happened.”

“Cohen is the greatest, most astute con man I’ve ever, ever met,” says Dallas attorney Cecil Emerson, who defended Cohen on two occasions when he was charged with federal criminal violations.

Emerson recalls an occasion in 1979 when he hired an analyst to evaluate Cohen. “The guy said Cohen was a sociopath. But it wasn’t long before that the analyst was seeking Cohen’s advice on the stock market. The only way to do a guy like Cohen is to run away from him. Yet he made a lot of money for a lot of people. The guy is sick. He has some kind of strange desire to get caught and at the same time has a desire to please people.”

“Everybody was amazed at how brilliant he was and how well he was picking high-tech stocks,” says Steve Webster, a former Dallas County prosecutor who participated in the state investigation of Cohen’s affairs. “Cohen was pooling the investors’ money and buying big blocks of stock with a few reputable Dallas stockbrokers. We even have some suspicions that he was investing so heavily in some small high-tech companies that he may have actually been able to manipulate the market. Word of his successes spread like wildfire.”

Some of Cohen’s most noteworthy stock picks included Williams Electric, a video game company whose stock sizzled when the craze hit; Medco, a hospital supply and service company; Frozen Food Express, a Dallas trucking company; and Commodore Computers, a stock that quadrupled the investment of some of Cohen’s clients.

IRONICALLY, MANY OF the people who risked investing hundreds of thousands of dollars with Cohen claim they weren’t sucked in by his personality. Most say he was not an outgoing, backslapping type; one says he had “the personality of an old shoe.” Nor were they attracted to his high-rolling lifestyle. (Cohen wore expensive suits, drove a 1982 Jaguar, a 1982 Seville and a 1983 Mercedes, and lived in a $425,000 house.) Instead, his following grew for a very simple reason: He could pick the right stocks. His clients gladly spread the good news. Even those investors who fell prey to his scheme have never doubted his ability to analyze the stock market. By the time his empire crumbled, Cohen’s investors numbered several hundred and stretched throughout Texas, Oklahoma, Arkansas and Louisiana-even as far as Kentucky and California.

Three of those investors were Ken Standridge, Ray Ashbrook and Louis Kent of Wichita Falls. “Prior to April 25, 1983, it was common knowledge in the Wichita Falls area that a Dallas-based stockbroker by the name of Ronald A. Cohen was a phenomenally successful trader on the various stock and option exchanges, primarily due to short profit swings, astute planning and perhaps gifted insight or reliable sources of information,” the three said in statements filed in Cohen’s bankruptcy proceedings.

The three investors initially tried to make small investments with Cohen in the neighborhood of $1,000 to $5,000, but he declined to accept them, saying they would be “too burdensome” for him. So to comply with state law, they formed their own company, Stake Inc., for the purpose of investing in securities. The three were burned on two large investments with Cohen. The first, on May 8, 1983, was $851,000; the second came on May 27 in the amount of $490,000. To date, Cohen has returned only $558,000 of the first investment and $382,000 of the later investment, they claim. By the time Cohen went to jail, the three had lost an estimated $400,000.

Diamond wholesaler Jenkins was another victim who learned of Cohen’s genius through friends. Jenkins claims he invested a total of $400,000 with Cohen and got back only $150,000, approximately 90 days before Cohen filed for bankruptcy in August 1983. Jenkins says he never saw any of the $500,000 in stock profits he made on paper.

But others lost even greater sums of money. One of the largest creditors listed on his bankruptcy papers is Delores Mitchell of Grayford, the wife of the late Joel Lee Mitchell, Cohen’s chief salesman. Mrs. Mitchell has filed a $1.1 million claim against Cohen, hoping to reclaim $303,000 in hot checks that Cohen wrote to Mitchell for commissions and more than $700,000 that the couple gave to Cohen for securities investments. Mrs. Mitchell will not discuss her claims, says David Winston, her attorney.

Earlier this year, an angry group of about 50 creditors hauled Cohen into federal bankruptcy court seeking long-awaited answers to their questions. Instead, the meeting only left the creditors more frustrated as Cohen refused to answer any of the 20 or so questions he was asked. Claiming he might incriminate himself, Cohen refused to answer such questions as: “What is your name?” “Are you married?” “What is your wife’s name?” “Has your wife filed for bankruptcy?” Cohen’s attorney refused to inform the creditors whether or not the former stockbroker had been granted immunity from prosecution by the federal or state prosecutors.

IN THE BEGINNING, there was a different Ron Cohen: a successful legitimate stockbroker who left his clients satisfied. The product of a broken home at the age of 8, Cohen dreamed of being a stockbroker like his father. As a teen-ager, while other kids were pondering what they wanted to do with their lives, Cohen was busy performing odd jobs at a Seattle brokerage firm, learning the ins and outs of stock trading. Later, he joined his father in the Los : Angeles area to become a stockbroker himself. In the early Seventies he left behind an unsuccessful marriage and moved to Dallas to work for a local business college. But soon he returned to his first love-stocks-and worked in the Dallas office of A.G. Edwards and Sons.

Then, in 1975, Cohen had his first brush with the law. “I’ve always heard he was a good honest salesman, and then something just snapped,” says Jimmy Deal, the current office manager at A.G. Edwards. When it snapped, Cohen was fired for making several hundred thousand dollars worth of “unauthorized transactions” while trading securities at A.G. Edwards. “He was doing what they call discretionary trading, or trading on the accounts of his customers without their permission,” says attorney Emerson.

Cohen subsequently confessed his activities to the FBI. He made a deal with the federal government to plead guilty if he was given a pretrial diversion, an agreement that would not leave him with a permanent record. In September 1975, the National Association of Securities Dealers expelled him from its membership rolls, publishing official notices that he was never again to work as a securities trader. Cohen was also permanently barred from associating with any member of the NASC.

“After that, Cohen appeared to be going straight for a while and got back on his feet,” says Emerson. But four years later, after holding down solid jobs as a credit manager for a few small Dallas companies, Cohen was in trouble again, this time for a check-kiting scheme. “He started hanging around the upscale bars, meeting the upcoming young professionals,” recalls Emerson. “He started winning again in the stock market and was making people money-good people with lots of dough.” And again, somewhere along the line, Cohen turned to his old ways and lined his own pockets with his investors’ money.

On November 8,1979, Cohen pleaded guilty to the lesser offense of writing a bad check and was sentenced to two years in the federal penitentiary. He began serving the sentence at Seagoville on January 3, 1980. It was there, within the walls of the minimum-security prison, that Cohen planted the seeds of a fraud that would be bigger than even he imagined.

AS IT TURNED out, Cohen’s 11-month stay in Seagoville was more of an opportunity than a punishment. It was in prison that Cohen met two instrumental characters who would later assist him in soliciting investors and would become victims of his scams themselves.

The first was Mitchell, the one-time Wichita Falls used-car dealer who was in Seagoville for his part in an auto-theft ring. Mitchell later became Cohen’s chief salesman, soliciting substantial investment in the Wichita Falls area, where he had lived while participating in the car-theft ring. He was also Cohen’s runner, the man who collected the cash from many of the investors and made the cash payments to the more fortunate investors to whom Cohen actually returned profits. It was Cohen’s association with Mitchell that would ultimately bring law-enforcement attention to his stock market dealings.

On July 9, 1982, Mitchell’s bullet-ridden, partly decomposed body was found inside his Camaro in a vacant field in Pleasant Grove, his pockets stuffed with cash. He was the apparent victim of a murder-for-hire plot. Mitchell’s slayers have yet to be indicted, but police say they have informed his wife that she is their prime suspect. Cohen was the last person to see Mitchell alive, and his fear of being connected with Mitchell’s murder led to his cooperation with federal authorities, say federal sources.

The second useful character Cohen met while he was at Seagoville was Warren Chaney, a former University of Houston/ Clearlake psychology professor who met Cohen while visiting a friend in the prison. Chaney and his brother in Hopkinsville, Kentucky, solicited millions of dollars of investments for Cohen through their firm, W & D Investments, according to their Houston attorney, Robert Rowland III. In the end, the two joined the ranks of people who claimed they were defrauded by Cohen, filing a $13.6 million lawsuit in Harris County and a huge claim against Cohen’s bankrupt estate. “To this day, we really don’t know what Cohen was doing,” says Rowland. Cohen countered the allegations by claiming that Chaney forced him to sign four promissory notes, calling W & D’s investments “usurious loans.”

Mitchell, through his contacts in the Grand Prairie auto-salvage yards, also introduced Cohen to two men who later became large investors, Jesse Rodriquez Mojica and his brother Johnny Mojica-two men also listed as creditors on Cohen’s bankruptcy petition. Several law-enforcement sources have confirmed that the business affairs of the Mo-jica brothers are among the targets of the continuing federal grand jury probe into tax evasion.

Jesse Mojica was one of 11 men arrested in August 1980 after Texas Department of Public Safety officers tailed the men from the Mexican border to a house at 1945 Dowdy Ferry Rd. After searching the house, police confiscated nearly 11,000 pounds of marijuana, an arsenal of weapons, four vans, three automobiles, an engine and a transmission. However, drug charges against the men were dropped when a state judge ruled that the search warrant was invalid.

Johnny Mojica pled guilty in 1976 to state charges of possessing more than four ounces of marijuana and received a two-year suspended sentence. In August 1983, he and two other men were indicted for possessing between 200 and 2,000 pounds of marijuana after officers searched a parked van believed to be owned by the men. In a trial before the court last April, State Judge John Ovard acquitted Mojica.

Federal investigators also have been focusing on the investment activites of Harry Zimmermann, a Dallas attorney who on several occasions has represented both Jesse and Johnny Mojica on criminal charges. Zimmermann is said to be one of Cohen’s more fortunate investors, a man who, sources say, reaped substantial profits from Cohen’s expertise.

Meanwhile, as federal investigators continue to pore over documents, Cohen is living in a cell at the federal penitentiary in Fort Worth, where he was placed “for the convenience of the government in having access to him for interrogators and testimony.”

“I really can’t picture the guy dealing with dope dealers,” says attorney Emerson. “Cohen really is a Woody Allen kind of guy. His demeanor is very humble most of the time. Yet he has a mind like a steel trap. At times he becomes aggressive and abusive, yet the man is so convincing that I promise you, if he was around you for any length of time, you’d hand him some money.”


Keep me up to date on the latest happenings and all that D Magazine has to offer.