Double Injustice

A con man squeezed $26 million out of 140 victims. Then a U.S. bankruptcy trustee squeezed them again.

The fat man crept across an Orinda lawn in the early hours of March 30, 1999. Lifting the doormat, he slipped a letter under it. Then, turning heavily in the suburban night, Edward A. Mueller, age 35, plodded back to his parked car, pondering his next move.

A few hours later, Dr. William S. Jewell, age 65, opened the letter. "Dear Dad," it read. "Sit down. Relax. Have a cup of coffee. It's all been a lie. There is no money. Sorry. Ed."

"My world crumbled," Jewell later wrote. "I could no longer understand what was fact or fiction. I told my family everything."

Edward Mueller during a recent interview at federal prison camp in Sheridan, Ore.
Peter Byrne
Edward Mueller during a recent interview at federal prison camp in Sheridan, Ore.

Jewell's recognition that his son-in-law had bilked him of $20 million marked a turning point in an all too familiar story of American business life: Mueller, a 300-pound man with an interest in aviation, had played his family, friends, and business associates for suckers. After conning them out of their savings by promising to pay interest rates as high as 60 percent, Mueller went bankrupt, defaulting on the "loans" he'd received. Although the amounts of money involved were not insignificant, Mueller's brand of confidence game was, in essence, a common Ponzi scheme.

But if his scam was ordinary, there is something unique about how Mueller was finally brought to justice.

As the U.S. Justice Department took its sweet time pursuing Mueller, allowing him to fleece additional sheep while the terms of a plea bargain were being finalized, the victims of the con looked to the United States Bankruptcy Administration for relief. But instead of helping them recover their money, a U.S. bankruptcy trustee sued these same victims, alleging that they had charged Mueller excessive interest rates -- that is, that they had committed the felony crime of usury. The federally appointed trustee demanded that these victims -- people who had, in some cases, lost their entire life savings -- pay thousands of dollars more to Mueller's bankrupt estate, or risk imprisonment.

Brian O'Neill of San Mateo lost $51,000 to Mueller's game. Then, he had to pay $8,500 to the bankruptcy trustee to escape a usury charge. "It was like being run over and maimed by a truck," O'Neill says, "and then being sued by the truck's insurance company for damaging the truck!"

"I knew Ed Mueller since he was a kid," says Sheila Klopper, age 53, who supervised campus security at Palo Alto's Gunn High School in the early 1980s, when Mueller went to school there. "Ed grew up in a privileged home in the Los Altos hills. He was estranged from his parents for some reason. His world was cars, planes, gambling. He seemed like he was trying to prove something, maybe because he was overweight."

Klopper admired Mueller's entrepreneurship. While in high school and college, he owned a profitable window-washing business. In 1988, he opened Discount Auto Center in a commercial strip in the Belmont area. His specialty was dealing luxury used cars; he soon branched out into real estate speculation.

Over time, Sheila Klopper became a private investigator. Like many of Mueller's victims, she seems comfortable on the seamy side of the street. (In the early '90s, she gained a minute of local fame when she pled guilty to bribing two San Jose police officers to pass on privileged information.) She used her contacts to "check out" Mueller before making a deal with him in 1989. For better or worse, he passed the Klopper Test. "We went skiing, and on the slopes I sold a station wagon to Ed and bought a truck," Klopper remembers. "Then I sold my ski cottage and invested $50,000 with him."

During the next few years, Klopper did $250,000 in business with her former student, and helped him to expand his web of sucker connections. Klopper's mother and aunt, both in their mid-90s, invested their life savings with Mueller. Her husband, her lawyer, and her friends who were cops -- they all put cash with Mueller on Klopper's recommendation. And for a while, the returns were ... fantastic. Mueller paid people 30 to 60 percent compound interest, says Klopper, who maxed out her credit cards to lend him money.

Typically, investors-cum-suckers raised capital for Mueller by taking second mortgages on their homes and raiding their savings and retirement accounts. They thought their loans were secured by Mueller's assets. There really weren't any meaningful assets; Mueller's operation simply took money provided by newcomers to pay returns to earlier "investors." Of course, at some point, such a circular Ponzi scheme collapses. When the bust came, Mueller simply declared bankruptcy.

But the investors had to pay off their second mortgages and maxed-out credit cards, and some lost their homes to bank foreclosure.

Mueller's pool of suckers was mostly confined to San Mateo and Santa Clara counties, although he once ventured south to Salinas to con the parents of his office manager -- and their neighbors, their relatives, and their other children, too. Mueller didn't target strangers. Like a virus inside an e-mail program, he infected the personal and business networks of friends and relatives.


There were danger signs, but people ignored them.

Mueller is not charming, or endearing, or very intelligent. He's a standard-issue schmoozer, an ordinary salesman full of shallow bonhomie, possessing one fatal attraction: a twinkle of the eye that winks seductively to the little grifter hiding inside us all.

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