Traci Brown: Chuck, welcome to Fraud Busting. I’m so excited to have you here. Not only just to chat a little bit, but just because we’re friends and it’s always good to catch up.
Chuck Gallagher: It’s great to be on your show. Thank you so much for the invitation. This is fun.
Traci Brown: Oh yea. Oh, it’s going to be great. Let’s let everybody get to know you a little bit first. We’re just after Easter when we’re recording. We’re in the middle of the apocalypse. We’re locked in. Tell me, how’s your toilet paper stash?
Chuck Gallagher: You know, I’m good. I am prepared.
Traci Brown: Are you? Okay.
Chuck Gallagher: I’ve learned the more cheese you eat, the less you need.
Traci Brown: Oh! Okay. (Laughing).
Chuck Gallagher: (Laughing). What can I say? You have to have these mental precautions.
Traci Brown: Well, you know, people tune in, and you never know what you’re going to learn here.
Chuck Gallagher: There you go, see.
Traci Brown: Number one for the day. Okay. What about Tiger King? Are you watching Tiger King?
Chuck Gallagher: Oh, I have not done that yet. I’ve been hooked on Dirty Money.
Traci Brown: Oh, okay.
Chuck Gallagher: Which is really good. Some of the things that are funny to sit there and watch, I’ve written about. It’s like, oh, it’s so cool to have written about it and then you see it kind of in a docuseries on Netflix.
Traci Brown: Ooh. I’m going to write that down because I haven’t seen it.
Chuck Gallagher: Dirty Money is good.
Traci Brown: Okay. Are you saying it’s pretty true to life?
Chuck Gallagher: Oh yea, oh yea. It’s kind of fascinating, I mean, especially with what you’re doing. You’re talking about fraud busters. They’ve got these great stories about fraudulent things that took place and kind of how that process got started and did it intend to be the way it ended. It’ a pretty good series.
Traci Brown: Okay. Alright. Good deal. Good deal. Okay, just a couple more questions. What in this apocalyptic time, what is the latest time you got out of your pajamas and into real clothes?
Chuck Gallagher: Oh, wow, that’s a wonderful question. You’re assuming that I’m not in my pajamas right now.
Traci Brown: No. See, I’m assuming that you are!
Chuck Gallagher: Oh. Actually, I’ll say, it’s been one of those things. I have found that I am sleeping in a little more in the morning, which I am enjoying. But I’m also able to get a whole lot of stuff done in a day because you don’t tend to have the same interruptions you do in a normal day like we had been accustomed with phone calls or people at the office asking questions or whatever the circumstances.
Traci Brown: Exactly. Okay. But you never gave me a time on your pajamas.
Chuck Gallagher: Let’s assume that’s somewhere in the 9:00 to 9:30-ish range.
Traci Brown: Oh, that’s not bad. I had someone tell me 3:00 of the following day. Don’t be ashamed at 9:00.
Chuck Gallagher: Yea. No, no, no.
Traci Brown: Yea. Last question. Earliest time you started drinking?
Chuck Gallagher: You know, so here’s the thing, I’m not a big drinker. It’s been one of those things where a good number of friends have been like, oh my gosh, I’m having a Covatini or whatever. Like, I’m just killing it on unsweet tea. I’m trying to maintain the keto, kind of, not put a lot of weight on during this thing. I just haven’t been consuming my sweets through alcohol.
Traci Brown: There you go. Okay. I haven’t been drinking a lot either. But you know what I’m noticing is I’m dropping a little bit of weight because I’m not going to all these conferences.
Chuck Gallagher: Yea. No kidding.
Traci Brown: Those snack breaks at the conferences, man, they get you every time. You’re hungry and then they show up with cinnamon rolls. I’m like, “Come on. I don’t even have a chance, and we’re doing this three times a week.” (Laughing). Alright, let’s jump in. Let’s get right to it. Now, you have a very interesting background which I wanted to chat with you here, especially on Fraud Busting. You ended up in prison.
Chuck Gallagher: Oh yea.
Traci Brown: How did that happen? Tell me the whole, everybody wants to know the whole story. What’s the scoop?
Chuck Gallagher: Okay. We’ll take it in like little bite-sized chunks.
Traci Brown: Okay.
Chuck Gallagher: It never was . . . I would not have been voted in high school or college the person most likely to end up in federal prison, but I did.
Traci Brown: Okay.
Chuck Gallagher: Let’s go back to the mid to late 1980s. 1987, in fact. I was a tax partner in a CPA firm. I had testified before Congress on various aspects of federal tax law. I’d written articles in national magazines. I’d taught continuing education in 38 states. I was on a really great upward trajectory. But it was the mid to late 1980s. There was a bit of a recession taking place, and I was overextended and underfunded. I had too much debt.
Traci Brown: Okay. Got it.
Chuck Gallagher: It occurred very simply. In January 1987, I get a call from my local banker who says, “Chuck, you’re two months behind in your house payment. Is there a problem?” Okay. Now, Traci, here’s the deal. If something happens to you unexpected, if it’s a trigger, okay, like this banker and I went to Sunday School class together, we were chicken eating buddies together, he sent me lots of business, and he calls me and says, “You’re two months behind in her house payment. Is there a problem?” I’m like, internally, Oh, crap. If I can’t manage my own financial affairs, is he going to send me any money? Surely, I can’t admit to him that I’m two months behind in my house payment, which by the way I was, but I admit it, then what would he do? He might think to himself, gosh, he can’t manage is own money, but I’m sending him other people’s money to manage and I’m not sure if this is going to make sense. If he didn’t send me the business, then what would happen? I’d have less business, and if I had less business, I’d have less money. If I can’t pay my bills now, I damn sure couldn’t pay them otherwise. My goodness, I’ve got to say something to preserve face.
Traci Brown: Oh, wow. Okay. Okay. So it happened like that, just in a snap?
Chuck Gallagher: Which by the way, for your program, typically if you talk to your average fraudster, they didn’t start by saying, I am going to be a fraudster. Some weird something that causes you by a trigger, an emotional trigger, to do something really stupid.
Traci Brown: Got it.
Chuck Gallagher: A quick side note to this. It’s like having a four year old and you just made cupcakes for the Friday take to school day thing.
Traci Brown: Yea.
Chuck Gallagher: And the four year old eats and has cupcake all over the face. You go in as mama and you look down at your little daughter and you say, “Did you eat that cupcake?” What will she say?
Traci Brown: No.
Chuck Gallagher: No, mom. No. There’s chocolate all over her face. We ask ourselves the question, how did that happen? It’s an instinctual fight or flight thing. If you think you’re going to be in trouble, by nature, you will fight or flight, but you’ll do something that rationally you’ll look back and say, the dumbest thing I’ve ever done. Yea, mom, I ate the cupcake and it was good.
Traci Brown: Yea.
Chuck Gallagher: I could have admitted, yea, I’m behind, but let’s work it out. I’ll get a big bonus at the end of tax season. No problem. But I didn’t.
Traci Brown: Oh, got it. Okay.
Chuck Gallagher: He says to me . . . I say back to him, I say, “Look, are you sure that payment hasn’t been misapplied?” Keep in mind, Traci, that was in 1987. We still had punch cards.
Traci Brown: Yea, yea.
Chuck Gallagher: That’s right. He said, “I don’t think so, but let me check and see.” Now, during the moment, the momentary lapse of him checking and seeing, here’s how it plays out. This is the fraud triangle. One, there’s a need. I needed $2,000.
Traci Brown: Okay.
Chuck Gallagher: That’s what it was, $1,000 a month, two months, $2,000. I need $2,000. Oh, crap. Where am I going to find that? So my need moves to opportunity. Where is the opportunity for me to quickly lay my grubby little hands on $2,000 to maintain the ruse that I am able to maintain my financial affairs.
Traci Brown: Right.
Chuck Gallagher: I could have gone to my partners, but the partners that signed the checks were at an audit in the far western part of North Carolina and would not be back, and this was on a Friday.
Traci Brown: Okay.
Chuck Gallagher: That wasn’t going to happen. I couldn’t do that. I could have called mama, but mama lived in Maryland. I could have called her and said, “Hey, can you loan me $2,000?”. She would have said “sure.” Except, it’s 1987. We didn’t have Paypal or deposit a check by phone, kind of, none of that stuff.
Traci Brown: It’d take a few days.
Chuck Gallagher: Right. Not going to work. I’ve got to solve this problem quickly. I then thought, okay, wait a minute, I’m a trustee of a client’s trust. I know. That’s the sound that I get that every time I admit that to a group. The beneficiaries of the trust would not need the proceeds for approximately 8 to 10 years. Me, moves to opportunity, moves to rationalization. Rationalization would be, okay, I’m going to borrow money from this trust. Notice the opportune word, “borrow.”
Traci Brown: Borrow.
Chuck Gallagher: Right. I’m going to borrow money from this trust. Of course, I’m not stealing it because if I’m borrowing it, I need to have a note. I went to the computer, WordPerfect, WordStar, whatever it was.
Traci Brown: WordPerfect, yes.
Chuck Gallagher: You remember that stuff? Right. I’m an old user. I can remember stuff like that. I, Charles Gallagher, being of sound mind and body. I’m sitting there typing this on the computer. I wrote out this note. I stole the money from the trust.
Traci Brown: And all this happened in the period of what, 30 minutes?
Chuck Gallagher: Yea, 30 to 45.
Traci Brown: Yea, okay. Okay.
Chuck Gallagher: Banker calls me back. Chuck, I’ve looked at . . . and before he could finish the sentence, it was like, “Oh, David, I am so sorry. I cannot believe this. You know my wife and I, we just had our first son”, which was true.
Traci Brown: Okay.
Chuck Gallagher: Now, I’m going to offend a bunch of people right here, not intending to, but here’s what happened. “You know, she pays the bills.”
Traci Brown: I almost spit out my water. (Laughing).
Chuck Gallagher: The truth is, she didn’t pay the bills. I did. But he didn’t know that. “She thought, in her postpartum time that I was taking care of it, and gosh, I thought she was, and I can’t believe I’ve done this. I’m going to bring the money down and pay you right now.” He responded and he said, “Chuck, don’t worry about it. When I was in college, I passed a bad check once.” We had this male bonding moment.
Traci Brown: Got it.
Chuck Gallagher: I took the stolen money, paid the delinquent house payments. We had a good laugh over it. Done. Okay. Now. End of tax season, I get a big bonus. If you and I were in a large conference and I was talking to a large group, but asked the question, how many of you think at the end of tax season when I got my bonus I paid off what I had stolen?
Traci Brown: I think you did. I’m raising my hand.
Chuck Gallagher: Okay. I appreciate that. Thank you so much. It warms my heart, Traci.
Traci Brown: Okay, good. Good. Yea.
Chuck Gallagher: I did.
Traci Brown: Okay.
Chuck Gallagher: Of course, I paid it off. Because if I had a need and I found an opportunity to truly rationalize the fraud, I needed to pay it off. So I did. But I found out, gosh, it was easy. So I did it again. And I paid that one off. And then I found out, gosh, it really is easy. It was almost as if I had my own private hedge fund.
Traci Brown: Yea, or a line of credit. Yea.
Chuck Gallagher: Or a line of credit. So functionally what happened was from that simple beginning in 1987 through November of 1990, I ended up creating a Ponzi scheme and embezzled $254,000.
Traci Brown: Oh, wow. Was it actually an investment that you set up that you ran like a Ponzi scheme? How?
Chuck Gallagher: It was a fake investment that I set up to run like a Ponzi scheme. Yea.
Traci Brown: Because you could, because you were right there.
Chuck Gallagher: Right. From a functional perspective, people then come along and they’ll say, “What did you do with the money?”
Traci Brown: Yea.
Chuck Gallagher: Lifestyle. Here’s what I found, which is really weird. I’m not hearing that it’s any different in 2020, so let’s be honest.
Traci Brown: Okay.
Chuck Gallagher: The more money I invested in lifestyle, house, car, clothes, blah, blah, blah, the more that investment people could see, the more they wanted to do business with me.
Traci Brown: Ooh. Okay. Okay.
Chuck Gallagher: People would look, and they would say, my gosh, he really must be good at what he does. I mean, look how . . .
Traci Brown: Yea.
Chuck Gallagher: And during that process, the psychological part of it that allowed it to continue was, well, but I’m making more money, so as long as I’m making more money, I have the capacity to repay. But the repayment in reality was just taking from someone else and making the Ponzi scheme, not that, by the way, I knew what the heck a Ponzi scheme was. I learned later that’s what it was.
Traci Brown: Oh, really?
Chuck Gallagher: Not a clue. Not a clue. But learned later that’s what it was. It was just a natural occurrence of the beginning of theft that continued to multiply.
Traci Brown: Uh-huh. Wow. Okay. At a certain point, did everyone want their money back and you were like, sorry, I’m out? How did it actually end up melting down? What’s the . . . ?
Chuck Gallagher: Okay. Fair question. November 1990, I’m in Boise, Idaho, and I’m teaching a continuing education course, 8 hours of tax law. I know that just sounds so titillating.
Traci Brown: It sounds riveting. Yes.
Chuck Gallagher: Yes, there it is. But 8 hours of tax law, we break for lunch, and there is a . . . you remember the old pink slips. It said, While You Were Out. That’s how we used to get notes. Well, there was one on the door and it said, “Call your partners ASAP.” I was kind of hungry, but everybody had gone to get lunch and the phone bank line, which is what they used to have and was available at the hotel, so I placed the call, talked to one of my partners, and he said, “Listen.” He said, “One of the clients that you’ve invested some money for or something or other has had a change of circumstance. They need to liquidate the investment ASAP. He’s called me four times today. I have no earthly clue what I’m supposed to be doing. If you’ll just tell me where the file is so I can get the process started, I can get him off my back.” Okay. Now, Traci, here’s the truth. The truth was, it was a Ponzi scheme, and for a Ponzi scheme to work, you have to have an influx of cash equal to or greater than the amount you need to pay out when you need to pay it out.
Traci Brown: Exactly.
Chuck Gallagher: But this was unexpected. There was no influx of cash that would allow me to just to instantly liquidate someone’s investment. So I told him, I said, “Listen. It’s not like this is invested with Charles Schwab. We just call and liquidate the investment. I’ll tell you what I’ll do. I’ll make a telephone call or two and I’ll be back in the office tomorrow anyway. But call him and tell him that I’ve got it under control and that we’ll have his investment liquidated real quick. That’ll get him off your back, and it’s just easier for me to do this than to try to get you involved in something that’ll waste too much of your time.
Traci Brown: Oh. Now that is a real classic, what I hear from bankers when they report fraud. It’s keeping other people away from the papers and the files. Yea.
Chuck Gallagher: Yep. I knew at the time that call was made that the card had been now pulled from the house of cards. It was all going to collapse, but no one else on the planet, just me and God knew what was getting ready to happen.
Traci Brown: Oh man. Okay.
Chuck Gallagher: That’s how the collapse began.
Traci Brown: Okay. Then what happened when you got back over the next day?
Chuck Gallagher: Well, there are kind of two parts to the story. Okay. The first part was the night before, I actually considered ending my life. It was one of those moments where it’s like, okay, I have legitimately been successful. I was very good at what I did. People knew me as this one person, but here it is, there is a quarter of a million dollars worth – which seemed like a lot of money at the time – but a quarter of a million dollars worth of just pure fraud. If I ended my life, there was way more insurance than anybody would need. It would pay off the folks that I’d stolen money from. People would mourn for a short period of time, but you know, my kids were real young. My would, I’m sure, remarry. Life would go on and I would just be a momentary blip in time.
Traci Brown: Right.
Chuck Gallagher: But that night, I ended up . . . I’m chicken. Let me just be the first to tell you this. I don’t like pain.
Traci Brown: Right, right. Yea.
Chuck Gallagher: Most guys do, don’t like pain. I ended up calling anybody I could get, psychiatrists, psychologists, proctologists, didn’t care, just needed to be a doctor, somebody with a behind them.
Traci Brown: Okay.
Chuck Gallagher: To talk to. I got this one guy and he ended up making a statement to me that was really profound. He said, “Son, you have made a terrible mistake, but you are not a mistake.”
Traci Brown: Okay.
Chuck Gallagher: It was like, okay. He said, “Son, you’ve made a terrible mistake, but you are not a mistake.” And then he said, “The choices you make tonight will define the life you live in the future and the legacy you leave for your two sons.”
Traci Brown: Oh boy.
Chuck Gallagher: “Make those choices wisely.” Now, Traci, because of that, I made it through the night. Still here. Which was a real blessing in ways that I can’t even begin to fathom. But the next day when I got home, I thought to myself, I said, okay, maybe just maybe just maybe somehow if I tell my partners what’s happened, I mean, I know they’re going to fire me and I know this is going to be ugly, but maybe somehow they’ll be a way to do something to mitigate this whole thing, like maybe they’ll say, we’re going to go borrow the money legitimately, pay everybody off, and nobody will know. You’re fired and that’s where it will end. I get back the next day. I needed to visit with my wife obviously. Needed to visit with my partners. I figured I’d try my partners first because that was like a practice round for golf.
Traci Brown: In fear of your wife. Oh, man. Okay.
Chuck Gallagher: It’s like maybe, I don’t know, maybe there’s just some way this is going to work. She had no idea, by the way, what was taking place. Anyway, long story short, went into my partners. One of them told me that he had a solution. I was ecstatic over the idea that he had a solution. He told me he was a big hunter, that he had the appropriate ammunition and pistols and so forth for me to end my life, I should go down by the river to do that. There’s plenty of insurance.
Traci Brown: Oh, he had your first solution kind of up his sleeve.
Chuck Gallagher: He read my mind from the night before. Now the other one, no political intent with this, but with like Donald Trump flair said, “You’re fired, but you need to tell us everything. You owe us that.”
Traci Brown: Right.
Chuck Gallagher: I decided at that point there was no point in hiding it. It was just, let’s just lay it out, the cards on the table. There’s no particular reason why this should be hard. I admitted to them that functionally I was a liar and a thief. After I met with them, then I went home and had to admit the same thing to my wife. So for everybody that was close to me, it was an incredibly devastating day because, you know, this illusion of who you are just got totally shattered from people that from practical perspectives trusted you the most.
Traci Brown: Wow. Okay. That gets you through like step one of this whole story, it seems like. What happened next? How did this thing go, or would you like to maybe take it a different way? I’ll let you pick. What are some of the signs? What are some of the signs that people can look for, at least in this little segment, right, like a dishonest financial guy that they’re working with? Is there anything, because we picked out one sign, is there anything else? Looking back, you know life if they had known what to look for, they could have picked it out sooner, like before the cards fell?
Chuck Gallagher: Yea. Okay. That’s actually a really cool question. Okay. Let’s look at this way. You’re the client.
Traci Brown: The client. Right.
Chuck Gallagher: I’m the fraudster. Okay. Here’s the way you would identify that there’s going to be a fraud, something’s wrong taking place. First thing I would do if I was a fraudster is I would say, “Traci, look, we need to talk. I really value you as a client. You’re probably one of my favorite clients, but one of the things that’s come up in this COVID-19 thing, there have been a lot of things, underlying now, that have surfaced, and there’s a very highly specialized fund that’s available right now that’s paying a 12% per year guaranteed return. It’s a minimum investment, and you have to leave the money in for five years in order for this to work because there’s a cycle to what’s taking place in the development of this vaccine and in the second tier of the vaccine that will be coming out. The reason I’m mentioning it to you is I’ve only got 10 slots available to be able to put people into the fund and again because of our relationship I just wanted to let you know it’s available. If you’re not interested, no problem on my end.
Traci Brown: Oh, that is rolling off your tongue really easy.
Chuck Gallagher: Okay.
Traci Brown: That is scary, Chuck, how you just did that.
Chuck Gallagher: Okay. Number one, there’s a promise. Notice what happened. It was exclusive. The promise was 12% per year, guaranteed for five years, got to leave it in for five years. I only have a limited number of spaces that are available, so it’s kind of like fishing. It’s like now I’ve got this barrel of fish out there, so I’m going to cast the bait. But then I’m going to start reeling that back in because in reality I want you to want it. I don’t really want to sell it to you. I want you to be like, oh my God, I’ve got to get in on that. That’s awesome. So promise would be the first part. If somebody’s making a promise that sounds too freaking good to be true, because normal people can’t get it, most of the time it ain’t real.
Traci Brown: Got it. Okay.
Chuck Gallagher: Number one. Two is illusion. The question is, what’s the investment? Okay. Let’s think this out just in terms of playing this up. What’s the investment? I connected it to COVID-19 and I said it’s related to whatever the – I forgot what the word was, but you know the inoculation that you’re going to get.
Traci Brown: What did you say? Vaccine, vaccine. That’s what you said. Okay, yea, yea, yea.
Chuck Gallagher: Okay. Look, you don’t know jack about a vaccine. I don’t know anything about a vaccine. You can throw out a number of names, Gilead Sciences or come up with some names of places that would seem to be reasonable. I could send you articles on, or something that would lend the belief that this was real. Okay. Most frauds, after they hit you from the promise, they’re going to give you something to make you believe it’s real.
Traci Brown: Okay.
Chuck Gallagher: We’re going to take a quick timeout. Bernie Madoff was brilliant. How in the hell he was able to print out statements every month and send them to people who were really financially smart, that were able to trick them into believing that he was successfully creating the results he was is mind boggling to me.
Traci Brown: Really? So just the logistics of it is what’s so fascinating?
Chuck Gallagher: That’s amazing. That was brilliant. Just used it the wrong way.
Traci Brown: Right, right, right. Okay.
Chuck Gallagher: For the most part, you’re going to create something that . . . the illusion is going to be enough that you would believe it.
Traci Brown: Okay.
Chuck Gallagher: Promise. Illusion. The third thing is trust. Okay. Who do fraudsters defraud? Generally speaking, it is people that are closest to them, that there is the greatest trust in.
Traci Brown: Okay. Yea.
Chuck Gallagher: Okay. Bernie Madoff defrauded generally people in the Jewish community. Why? Because he was Jewish. Because he was connected there. Because if you have people who are connected there that are part of this, it’s like, oh my God, he’s great. For a fraudster, all you have to do is get one person to bite, then get a second to bite, and after the first two bite, the first two will be the best sales pitch you ever had to the third.
Traci Brown: Got it. Okay. It becomes a community thing.
Chuck Gallagher: Exactly. Play this out just a second because both of us are involved in the National Speakers’ Association. Now, I want to be crystal clear with this. I’m not perpetrating a fraud. This is for purposes of your show.
Traci Brown: Yea.
Chuck Gallagher: But if I were perpetrating a fraud, who would I go after? I’d go after someone in the National Speakers’ Association that we’re friendly enough they would say, “Oh my gosh, this is great.” Let’ say for hypothetical purposes, it’s Scott McKain or Jane Jenkins Herlong or Steve Gilliland, but someone that’s in the Hall of Fame that people would know, and if I said, “Look, we’ve got this program that mitigates problems that speakers have in downturns because we’ve been able to do whatever the heck it happens to be.
Traci Brown: Sure.
Chuck Gallagher: Scott’s an investor. Jane’s an investor. Traci, you might want to consider that because of our special relationship and what you do, I think you’d be awesome for this.
Traci Brown: Yea. It gets everybody on board, and it has a little prestige right there with it.
Chuck Gallagher: Exactly. What you do is you’re going to pick up the phone and call Scott or Jane, and they’re going to say, “Oh, yea, it’s great, man. Chuck told me X, Y, Z is happening, and I’ve been getting the checks just like clockwork.” Of course, he’s getting checks from somebody else’s money, but he doesn’t know that.
Traci Brown: Right. Right.
Chuck Gallagher: Then all of a sudden, if you get enough people on board, which is what Madoff did, it becomes the place you want to be. The better you are it, the more you push people away, because by pushing them away, it causes them to draw closer.
Traci Brown: Uh-hum. Okay.
Chuck Gallagher: It’s a PIT – promise, illusion, and trust.
Traci Brown: Got it. Okay.
Chuck Gallagher: If you’re sitting back, for anybody that’s listening to the podcast, if you’re sitting back and thinking, oh my gosh, somebody really close to me has said I’ve got this great thing, probably a friend at the country club or the church or whoever you’re connected with, but I’ve got this great thing. Here’s what it is, and it’s only to people that are close or close knit, you need to do your due diligence because there’s a reasonably good chance it’s fraud. Right now, because we’re sitting here in the midst of a global pandemic where people are sequestered at home and folks are losing money, now is the time for fraudsters to be rampant out there.
Traci Brown: Oh yea, when the economy goes down, fraud goes up.
Chuck Gallagher: Absolutely.
Traci Brown: People are just starting to feel the desperation. I mean, we are just scratching the surface of what we’re going to see. Those are brilliant tips. I love that. Okay. What happened next? You’ve admitted it to your business partners. You’ve admitted it to your wife. You got fired.
Chuck Gallagher: Yep. Went to the clients and told them what happened. Of course, they did not like me. That would be a minor understatement. But Traci, the question to them was, well first, I went to the State Board of CPA Examiners and said, “Look, I’m relinquishing my license. There’s no sense in conducting an investigation. I’m just outing myself. Let’s just be done with it.”
Traci Brown: Yea.
Chuck Gallagher: But I went to the clients that I had stolen money from and I said, “Look, here’s the choice. You can put me in jail, and I will not be able to earn any money, and therefore I can’t repay you. Or we can work out, give me time to see if I can work out being able to repay your in exchange for you not wanting to immediately prosecute.” Five clients that I had stolen money from, to make it easy for me and you, it was $50,000 a piece, just so we can do the math. They didn’t like me, but they said they wanted to be repaid. With the help of family and friends, I was able to ultimately raise the money to repay them, all the principal, plus interest at 9%, which they were okay with. The local DA did not want to prosecute. He said, “Look, you’ve lost your license. You’ve lost your interest in the partnership. You and your wife have sold every asset that you have. You’ve repaid everybody. You repaid them with interest. I mean, there’s just no value here.” Plus, I do his tax return and he was a nice guy.
Traci Brown: Okay, okay. You got the money, I guess loans from family is what it sounds like.
Chuck Gallagher: Loans from family and the bank. Yea.
Traci Brown: Then what happened?
Chuck Gallagher: Well, it was mid 1991 after all of this was paid off, I get the knock on the door. At the door there is two people dressed in suits. One was the IRS and the other was the Department of Labor. The Department of Labor criminal investigator said, “Are you Charles Gallagher?” In the South, when you’re called by your Christian name, you’re in trouble.
Traci Brown: Oh yea, and your middle name, yea.
Chuck Gallagher: Oh yea. He says, “We’re investigating you for embezzling money from a retirement plan.” Well, I was a specialist in the Employment Retirement Income Security Act of 1974, which is the law that governs all retirement plans, so I clearly knew better. The IRS wanted to investigate me for failing to pay tax on stolen money, which . . .
Traci Brown: Oooh, so the Al Capone move. Okay, okay.
Chuck Gallagher: Yep, 1040, line 23, other income, stolen money. Who would do that?
Traci Brown: Right, right.
Chuck Gallagher: Ultimately, the federal government, I mean, there was no investigation because I’d already outed myself. It was pretty public by that point in time. Ultimately, we agreed I would plead guilty to one count of embezzlement and one count of tax evasion. I will say, the federal government was kind. They did not have to do this, but all of this was in 1991 and they initially wanted to put me in prison and get this thing over with, but if I was incarcerated, I couldn’t repay the bank. I did actually have a job. I didn’t pay a lot, but I did have a job. I couldn’t repay the bank if I was incarcerated so the federal government deferred prosecution until 1995 and in 1995, I did what I said I would do. I plead guilty to one count of tax evasion and one count of embezzlement. On October 2, 1995, I took 23 steps into federal prison, became 11642058.
Traci Brown: Oh boy. Was there a court thing or did you just go straight there? How does all that come together?
Chuck Gallagher: It was pretty simple. There was a court thing. You go before the judge. The judge says, “How do you want to plead to the two counts?” You say, “I plead guilty.” I did. He said, “Okay. You’re guilty.” They took me back, fingerprinted me at that point in time, and then they released me on my own recognizance and said that they would let me know when sentencing was going to be held. In June of 1995I went for sentencing. I was hoping they would give me probation. I hadn’t fled the country. I hadn’t done anything wrong. I was making my payments like I should. I had made restitution, etc. The judge sentenced me to 18 months active, three years of probation following that, and then told me, okay, go home and we’ll tell you when to report. Then they told me when to report to federal prison an on October 2, 1995, that’s the day I walked in.
Traci Brown: Oh, wow. Okay. What’s prison like? Is it like TV? What’s the experience?
Chuck Gallagher: Okay. It’s not so much like TV. It depends I guess to some extend on which prison you’re in. I was in a minimum-security prison. Now, most people say, Club Fed, that’s where all the white-collar people hang out.
Traci Brown: Right, right.
Chuck Gallagher: Wrong. It is a club because we’re all convicted felons and will be for the rest of our lives, other than getting a presidential pardon, which I’m not expecting.
Traci Brown: You don’t think Trump likes to pardon people?
Chuck Gallagher: He’s not been as willing to do that. His get a lot of attention, but you know, it’s like, I don’t want to have any celebrity on my court that’s trying to vie for me. What can I say?
Traci Brown: That’s what you need. You need a Kardashian and you’d be alright.
Chuck Gallagher: Kim Kardashian. I’d be in like Flynn.
Traci Brown: Yea.
Chuck Gallagher: I don’t know a Kardashian. What can I say? I’ve yet to figure that out, what the appeal is, but you know, I guess I’m too old. I don’t know. Anyway, here’s the thing. Prison was probably the worst experience that I’ve had. But it was the best thing that ever happened to me.
Traci Brown: Oh, okay. Explain that.
Chuck Gallagher: It’s like figuratively, it’s like going in and just being stripped. You have nothing. There is no ego that you can play with because you’re just the same as everybody else. Now, I was clearly a minority. It was 70% drug dealers, 30% everything else, whatever that is. It was 70% African American, 20% Hispanic, and 10% white. A white-collar crime, minority dude in a prison of predominantly drug dealers who have had 10 and 15-year sentences that because of good behavior got moved down to a minimum-security facility.
Traci Brown: Okay, okay.
Chuck Gallagher: Traci, I learned more stuff than you could shake a stick at. It was the most incredible experience of learning different cultures, different races, different thought processes. It’s like this shrinked 18 months of oh, wow, I would never have gotten the education outside that I got inside.
Traci Brown: What’s the number one thing you learned?
Chuck Gallagher: Well, the number one is kind of hard, but there are several.
Traci Brown: You go into two. Two is fine.
Chuck Gallagher: When I first got in, my cell mate was a young African American guy. His name was Buck. Here was Chuck. We weren’t sure if they put us together for comic relief or not, but it was Buck and Chuck. Okay. In the first 24 hours, Buck says nothing. Nothing. I decide, well, if he ain’t going to talk, I ain’t going to talk because I didn’t go to Barnes & Noble and buy Prison for Dummies. I wasn’t sure exactly what I was supposed to do.
Traci Brown: Right, right.
Chuck Gallagher: So 24 hours later, he looks at me. By the way, I’m not making fun the way I do this. It just makes sense if you hear it like it was. He looks at me and he says, “Yo man.” He said, “What you in here fo?” I’m like, ooh, he’s smoking. I had to put my like John Wayne, Clint Eastwood, bad. I said, “I’m a liar and a thief.” He said, “Word?” I was like, word? “Yo, man, I said word.” Word? He said, “You don’t know what I’m talking about, don’t cha?” He flies out of the cell. I’m like, what the hell just happened? I mean, these were the first words we’ve spoken, and I’ve got no clue what just took place. Like the Tasmanian devil he comes, zoom, flies back in. He says, “Man, you ain’t going to make it in here, but I’ll makes you a deal.” I’m like, make me a deal?
Traci Brown: Already.
Chuck Gallagher: After 24 hours. Convict want to make me a deal. Then I thought, but I am a convict. Maybe it’s okay. I didn’t read Prison for Dummies. I’m not really sure. He says, “I tell you what. I’ll teach you everything you needs to know in here.” He said, “I’ll teach you the lingo. I’ll teach you what you needs to say and when you needs to say it.” He said, “I’ll have your back.” He said, “I’ll make it so when you get out of here, you can go to the hood anywhere, anyplace, and ain’t nobody going to mess wich you, if you’ll teach me how to speak correctly so when I get out I got a chance at getting a real job because I never want to be back here”
Traci Brown: Oh man. Okay, okay. Did you do it?
Chuck Gallagher: Yea. It was like he was an angel. It was like, here is this little guy who had a 10-year sentence. He had already been through five years in a medium-security place, comes in, and he’s a street dude. He wants me to teach him how to not be a street dude, and he’s going to keep me safe. One of the first things he said to me, he said, “Now, you made your first mistake with me, but it’s okay.” I said, “What was it?” He said, “You told me why you were.” He said, “Don’t tell anybody in prison why you’re there or anything about your background because the less people know about you, the more they will fear you. So if you don’t want to get your ass whipped, don’t them I’m an accountant, because if you tell them that, you’re in trouble.” If they think you might have been with the special forces somewhere and they have no clue. They say to you, “What you in there for?” You say, “Yea, I’m just doing my time. That’s it. We don’t need to talk anymore about that. This is not about me. I’m just doing my time.” Then they will fear you, and you’ll never get in trouble. And it was like that. That was probably one of the best pieces of advice I ever got.
Traci Brown: Oh, wow. Okay, so how can we apply that out in the rest of the world? Is it just always knowing more than is immediately obvious and having a cloak of mystery around you? How can we use it?
Chuck Gallagher: Well, you know, if you sit back and you said, okay, what’s the environment that I’m in and where do I find safety? That’s kind of what he was laying out. It’s like, look, you know, if you want to be safe, just recognize if you’re in an unsafe environment, more mystery equals greater safety. Because what people don’t know keeps a bit of distance. Now, the flip side to that is if I want to be close, then it means I also need to be vulnerable.
Traci Brown: Oh, got it.
Chuck Gallagher: Think about it. Whenever you’re in a presentation, or I’m in a presentation, if we are in this presentation, and we’re willing to be vulnerable, oh my gosh, you know as well as I do at the end when people come up to you, it’s like Traci, you were vulnerable. I have had, and they’ll tell you whatever their challenge has been, and the fact that you were willing to be vulnerable and to be open your heart and to be there for them made the experience for them impactful. You didn’t know that walking into your presentation. But you know it walking out. Less vulnerable may be more safe, but more vulnerable may be less safe but more impactful.
Traci Brown: Oh, wow. Oh, that’s huge. That’s huge. What else did you learn in prison? Anything else we could . . . Because that was actually pretty huge. I love that.
Chuck Gallagher: There were a lot of things, some of which were marginally entertaining. The one thing Buck told me going in pretty quickly he said the first Monday morning, they count you six times a day. It’s called count time. They count you six times a day. At the 6:00 am count, this is my first Monday. Buck kicks the bunk bed and he said, “Get up.” I said, “Why?” He said, “Get up.” I said, “Okay.” He said, “It’s time to go the chow hall.” I said, “I’m not hungry.” He said, “Okay, look.” He said, “You’re in the federal prison. It’s going to take them three weeks to figure out you’re here. This is the federal government. Nothing moves fast.” Which, by the way, if you’re waiting for your payment from the federal government, remember nothing moves fast.
Traci Brown: Yea. I know. We’re not going to see those for a while.
Chuck Gallagher: Anyway, he says “Look, they won’t figure out you’re here for three weeks. So if you’re laying in the bed, a guard’s going to come through, see you laying in the bed, he’s going to give you a job because everybody in prison has to work.” You have to work in prison. Otherwise, it would be called slavery. They pay you. You’ll get paid 12 cents an hour. It’s amazing how much money you’ll make.
Traci Brown: Is it really 12 cents? Is that what you get? Oh my goodness, okay.
Chuck Gallagher: Yea, 12 cents an hour. He said, “So look, for three weeks you just need to walk around. Walk like you’re going somewhere with intention. If you look like you’re going someplace to do something, the guards will leave you alone.” He said, “For all day, you need to walk around with intention.” He said, “Find you a job.” He said, “Because if you don’t, you’re going to get the crappiest job that’s available. I promise you, and you’ll be stuck with it because nobody else wants it, and it’ll be miserable.” I went to the business office. I’m a reasonable smart person.
Traci Brown: Yea, yea.
Chuck Gallagher: Business office. I meet the business manager for the prison. I said, “Do you have any openings?” “Well, maybe.” I said, “Well, I’m a former CPA.” “I believe I have an opening.”
Traci Brown: That sounds a lot like Shawshank Redemption.
Chuck Gallagher: Traci, it so was. He lined the whole business office with white-collar criminals. We all wanted to be there because it was air conditioned in the summer and heated in the winter, and that was good for us. You couldn’t use a calculator. You couldn’t use a computer. You couldn’t use a typewriter. Everything had to be done by hand. If it plugged into the wall, you were going to freak them out. Anyway, I’d go in. I’m working. I’d been there about three and a half months. One day, a new warden walks in. When a warden walks in, man, you start looking like you’re working. You’re feverishly doing something.
Traci Brown: Yea.
Chuck Gallagher: We all figured out that the prison was buying crap and prices three times what you could buy it for from Walmart.
Traci Brown: Oh.
Chuck Gallagher: We knew. It was just ridiculous. Anyway, the warden comes in, talks with the business manager. They go behind in this soundproof room, so hear these muddled talking sounds. He walks out and he looks at all the inmates and said, “Inmates.” We all look up. He said, “You’re fired.” Now, Traci, let me just say as a side note, going to prison sucks, but being fired from a prison job really is just . . . it hurts your ego.
Traci Brown: Does it hurt your heart there a little? Oh my gosh.
Chuck Gallagher: But he felt like we weren’t being punished enough.
Traci Brown: Oh, okay. Okay.
Chuck Gallagher: He brought the crack dealers, who loved being outside, into the business manager’s office and they didn’t know jack about accounting. Then turned to us and sent us out on this Air Force base where we were. My job was cleaning toilets and urinals with a toothbrush.
Traci Brown: Oh boy. How long did that last?
Chuck Gallagher: Until I left. I am the bathroom cleaner. I will tell you, that’s a skill now that has transformed and moved into my home.
Traci Brown: Oh, okay.
Chuck Gallagher: I’m the man.
Traci Brown: Oh, my goodness. Wow. I don’t want to take a ton more time here, like your time, and I know people are listening. One last thing out of prison that you got, or would you like to talk about what people should think about moving forward, like if they have what it takes to be a fraudster? I saw something along those lines from something I saw that maybe you wrote, or someone wrote, but you were definitely involved in it.
Chuck Gallagher: Okay. Let’s think about this for just a second. First thing, let’s talk about what it takes to be a fraudster. Now, I’m going to make a statement that will be a bit controversial.
Traci Brown: Okay.
Chuck Gallagher: But I’m going to suggest anybody could be a fraudster.
Traci Brown: Alright.
Chuck Gallagher: Now there are some people that are like, well, I would never do anything wrong. Okay. Great. I want to challenge that for just a moment. If we could play this out for just a second. Question one: Would you, if you’re listening to this, would you voluntarily choose to do something unethical? It’s either yes or no.
Traci Brown: You want me to answer? I guess it would depend on the circumstance. Probably not.
Chuck Gallagher: Probably not. Okay. Alright. Let’s go to question two. Do you think that voluntarily breaking the law is unethical?
Traci Brown: Not always.
Chuck Gallagher: Not always. Okay. That’s an interesting response.
Traci Brown: Okay. Let me explain it. If I was going to run a stop light, that’s breaking the law. I would say it’s unethical and just unsafe in rush hour, but at 3:00 am, when no one’s around in the middle of a quarantine, am I going to sit there? Probably not.
Chuck Gallagher: Okay. Alright. You have, which is fair and that’s good, you have basically said, there’s kind of some arbitrary, internal guidance limit as to what’s kind of okay and kind of not okay. You and I both are going to fall into the next two answers. Have you ever been on the interstate highways in the past two weeks?
Traci Brown: Yea, I did.
Chuck Gallagher: Do you speed?
Traci Brown: I think I did in the last two . . . yea.
Chuck Gallagher: Okay. Now, most everybody, if you ask that question, would say, yea, 5 to 10 over.
Traci Brown: Yea, yea.
Chuck Gallagher: Let’s play it out for just a second because it’s really important for people to think about. A lot of people will say, well, I would never do anything wrong. Oh, BS. Wrong, wrong, wrong. You speed. You speed. Here’s what happens. I get on the interstate highway. I need to go from point A to point B. Maybe I didn’t allow for enough time. Now today on the interstate highways, wide open. If it was three months ago on the 405 out in LA, God only knows how long it would take you.
Traci Brown: Hours, hours.
Chuck Gallagher: Yea. I need to get from point A to point B. I’m in a car that allows me to exceed the speed limit. The rationalization is, okay, I’m in a black Camry. What’s the probability the police are going to pull me? After all, everybody does it, and everybody does it, and if I don’t do it, I’m really going to be creating – I’m into my head now – a traffic conundrum. People are going to be flying by me, flipping me the bird, doing all of these crazy things, oh my gosh, we just have to do what everybody does. Okay. If we’re willing to do that speeding, what are we willing to do within our companies? Are we willing to sit there in our companies and take our phone and surf Facebook and text people all during the day, realizing that if you add up all the texts and all of the surfing on Facebook and the likes on Instagram and the whatever it happens to be, you’ve just stolen an hour or hour and a half of time from your employer. But everybody does it. I just set the phone down, and I go back to working because they don’t pay me enough and this is really ridiculous, etc. What are the things that we are willing to do that nobody seems to have any concern over? Because if you’re willing to do the small thing, is it possible that taking that first step on a slippery slope and you started off by saying you had snow there, so you know about slippery slopes.
Traci Brown: Oh yea. You go right down.
Chuck Gallagher: Right. You know, if you’re willing to take the first step on the slippery slope, is it possible you’re willing to take another step? Is it possible over time that in doing that you could actually be really advancing your choices?
Traci Brown: Yea. I think you get numb to it after a while, like it doesn’t seem wrong anymore.
Chuck Gallagher: Right. And 3:00 am running a red light if there’s nobody there or a stop sign, who cares? It’ll be a rolling stop. It’s 3:00 am. Middle of the day, people going, you are going to be more apt to stop. Middle of the day, if everybody’s doing 80 on the interstate highway and the speed limit’s 70, but if everybody’s doing 80, you just go with the flow of traffic. If people in the office naturally are going to take pens or pads of paper or reams of paper because they need some paper for the printer at home because they’re going to be printing something, their tax return, whatever, but everybody kind of does it, and that’s just the way it is. You start looking at that and you think it might not be good for the customer. What is it that we might be that might not be good for the customer? Because there are things that could take place, or, it’s not good for the company, or it’s a policy violation. I mean, people violate these things all the time. It might get to the place where it’s unethical. In the speaking world, it is ethical to buy your pictures and video and so forth that you’re going to use. That is the ethical thing to do. But if you’re sitting there writing a blog about COVID-19 and you’re interested in getting a picture, you can easily put COVID-19 in a google search, hit images, find a gazillion images, right-click on the doggone thing, stick it in your blog, and pay no attention to it until three years later when Getty Images sends you a bill for $900 for using an image that you didn’t pay for. You didn’t even think about it because it was like, it’s just an image that I’m using for a flipping blog during a particular point in time.
Traci Brown: Right, right.
Chuck Gallagher: That would be a violation of our code of ethics for the National Speakers’ Association. It also would be illegal, and Getty Images is pretty good about sending people bills for that kind of stuff.
Traci Brown: Aren’t they. Yes.
Chuck Gallagher: That you definitely don’t get out of. You see how the slippery slope can kind of take place. Most people don’t start saying, I’m going to be a fraudster. I never had that perception in mind. I became one, but I didn’t start that way. We can identify that there are things that will trigger us to make stupid choices, and by the way, there are three of those, just to throw this is.
Traci Brown: Yea, yea.
Chuck Gallagher: Financial is a trigger. We saw that in the Great Recession of 2008-2009. Financial is a trigger. Relationships are a trigger. If your relationship goes bad with people, that’s a trigger to do some crap. Health is a trigger. Now, think about where we are right now, and this is like the flipping trifecta . . .
Traci Brown: Oh yea.
Chuck Gallagher: Of stupid choices because it has a financial impact. It has a relationship impact. There will either be more babies born or more divorces in probably 9 or 10 months.
Traci Brown: Oh yea. Oh yea.
Chuck Gallagher: And it has an impact from a health perspective because now a lot of us will be re-thinking, what’s our social interaction with folks? Are we immediately going to go out to the big NBA games and sit with a whole bunch of people? People will re-think what that experience is going to be like. It creates impacts to people’s lives and when people’s lives are impacted in ways they can’t control, they try to find something that gives them control.
Traci Brown: Wow. Okay. So that’s when they’re going to try to do the dumb things.
Chuck Gallagher: Yep.
Traci Brown: Because they have control of that one aspect, at least.
Chuck Gallagher: Or they think they do.
Traci Brown: Yea, they think they do. It’ll last as long as it lasts until it stops working.
Chuck Gallagher: With what you’re doing, Fraud Busting, you can take to the bank, every time you talk to somebody that has perpetrated a fraud somewhere, somewhere in their mind there was a need, in their head, something, that triggered an opportunity that ultimately triggered rationalization. To make it simple for me and you, Bernie Madoff, what was the need? It wasn’t money to begin with. Bernie Madoff’s need really was emotional when it went back to his childhood because when his Daddy’s business failed, little Bernie said, I am never going to be like that. It will never happen. He was a brilliant guy.
Traci Brown: Yea.
Chuck Gallagher: But all of a sudden when the market took a downturn, he was like, I cannot not pay these people. I promised this and that was the beginning of the Ponzi scheme and eventually it just was this is just the easiest way for this to happen. It would have continued to this day had it not been for the recession in 2008 because when the money dried up coming into his fund and people wanted money out of his fund, he could no longer sustain the fund, which is how a Ponzi scheme always collapses.
Traci Brown: Yea, yea. Absolutely. We have a financial hiccup every 10 years or so. We’ve beat this one for a good two years, I think.
Chuck Gallagher: Yep.
Traci Brown: Beat it off, but yea, here it is again. We’re going to see a lot of this coming up. Chuck, one final thought for people. Anything that we need to know?
Chuck Gallagher: Your history doesn’t create your destiny. People have asked me this. When did you get started in public speaking? Well, I got out of prison in 1996. A decade later I was a senior VP of sales and marketing in a public company. How do you be a senior VP in a public company and a convicted felon? The answer is every choice has a consequence. If you make a different set of choices, the consequence will be different. I’m a convicted felon, but that doesn’t mean I bring no value to the table. For people who have made mistakes, and that doesn’t mean they’re all convicted felons, I’m not saying that, but for people who have made mistakes, you have a choice. You can be a victim or a victor. If you’re a victim, you’re letting your history define who you are. If you’re a victor, you’re saying, you know what, it’s part of who I am, but it is not who I am. I have learned from the experience of the past that if I’m transparent, I can lay out the facts so people can see the simplicity under which it takes place and maybe either recognize that in themselves or in others so they’re precautious, or recognize that promise, illusion, and trust is that three-pronged approach to how fraudsters defraud people. If I’m aware of a promise that is too good to be true, an illusion that I cannot absolutely pin down and guarantee is 100% correct, and the fact that it’s going to be with people that generally are pretty close, that are trusting, same thing that happened with Elizabeth Holmes in Theranos.
Traci Brown: Oh man, yea.
Chuck Gallagher: You look at it. You can see it. You can see exactly how it plays when you look back. The question is, can we look forward and recognize it before it happens to us?
Traci Brown: I think that’s the goal. That’s really what I’m trying to do with this podcast. How can people get a hold of you? Because you’re actually a fantastic keynote speaker. Tell me what kind of groups are you good with? Website? How can people find you?
Chuck Gallagher: Okay. The website’s easy. It’s ChuckGallagher.com. Gallagher is G-a-l-l-a-g-h-e-r. Email is Chuck@ChuckGallagher.com. I’m not a hard person to get in touch with. Phone number is (828) 244-1400. (828) 244-1400. Operators are standing by.
Traci Brown: (Laughing).
Chuck Gallagher: But you know, here’s the thing. I speak to all kinds of groups, whether it is the Geospatial Intelligence Agency, the FBI, Lockheed Martin, or the International Association of Kitchen Exhaust Fan Cleaners.
Traci Brown: Hey.
Chuck Gallagher: Every organization has people that have the potential to make poor choices. Traci, from my perspective, if I can do something to illuminate how those choices take place so that maybe when we shine some light on it, we can prohibit that from happening. I think that’s a positive thing. That’s what I do.
Traci Brown: That’s good. I’m glad you’re out making the world a better place and having learned from your mistakes. Thank you so much for coming on the show.
Chuck Gallagher: Hey Traci, it’s been my pleasure. You’re going to rock this. I know so much about you. The cool part about it is, if I was a fraudster and not being willing to be totally open, I’d be afraid of you because you know how that body language thing works. The next thing you know, you’d be like, no, crap no. I know what’s going on there.
Traci Brown: Quit lying, Chuck. (Laughing).
Chuck Gallagher: Come on. Don’t out me.
Traci Brown: No. It’s all good. Thank you for helping me out.