How to Avoid Being a Victim of Affinity Fraud
In Mozart’s Don Giovanni, the title character is a serial seducer whose conquests number in the thousands. He manipulates women of every social class—noblewomen, peasants, and everything in between—promising love, marriage, or comfort, only to abandon them once he gets what he wants. His behavior isn't limited to romantic deceit; he lies, cheats, fights, and commits murder, all while hiding behind his social status and polished and confident image.
The opera begins with Don Giovanni attempting to seduce Donna Anna. When she resists, a struggle ensues, and he kills her father, the Commendatore, who tries to defend her. Rather than show remorse, Don Giovanni flees and continues his predatory pursuits. He cruelly mocks Donna Elvira, who, even though Don Giovanni has wronged her, implores him to change his ways. He tries to lure Zerlina, a young bride, away from her fiancé on their wedding day. And throughout the opera, he treats his servant Leporello as a pawn in his schemes.
Throughout the opera, Don Giovanni brazenly refuses to acknowledge any guilt or fear of consequences. Even when the ghostly statue of the slain Commendatore confronts him and offers him a chance to repent, Don Giovanni laughs, mocks the supernatural, and refuses to atone. In a dramatic finale, he is dragged down to hell, with justice finally being served for his life without conscience.
The opera’s message lies in how long Don Giovanni is able to operate due to his charm, power, and the willingness of others to believe in appearances over substance. On May 22, 2025, the Securities and Exchange Commission (SEC) brought a complaint against Kenneth Mattson, former CEO and CFO of legitimate real estate firm LeFever Mattson. Like Don Giovanni (minus the seduction), the SEC claims investors, many of whom were elderly, were defrauded after relying on their trust in Mattson as a member of their church and successful businessman.
The SEC claims Mattson orchestrated a multi-year fraud that stole nearly $100 Million from an estimated 300 investors from 2007 through 2024. According to the SEC, sometimes guaranteeing a 6% return, Mattson facilitated moving investors’ retirement funds into self-directed IRAs so they could invest. The SEC alleges Mattson sold fake ownership interests, which had a patina of legitimacy because they looked like legitimate real estate partnerships operated by LeFever Mattson.
Many legitimate business relationships develop through churches and other organizations. However, not everyone who goes to church is honest; like Don Giovanni, there are individuals whose public appearance of social status, wealth, and legitimacy do not match reality. And sadly, it’s not uncommon for fraudsters to cultivate relationships through religious and community organizations to create an “affinity scam.” Therefore, while personal connections can be a great way to forge a win-win business relationship to prevent falling victim to an affinity scam, someone should verify the legitimacy of an investment before parting with a large sum of money.
According to the SEC complaint, Mattson personally collected investor funds directly through a private P.O. Box and deposited those funds into a bank account that only he controlled so the investments weren’t recorded in LeFever Mattson’s books. The complaint states that investors never received partnership shares or the right to share in cash flow from the real property the partnerships owned.
Instead, according to the complaint, Mattson used Ponzi-like payments made from new investor funds to older ones to create the impression that the investors had interests in LeFever Mattson partnerships. Since Mattson was a partner in LeFever Mattson, he was able to make these payments from accounts in the company’s name to which only he had access, making it more challenging for investors to detect the fraud.
Still, there were red flags that could have alerted investors of the need to make additional inquiries before investing. Mattson's alleged request that investors send large payments to a P.O. Box rather than the company's standard mailing address or via wire or other electronic transfer was irregular.
Investors could have verified where their money was going by asking to wire funds directly to the partnership's designated financial institution or sending a check to LeFever Mattson (and confirming the wire instructions and address via a telephone call). This may have been challenging since LeFever Mattson had no employees. However, some research likely would have revealed that it had an affiliated property management company, Home Tax, which managed the mechanics of its limited partnerships.
This highlights the importance of investors seeking advice from their own accountant, attorney, or financial advisor. Although an ordinary investor might not be equipped to do this research, a knowledgeable attorney or accountant certainly could have done so.
Even when investors don’t suspect fraud, it’s important to verify how funds are to be delivered via telephone call – and the telephone number should come from a source (e.g., corporate website) other than the individual requesting the funds. It’s increasingly common for email accounts, particularly those handling real estate closings and investments, to be hacked. Scammers often use hacked accounts to request large wire transfers.
Based on the SEC complaint, Mattson’s investors also did not receive documentation of their investments, nor did they receive financial information from Mattson. Genuine limited partnerships and real estate funds should provide documentation of the investment.
The guaranteed return should also have been a red flag. Few investments, except possibly US treasury securities and maybe an FDIC-insured bank account, can guarantee a return – and even those investments guarantee the return for only a limited period. While real estate can be an excellent investment, it is not risk-free, and a guaranteed return on any real estate investment should be a warning sign.
Another concern was the use of retirement funds for the investment. Many people's money is tied up in retirement accounts, and conventional IRA custodians don’t offer alternative investments. Therefore, it’s not unusual for investors to move retirement funds into self-directed IRAs to facilitate investment into alternative investment vehicles, like real estate. However, an individual should not make this change unless they are a very sophisticated investor or consult with their attorney or consultant to fully evaluate the consequences of the change. Among other things, there can be tax consequences when retirement funds are used to purchase real estate investments.
Legitimate partnerships are required to send investors annual forms K-1 reflecting each investor’s share of income and losses for tax purposes. The SEC claims Mattson gave his investors fake forms K-1, which those individuals presumably used to file their tax returns. So, in addition to losing their money, the investors might have to pay additional taxes or penalties because their tax returns included inaccurate information (albeit provided by Mattson).
These red flags might not have been noticeable until after individuals had invested. Yet, had they contacted LeFever Mattson’s main office, rather than solely through Mattson, and asked for those missing documents through individuals other than Mattson, they might have discovered the fraud much sooner.
Investors should have insisted on receiving periodic financial reports directly from the general partner or an independent fund administrator. Before investing, they might also have asked to review organizational documents. After investing, they should have asked for financial reports and Forms K-1. Mattson ensured these "investors" were never included in the company's formal books. So, any inquiry directly with LeFever Mattson would have revealed the possibility of fraud.
Unfortunately, the fraud was not discovered until late 2023, when LeFever Mattson uncovered Mattson’s misconduct. He left LeFever Mattson in April 2024, but by then, the damage was done. LeFever Mattson and its affiliated partnerships filed for Chapter 11 bankruptcy later that year, leaving many defrauded investors with little hope of recovery and possibly resulting in losses for legitimate investors, as well.
Based on the SEC complaint, Mattson's operation hinged on personal relationships and trust in his business savvy rather than transparency. Even when there's no fraud, the lack of basic compliance procedures, indicates that the investment is not well-run. If these individuals had sought independent legal or financial advice before investing, the fraud may have unraveled sooner. Trust alone is not a substitute for accountability. As the complaint against Mattson shows, failing to ask the right questions can have devastating consequences.
© 2025 by Elizabeth A. Whitman
Any references to clients and their legal situations have been changed to protect client confidentiality.
DISCLAIMER: The content of this blog is for informational purposes only and does not provide legal advice. No one should take any action regarding the information in this blog without first seeking the advice of an attorney. Neither reading this blog nor communication with Whitman Legal Solutions, LLC or Elizabeth A. Whitman creates an attorney-client relationship. No attorney-client relationship will exist with Whitman Legal Solutions, LLC, or any attorney affiliated with it unless a written contract is signed and accepted by WLS.