Walnut Charitable Fund Manager Points to Ponzi Scheme Warnings

Walnut resident Gary Chow has traded stock options for years, so he knows the ropes.

When he heard of the masterminded by three PTA mothers at Neil Armstrong Elementary in Diamond Bar, he fired off three warning signs:

1. Investment yields are too high
2. Money is made with a "black box" formula (a special arrangement, an exclusive contract)
3. Leaders usually are affiliated with a charitable organization

The story is of particular relevance for Chow: he runs his own charitable investment operation in the Walnut Valley Unified School District called Gifts After Six with partner Don Arii. The limited liability corporation at a cost of $248,000 a year for three teaching positions.

"(Gifts After Six) has a similar indication, but mine is real," Chow said.

But how do you know?

"I don't have a black box formula," Chow said. "I show you how it's done and how it theoretically works and you can make a decision on whether it's theoretically sound."

Chow's operation is also of a different nature. Under his contract with WVUSD, Chow pays the district first before paying any money back to funders of the nearly $400,000 endowment. The contract also leaves Gifts After Six on the line to fund the district's music program, even if it means mortgaging the house, Chow said.

"Come hell or high water that check needs to be paid to the district and if I have a blow up or something like that, I'm going to write those remaining (checks) myself," Chow said.

And Chow doesn't deal in cash. Funds are deposited into individual accounts, Chow said, for which he has what is called a limited trading authorization, meaning he cannot make withdrawals from client accounts.

Every day, Chow — who is an investment advisor and accountant working out of a small office in a Walnut industrial park — hits the computer and puts in trades that are distributed amongst funding accounts.

"I've written the third check to the district," Chow said. "We're up to $248,000 a year."

Chow that six percent earned by trading goes back to pay loans and anything else is earmarked for other charities.

Chow said his returns are near 50 percent and that the promised 100 percent returns and "exclusive contract" to distribute AltaDena Dairy products from the PTA Ponzi schemers should have been a red flag to investors.

"You have to have healthy skepticism," Chow said. "Don't get caught up in the returns."

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