Mayor On the Run: Corliss P. Stone

Corliss P. Stone was a prominent businessman, city council member and mayor of Seattle, but his cryptic disappearance — and an alleged $15,000 embezzlement — earned Stone a spot amongst Seattle’s Worst Fraudsters.

Long before he got involved in local politics, Stone and his real estate firm were busy developing what are now the Wallingford and Fremont neighborhoods in Seattle; Corliss Avenue and Stone Way in Wallingford are named for him. According to History Link, Stone’s firm constructed one of the first brick buildings in Seattle and built a large wharf on Elliott Bay. In 1869, Stone, a Republican, was elected to Seattle’s Common Council, where he served three terms.

On July 8, 1872, Corliss P. Stone became the third mayor of Seattle; however, just seven months into his term on Feb. 23, 1873, he left a noticeable vacancy at city hall when he mysteriously disappeared with $15,000 ($380,000 today) from his firm, Stone and Burnett. According to early reports of his unexpected departure, he had gone to San Francisco to pay off creditors and purchase supplies. But reports soon revealed that Stone’s business partner, Charles Burnett, discovered that Stone had removed the cash from the company safe, leaving Burnett with the duty of settling the firm’s accounts payable. Stone reportedly turned over all his business property to Burnett. And it didn’t take long for the rumors to begin. Newspapers of the day were notorious for reporting gossip, and, in Stone’s case, publications reported a salacious story that Stone had embezzled the company’s money and ran off to California with a woman married to another man.

Nobody really knows what transpired when Stone allegedly absconded with his firm’s money, but he was never criminally charged; his predecessor stepped in as mayor to fill Stone’s vacancy. Two months after his disappearance, the city held a special election for a new mayor. And Stone eventually made his way back to Seattle where he continued his business career and was even a founding member of the Seattle Chamber of Commerce in 1882. He died in 1906.

The Problem with Pinball

When pinball machines were first introduced in the 1930s, they weren’t the innocent games found in today’s arcades. Indeed, pinball machines arrived just in time for the repeal of Prohibition, and tavern and nightclub owners quickly saw their appeal, offering cash prizes for games to attract customers. The popularity of the game would spark a national debate over gambling, and many states would outlaw it.

But in Seattle, city officials saw the popularity of the game as an opportunity for revenue and regulated pinball with hefty taxes. Even still, state and local officials debated the legality of the games and for decades, pinball games existed in a legal gray area -- not always legit but tolerated by local officials. In this murky atmosphere, pinball machines became a nexus for widespread corruption and bribery involving city officials, such as the King County sheriff and the police chief, and tax evasion by local business owners. A battle between local crime syndicates over control of the pinball market led to a series of bombings and deaths that would rock the city in the 1950s.

In the 1940s, Seattle introduced its “tolerance policy.” Under this system, police bribes replaced the official licensing system used for gambling activities, and pinball games were allowed to continue if business owners paid their licensing fees —and a little extra to the cops. A former city council member told Pacific NW Magazine in 2019, “Basically, the city openly and officially took the position that if we allow just a little bit of crime, we’ll keep the big East Coast Mafiosi out of Seattle.”

Amid all this corruption were bombings tied to local crime boss, Frank Colacurcio, Sr., (more on him in the next section) who was fighting with the Amusement Association of Seattle (AAS) over control of the pinball industry. Between 1957 and 1960, several Seattle pinball companies and their owners were bombed, and many suspected that Colacurcio and his crime family were the masterminds. In the 1960s, the bombings, along with a crackdown on corruption and organized crime, led to multiple criminal convictions, and by the late 1970s, pinball games had shifted out of seedy bars and nightclubs to mainstream venues.

Frank Colacurcio, Sr., and the Seattle Mafia

Local racketeer Frank Colacurcio, Sr., makes more than one appearance in Seattle’s Worst Fraudsters. He earned this distinction through intimidation and violence, bribery schemes to expand his strip-club empire, and money laundering and tax evasion.

In the 1950s, Colacurcio was fighting for control of the pinball market with pinball operator AAS. Since the local Teamsters union backed the organization, Colacurcio targeted businesses that rented their machines from AAS. Between 1957 and 1960, AAS-affiliated businesses were bombed, and although Colacurcio was never charged, it was a pretty good bet that he was the perpetrator. City officials struggling to contain the corruption within the pinball industry and turned off by the violence eventually blackballed Colacurcio from the market. When the Seattle City Council learned that members of the Colacurcio family were evading pinball regulations by operating dummy corporations, it revoked licenses for any coin-operated businesses with ties to them.

After his exit from the pinball industry, Colacurcio focused his attention on running strip clubs and prostitution in the 1960s and continued scheming through tax evasion and skimming money from his clubs. In the 1970s, he allied with the Bonanno crime family to grow his strip-club and prostitution rackets. Eventually, Colacurcio owned strip clubs throughout Washington state. His empire expanded to nine other states in the U.S.

In 2003, at 86, Colacurcio decided it was time to expand Rick’s strip club, which he co-owned with his son, Frank Jr. But he needed a zoning change to do it and the Seattle City Council had rejected his rezoning applications twice. So Colacurcio masterminded a criminal conspiracy to get his club expansion. The plot, which became known as “strippergate,” allegedly involved bribing three city council members who were running for reelection with a $36,000 donation. The council members were never charged for accepting the money, but Colacurcio pleaded guilty to felony charges.

Yet for all his alleged deeds, Colacurcio would never do any serious prison time. In 2009, a federal grand jury indicted Colacurcio, his son and four associates for racketeering related to decades of running brothels and money laundering. But in 2010, before he could be convicted, Colacurcio died of heart failure at the age of 93, and federal prosecutors dismissed his charges. His son, Frank Jr., was sentenced to a year in prison and fined $1.3 million.

Mini Madoff: Darren Berg

After Bernie Madoff’s Ponzi scheme collapsed in 2008, wiping out billions of his investors’ funds, it was understandable if investors across the U.S. were worried about how their money was being spent. Indeed, some who had invested in the Meridian Group, a Seattle-based investment fund run by Darren Berg, were rattled by the Madoff scandal and wanted to cash out. After a few Meridian Group investors tipped off the FBI that something wasn’t quite right, Berg’s investment fund would unravel into the largest Ponzi scheme in Washington State history, and Berg would earn the nickname “Mini Madoff.”

Berg’s investors probably didn’t know that he had a history of committing fraud going all the way back to his college days. Berg, who was treasurer of his fraternity, was accused of using $21,000 in rent he collected from his fraternity brothers to fund his charter bus company instead of paying their landlord. Berg denied the accusation but left the fraternity and dropped out of school. In the late ’80s, Berg was convicted of bank fraud in Oregon for stealing about $30,000 in a check kiting scheme. He didn’t get any jail time and was sentenced to probation. Then he moved to Seattle.

In 2001, Berg created and operated the Meridian Group. He pitched to investors that he would use their money to buy real estate, mortgage-backed securities and private mortgages. He told his investors (many of whom were older and looking to save for retirement) that he would generate huge profits for them with interest. According to the Seattle Met, by 2010, Berg had raised hundreds of millions of dollars from investors in about 20 states.

But Berg was not producing those huge returns as promised, and when some investors demanded their money, Berg held them off. In reality, Berg had deceived his investors by opening dozens of P.O. Boxes under fake names, listing the addresses on fake loan files and submitting bogus information to his auditor. Berg diverted $45 million of his investors’ money to MTR Western, a bus company. Millions more went to a construction company he owned, his Mercer Island home, Lear jets and yachts. One of Berg’s former employees recounted to the Seattle Met that Berg tightly controlled his operation by keeping people in silos and making sure that everyone communicated through him — a classic red flag of a Ponzi scheme.

In 2010, federal prosecutors charged Berg with wire fraud, money laundering and bankruptcy fraud, and in 2011, he was sentenced to 18 years in prison. While Berg’s sentence wasn’t nearly as long as Madoff’s 150-year prison sentence, he was able to pull off something Madoff didn’t. In 2018, Berg escaped from the U.S. Penitentiary in Atwater, California. He’s still on the run.

From Rags to Riches to Fraud: Lobsang Dargey

In 2011, the Bellevue Reporter featured an interview with an up-and-coming Seattle real estate developer with an unusual background. The developer, Lobsang Dargey was a former Buddhist monk who spoke humbly about financing projects and “disdaining many of the trappings of wealth, such as big houses and fancy cars.”

But this public image of a self-effacing former monk belied reality. Dargey would go on to commit one of Seattle’s biggest frauds, scamming millions of dollars out of Chinese investors who aspired to U.S. citizenship and using that money to, in fact, buy a big house and a fancy car.

Dargey’s story begins in Tibet where he developed a reputation as a “business monk,” in charge of finances at a monastery. In the 1990s, he fled Tibet to escape persecution by Chinese security forces. Eventually, he made it to the U.S. and landed in the Seattle area in 1997. After working a variety of jobs, Dargey settled in nicely, meeting and marrying Tami Agassi, sister of tennis star, Andre Agassi. Dargey reportedly used his wife’s connections to build a real estate business.

By 2011, Dargey had a somewhat successful real estate career in the Seattle area, but he had designs on big projects — the Path American Farmer’s Market in Everett, Washington, and the Potala Tower in Seattle’s Belltown neighborhood. Both required a lot of financing. According to the U.S. Department of Justice, to score the financing he needed for those projects, Dargey turned to the U.S. government for help and lured prospective investors mainly from China with the EB-5 program, which gives foreign investors a path to U.S. citizenship if they create jobs by investing $500,000 in qualifying business projects in the U.S.

But while Dargey was enticing investors with promises of green cards, he was diverting tens of millions from the nearly $240 million he raised from them into businesses that didn’t qualify for the EB-5 program and for his personal use. He used those funds to buy a $2.5 million house, drive a Bentley and go on shopping sprees. He falsified or forged documents to hide his actions. In all, Dargey scammed about 280 investors out of $24.2 million. Most of his foreign investors were denied green cards because of the scheme.

Dargey’s was convicted of defrauding investors, and in 2017, he was sentenced to four years in prison and agreed to pay about $24 million in restitution. He was released from prison in 2020, and as of 2021, back on his feet again with a job at a firm called Anandacom, which describes itself as an organization “building eco-friendly communities through innovation.” According to a lawsuit that Dargey’s now ex-wife, Tami, filed against him, some of Anandacom’s owners include the very Chinese investors he deceived in the past.

Police Payoff Scandal

Beginning with the economic boom of the Klondike Gold Rush in 1897 as prospectors made Seattle a major stop on the way to Alaska, through the pinball craze and the city’s tolerance policy on gambling and brothels, Seattle was at one time a bustling center of vice and corruption. The corruption went to the highest levels, ensnaring police officers, the King County Sheriff and the once-powerful King County prosecutor, Charles O. Carroll.

Over the years, eradicating vice was a major theme of municipal elections, with mayoral candidates and police chiefs making promises to clean up the city; however, no one followed through. When the Seattle City Council passed an ordinance to license cardrooms, the Seattle vice squad took it as a signal to collect bribes from gambling operators to allow their games to continue. According to History Link, Officers collected payments from gambling operators and the money was passed up the chain of command. Operators who refused to pay bribes often had their liquor licenses suspended. In 1969, a raid on a club that housed a bingo parlor recovered accounts naming prosecutors and city council members who were on the take going back as far as the 1920s, including the wife of former County Sheriff Tim McCullough, who was on the payroll.

Several events began to unravel the years of bribery and corruption. In 1967, The Seattle Times published a series of articles exposing the system. The article inspired the mayor to impanel a commission to investigate allegations. The panel didn’t find enough evidence of payoffs to warrant criminal charges but was highly critical of the police department. The International Association of Chiefs of Police reviewed the Seattle Police Department structure and recommended substantial changes to the department. The department reorganized as a result, which supposedly helped curb police bribes. Although the U.S. federal government lacked authority to prosecute local corruption, in 1969, then-U.S. Attorney Stan Pitkin secured a perjury conviction against former Assistant Police Chief Milford Cook. Cook’s high-profile trial put the city’s history of bribery on the public record.

Under a series of interim assistant police chiefs, the Seattle Police Department began investigating the payoff network in 1970, and, by 1971, 54 police officers and city leaders, including the now-former County Prosecutor Carroll, were indicted for their roles in the payoff system. Some of the defendants, including Carroll, were acquitted but others pled guilty or were convicted for their roles in the long-running scandal.

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