Big talk likely fueled swindles

Regan and Madoff are both confessed swindlers, investment managers who affected a sophisticated mien and charmed and then betrayed clients. Madoff is from New York and Regan from Wayland, but both trolled heavily in Massachusetts for clients.

Madoff, 71, stole at least $13 billion, and in Manhattan on Monday he received a 150-year prison sentence. Regan, 65, stole about $9 million, according to authorities, and faces up to 20 years in prison and $5 million in penalties. He is out on bail awaiting sentencing, scheduled for September in federal court in Brooklyn.

By modern measures, Regan’s crime is at the lower end of the scale of securities fraud, while Madoff’s is a colossus. Yet, to specialists familiar with such fraudsters, Regan and Madoff are of a type: con men who compensate for their insecurities with grandiose schemes and promises.

“These are people, who crave success, who crave attention, who want to create an aura of being somewhat of a financial mastermind, and who I think often go into these schemes, having convinced themselves of being able to pull off the rates of returns that they promise investors,’’ said Robert Mintz, a former federal prosecutor who is now at partner at the McCarter & English law firm in Newark, N.J.

“What they promise is unachievable,’’ Mintz added, “and they are just unable to cope with failure and instead succumb to the temptation of using money that doesn’t belong to them in order to pay other investors.’’

Regan did not respond to repeated requests for comment. His lawyer, Raymond Mansolillo, declined to comment last week, saying he didn’t want to prejudice the sentencing hearing. In a Globe story last year, Mansolillo said Regan simply got in over his head, that he didn’t have the financial savvy to manage so much money.

“You will find out this isn’t the typical hedge fund operator who intentionally pilfered people’s money and lived the high life,’’ Mansolillo said in July 2008. “He’s a 65-year-old gentleman who had over $1 million of his own money in the fund that he probably lost.’’

Regan worked at financial services firms and in acquisitions for an industrial conglomerate for more than two decades before going out on his own in 1990. In 1999 he started an investment fund, River Stream, with a money-making pitch to clients similar to Madoff’s: rapid, short-term trading in top stocks that allegedly produced consistent profits.

Madoff never made such profits because he never actually made trades for clients; Regan actually lost money or had minimal returns most years, according to court records. Then, authorities said, he stopped trading altogether between 2003 and 2005, using money from one client to pay another, creating the same illusion of profits Madoff and other Ponzi schemers have throughout history.

James D. Cox, a professor of corporate and securities law at Duke University School of Law, said that based on the number of cases he hears about from state-level securities regulators, smaller “nickel-and-dime’’ Ponzi schemes are more common than Madoff-size rip-offs.

“These are affinity crimes,’’ Cox said, where the schemer taps into a network, such as fraternal organizations and community groups, to get clients. “The damages are measured in thousands of dollars, not millions.’’

In Regan’s case, court filings indicate that many of his 70 or so clients lost six-figure sums, with a few losing more than $1 million each. Several of those former clients had previously joined together in a lawsuit against him to recover lost funds.

Like Madoff, Regan used the trappings of wealth to impress clients, according to a half-dozen former clients who spoke to the Globe on condition of anonymity. He had leased a large farmhouse in Wayland that one client likened to the Ponderosa, the fictional estate in the old TV western “Bonanza.’’ He would fly first-class to vacation spots such as Puerto Rico.

He also appeared to be devoted to his family, spending thousands of dollars on them. He has two daughters, five grandchildren, and a son, whom he sent to an expensive private boarding school, according to one client who described himself as Regan’s best friend at one time.

Madoff cultivated an air of exclusivity around his operation, authorities said, and allegedly had brokers such as Robert Jaffe of Weston act as gatekeepers to his special club. Regan, however, would apply the charm directly, clients said.

One investor said Regan visited her frequently after her husband died and she subsequently broke her foot, to check on her condition and occasionally take her to lunch. And like Madoff, Regan found the setting of a country club to his advantage, wining and dining clients and potential investors at the Brae Burn Country Club in West Newton.

There is one other thing that distinguishes Regan from Madoff: notoriety. Madoff, in the words of one victim who attended his sentencing, “is the most despised man in America,’’ his clients among the most wealthy or famous names in the country, and his sentencing this past week was a spectacle.

Regan, by contrast, functioned in near-anonymity. At his plea hearing last week in Brooklyn were his attorney and one daughter, according to a US attorney’s office spokesman. None of Regan’s clients who were interviewed by the Globe attended his hearing.

Regan’s victims, meanwhile, face a somewhat different prospect of getting money back than do Madoff’s. The latter investors were covered by the Securities Investor Protection Corp., which pays fraud victims up to $500,000, and has so far committed $231 million in payments. The bankruptcy trustee overseeing the Madoff case has so far identified $1.2 billion in assets that can be used to repay clients.

Regan did not have coverage from SIPC. And though he was ordered last week to pay $8.7 million as part of a settlement with regulators, in a bankruptcy filing in August 2008 Regan listed liabilities of $9.2 million and assets of just $234,000.

Sean Sposito can be reached at ssposito@globe.com.