Bus. Week: Kenneth Starr took money from rich clients and spent it on himself and 4th wife

His career famously came to an end last month when FBI agents arrived at his home on Manhattan’s Upper East Side and found Starr hiding in a closet. His $7.5 million condominium, which he shared with his fourth wife, Diane Passage, a pole dancer, featured floor-to-ceiling windows, a granite lap pool, and a 1,500-square-foot garden, all allegedly financed with plundered cash. Ten days after his arrest, a grand jury indicted Starr for cheating 11 clients””Jim Wiatt, the former head of the William Morris Agency, and Uma Thurman among them””out of $59 million. Starr allegedly pocketed half that amount, while the other half was placed in investments in which he or his friends had a secret interest. Starr has denied wrongdoing and is being held at the Metropolitan Correctional Center in lower Manhattan.

The Securities & Exchange Commission brought its own civil fraud lawsuit against Starr and Passage, seeking the return of tens of millions of dollars. The two haven’t yet responded to the SEC. A judge last week extended the freeze on the couple’s assets at a hearing attended by Passage, who looked uncharacteristically demure in a pink Vivienne Westwood cardigan and a black skirt. She declined all reporters’ questions except for one from Bloomberg Businessweek, about her age: “Thirty-four,” she said. “You can take a couple of years off that if you want to.”

The disintegration of Starr & Co., which once managed more than $700 million for about 175 wealthy individuals, exposes an uncomfortable truth about the elite crowd he preyed on””that these wealthy, supposedly sophisticated people could be such easy marks for fraud. The numbers involved are not on the scale of Bernie Madoff, but Starr shared Madoff’s ability to create an aura of exclusivity around himself that appealed to the elite””which was augmented by Starr’s attendance at prestigious business gatherings, such as Allen & Co. President Herbert Allen’s annual media conference in Sun Valley, Idaho.

Read it all.