The star wall in Jeff Grayson's downtown office featured autographed photographs of Grayson's powerful friends and acquaintances, including former Gov. Neil Goldschmidt, President George H.W. Bush and Trail Blazers legend Clyde Drexler.

Grayson sat at the center of Portland's circles of power. At its peak, Grayson's company, Capital Consultants, managed $1 billion in investments, most of it in union pension funds. Multiple sclerosis put him in a wheelchair at 42, but his disability didn't slow Grayson. He was a prolific fundraiser for a variety of causes, including the University of Oregon, where he headed the university's foundation and for a time had his name on the former law school building. In a town filled with bumper-stickered Volvos, Grayson traveled in a chauffeur-driven Bentley.

Most pension-fund managers find relatively conservative places, such as stocks and bonds, to put their investors' money.

Grayson invested in unconventional assets, such as financing a Portland shipyard and lending money against a fleet of nonfunctioning airplanes.

"We don't take collateral that eats or shits," Grayson told WW in 1999. "But we'll take just about anything else."

For years, there were whispers about whether his deals were legitimate, but his outsized personality and relationships with the state's power structure kept doubters at bay.

"He was a pillar of the community, and as a result he got the benefit of the doubt far longer than he should have, the same way Bernie Madoff got the benefit of the doubt," says Portland lawyer Stephen English, who would later sue Grayson on behalf of numerous investors.

In 1998, WW published the first story linking Grayson to a youthful financier named Andy Wiederhorn, who specialized in buying bad debts and squeezing money out of them. With his slicked-back hair, cufflinks and private jet, Wiederhorn looked like he'd gotten lost in Portland on his way to Wall Street. His stake in just one of his companies, Wilshire Financial Services Group, was worth more than $140 million by the time Wiederhorn turned 32.

Grayson's company loaned another Wiederhorn firm more than $160 million. When Wiederhorn's business schemes left him unable to pay the money, Wilshire collapsed into bankruptcy. A federal investigation quickly led to Grayson.

On Sept. 21, 2000, the U.S. Securities and Exchange Commission shut Grayson down, alleging he'd been engaging in a Ponzi scheme for years. The story federal investigators unraveled included widespread bribery, exotic hunting trips to Africa and Asia used to influence pension-fund trustees, and increasingly desperate bailout schemes featuring shady car dealers and the Miami mob.

"I was sitting in the office at Local 290 the day he called to say, 'It's all over,'" recalls Ron Murray, then an official of Plumbers and Steamfitters, whose union had $159 million invested with Grayson. "Nobody could believe it."

The feds charged Grayson with what was then the largest union pension fraud in U.S. history—more than $350 million was missing.

Grayson pleaded guilty in 2002 but soon after suffered a stroke. He lived the rest of his life in a rehab facility, dying in 2009. Eight others, including Wiederhorn, also pleaded guilty to various crimes related to Capital Consultants. Wiederhorn spent 18 months in federal prison, and after he got out, took over as CEO of Beverly Hills-based fast-food chain Fatburger.

English and other lawyers spent years fighting on behalf of union pension funds, clawing back most of the money Grayson looted. English has pursued other high-profile con men but says the Capital Consultants case remains the most memorable of his career.


From the Archives:


March 26, 2014: "House at the End of a Scam"; last remnants of the Wiederhorn empire auctioned off.