From riding dirt bikes to polo ponies

Known at various times as D.A. Young, Walker Young, and other permutations of his name, he has rewritten aspects of his life story numerous times over the past two decades.

As best as Fortune can tell, these are the facts about the origin of the mysterious money manager: As the adopted and only child of Bobby and Janelle Young, Tony was put on the path to social advancement from an early age.

"Tony was a good kid behavior-wise, but he acted like he was better than the rest of us," recalls Brian Powell, 38, a neighbor who grew up with Young in the rural town of Fitzgerald. Powell and others say Tony relentlessly practiced the sport of motocross, excelling at it. "Even though the Youngs weren't rich -- just as poor as the rest of us -- his dad was always buying him new dirt bikes," remembers Powell.

By 1992, Young, then 21, was living in Atlanta's posh Buckhead neighborhood. It was there that he began to spin yarns about his past as he tried to break into the town's nascent polo scene.

Those who knew him during his Atlanta years remember Young talking about having a "trust fund" as part of an inheritance that came from the sale of his family's insurance business to Gulf Life Insurance, now part of AIG.

"He told me he'd grown up in a large home in south Georgia and had a full-time cook and maid, a racetrack in his yard, and a swimming pool," says a friend from Tony's Atlanta years. He also told people that his mother charitably taught the children of migrant workers.

There are glimmers of truth to the story. Young apparently came into the money he used to launch himself in Atlanta not long after losing his mother. In June 1991, Janelle Walker Young, then 53, was found dead in the family swimming pool behind their rural ranch house after suffering "drowning and blunt force trauma to the neck and head," according to the death certificate, which Fortune obtained. Her death was deemed an accident. She was buried two days later. She had been a public school teacher who ended up working with migrant children. Young's father had worked as a door-to-door life insurance salesman.

Not long after his mother's death, Young became a partner in an Atlanta business that sold ads for coupon booklets. The business soured, and in 1995 he approached J. Patrick Best, an editor who had launched two alternative Atlanta weeklies. Young claimed to have had an "advanced finance degree," says Best. "I think he saw himself as the next Ted Turner, whom he seemed to worship."

Young bought shares in the startup, Triarchy Publishing, for around $20,000. "He basically became our bookkeeper, and his pay was pretty much sweat equity," says Best. According to records, Young dubbed himself Triarchy's chief financial officer beginning in early 1996 -- and later in Unionville he claimed in a polo newsletter that he "owned weekly newspapers in Georgia."

During his early days in Atlanta, Young met a series of unwitting enablers who would help him on his social climb, and it was here that Young apparently became enamored of polo. Best says of Young's love of the sport, "Tony went from dirt bikes to polo ponies overnight."

To outsiders, learning polo might sound like a daunting task, but if you are willing to work at it and invest $5,000 to $10,000 for a good horse that has been trained to follow the ball, the path to proficiency is not that steep.

Mastering the scene surrounding the game is trickier. For that task Young relied on new friendships with two socially prominent players -- the beer heir Adolphus Busch Orthwein III, cousin of the Anheuser-Busch family, and Ainsworth Dudley, a young Atlanta lawyer from an established Southern family.

"Tony told me Ainsworth paid for most of their shared polo expenses -- a trainer, horse boarding, all that," claims a former friend of Young's from Unionville. Dudley declined comment.

For Young, the major social breakthrough in Atlanta was befriending Orthwein, whose parents had basically brought polo to the area. As a result, "Dolph" was a princeling on the scene, and his house was a frat-like hangout for young Atlanta society types.

With Ainsworth Dudley and, on occasion, Dolph Orthwein as his wingmen, Young started showing up around Unionville to play polo at the Brandywine Polo Club. Young's new skills on the field didn't hurt, given that a decent player can get quite far in this circle. And to go with this new, more rarefied scene, Young developed a new, more rarefied story of his origins.

His Northern friends remember Young telling them that he'd grown up on an antebellum Georgia plantation called Rosebud, where he was raised by an African- American nanny named Mae-Mae. (Fortune was unable to identify any such place.)

These friends remember Young showing off dog-eared photos of the Tara-like estate that he kept in his wallet. When a Unionville acquaintance asked why he wasn't living there, he explained that Rosebud had been divvied up by his extended family. His turn to live there would be coming up soon.

It was in Unionville during the late 1990s that Young cemented his friendship with Dixon Stroud Jr. The two had met several times before on the polo circuit. Then in his fifties, Stroud was the great-grandson of Seth Milliken, founder of one of the world's largest privately held textile companies. In addition, he had inherited the local convenience-store chain Landhope Farms, which his father had started in 1969. Stroud, however, was looking to free up some capital from the convenience stores to devote to an investment portfolio.

Young was able to court Stroud, his eventual patron, on several levels. The two shared a love of polo and of investing, and Young professed an interest in the convenience-store business, telling Stroud that he'd been looking to buy the Sunny Swifty chain in Georgia. "Dixon was never that close to his own sons. I think he related to Tony's ambition, sharp intellect, and chatty nature," says an acquaintance of both men.

Upon Stroud's invitation, Young and his wife, whom he had met in Atlanta and married in 1997, moved up to Pennsylvania horse country in early 1998. Living at first with Stroud and his wife, Lisa, on their 100-acre farm, the Youngs eventually purchased a modest horse farm from Stroud for around $400,000, according to property records. Young managed the convenience chain's day-to-day operations from offices atop a white barn-style Landhope Farms store adjacent to Stroud's estate.

Young ingratiated himself further with Stroud by becoming a leading volunteer for a local nonprofit close to Stroud's heart. Called S.A.V.E. Rt. 41, the organization's primary purpose was to block plans by the state to broaden the quaint two-lane road running through the county and keep development in this feudal enclave at bay.

Tony finally got a chance to show off his business acumen in May 1998. Back then, Stroud sold off 10 Landhope stores, with rights to three additional sites under development, to Pennsylvania-based Sunoco (SUN, Fortune 500). A person familiar with the deal, which left Stroud with only four Landhope stores, estimates that it netted Stroud around $10 million. According to this source, Young was involved in the deal: "Tony at his core is lazy. But when he's focused, he can act brilliantly in business. He impressed Dixon."

Young was also involved with Stroud in at least one other transaction -- this one through the Woodglen Group, an investment partnership in which Stroud is president and chief executive.

According to SEC records, in June 2001 Young acted as both a signatory for Stroud and Stroud's investment adviser on a promissory-note transaction with I-Trax, then a privately held health-care management company. Stroud had put seed capital in I-Trax, which went on to become a publicly traded company. Stroud profited from the I-Trax deal, which provided for his money to be converted at a handsome share price within a certain period.

Not long after, friends say, Stroud started telling people, "Tony is smart as a whip. He's a financial genius." No doubt it was great public relations for Young, who launched the Acorn hedge fund in 2001, working out of the office space above the convenience store.

Two of Acorn's first -- and probably largest -- investors, were Stroud and Strawbridge. Others followed. Says Richard "Buzz" Hannum, a former lawyer and longtime Unionville resident: "People got caught up in the excitement of being part of Acorn."

It didn't hurt that Young went to great lengths to appear legitimate. An SEC-registered investment adviser, he filed quarterly 13Fs -- forms that include specific securities held, the number of shares, and the value -- with the regulator. He hired an old Wilmington accounting firm, Master, Sidlow & Associates, and a noted law firm, Dechert, to advise Acorn. Dechert's Paul Huey-Burns, who resigned as Acorn's lawyer after the SEC filed its complaint, declined comment.

If Acorn started out as an alleged Ponzi scheme, that would be news to some of Young's former employees and investors: He once was a legitimate money manager. One Acorn investor says he would sometimes drop by Acorn's offices unannounced and sit with Young for an hour or so. "He called his investment style 'value with a catalyst' and seemed really up on what companies could merge -- that sort of thing," recalls the investor.

Says a former Acorn colleague: "Tony was always reading finance books, anything by Warren Buffett, Graham and Dodd."

What Young eventually ended up doing in fact had less to do with Graham and Dodd and allegedly more to do with fraud. The SEC claims he began misappropriating investors' money in 2005, four years after launching the fund.

According to the SEC, the way Young worked his financial sleight of hand was pretty straightforward: When Young received a check, he deposited the funds in the Acorn LP account at his clearing firm. Then he instructed his accountants to record the deposit in an Acorn account in Young's name, rather than the actual investor's name. That way the amount of capital in the fund remained level for a while, keeping the accountants satisfied.

Any information about individual investors' accounts was provided to the accountants by Young. So when Young took money out of the fund for personal use, he would tell the accountants it was for an investor redemption. Or he would withdraw funds from other investor accounts and deposit them in personal bank accounts held by himself or held jointly with his wife.

For example, in May 2002 one investor deposited $2 million in Acorn. In April 2006, after biding his time, Young withdrew $1.9 million from that investor's account and arranged for it to be wired to the bank account of a real estate lawyer in West Palm Beach. The next day Young bought his Palm Beach house for $2.1 million in cash.

How could it all go undetected? Young had complete control of every aspect of Acorn, according to the SEC. He "managed" its books, routinely sending false information to the accounting firm. He created performance and account statements that he himself provided to investors. He even routinely provided the SEC with falsified 13Fs and other documents, a criminal offense.

Meanwhile, Young and his wife, who now had two young children, hit the social scene. Young, ostensibly because of his tight connection to Stroud, was welcomed into the prestigious Brandywine Polo Club, of which he eventually became president.

The Youngs dined out frequently with the Strawbridges at the Whip Tavern, the local watering hole. Tony even hired George's son Stewart, a 1998 Bowdoin College grad who became a certified financial analyst while working at Acorn.

It was primarily his connection to those two families, the Strawbridges and the Strouds, say numerous Unionville denizens, that vaulted the Youngs into the upper echelon of society.

Young was asked to join the ultra-exclusive Mr. Stewart's Cheshire Foxhounds, one of the last fox-hunting groups in the country. The couple's moniker, "Mr. and Mrs. D.A. Walker Young," appeared in donor listings of numerous local charities, including Winterthur (the du Pont estate turned museum) and the Brandywine Conservancy, the land preservation group.

The Youngs even began summering in Northeast Harbor, Maine, where other high-society people headed in the heat. Young, who'd gained membership into the Northeast Harbor Fleet Yacht Club, raced International One Design sailboats and took friends for cocktail cruises on his Hinckley Picnic Boat, a 36.5-foot boat that retails for around $650,000.

As Young's social reputation soared, he seemed to grow more brazen, taking the bulk of the money out of Acorn from 2006 to early 2009, according to the SEC. "I often wondered how someone so young could have so many external trappings," says Buzz Hannum.

Those included partial ownership of a Learjet, a black Mercedes station wagon, a white Porsche Carrera convertible, and horses and a staff of as many as seven at the Unionville manse, including a chef and estate manager. Soon, however, the cost of keeping up appearances would catch up with Young.

By the winter of 2008, Young's fund was in trouble. Stewart Strawbridge "must have figured out things weren't right," says an investor. Strawbridge began making plans to leave the firm, and his impending departure triggered a wave of redemptions. Both Strawbridge's father, George, and Dixon Stroud -- who were not just limited partners but equity partners -- wanted out, according to a source close to the fund.

In January 2008, Acorn was faced with a huge liquidation request -- $11.5 million. Problem was, Young had spent almost all of that investor's money, according to the SEC's complaint. Young quickly got to work, shifting money from other investors' accounts back to the unidentified investor -- referred to only as "Investor D" by the SEC. From Feb. 5 through July 29, 2008, Young wired about $11.5 million into Investor D's bank account.

Also, around the same time, the SEC alleges that Young transferred $7 million to Dixon Stroud, ostensibly for a "note receivable." Stroud, in a formal answer to the SEC's complaint, "expressly denied that Young transferred more than $7 million" to him for his benefit, that it was only a perfunctory redemption. Stroud also denied he was "connected to Young" and claimed he was merely one of many Acorn investors and that he had no knowledge of Acorn's fraudulent activity. Stroud did not respond to Fortune's inquiries. Strawbridge's lawyer declined to comment.

As the fund's assets under management diminished, it got harder and harder for Young to keep the alleged con going. According to a source familiar with the fund, in August 2008, in a quarterly statement, Acorn's clearing firm reported the amount of money -- $6.4 million -- held in Acorn LP's core account to a socially connected broker, William "Bill" Coleman. Coleman had placed six clients in Acorn.

The small amount in Acorn's core account was troubling enough to Coleman. But when he simultaneously received account statements for four of six clients he'd shepherded into the fund and the statements showed that the four clients' total worth was just over $6.3 million, the broker suspected something was very wrong. There was no way Coleman's clients accounted for almost 100% of Acorn's portfolio.

Coleman knew there were quite a few other investors in Acorn besides the ones he'd recruited. So he asked Young about the alarming figures. In September, Young told Coleman that Acorn LP actually held around $28 million -- not $6.4 million -- split among different accounts, including a brokerage account and a separate bank account.

Then, early this year, Young sent Coleman falsified statements created with image-altering software from letterhead documents of actual financial institutions. The new statements reflected that Acorn held around $24 million in assets, not including the core account, which had dwindled to $4 million. Coleman remained suspicious, according to the source. Coleman did not return calls.

Meanwhile, Young slipped up. Another Acorn investor, Craig Coleman, coincidentally Bill's first cousin and a friend of Stew Strawbridge's, found a transaction he couldn't identify in a K-1 tax filing that Young had sent him, according to the source. Coleman called Master, Sidlow, Acorn's accounting firm, to inquire about it. Master, Sidlow compared Coleman's K-1 to the K-1 filing Young had sent the firm and the filings didn't match up. (Master, Sidlow and Craig Coleman did not return calls for comment.)

The SEC will not say whether it was the accounting firm, Craig Coleman, Coleman's lawyer, or someone else who tipped it off, but in January 2009 the SEC began what seemed to be a routine inquiry into Acorn.

When Young refused to turn over requested records, the SEC's Philadelphia office got to work combing through Acorn's brokerage accounts, Young's personal bank statements, records from his accounting firm, public records, and testimony from several Acorn investors.

When the SEC complaint was brought this April, it revealed that Acorn had only $3.3 million left in its brokerage account. Yet even in Acorn's second-quarter report to the SEC, filed on April 1, Young stuck to his guns and claimed to have a total of $122.4 million in the fund, and 12 separately managed investment accounts. And in a bizarre twist Young reported that his largest "positions" were $31 million in Campbell Soup (CPB, Fortune 500) stock and more than $11 million in Merck (MRK, Fortune 500).

The Youngs' assets, frozen in April by the SEC, are now in receivership. Sotheby's recently listed their Pennsylvania and Maine homes for sale. On Oct. 10, Young's horses -- which have now grown fat from not chasing polo balls -- were sold at auction for roughly $150,000. The contents of the Youngs' Unionville house were to be auctioned on Nov. 14.

The U.S. Attorney's office in Philadelphia and the Federal Bureau of Investigation are looking into Acorn, and lawyers involved with the case say they expect Young to be indicted soon.

Meanwhile, Dixon Stroud's reputation as Unionville's reigning patrician is tainted. Not only did he vouch for an alleged charlatan, but he also propelled Young into this rarefied world. A neighbor told Fortune that Stroud has been telling people he feels awful about introducing Young to the community. "My sense is that he despises Tony Young now," says the neighbor.

It's late September in Palm Beach. The mercury hovers at 100 degrees. Worth Avenue, with its usually bustling boutiques, is shuttered. Many of the oceanfront mansions are sealed up for hurricane season. About the only action in town is at 280 Sanford Ave., Tony Young's house, where the once-great sportsman is holed up -- out of season and out of luck.

His children, one sporting a Brandywine Polo Club T-shirt, are running around the gravel driveway with a power hose, supposedly washing the car. Suddenly Young walks down the driveway as if he's been expecting a visitor.

Young looks far from villainous, with his flash of reddish-gold hair and broad, warm smile. His lawyer, Catherine Recker, has instructed Young not to talk. Yet he can't stop himself. He says he wants to write an investing book about sussing out fraud. "I'll have plenty of time on my hands to do that," he says, and then laughs at his own joke.

Give him a topic like polo, and he's off. He says he's ranked a "1" in polo -- that is, he's a very good amateur. He boasts about playing "competitive" matches at the International Palm Beach Polo and Country Club in Wellington, Fla., the epicenter of the sport of kings. Indeed, it was his great love of the costly sport, he says, that led in part to his undoing.

Over the course of an hour chat, two themes keep coming up. First, Young admits that he messed up with Acorn. "I crossed the line. I did things that were very wrong, illegal, and I'm very sorry about the investors who got hurt," he says. "I'm working diligently for the best outcome for Acorn's investors."

When confronted with the various inconsistencies in his biography and the yarns he allegedly spun along the way, Young either denies he ever told them or he tries to talk his way out of them. For example, when asked about his attending Choate (and the school having no record of him), he claims to have attended summer school there -- an uncheckable assertion as the school does not keep records for summer school attendees.

The second theme is more subtle. He asks a lot of questions, trying to deduce what exactly Fortune has learned about his upbringing in Georgia. Maintaining the façade of being from a patrician background seems more important to him than the legal predicament in which he currently finds himself. Chatting with him, you get the sense that if he could choose between losing his social rank or his freedom, he just might forfeit the latter.

Indeed, after all that has happened, he continues to put a gloss on his youth. Today he reminisces about "growing up in the greater Georgia plantation community," and getting his first polo pony from his parents when he was 17 years old. His parents, he says, bought the horse from Norman Brinker, founder of Chili's.

He talks about another old-money pastime, "shooting" -- i.e., quail hunting -- on sprawling acreage owned by his "longtime friend" John Flournoy. (Perhaps it has slipped his memory that Flournoy, a Georgia-based Acorn investor, is unlikely to be a hunting partner anytime soon, since he recently filed a separate suit against Young and Acorn.)

Even his account of his mother's mysterious death is seasoned with a dash of Southern Gothic. One day he got a call from a Fitzgerald woman he calls a family "hanger-on" (a term he often bandies about). She said, "I have good news for you and bad. First, your mother is in a better place. Second, she hit her head on the side of the pool today and drowned."

There is something pathetic about his inability to understand that his fibs are catching up with him and that many of his society friends now view him as a pariah. He has reached out by cellphone to some Unionville friends -- or rather ex-friends -- "exhibiting an oddly upbeat manner," says one. "He's told them he's going to make investors whole. He just has to get his hands on more of his family's Coca-Cola money." Money that, he says, his father has.

Brian Powell, Young's boyhood neighbor in Fitzgerald, isn't so sure about the Coca-Cola money. Or as he says, "I'm looking out the window at Bobby Young's place, where Tony grew up. It looks like a HUD house. If he has a dime to his name, he's never shown it. And I've known him all my life."

Reporter associate: Marilyn Adamo 

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