Ponzi Scheme

This weekend I saw a movie called The Informant. It stars Matthew Damon playing the real life person who exposed a price fixing scheme going on at Archer Daniels Midland (ADM). The guy's name was (and still is) Mark Whitacre.

While acting as an FBI informant for about 3 years, he also stole over $9 million from his employer. So much for being Mr. Nice Guy.



Mr. Whitacre to this day claims he was actually one of the good guys and that without his help the FBI would never have found out about the bad guys doing all that really bad price fixing which hurt so many good people. Like a lot of white collar criminals, Whitacre is extremely well educated. He also rationizes his own criminal conduct by claiming what he did was, well, justified or okay under the circumstances.



I enjoyed the movie but, at the same time, found it disturbing. I recall working with criminal clients over the years and, for the most part, they all rationalized their conduct. If they had stolen from their employer it was because they did SO MUCH for their employer but were paid SO LITTLE! So they just sort of made things right, don't you know? (I always said "No, I don't know and neither will a judge.")

The guy who stole money to support his drug habit or robbed a store to get cigarettes, beer and $24 in cash (and, yes, people do such things more than you ever believe) or drove off with someone else's car, well, they need to spend some time in jail. No doubt.

But the REAL crooks -- the REAL bad guys -- are the Bernie Madoff's of the world. You may recognize Mr. Madoff in this photograph.



Without boring you to tears -- assuming you are still reading this -- Madoff stole $65 billion (yes -- BILLION) from investors. (There's a lot more to this story....) When Madoff was sentenced to 150 years in federal prison, he was also ordered to turn over $170 billion (yes -- BILLION) in assets.

Madoff admitted that he had been running a Ponzi scheme for many years. A Ponzi scheme, in essence, is just a type of con game. Some fancy, well spoken, legitimate looking person makes promises that he will take you money, invest it for you and you will make great profits. To encourage you to keep giving him money, he will pay you "returns" as promised - such as 20% on your investment. The con game is that the money he pays you for the big return is actually your own money! The idea is to lure more and more people to invest their money with you.

Here's a picture of Charles Ponzi -- the guy who became infamous for using this con game technique to swindle people in early to mid twentieth century.



Charles Ponzi made over $420,000 by fooling people in 1920. Yet, if you were to have talked to the man or even just looked at him, you would find him a very credible, apparently intelligent, hard working and maybe even honest person.



The key to any good con man or embezzler is to make others think you can be trusted. You victims .... uh, clients ... also have to believe you are really successful. Thus, since YOU are so successful, then you can help ME become successful, too!

Last night Marc Dreier was featured on 60 Minutes. This man was considered one of New York City's best lawyers, lived in an $11 million condo, owned an $18 million yacht, had an art collection that was incredible -- but it was discovered he stole $400 million from people using a Ponzi scheme approach. He was sentenced to 20 years in federal prison.



What is really sad is that people like Mark Whitaker, Bernie Madoff and Marc Dreier are all extremely intelligent, well educated and hard working people. They proved they could be successful and had the ability to make a lot of money. Unfortunately, they are crooks.

It makes you wonder why people like this act the way they do. It is such a waste. But, then again, money and greed and a desire to have more and more and more can ruin a person. So often a person with great potential opts to take the easy way out or allows greed to justify criminal behavior.

I noticed none of these men ever admitted they did anything really wrong. They did say they were sorry if they hurt other people but never believed what they did was bad. And that is the real tragedy.

Fortunately for me I will never have to worry about having a of money to invest (well, maybe that is not so good, but.....). I fall into the category of person much more like Clark Griswold than Bernie Madoff!



I guess that Truckster does look pretty good! And it looks like such a good place to buy a car! Hmmm.....

Thanks for stopping by.