Looking at Criminal Fraud

On Monday, December 6, 2010, the Justice Department charged hundreds of people in criminal and civil financial fraud cases in an effort to cut down on investment scams such as Ponzi schemes.  The Bernie Madoff affair is the "mother of all Ponzi schemes" as I previously blogged. However, it doesn't stop with Madoff. Government officials claim that these and other schemes harmed more than 120,000 people and that criminals stole thousands and sometimes millions of dollars from victims.  There appears to be three groups of scammed investors. One group are those that trust the scam artist and may even have a personal relationship with that party just as did those harmed by Madoff's scams. Another group appears to be well-heeled individuals such as those in the sports and entertainment fields. These folks may be ready targets because they have a lot of money to invest, typically know little or nothing about how to invest it, and some may also rely on outside parties to advise them on investments only to find that they, too, have been scammed. Then there are the least among us able to provide for our own future retirement such as the elderly who believe the promises of huge returns only to lose their life savings.

What leads someone to take advantage of others in the worst kind of way? Are they good people who just got greedy? If that's the case they are not good people. They pursue their own self-interests to the detriment of others. They rarely consider the consequences of their actions on others. They look for any advantage -- an opening -- to build the level of trust needed to scam another party in the grossest way.

What can we do about it as a society? Ponzi schemes and the like are indicators of a greater malaise in our society where too many people look for ways to get money without working hard to get it. In other words, they earn their money the new way -- scamming -- not the old fashioned way as the veritable, old brokerage house of Smith Barney used to say. You remember -- we eeaarn it!

Every day we seem to hear about some kind of financial fraud whether it is investment scams, financial statement fraud, Medicare fraud, city officials like those at Bell city in California stealing the public's money by pulling in outrageous salaries and other benefits. Then there are those who use their position and influence to enhance personal wealth such as government officials. Let’s not leave out the corporate-types who walk away from their jobs with multi-million dollar severance packages even in the face of a financial meltdown.  This is just the tip of the iceberg. We have a real problem in the U.S. and it's getting worse.