Monday, October 5, 2009

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.


Leslie: said...

It is so sad when people do things like that instead of using their God-given brains to make a great life for themselves AND others instead of being crooks.

Maureen said...

I believe the word you're looking for is sociopath.

Hilary said...

I believe Maureen nailed it. No remorse.. no thought to others. A scary sort.

Great post, Clark.. errr.. Russell. ;)

Jo said...

Now that is my type of car. I would buy that car just for the headlights...!

And yes, there will always be people who con other people, and I imagine the majority of them don't get caught. It's like the esteemed J. Wellington Wimpy in the "Popeye" cartoons -- "I'll gladly pay you Tuesday for a hamburger today."

Of course, you know you're never going to get paid for that hamburger.

These crooks are just moochers. They want something for nothing, and if people are stupid enough to give it to them ... well ... Fortunately, I don't have anything to give them. :-)

Russell said...

I don't normally post a comment to my own post, but....!

You see that Truckster car? Which, by the way, I love a lot. That is a Ford LTD Country Squire station wagon that was customized with the extra front lights and so on.

My father had a Ford LTD Country Squire nearly identical to this car for years -- and he had prior and later models, too. We had one, one time with that same green color and the wood grain paneling -- I think they all pretty much had the wood grain paneling.

The first car I ever drove was one of these and I think it was bigger than most school buses! Heh! But it was great!

Dr.John said...

It is this desire for more and yet more that both drives and hurts capitalism. The "good guys" that run our industries want larger and larger profits so they out source their factories. Our workers are left with no jobs. But the stockholders got still richer.

Floyd Perry said...

I am the official biographer of Mark Whitacre and know him and his wife Ginger and their three children extremely well. While I appreciate your efforts to interpret the movie and draw conclusions from it, you are way off in your analysis of Mark Whitacre. Your comments are based on limited knowledge, and if you had the full story, you would reverse your position instantly.

Mark Whitacre had acute situational stress disorder as a result of working undercover for the FBI wearing a wire for more than 3 years. He has accepted full responsibility for his transgressions, which were in fact minor compared to the enormous good he did. He saved consumers millions and millions of dollars by exposing the price fixing scandal at ADM. None of the others you mention had any offsetting good actions. Therefore, I take strong exception to your comparing him to Bernie Madoff or Macr Dreier, both of whom were outright thieves. Mark Whitacre has NEVER tried to justify what he did. He takes full blame and full responsibility for his embezzlement even thought the FBI today calls him a national hero. I strongly suggest you either order the book I wrote about Whitacre (MARK WHITACRE AGAINST ALL ODDS) available on Amazon cheaply (about $13). Or call me at 904-790-9423 and I would be happy to send you a courtesy copy. You could not be further from the truth with respect to Mark Whitacre. His case is completely and totally unlike the others. Yours very truly, Floyd Perry

Russell said...

Mr. Perry,

Thank you for your comments.

How can Mark Whitacre justify stealing $9 million (or was it $11 million?) from ADM? I am not interested in his accepting blame or being sorry -- every criminal I represented was sorry they were caught (!!).

Usually when people have to explain or justify their actions, the actions were wrong.

Anonymous said...

The FBI seems to be holding press conferences on TV supporting Whitaker
and disagreeing with the film

Small City Scenes said...

Greed is terrible and they (whoever they are) say we all have a little larceny in all of us but........that is going to extremes. 11 billion--zowie!
He who protests too much usually is guilty.
Good post Russell. MB

Russell said...

Yes... you are right, MB.

I will be honest. I really don't know much about Mark Whitacre other than seeing the film and what I have read about the case. I will be happy to read Mr. Perry's book.

I would like to know if Mr. Whitacre paid back the $9,000,000,000 he stole from ADM?

I did have to laugh when Mr. Perry claimed Mark Whitacre is not a crook like the other men mentioned in my post.

So.... assuming he is not a crook, then just what DO you call a man who steals $9,000,000,000 from his employer??! Heh!

By the way, the term "con" man refers to a crook who convinces someone to take hm (the crook) into his confidence and to trust him.

Perhaps Mr. Perry would see Mr. Whitacre a bit differently if he were not so close to the man and subject to Whitacre's spin and rationalization of his criminal acts.

My interpretation is that the reason Whitacre cooperated with the FBI was because he wanted to become the CEO of the company -- so the cooperation was for self gain.

But, I have spent more time thinking about Mark Whitacre than I care to -- from my impression, he is not worth my time.

But, one more time: Did he pay back the $9,000,000,000 he, uh, let's say, "borrowed" from his employer??????

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