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(If you want to commit a crime,) DO IT IN BOSTON. - It was the best and worst of times in America. Many still refer to the era as “The Roarin’ 20’s.” It was the age of Al Capone, gangland wars, the Prohibition, the silent movies. It was also the Golden Era of the USA, if there ever was one. It was the age of Joe Louis, Babe Ruth, Big Bill Tilden, Valentino, Bette Davis, Enrico Caruso, Arturo Toscanini, Paganini and so many other great talents in sports, the film industry, the performing arts, etc., the likes of which and of whom we have never seen again, then and now. It was also right about the time when Charles PONZI pulled off one of the biggest scams in history, an outright case of fraud and embezzlement now more commonly known as the “PONZI scheme/scam,” named after, who else. At the height of his operations, Ponzi, an Italian immigrant, was making $250,000.00 a day. In today’s currency, that would roughly be equivalent to $25-million daily.
I bring this up only because even now the entire financial world is still reeling from the impact of what may turn out to be the biggest Ponzi scam of all, admittedly perpetrated by Bernard Madoff, former Chairman of NASDAQ. Initial estimates of the total amount lost in the pyramid scheme is approximately US$50 billion, which is approximately the total foreign debt of the Philippines which every year eats up 75% of our annual budget. That’s why we’re so miserable. Like any bankrupt business in the process of liquidation, our country has to make do and operate on a budget of 25% of its annual approved general appropriations bill, including inherent losses for fraud, waste and abuse on the part of those in power. The rest automatically (by law) goes into “servicing” or paying the interest on our foreign debt. (Why we have to pay will have to be the subject of another blog).
After serving prison terms in Quebec (Canada) and Atlanta (Georgia, USA), Ponzi finally settled and married in Boston. He began his pyramid operations by renting a tiny little nondescript storefront unit in downtown Boston. Making an outlandish “double-your-money-in-90-days” offer to incredulous if curious customers, Ponzi soon managed to attract hundreds/thousands of investors into the scheme, eventually taking over the entire ground floor, then the entire building where he had started. People were mortgaging their homes and investing their life savings. Sacks full of money were literally being brought in daily. The irony of it all was that the government (federal and state) eventually stepped in not really to investigate the patently fraudulent and illegal investment scheme (a palpable violation of the securities law as well as banking regulations), but on account of the scandalous and unbearable volume of traffic spawned in the area.
Well, the rest as they say is history and may be found extensively described in Google’s Wikipedia. Unknown to many, however, is that Ponzi purposely chose Boston as the site of his illegal operations because at the time the city was reputed to have the best prison facilities. That’s probably where or how he picked up the term or how the term was coined: “if you want to commit a crime, do it in Boston.” It seems in the roarin’ 20’s it was eventually shortened to “do it in Boston.” (Of course, having previously worked in a small bank, Ponzi also realized that at the time, there was a legal provision (Federal) indicating a maximum prison term of five (5) years for any bank president who embezzles. Eventually, though, the State stepped in to add another 3-year imprisonment for his crime).
The Ponzi scheme/scam has been replicated and perpetrated over and over again, sometimes in more or less sophisticated forms throughout history all over the world. As long as there are criminal minds determined to get rich quick, the pyramid scheme will surface and re-surface in the financial world to attract gullible if greedy investors,. The Philippines of course is no exception. Even as we speak, the SEC must have its hands full investigating and having to deal with similar investment scams.
As if the USA and the world were not buffeted enough by all kinds of failed businesses, industries, banking and financial crises, resulting in global recession, we have been witness to outright corporate fraud amounting to tens of billions of dollars perpetrated in the publicly-listed companies such as ENRON and the late Kenneth Lay, Anderson Consulting, etc. To top it all, here comes this fellow Madoff, an erstwhile respected giant in the financial world. He may go down in history as taking over the Ponzi scam and converting it into the “Madoff madscam” (I am laying claim to be the first to coin the term).
The whole sordid business of fraudulent financial scams is almost laughable. How can people be so stupid and how can Madoff even think of pulling off such scheme? But nobody’s laughing because even now many giant philanthropic institutions are reeling from the hundreds of millions they lost in such investments, money that could have fed all the starving and homeless millions in Darfur, Sudan, Ethiopia, etc. till the next century. The whole financial world lost money and investment confidence after this series of white-collar fraud.
What can the world do with people like Kenneth Lay & Co.; and what did they want to do with billions of dollars of ill-gotten wealth, for goodness sake? Poor Kenneth Lay died soon after he was convicted. Madoff it seems is almost 70. By the time he leaves prison, he will be 90. Does anybody even care? Why am I blogging about this anyway? I don’t have $100 to invest.
Don’t we have government regulatory agencies which are supposed to watch out for and guard us against securities fraud? What regulatory agencies? We have regulatory agencies which are supposed to guard and protect us from abuses in virtually every conceivable business or commodity. There are oversight bodies for oil, sugar, rice, coconut, mining, construction, etc., etc. What are they good for? If anything, they are there to remind us that nobody can protect you or watch out for your interest except yourself. The state is there to provide lucrative jobs for some lucky few bureaucrats in the red-tape industry.
This whole sordid business with billions of dollars somehow makes me hungry. Excuse me while I go to a neighborhood carinderia to buy my daily P25-lunch. – JAMES D. LANSANG
elmersarmiento wrote on Dec 19, '08
The scheme was not only tried in the U.S. but also in our poor country. The manipulators became rich and some have been tried and jailed. Others are still roaming around and are living the lifestyle of the rich and famous.
Sounds familiar, James. |
To know more about pyramid schemes and other scams, the Department of Trade and Industry recommends the following sites:
http://www.mlm-thetruth.com http://www.pyramidschemealert.org The US-based scammers after being exposed and prosecuted in the USA are going to other developing countries such as the Philippines. |
Tnx, Kuya TOM. Actually, it is our Securities & Exchange Commission (SEC) which is principally the regulatory body tasked to prevent and prosecute such "securities" fraud. However, as you might agree, most of these agencies are heard from only after the swindler has managed to run off with millions of pesos from gullible investors. It's like closing the barnyard door after the horse is gone. There is no pro-active "intelligence work" undertaken to prevent recurrence of such crimes. SEC is too busy with its typical bureaucratic and administrative red tape. If truth be told, many "networking" operations should be disallowed as sly forms of pyramiding schemes. Instead of dealing in "securities" these companies purportedly trade in "goods."
What can we do? Suckers are born every minute. |
Korek ka dyan, Kuya ELMER. Our poor gullible investors would be much better off is SEC would use its "intelligence funds" to investigate suspicious-looking operations and nip them at the bud, instead of these government functionaries simply sitting in their air-conditioned offices waiting for complaints to suddenly flood them. By then, the bird has long flown the coop and millions of hard-earned money lost.
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To view a TV expose on a typical MLM/pyramid/network marketing scam, go to:
http://www.cbc.ca/marketplace/2007/01/goji.html |
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