The Supreme Court last week narrowed the scope of the honest services law, which makes it fraud to “deprive another of the intangible right of honest services.” The law was used to convict everyone from lobbyist Jack Abramoff (out of prison and working at a pizzeria of all places), to U.S. Rep. William Jefferson of Louisiana (who hid $90,000 in his freezer of all places.)
The honest services law was also used to convict several of our inductees — including Jeffrey Skilling of Enron and Conrad Black, both of whom had their cases reviewed and sent back to the lower courts. In its ruling, the Supreme Court deemed the honest services law unconstitutionally vague and limited its scope to bribes and kickbacks. While Skilling and Black certainly used unsavory methods to line their pockets, it’s up to lower courts to decide whether some or all of their charges should be dropped.
So how will this play out? There’s been a lot of buzz about the wisdom of the court’s decision; a former U.S. attorney general described it to NPR as a “real cutback,” while an editorial in The Washington Post noted that the law was unclear and imprecise and “deserved to be struck down.”
Beyond the impact of the court’s ruling on future cases of gross misconduct (the honest-services law has been widely described as a favored tool of prosecutors), people are wondering what this means for Skilling, Black, and others.
Skilling, who was convicted on 19 counts, is unlikely to be “home free” even if his honest-services charge is dropped, noted a lawyer on a Wall Street Journal blog. As for Black, the high court agreed that his jury was given improper instructions to determine whether he was guilty of fraud. Black’s lawyer plans to seek bail, reports the Chicago Tribune. But, like Skilling, he was convicted on other charges; there’s the little matter of obstruction of justice — the 13 boxes of evidence that Black was caught on tape removing from his office.
What do you think of the ruling? Do you think it was too vague and used too freely (even to ensnare crooks)? Or do you think the Supreme Court has dealt a serious blow to the prosecution of the greedy and corrupt? Weigh in with a comment!
Sam Antar, who cooked the books in the outrageous Crazy Eddie con of the 1980s, doesn’t mind being called a creep. In fact, he sort of likes it. When he spoke recently to a group of students at Stanford University, he got the usual questions. Someone wanted to know if he was sorry for ruining so many lives. He insisted that’s not the point. Another person asked if he ever talks to Eddie Antar, his cousin, co-conspirator, and childhood hero. (They sat down for a joint interview a few years ago…but that didn’t go so well.) The last student at Stanford didn’t have a question. She just wanted to share something. She thinks he’s creepy.
Sam’s face lit up when he told me that story. That’s just the point! That’s exactly right! Sam is a person who will remind you of his basic lousiness and inhumanity as many times as you’ll let him. To make a point, he’ll stretch about as far as a person possibly can into what he freely calls “hyperbole and bullshit.” He challenged me to explain why I’d give him a ride to the airport from Stanford: Would you do the same for a serial killer? Is there any difference? Aren’t white collar criminals just as brutal in the execution of their crimes? I said I thought every interaction is a sort of negotiation. White collar criminals (and serial killers) might be more ruthless and cold-blooded than the rest of us…but don’t we all have an eye out for an opportunity?
I’m glad we took ours and sat down with Sam Antar before he flew back to his native New York City. It was a long and interesting interview with the biggest liar — and the biggest straight talker — I’ve ever shared an afternoon with.
Here are a few short clips from that interview. We’ll post more in the coming weeks. But, for now, here’s Sam Antar on criminality and humanity:
Sam Antar Interview, Part 1: The Rules of Criminality
Sam Antar Interview, Part 2: Humanity, or the lack thereof
The twisty manipulations of a con artist can make for a great movie plot. It can be fun to watch a cinematic smooth talker reel in his victim, or scramble to keep up appearances. Like the characters in this Hall of Infamy, these con artists can be charming, extravagant, and unscrupulous. Their lies can seem so blatant to us, the audience who’s at a safe distance and watching the drama unfold. We can’t believe their victims don’t see what happening; it’s so obvious, we say (just as we sometimes do after learning of a real-life con or fraud).
What’s your favorite movie about con artists? Here are a few that came to mind — but feel free to add your favorite in the comments:
House of Games (1987): The plot of House of Games (director David Mamet’s first film) is about as twisty as they come. The tag line in the trailer says it all: “In the House of Games, there’s no one you can trust…not even yourself.”
The Sting (1973): Set in 1930s Chicago, The Sting stars a terrific pair: Paul Newman and Robert Redford. This is a classic that deserved each one of the seven Academy Awards that it earned.
Catch Me if You Can (2002): Based on the true life story of Frank Abagnale, Jr., this film follows Leonardo DiCaprio as he writes one bad check after another, passes himself off as a pilot, doctor, and a lawyer, and tries to elude the FBI agent determined to catch him.
Wall Street (1987): “Greed is good,” says the scheming stockbroker played by Michael Douglas. That character, Gordon Gekko, was a composite of several real people, including Ivan Boesky. Oliver Stone has directed a sequel about the 2008 crash, Wall Street: Money Never Sleeps, set for release in September 2010.
What else? Let’s grow this con artist movie list; after all, they’re better to watch on screen than to actually know….
This weekend, I read in the Winston-Salem Journal about an alleged Ponzi schemer named Keith Franklin Simmons who – up until the moment he was arrested in December – scrambled to find a way out. He came up with an elaborate story to explain why his investors hadn’t seen a dime in five months. The story went like this: the 240 investors in Black Diamond Capital Solutions had nothing to worry about. Their money was wisely and safely being invested in the foreign-currency exchange system. The reason they couldn’t make a withdrawal or receive a payment was simple. One of their fellow investors was a German fugitive under investigation by the Treasury Department.
Investors received a series of emails from a hedge fund manager (who says he was also duped by Keith Franklin Simmons) that are alleged to be total fiction. On Dec. 2, the story was that the German fugitive’s attorney had become involved and would ensure that $120 million was put back into the foreign-currency exchange. The hedge fund manager wrote: “…I felt good myself after hearing Keith this morning because he had a very upbeat tone in his voice and that can’t be anything but good for us.”
An upbeat tone in his voice, maybe, but what must Simmons have been feeling when he talked to the hedge fund manager? There was no German investor named Klaus. There was no $120 million. According to court documents, Simmons didn’t invest funds anywhere except for banks and on cars, real estate, luxury travel and, of course, in the Ponzi scheme itself.
By Dec. 11, the hedge fund manager admitted that he hadn’t been able to reach Simmons. “I wish I had more to report but we’re all in the same boat and just want our money…” Less than a week later, the FBI arrested Simmons.
This story caught my eye because it reminded me of one of our inductees. When James P. Lewis, Jr. knew his Ponzi scheme was winding down, he froze his investors’ accounts and blamed it on the Department of Homeland Security. He even placed a fake phone call from a “Mr. Sanchez” to convince his clueless employees that the freeze was happening on account of a suspicious wire transfer.
What do you make of this kind of behavior? Do you think these guys believed they could find a way out? Did they think that their employees and investors would buy a far-out story for long enough to allow them time to dig up more money? Or were they just stalling the arrest they knew was coming?
Thanks for voting on the con artist you’d like to see in the Hall of Infamy. If you missed this round, we’ll have another group for you to vote on next week.
And the crook with the most votes is…Lou Pearlman. At the same time that he launched two wildly successful boy bands, ‘NSync and the Backstreet Boys, Pearlman ran a huge 20-year Ponzi scheme. Among the investors he persuaded to fork over millions for two non-existent companies were close friends and the elderly; such details don’t go unnoticed. As the judge who sentenced Pearlman noted: “…The sympathy factor doesn’t run high with the court.”
So Pearlman is serving a 25-year prison sentence. According to several articles published in March 2009, he’s keeping busy behind bars and looking to promote a new band called Biteboy. Last year, he was working on a deal for a reality television show about Biteboy’s attempts to hit the big-time. “It’s part Charlie’s Angels, part Making the Band,” the band’s manager told Portfolio magazine. If this show pans out, Pearlman might even play a minor role in the show — or at least his voice on speakerphone would play a role. The tentative name for the show: “Jailhouse Rock.”
If it sounds like I’m making this up (and I know it does), check out this article in Portfolio magazine. Apparently, there are ways for convicted felons to work outside the confines of prison. And, apparently, some people still want to work with Lou Pearlman.
Crazy, I know. But, then again, as the Portfolio article points out, maybe Pearlman is just the guy to pull this off:
“Before he filed for bankruptcy in early 2007, Pearlman had parlayed a cash-strapped helicopter service into a blimp company, crashed his first blimp minutes after its launch, then used the insurance money to take a second blimp company public. At the same time, he lured investors by selling shares of 727s and 747s in his charter airline fleet—jets he never owned.”
We’ll learn more about this character soon – look for him when we roll out our 2010 inductees this summer.
We’re gearing up for our 2010 inductions — and we need help deciding which crooks deserve a spot! We’ve selected some of the best nominations submitted by visitors to the Hall of Infamy; every two weeks, we’ll post a bit about these schemers and ask for your VOTE. We’ll post the results the following week — and then give you another chance to vote on who you think we should add to this infamous crew.
VOTE #1:
Courtney Chauncey Julian may have had a big, flowery name but he used down-home folksy tactics to run his con in the 1920s. He reeled in thousands of people during the speculative oil frenzy that gripped the city of Los Angeles with clever newspaper ads that promised easy money. When the bubble burst in 1927, shareholders lost up to $150 million.
Jordan Belfort, the “Wolf of the Wall Street” ran a pump-and-dump operation in the 1990s; investors who bought his artificially inflated stocks lost $100 million. A movie about his life (and based on his autobiography) is due out in 2010 – it’s directed by Martin Scorsese and stars Leonardo DiCaprio.
The Jacobowitz family of New York ran a huge decade-long fraud with Allou Healthcare, from imaginary sales and inventory to phony insurance claims. The con collapsed when the family bribed an undercover Fire Marshal to describe the fire in an Allou warehouse an “accident” (rather than “arson”). Losses totaled about $160 million and three Jacobowitz brothers are serving prison time.
Philip M. Musica was known to the world at various times as Frank D. Coster and F. Donald Coster; under all three names, he ran afoul of the law until his suicide in 1938 – for bribing customs officials while importing cheese, for borrowing on invoices for a company that dealt in human hair and, finally, for masterminding a major financial fraud through McKesson & Robbins, a pharmaceutical company.
Lou Pearlman launched two of the biggest “boy bands” of the 1990s — and he swindled banks and individuals of more than $300 million. Over 20 years, Pearlman took funds from hapless investors for companies that only existed on paper. In 2008, he plead guilty to four counts of conspiracy, money laundering and making false claims of bankruptcy.
I remember feeling such outrage over Enron. I remember seeing news footage of grim-faced employees carrying boxes of their belongings from the corporate headquarters. Those employees – about 20,000 people in total – lost their jobs, along with billions of dollars in stock and retirement savings. I remember feeling such contempt for the architects of that gigantic fraud; feelings that were reawakened when I watched the excellent documentary, “Enron: The Smartest Guys in the Room.”
We learned about Enron nearly ten years ago. A lot has happened since then (much of it worthy of outrage), but it’s interesting to think back to that time and that particular outrage. Enron turned out to be the first in a significant wave of revelations of fraud. There was Bernie Ebbers of WorldCom, a company with inflated stock prices and as many as 55 distinct billing systems. Then there was Dennis Kozlowski, the CEO of Tyco known as “Deal-a-Day Dennis.” Like Enron and WorldCom, the details of Tyco’s $600 million fraud were shocking. But what really seemed to stick in the mind (and the craw) was Kozlowski’s gross and over-the-top extravagance on the company dime. Film footage of the $2.2 million party that Kozlowski threw in Sardinia (complete with an ice sculpture of Michaelangelo that dispensed vodka) was hard to stomach. Apparently, the jurors in his trial agreed; he was sentenced to 8-25 years in prison.
The crimes of Skilling, Ebbers, and Kozlowski (and the attendant front page headlines) happened in a very different atmosphere. An article that appeared in Fortune Magazine a few months ago poked at the question of then and now; David A. Kaplan, who’s working on a new book of great interest to us (”The Age of Avarice”), offered a “contrarian’s take” on crime and punishment. His article, “Why Tyco ex-CEO Kozlowski should get clemency,” laid out a case for clemency for Deal-a-Day-Dennis — or inmate No. 05A4820 as he’s now known.
Kaplan quotes the inmate himself, who acknowledges that he was “piggy” but feels he doesn’t deserve to be behind bars. In the light of the current “sea of financial shenanigans,” Kozlowski looks a bit different. He looks more like a “scapegoat deserving retrospective leniency.” Kozlowski was indeed piggy, but he didn’t bring Tyco down; Kaplan wonders if it’s fair for him to serve more time than that of most killers.
It’s a thought-provoking commentary. Do you think the punishment matches his crime? Bernard L. Madoff got the maximum sentence of 150 years. Fair? What about the execs who brought down AIG or Lehman? What do they deserve?
Charles Ponzi
As we prepare to enter a new year, it’s natural to take a hard look back at where we’ve been. There are some dark patches in the last decade – events and people we’d like to leave behind. Included in that discard pile: the scores of greedy crooks who recently slithered out into the sunlight. In a moment when so many Americans are struggling to get by with so little, we’d love to see 2010 unmarked by fraud, deception and financial ruin. But the tide hasn’t washed up all the scumbags. Nor will it ever, which is why this website could exist for eternity…
It goes without saying that the fraudster and the con artist are enduring characters; our infamous pack of 36 goes all the way back to the 18th century with John Law and the South Sea Bubble. It’s also clear that these crimes happen in waves when the market is booming and investors feel that anything is possible. When the cash dries up, the game is over.
We knew that 2009 was significant in the world of con artistry – it’s the year the Hall of Infamy launched. It’s also the year that both Madoff, and Ponzi, became household names. For (probably) unrelated reasons, this was a terrible year to be a con artist. An Associated Press analysis of scams in all 50 states revealed that nearly four times as many investment scams were uncovered this year as in 2008; about 150 Ponzi schemes fell apart in 2009, leaving investors with holes in their pockets totaling $16.5 billion.
The AP article notes that stepped up efforts to investigate fraud have helped to both uncover these crimes, and have resulted in greater caution and awareness amongst investors. We’re interested in exploring the enforcement side of the fraud story; in 2010, you can expect to see more about that on Con Watch. We’re also planning to nominate a new batch of inductees to the Hall of Infamy. Starting next week, you’ll have an opportunity to vote for the creeps you think are most deserving of a spot here. We’ll be drawing from the names submitted by Con Watch readers; if you have a crook in mind, there’s still time to nominate.
In the meantime, we wish you a happy new year. May you only experience deceit and ruin on the pages of this website!
Last Sunday, I sent an email to one of our inductees. Fifteen minutes later, the phone rang. I spent the next hour talking with the former chief financial officer of the Crazy Eddie fraud about immorality and “walls of false integrity.”
Sam Antar says he hasn’t changed. “I’m the same person that I was in 1985,” he told me. “The only thing that’s changed is that I’ve made a choice not to commit crime.” Back then, Sam helped build the crooked foundation of the Antar family’s business. Today, he runs a website devoted to white collar fraud and travels around the country giving lectures with “chilling straight talk about the mind, motivations, manipulations, and techniques of a fraudster.”
As for the chilling straight talk of our conversation, Sam said that he, his cousin, Eddie, and the rest of the Antar clan never gave a second thought to the victims of their crime. Their conversations were “cold-blooded,” focused solely on how to increase their profits and hold the fraud together.
It’s hard for me to understand such cruel self-interest, but I may not be alone in this. According to Sam, it’s a mistake to “humanize a crook” by trying to understand his actions. “We’re inhuman,” he tells me. “We have no humanity as it relates to morality.” Every single move that a con artist makes is designed to conceal his true intentions behind a “wall of false integrity” and bolster his victim’s comfort level.
So what about those of us who struggle to fathom how a person could set aside morals for a buck? What does Sam Antar make of us? “Enablers.”
And white collar criminals are very good at picking up enablers. They love moral people.
**
Stay tuned – there’s more to come from Sam Antar in the coming weeks. It turns out he’s not only an inductee to the Con Artist Hall of Infamy….he’s a fan!
Laurie Schneider, alleged "Ponzi princess," NY Post
As we rounded up our first group of inductees, we knew who was missing. We have profiles of con artists from the 1860s and the 1960s. We have crooks from Brooklyn and Sweden. We have pastors and CEOs. But we don’t have a single woman in the Hall of Infamy. Sure, women figure prominently in these stories. Some of them are pretty interesting, like the long-lashed Tammy Faye, who was married to Jim Bakker. One woman – Betty Payne – ended up behind bars for helping her husband run his con. But, like the female characters in a blockbuster action film, these women are peripheral. They didn’t engineer the cons; they played supporting roles.
So where are the women con artists? Is it lack of opportunity – a kind of criminal’s glass ceiling? Or maybe they’re better at not getting caught?! We’ve speculated and joked about the reasons; now we’re determined to feminize the Hall of Infamy. We’ve already received several nominations. The first arrived on the heels of the site’s launch in July, after Leah Garchik wrote about it in her San Francisco Chronicle column. She noted the popularity of the name “Bernie” amongst our con artists (Cornfeld, Ebbers and Madoff), as well as the absence of women. One of Garchik’s readers sent in a suggestion – a Long Island woman who allegedly ran a real estate-based Ponzi Scheme. I filed the woman’s name away in order to keep an eye on her: she was a “person of interest” – she wasn’t facing formal charges and she certainly hadn’t been found guilty in a court of law, which is a criteria for a contemporary inductee to the Hall of Infamy.
I was thinking about women con artists recently and did a quick search of the alleged con artist (Laurie Schneider) and the nickname she was given by Garchik’s reader: “Ponzi Princess.” To my surprise, I found an article that appeared just two weeks ago in the New York Post. The story included this quote from an investor, who claims to have lost $200,000 to Schneider: “Madoff is the king. She is like a little Ponzi princess. And no one has done anything about it.”
It appears that someone has done something about it; Schneider’s lawyer confirmed that the Brooklyn US Attorney’s Office has begun an investigation into the alleged scam, which is said to involve phony investments and the flipping of non-existent real estate. The alleged fraud may have taken in as many as 50 victims, who lost as much as $30 million, according to the US Bankruptcy Court trustee assigned to the case.
Perhaps it’s the (relatively) small scale of the crime that make this alleged con artist a “princess” next to Madoff’s “king.” Or perhaps because women are so rarely accused of con artistry, they make for a novel story and seem to need a cute nickname. Whatever the case, I happen to agree with the reader of Garchik’s column, who wrote of her reasons for wanting to see the Ponzi princess on this site: “I certainly do not want the world to think that only men could be sick schemers.”
Can you suggest any women (past or present, under investigation or convicted) to our equal opportunity website devoted to sick schemers?
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