The technology of fraud

2.1.2011 | 12:08 am | admin

imagesYou can find anything on the Internet — and so can a thief.  A wily crook takes note of the personal information that you’ve conveniently provided on a social networking site like Facebook and uses those details to rid you of as much cash as possible.  A column in the Sacramento Bee this weekend gave an example of this distinctly 21st century crime:  By peppering an email with references to family members (thanks, Facebook!), a thief in Canada persuaded a woman in California that he was her desperate granddaughter — detained in a jail up north on drug charges.  She wired $4,600 in bail money immediately.

A few years ago, I got an email from the vaguest of acquaintances — a person with whom I had exchanged a few emails. She said she’d been robbed at gunpoint of her cash, credit cards and phone. She needed money wired to her hotel.  It didn’t make any sense whatsoever. Sure enough, within a matter of hours, I had another email from her; this one was titled “Hacked” and expressed her dismay. I wondered if anyone fell for it — how could they?

But, then again: if you didn’t stop to really think about it… If you thought someone you loved was in trouble and needed your help… Maybe it’s the same sort of principle that fuels most cons — preying on our deepest fears and our deepest desires.  Maybe people who fall for a tall tale online are driven by a desire to rescue that’s stronger and louder than the voice of reason that whispers: Hey, why didn’t she call me from the hotel? This is similar to the desire for easy cash that silences any misgivings about a too-good-to-be-true investment. (60% returns…sounds great!)

Here’s a look at how technology figured in the cons of a few of our inductees:

In the early 1970s, Equity Funding sold 60,000 phony life insurance policies.  The con was huge; how did it slip beneath the radars of banks, auditors and regulators?  Some people wondered if the new-fangled computers that Equity used to track their bogus policies were to blame. A wise person, an early computer expert, discredited this notion in the New York Times; he said that blaming the fraud on computers was “like blaming pencils for all the swindles that happened before.”

There’s no doubt that a con artist will use whatever tools are at his disposal — but sometimes in a less than effective way. Sometimes it’s the technology that does the con artist in.  That was the case with the Rastogi brothers, who ran an outrageous international con. They might have gone on making multimillion metal trades out of thin air if it weren’t for a slip of the finger.  Instead of faxing a stack of phony documents from one brother to the other, an employee sent them to their auditor. Oops!

Have you ever had a brush with Internet fraud?  Heard any good stories about a Nigerian princess in distress or an offer that you just can’t miss, only enter your credit card number here first….?

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It wasn’t really me who took all that money…

1.24.2011 | 10:58 pm | admin

SuperStock_255-6575More than a few of the con artists here denied their crimes –even in spite of tremendous evidence pointing to the bright, glaring truth: “Guity!”

For example, Richard Scrushy.  To this day, Scrushy maintains he had nothing to do with the fraud that took place at HealthSouth — even though a half dozen co-conspirators testified against him.  Scrushy proclaimed his innocence — even as the jury listened to a taped conversation in which he nervously asks about a wire.

Another approach is to only half-admit to wrongdoing.  Yes, fraud took place. Yes, I was involved. But I had no choice!  The scientologist swindler, Reed Slatkin, took this approach.  He ran a huge Ponzi scheme for 15 years and stole millions.  But.. but.. but… he was acting under “duress and diminished capacity.” He was being threatened by powerful and dangerous Scientologists. He was just trying to protect his family!

I guess when you’re in a courtroom, facing enraged victims and a long prison sentence, you can really come up with an alibi. Phyllis Stevens, an Iowa woman sentenced to six years in prison last week, had quite an explanation.  She expressed regret for pocketing $6 million via wire and computer fraud; but there was a hitch to her confession.  Stevens claims to have dissociative identity disorder, or multiple personalities.  That’s right… one of her hundreds of personalities acted without her knowledge.  “Robin and some of the other personalities took money out of the bank,” she told a psychiatrist. “When I became aware again as the core personality, I was sitting in a Walmart with about $30,000 in my purse.”

Wow.

What do you make of the fingerpointing fraudster? Do you have any good “It wasn’t really me” stories to share? Post in the comments!

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Bernie in the news…and “Camp Fluffy”

12.11.2010 | 6:07 pm | admin

madoff100614_1_560The headlines this week have been full of news about Bernie Madoff, the mega-Ponzi-scheming crook who’s the most infamous of them all.  Exactly two years ago, the SEC filed charges against Madoff.  In July 2009, he was sentenced to 150 years in prison — and, it so happens, this website launched.

Today, there was the news that his eldest son, Mark Madoff, committed suicide. Whether you think the Madoff sons were involved in or knew about the multi-billion scam or not, it’s a sad story.  The 46-year-old Madoff, who on his lawyer’s advice hasn’t spoken to his parents for two years, was facing a civil lawsuit that said he received nearly $67 million in “improper proceeds.”  Early this morning, Madoff sent his wife several emails, urging her to check on their 2-year-old son who was sleeping in the next room.  The impact of Bernie’s deeds are grim and, for many, many people, will be felt forever.

Then there was the Austrian banker who we learned about yesterday.   Sonja Kohn is accused of posing as one of his biggest victims when, in fact, she was a co-conspirator who funneled billions into his rotten scheme.  Maybe she’ll earn a spot in the Hall of Infamy one day..

Finally, if you’re wondering what life has been like for Bernie behind bars, check out this story from New York Magazine.  It’s full of details about life at Butner Medium I, or “Camp Fluffy” as it’s known to more hardened convicts.  It describes Madoff sweeping up in the cafeteria for 14 cents an hour, sipping diet coke and reading mystery novels, and – no doubt – basking in the attention he gets from some fellow prisoners.  “In the context of prison, he isn’t a cancer on society; he’s a success, admired for his vast accomplishments. “A hero,” wrote Robert Rosso, a lifer, on a website he managed to found called convictinc .com. “He’s arguably the greatest con of all time.

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Not every con is well thought-out…

10.12.2010 | 10:20 pm | admin

Some cons are diabolically clever.  They seem almost too simple to work. The con of Tino DeAngelis falls into this category.  His warehouse looked legitimate and the inspectors saw only what he wanted them to see.  And so those inspectors (and his investors) believed DeAngelis had more than 100 tanks filled with soybean oil — when only a slender tube inside each tank contained oil.  The rest of those tanks?  They were filled with water.

On the other end of the spectrum are scams that are just plain dumb.  These are the ones that make you shake your head. How on earth did anyone think this would work? And what about the people who fell for it — what were they thinking? These sorts of cons tend to fall apart pretty quickly.  As an example, take Graham Halksworth.  Halksworth and his partner-in-crime devised an incredibly complicated (and implausible) story to try and pass phony U.S. bonds.  They said these bonds were issued in 1934 but had languished in a Philippine jungle for decades after a plane crash. So how come they were created on an ink-jet printer? What about all the typos?

Any Ponzi scheme is, well, short-sighted. It doesn’t matter what the con artist uses as fuel — maybe his influence in a particular community or an especially enticing pitch — sooner or later, he’ll run out of gas.  There have been “robbing Peter to pay Paul” scams that have lasted for years. Bernie Madoff swung it for two decades.  Another one of our 2010 inductees, Thomas Petters, spent 15 years stealing money from people all over the globe.  Of course, in the end, the charm and intelligence of those gambler con artists who count on finding another victim isn’t worth much.  All it takes is an economic tailspin and everyone starts paying  close attention…and that’s the last thing a con artist needs….

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Meet the 2010 inductees!

9.27.2010 | 8:12 am | admin

We received dozens of nominations for inductees to the Hall of Infamy (thanks to those of you who sent them!).  And, of course, there’s an endless supply of con artists who have earned a spot here.  It wasn’t easy to whittle down the list, and there are crooks just waiting in the wings to be added. But, for now, we present this year’s batch of schemers, liars and thieves.

Among them, you’ll find a New Jersey woman who was a liar and a lousy gambler.  (Our first step to feminize the Hall of Infamy! We have our eye on a few others who have yet to be convicted…) You’ll also find a fellow who took on a new name and persona to hide his illicit past and run a big con.  There’s a music producer who ran an enormous Ponzi scheme offstage and a father-and-son duo whose specialty was convincing senior citizens to hand over their savings.

Check them out — and please continue to send in your nominations!

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Conrad Black released on bond – now what?

8.1.2010 | 12:21 pm | admin

conrad+black

Conrad Black, a Hall of Infamy inductee, was released on bond from federal prison a few weeks ago.  The judge needs time to decide whether to overturn his 2007 conviction, based on a Supreme Court decision to limit the scope of the fraud law used against him.

An attorney who knows about these things told Reuters that it’s doubtful Black will end up back behind bars.  For now, he can’t leave the continental U.S. and, even if he’s cleared of the fraud charges, he still faces a slew of civil suits. And then there’s the $71 million the IRS is looking to him for cough up in unpaid taxes.

If you’re wondering whether Lord Black of Crossharbour learned anything during his nearly two years of incarceration, you’re in luck.  He wrote about his prison education for “National Post,” a Canadian newspaper.  The first clue about his attitude is far from buried. In the first paragraph, he says he would “never dream of committing a crime in a thousand years.”

Really? Along with fraud, he was charged with obstruction of justice for trying to sneak 13 boxes of evidence out of his office.  If he’s so innocent-minded that he wouldn’t even dream of wrongdoing, what exactly was in those boxes?

He goes on to describe prison life: phone calls to his wife, crossword puzzles and tutoring fellow inmates. I must admit that I was surprised by the company he kept in the low-security wing of Coleman Federal Prison in Florida.  Here, Black lists out the men who came to bid him farewell:

The Mafiosi, the Colombian drug dealers, (including a senator with whom I had a special greeting as a fellow member of a parliamentary upper house), the American drug dealers, high and low, black, white, and Hispanic; the alleged swindlers, hackers, pornographers, credit card fraudsters, bank robbers, and even an accomplished airplane thief; the rehabilitated and unregenerate, the innocent and the guilty, and in almost all cases the grossly over-sentenced…”

Black lays out the symptoms and outcomes of that gross over-sentencing. He describes racial inequity and the failures of U.S. drug policy and the public defender system.  He describes prisoners as “an ostracized, voiceless legion of the walking dead; they are no one’s constituency.”

Maybe he’s found a new calling. Maybe he’ll dedicate the remainder of his days to trying to fix a broken system, or contribute his smarts and funds in some way to organizations like The Sentencing Project. I’m not sure this will happen – and I know it’s not a path he would have ever chosen or expected to find himself traveling.

But the same can be said of the post-prison lives of several of our inductees. Richard Whitney went from king of Wall Street to manager of a dairy farm.  After serving time for his precocious con artistry, Barry Minkow became an evangelical minister and fraud investigator.  So, Conrad Black, now what?

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Supreme Court decision raises questions about Hall of Infamers

6.29.2010 | 1:54 pm | admin

us-supreme-court-300x300The 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!

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Video clips of our interview with Sam Antar of Craaaazy Eddie!

5.3.2010 | 3:30 pm | admin

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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

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What’s your favorite movie about con artists?

3.14.2010 | 5:14 pm | admin

HouseofGames

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….

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The dealer is empty-handed but the card game goes on…

2.15.2010 | 9:42 am | admin

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?

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