You Can't Cheat an Honest Man - James Walsh [0]
How Ponzi Schemes and Pyramid Frauds Work ...and Why They’re More Common Than Ever
James Walsh
SILVER LAKE PUBLISHING
LOS ANGELES, CA ABERDEEN, WA
You Can’t Cheat an Honest Man
How Ponzi Schemes and Pyramid Frauds Work…and Why They’re More Common Than Ever
First edition, second printing 2003 Copyright © 2003 Silver Lake Publishing
Silver Lake Publishing
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Library of Congress Catalog Number: Pending
James Walsh
You Can’t Cheat an Honest Man
How Ponzi Schemes and Pyramid Frauds Work…and Why They’re More Common Than Ever
Includes index. Pages: 354
ISBN: 1-56343-169-6
Printed in the United States of America.
Table of Contents
Introduction
Some Background to the Current Situation ...1
Part One: How the Schemes Work
Chapter 1: The Mechanics Are Simple Enough ...19
Chapter 2: Location, Location, Location...Then the Money’s Gone ...29 Chapter 3: A Better Mousetrap Makes a Good Scam ...39 Chapter 4: Paying First Class, Traveling Steerage ...49
Chapter 5: 1040-Ponzi ...61
Chapter 6: Sure-thing Investments and Sweetheart Loans ...71 Chapter 7: Precious Metals, Currency and Commodities ...87 Chapter 8: Affinity Scams ...101
Part Two: Why the Schemes Work
Chapter 9: Trust ...117
Chapter 10: Greed ...131
Chapter 11: Family Ties ...141
Chapter 12: Secrecy and Privacy ...155
Chapter 13: Loneliness, Fear and Desperation ...167
Part Three: Contemporary Variations
Chapter 14: Multi-level Marketing ...183
Chapter 15: Faith, Religion and New Age Gurus ...203 Chapter 16: Charities and Not-for-Profit Organizations ...217 Chapter 17: www.ponzischeme.com ...231
Part Four: What to Do if You’ve Been Scammed Chapter 18: Make Friends with the Regulators ...243 Chapter 19: Go After the People Who Got Money Out ...257 Chapter 20: Go After the Lawyers and Accountants ...273 Chapter 21: Go After Banks and Financiers ...287 Chapter 22: Fight Like Hell in Bankruptcy Court ...305
Conclusion
The Mother of All Ponzi Schemes ...319
Index ...331
INTRODUCTION
Introduction: Some Background to the Current Situation
Ponzi schemes have a strong—almost addictive—grasp on the people who perpetrate them and the people who invest in them. Why? Consider the original scheme.
Carlo Ponzi was a loser. He knew this. Everyone who knew him knew this. But he was desperate to be something more.
Floating from job to job in the hard-scrabble Boston of the early 1920s, the formal little man (he was 5’2" and irregularly employed but elegantly dressed) was, in one sense, loosely moored to reality. He would stay up late nights dreaming up ways to get rich.
Ponzi had been born in Italy but arrived in New York in 1893 at the age of 15. He immediately set to the task of finding a fast way to make a lot of money. His impatience lead him into the most basic kind of swindles—and an itinerant lifestyle. He served short stretches of time in prison in both Canada (for mail fraud and passing bad checks) and Atlanta (for an illegal immigration scheme). He ended up moving to Boston in 1919.
Boston has always been a particularly tough place to be poor. Frustrated by the luxury he saw being casually enjoyed by the local swells, Ponzi kept dreaming of ways to take his piece. And he wrote letters home to various members of his extended family. Living in the aftermath of World War I, they were anxious for their traveling son to strike it rich in the New World.
His letters home provided Ponzi with the origin of what he would later—famously—call his “Great Idea.” Although Ponzi himself probably couldn’t describe it, the scheme was essentially a crude form of currency exchange