You Can't Cheat an Honest Man - James Walsh [48]
A judgment in the civil case was handed down during the summer of 1990. It sided with the burned investors, awarding them $4.5 million of their initial investment and about $16 million in returns. “It’s definitely nice to have a big judgment,” said John Proctor, a Fort Worth attorney who represented Sims and Pace. “It would be even nicer to collect. [The investors] would like to get a return of their money first, and secondly, they would like to get a return on their money.”
The judgment was the first major development in the case since federal agents in Dallas had seized millions of dollars in assets from the investment organizers. “We were able to get our initial investment back plus the profit that the money made,” said John Gamboa, an attorney representing dozens of burned investors. “We know where [Johnson] is, and we know where his assets are,” he said. But Gamboa said he expected the judgment would be appealed. “With that sizable a judgment, I’d be surprised if they didn’t appeal,” he said.
While the civil suits mounted, Johnson was awaiting trial on the federal criminal charges in a Tulsa jail.
Gray’s whereabouts were unknown, although he was believed to have fled the state. His former attorney, Don Crowder, said he did not know how to contact Gray. “Even when I was representing him, I just had a phone number that I would call and leave a number and he would call me back,” Crowder said.
Gray was eventually found by federal agents and returned to Texas for trial. He was convicted and sentenced to more than 10 years in federal prison. But he insisted the Feds had seized all of his money. Informed opinion differed on this issue. “Bill Gray’s an idiot...a pathological liar and a thief,” says one of his former defense attorneys. “He has still got $10 million buried somewhere. I believe that with all my heart.”
CHAPTER 8
Chapter 8: Affinity Scams
We’ve considered the most common premises for Ponzi schemes— tax shelters, travel deals, loan networks and commodities investments. But, in a growing number of cases, the premise of the scheme doesn’t matter. These schemes are sold by something other than a Great Idea.
Instead, they rely on another of Carlo Ponzi’s tools: Exploiting the trust of members of tight-knit communities. This often means people who share a racial group or ethnic origin—but it can also apply to people in the same profession, church or extended family.
Law enforcement officials call these “affinity scams.” (And even the law enforcement community isn’t immune...the 1990s saw an explosion of affinity scams directed at police officers.)
Recent immigrants—particularly recent illegal immigrants—are particularly vulnerable to affinity scams because they’re often unfamiliar with the operations of American banks and mainstream investment services. In some cases, the countries from which they’ve come have an unstable official banking structure—so the difference between official and underground investments isn’t very great.
In the United States, this orientation has created informal savings institutions like Korean kye and Caribbean susu. These can be dynamic lenders—examples of free-market capitalism at its best. But they can also attract crooks who thrive in the shady regions of looselyregulated money.
Another reason that affinity scams focus on immigrants: Securities regulators don’t track foreign-language newspapers, radio or television as closely as they do English-language outlets. As a result, advertisements recruiting investors can make outrageous promises with less accountability.
Beginning in the late 1980s, the North American Securities Administrators Association began issuing a series of warnings about affinity scams, especially those directed at immigrant communities. And with good cause.
Immigrants as an Affinity Target
In five years, between 1987 and 1992, New York-based Oxford Capital Securities Inc. scammed scores of investors out of more than $10 million in a Ponzi scheme that was as crude as