You Can't Cheat an Honest Man - James Walsh [53]
Like most Ponzi perps, Swanson started to run out of new investors more quickly than he’d figured. By late 1995, he was bouncing distribution checks. Most of his investors were worried; some called the police.
The scam was complex enough that it took investigators months to unravel. In the meantime, Swanson declared bankruptcy and withdrew from the Burbank church. When he was finally arrested on more than 60 counts of fraud, grand theft and money laundering, he was driving a soft drink delivery truck and living in a low-rent neighborhood. (But he maintained his ability to charm people out of their money. Some parishioners at his new church put up their own houses to help bail him out.)
Eventually, the deputy district attorney who tried the case against Swanson explained the scam in religious terms. He called Swanson a “financial Judas—except Judas only betrayed one person, and he did it for less money.”
Swanson’s criminal trial lasted more than eight weeks. The testimony of his conned investors—including a police detective, a fireman, a clinical psychologist and a banker—was full of insights learned painfully. Most concluded that they’d allowed their friendship with Swanson color their investment judgment. “You just wanted to believe that [Swanson] was what he seemed to be,” said an investor— privately, after Swanson’s trial. “It was a difficult moment when I realized that this man...who was so much a part of my church...was a thief.”
Not all affinity frauds take the form of pyramid or Ponzi schemes. Many crooks use the pretense of ethnicity, national origin or religious affiliation to rip off others in a more basic way. But Ponzi schemes have a kind of resonance with affinity fraud. The familiarity and trust of the one plays off against the familiarity and trust of the other—with the final result being a bigger rip-off than either device could have created by itself.
An investor who lost money in an Asian affinity scheme described the geometric impact well:
It was almost worth the monetary loss because of how good it felt [to believe] that this thing was working.... I’ve never been involved in ethnic pride movements. But they must feel like this felt. I was happy that [immigrants from the same place] were looking out for each other. Making each other rich. I’m not a big financial person, either. I’ve always believed in being conservative with money. Investing conservatively. But this appealed to me emotionally.... When I found out it was a [Ponzi scheme], I didn’t want to believe it. It was like someone in my family had betrayed me.
It’s a tragedy that investors can lose money and feel this level of betrayal. But this kind of self-supporting trust is irresistible to Ponzi perps. Case Study: Wild Irish Castles
Affinity scams that target ethnic or racial groups don’t always limit themselves to poor, recent immigrants. From 1985 to 1988, a group of New York con men ran one of the most successful affinity Ponzi schemes in recent history. And this monster’s tentacles reached across the Atlantic Ocean to the Emerald Isle. All involved, perps and victims, were of Irish descent. Carlo Ponzi would likely have approved.
William Dowling, Walter J.P. Curley and Adams Nickerson controlled Dowmar Securities, a real estate syndication firm based in New York. Dowmar had showy offices in Rockefeller Center. Its syndication experts were often quoted in the financial pages, talking about the real estate market and specific deals.
The principals had pedigree. Curley was a former U.S. ambassador to Ireland and France. Dowling had been one of the developers behind the late Daniel K. Ludwig’s Princess Hotels chain. Nickerson was a member of a socially prominent Long Island family.
The affluent background of the three players might suggest a blase attitude toward social climbing. But Dowmar made a concerted effort to have its people move in high net worth circles. “Frankly, they were pushy about it,” complained one investor through a rigid Long