You Can't Cheat an Honest Man - James Walsh [64]
Some residents were surprised by how many community leaders were in the scheme. Among the people indicted were: the president of the area’s only higher education institution, the College of the Desert; the superintendent of the Desert Sands Unified School District; and the executive director of the McCallum Theatre—the region’s performing arts venue.
An internal investigation by the College of the Desert had found that at least 20 employees put in money, though there was no evidence that anyone had been pressured to take part. Still, it accepted President David George’s resignation.
It whad been a College of the Desert employee—Joyce Moore, president of the local college employees union—who’d first brought the scheme to public attention. When she heard that George was involved, Moore had confronted him and then complained to the local newspaper and television station.
Deputy D.A. Edward Kotkin, who was prosecuting the criminal cases, said the area’s tight-knit social and business circles provided the perfect environment in which the scheme could incubate. “My office is most concerned about people who may have used their influence or positions of public trust to bring others into the scheme,” he said.
But the argument that the investors were as greedy as perps resonated with many people who lived in the Coachella Valley. One teacher at the College of the Desert noted that the area’s country club set bred a lot of “country-club wannabees” who tried to act the part but didn’t really have the financial resources to keep up.
Social climbing—which one loser called “the greed for recognition”— certainly was a major factor. With so many of the local swells involved, the social element of the scheme was important. One local society columnist explained:
A friend said...the pyramid party was the damnedest thing he ever saw. So I went two nights later. There were 150 people there—people who own art galleries, charity chairpersons, real estate people, members of the Daughters of the American Revolution—very respectable people. And people were turning over money and hugging one another, like a spiritual revival. And it was the damnedest thing I ever saw.
Moore—the original whistle-blower—offered her explanation to a national newspaper: “We think we’re sophisticated, but we’re an isolated community. Greed was what did it.”
Case Study: Michael Scott Douglas
Like most compulsive behavior, the greedy rush for money makes little sense to outside observers. Michael Scott Douglas was a twice-convicted felon who used a little bit of computer knowledge to build a Ponzi scheme that bilked investors out of more than $20 million. His effectiveness is a testament to greed—his own and his investors’.
From August 1987 through November 1989, Douglas operated a bogus investment firm through which he induced investors to purchase limited partnership interests in four entities: D&S Trading Group, Ltd., Analytic Trading Systems, Inc., Analytic Trading Service, Inc. and Market Systems, Inc.
The companies were headquartered in a single fancy, computerequipped office suite on LaSalle Street—the heart of Chicago’s banking and financial district. The pitch was simple. Douglas claimed he’d developed a proprietary system for exploiting price differences between stocks and related stock options or various kinds of commodities futures. He promised returns of 10 percent to 20 percent per month on investments.
As a federal court later explained:
Although some trading of commodities was done, most of the money raised from the sale of the limited-partner interests was used simply to pay the promised return. These payments gave the scheme credibility, enabling Douglas to sell additional limited-partner interests.
In a little more than two years, Douglas raised $30 million from the sale of limited-partnership interests and paid back less than $10 million in phony profits. During the same period, Douglas paid himself $3 million in salary. He bought 19 cars, two condominiums