Tuesday, November 19, 2013

The most famous financial criminals in U.S. history.

Today, news came down that J.P. Morgan Chase, the disgraced Wall Street giant that had its collective fingerprints all over the mortgage and financial collapse of 2008, is set to pay a $12 billion settlement.  The payment is restitution, levied by the US Justice Department, for its illegal misspelling of mortgage-backed securities.

While many consider the settlement “A good start,” we can hardly expect it to act as a deterrent to future financial criminals.  In fact, United States history is rife with fraudsters and sham artists who chose not to use a mask and gun to rob the American people, but a three-piece suit and their business acumen. 

Let’s look at the most famous financial criminals in U.S. history:

Bernard “Bernie” Madoff.
Madoff was the poster boy for Wall Street greed and larceny, defrauding the US people to the tune of $65 billion dollars in the greatest Ponzi scheme in history.  His “client” list of 1,300 included Stephen Spielberg, Kevin Bacon, and many other notables, including financial institutions themselves.  On June 29, 2009 he was sentenced to 150 years in prison with no parole.  He was incarcerated and soon transferred to a federal prison in North Carolina, where reports of his quality of life differ.  Some say he was admitted to the Duke University health center in 2009 with facial fractures, broken ribs, and a collapsed lung consistent with an attack by a fellow inmate, though the prison claims he was admitted for hypertension.

Kenneth Lay.
Lay was the chairman of the Enron energy company before being indicted in 2002 on 11 counts of securities fraud, revealing his chief role in a massive accounting and corporate abuse scandal that stole billions of dollars.  In 2006 he was found guilty on 10 of those counts, which would have landed him a cell without a view for up to 30 years.  Only about three and a half months before his sentencing, Lay died suddenly of a heart attack while on vacation in Colorado.  Some would say he got off easy, and his funeral was attended by more than 1,200 well wishers.

Bernie Ebbers.
The Canadian-born Ebbers was an original founder and former head executive at telecom giant WorldCom when they were convicted of fraud as investors lost more than $100 billion, the largest accounting scandal in U.S. history at that time (until Bernie Madoff came along.)  He is currently serving a 25-year sentence in Oakdale Federal Correctional Facility in Louisiana.  CNBC named Ebbers the 5th worst CEO in American history and the 10th most corrupt CEO of all time.

Charles Ponzi.
A list of financial robber barons wouldn’t be complete without their patron saint, Charles Ponzi himself, who the term “Ponzi scheme” was named after.  Ponzi, who lived from 1882-1949, devised scams that actually paid off early investors with the funds from later investors, making forming a pyramid in structure.  As long as people keep paying in, someone get’s paid, and the rush and greed of easy money usually fuels these fires for a long time before they fall apart suddenly.  Ponzi’s first schemes promised a 50% payoff within 45 days, or 100% for every 90 days, and the premise of his pyramid Ponzi scheme hasn’t changed much since.   He served several short sentences throughout his life until he was finally deported to Italy upon release in 1934, where he lived in poverty and obscurity until his passing.

Lou Pearlman.
Pearlman, often described as “bloated and soul-less” had his hand in many pots – and very few of them legitimate.  He was the manager of famous by bands the Backstreet Boys and N’Sync, but his greatest accomplishments in business turned out to be one of the biggest shams in US fraud history.  For over 20 years he charmed investors for his conglomerate Trans Continental Airlines.  The only problem was it never existed, except for on paper, and a means to siphon approximately $300 million he’d amassed in debts into his own pocket.  When exposed, he went on the run, but was caught and arrested.  Pearlman tried to cover his tracks by filing bankruptcy, but even lied and attempted to defraud the courts in those proceedings.  In 2008 he was sentenced to 25 years in prison after being found guilty of money laundering, perjury, and conspiracy charges.  By the way, the BackStreet Boys and N’Sync eventually sued Pearlman for misrepresentation and fraud.  Pearlman is still behind bars, with a projected release date in 2029.

Frank William Abagnale.
Abagnale’s story came to public awareness with the film about his life, Catch Me If You Can, in which Leonardo DiCaprio played the charming and brilliant conman who lived high and played fast.  He easily shifted into different personas, including an airline pilot, doctor, and even US Bureau of Prisons Agent, and his fraudulent forte was passing bad cheques.  After a long and exhausting pursuit, he was caught and charged with cheque fraud to the tune of $2.5 million dollars (in 1960 dollars) in 26 countries.  He served a five-year sentence in prison before the federal government released him on the condition that he would work for them, helping identify and catch other financial scammers, and also check in once a week.  The arrangement worked so well and his inside input became so indispensible, that he later formed Abagnale & Associates, a financial fraud consulting firm.  Abagnale wasn’t one of the biggest financial criminals of all time, but he certainly was one of the most interesting, and elusive to catch, including escapes from prison and from a taxing airliner as authorities moved in.

Dennis Kozlowski.
Kozlowski, once the CEO of mega firm Tyco International, was convicted of embezzling over $400 million of the company’s funds.  Those included paying himself $81 million I unauthorized bonuses, adding $14 million in art to his personal collection, and $20 million dollar payments to a crony.  His super luxurious lifestyle became the thing of legends, as he owned a $30 million dollar Manhattan apartment (on the company dime) with $6,000 shower curtains and $15,000 umbrella stands!  His parties also became legendary for their opulence, risqué, and lack of class.  Originally from New Jersey, Kozlowski almost got away with his daft and obvious financial crimes, as a juror sided with him in his first trial and forced a mistrial, though it came out that she had been physically threatened.  He was tried again and convicted in 2005 and sentenced to an approximately 8-year prison term, which he is still serving. 

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