Dear Readers,
From time to time I publish a post in letter form. This usually happens when a post in story, editorial or essay form does not seem appropriate. This is one of those times.
Honestly, just how strange could things get in Ponzi Land?
Ponzi Land, which relatively few people outside of law enforcement even knew existed a year ago, suddenly and notoriously is populated by senior citizens — and not only as victims, but also as perpetrators. So much of it seems upside down, a world that challenges assumptions.
Are we entering a sort of awkward cross between a Lewis Carroll-like world and an Orwellian world, a world in which illogic passes for logic and, because news travels so quickly on the Internet and because negatives get spun so furiously as positives these days, bizarre crime gets positioned or explained away as a new form of nobility?
Let’s take a look at today’s news on Ponzi schemes.
Before we begin, did you notice the phrasing in the sentence above — today’s news on Ponzi schemes? Ponzi schemes are breaking out like Blue Light Specials broke out at the Kmart of my youth. Men and women whose hair is blue or tinting toward blue are running Ponzis — instead of doing recon in the aisles and waiting for the famous voice to intone, “Attention Kmart shoppers.”
It used to be that you made money by not spending it or shopping patiently and even furiously for the best possible deal, perhaps especially if you were a senior.
Allegations now have emerged that Julia Ann Schmidt, the 68-year-old alleged Ponzi schemer from Texas, posed as an investment adviser using the name of Fortis Investments, a famous European brand with U.S. reach.
Schmidt allegedly said she was working for a man named “Jack Layne” — and when investors became skeptical, she hired a man to pretend to be “Jack Layne Jr.,” saying “Jack Layne” had died.
The case is new, and few facts have emerged. But the allegations read as though Schmidt knew she was about to get caught, and called a meeting of investors, telling them that she was rolling over their investments into an insurance annuity. She allegedly brought the man pretending to be “Jack Layne Jr.” to the meeting, telling investors their money was safe because “Jack Layne Jr.” was handling “all the investor accounts through a local Waco law firm.”
To add a false air of nobility to the alleged scheme, senior-citizen Schmidt put on a show for investors, prosecutors said.
“In order to falsely lend credibility to the annuity transfer, [Schmidt] completed an application for her and her husband for the transfer of a non-existent sum of $500,000 from Fortis Investments to Life Insurance Company of the Southwest,” prosecutors said.
For good measure, Schmidt “provided the false address for ‘Jack Layne’ and Fortis Investments where the annuity contracts and authorizations were to be mailed,” prosecutors said.
The investment firm’s address proved to be a vacant parcel of land.
So, if we’re reading this correctly, the alleged Schmidt plot involved:
- A Ponzi scheme Schmidt pulled off by posing as an investment adviser for a prominent company that did not have a clue who she was.
- Schmidt’s knowledge that her story and the scheme were collapsing.
- An attempt by Schmidt to create plausible deniability by introducing “Jack Layne Jr.” and explaining that “Jack Layne” had died.
- An attempt by Schmidt to sanitize the fraud and calm fears by explaining that “Jack Layne Jr.” was working with a “law firm.”
- A subplot in which Schmidt further hoped to calm fears by creating nobility where none existed, saying investment accounts were being rolled over into an insurance annuity.
- A false demonstration of nobility in which Schmidt pretended she was rolling over $500,000 into an insurance annuity.
- Schmidt’s use of U.S. mail in furtherance of a bizarre scheme to create nobility where none existed.
Kmart, which dialed down Blue Light specials in the 1990s but still brings them back from time to time, needs to make them a fixture in stores again.
Right away.
Here is more news involving alleged senior Ponzi schemers or proven senior Ponzi schemers:
In Buffalo, N.Y., Richard Piccoli, 83 — yes, 83 — was sentenced to 20 years in prison for recruiting Catholics and senior citizens into a Ponzi scheme he’d been operating since 1975. He’d managed to fleece investors out of as much as $25 million, leading to “devastating” consequences for the victims, prosecutors said.
One of his victims said Piccoli had tried to turn the world upside down, putting on an air of nobility and youthful vigor when he was selling the scheme, but expecting the dignity and respect normally accorded a frail, 83-year-old man after the scheme was exposed.
“He wanted to reverse his age when he wanted us as victims,” a woman told WGRZ-TV. “And now, he’s like, saying just the opposite: ‘Oh, I’m too old to be punished.’ So, you know, he worked his age in his own favor.”
Piccoli ultimately cooperated with investigators — in no small part because the evidence was overwhelming. Authorities had cataloged ads he had placed in Catholic newspapers and publications. The ads, which promised a payout, specifically targeted seniors and people of faith.
An undercover agent from the U.S. Postal Inspection Service, which had worked with the IRS to target Piccoli in a sting, posed as a man seeking to invest money for his aging mother.
Piccoli, always looking for senior-citizen marks even in his 80s and trading for decades on the noble names of Catholic priests and churches, was happy to oblige.
The churches were getting a 3 percent return on investments in safe institutions. Piccoli told them he could get 7 percent and provided a guarantee, reportedly even saying the investments were tax-free. This was music to the ears of churches and parishioners who’d watched a consolidation of Catholic entities across the United States that had resulted in the closure of schools and churches, owing to a lack of resources.
“During one taped conversation, Piccoli promised the investigator ‘we can make a hell of a profit,’ and boasted that his list of clients included at least 50 priests,” The Buffalo News reported.
Piccoli’s attorney asked for a sentence of six years. A federal judge said such a light sentence would not reflect the severity of a crime that involved tens of millions of dollars and as many as 500 victims over the years, and sent Piccoli to prison for 20 years — effectively a life sentence.
In the end, justice was served, including justice for a 79-year-old man Piccoli had fleeced. The man said he suffered a heart attack after news of Piccoli’s arrest broke last winter. Authorities, acting swiftly after Piccoli’s name had been brought to their attention and an investigation began, recognized almost instantly that he had been operating a Ponzi scheme for decades.
They froze the crime in its tracks, trapping $6 million that still remained. Piccoli had gathered at least $500,000 in November 2008 alone, and at least $16 million since 2007, depositing the money and writing checks to earlier investors as money came in from new investors. He promised a payout of between 7.1 percent and 8.3 percent, but had been insolvent for years — and owed unsuspecting clients up to $25 million.
Piccoli’s attorney — doing what attorneys are paid to do — pointed out that Piccoli had cooperated after getting caught, a sort of last shot at nobility. The attorney criticized neither the judge who sentenced his elderly client to 20 years nor the prosecutors who brought the case.
Judith Zabalaoui, 71, was accused in February of swindling Greater New Orleans investors out of more than $3.2 million in an elaborate Ponzi fraud in which she set up fake companies, pretended to have employees and called her mailboxes at UPS stores “suites” to trick clients into thinking they were dealing with real firms. In August, she was sentenced to eight years in prison.
Zabalaoui became emotional in the courtroom at her sentencing, explaining that she had committed crimes because she wanted her family to live well and had a predisposition for over-protecting her loved ones.
Her victims cried — not for her, but for themselves.
Elsewhere, in reports about the Bernard Madoff Ponzi scheme published yesterday, Madoff was said to have sponsored cocaine parties at his securities company.
Madoff, 71, was sentenced in June to 150 years in prison. His Ponzi wiped out personal, charitable and corporate fortunes. An attorney with whom Madoff granted a prison interview — the same attorney now is suing Madoff and others — said Madoff “spends time” in prison with a Mafia crime boss and a convicted spy. The attorney claimed Madoff enjoys pizza cooked by a child molester.
Madoff told the FBI he had acted alone in the $65 billion swindle. No one believes that, not the FBI, not the attorney who is suing him.
Bernard Madoff was not the sort of customer who performed recon in the aisles at Kmart and spent extra time in the store, hoping to be there when the famous Blue Light flashed.
Regardless, Kmart can’t bring back the Blue Light Special for Americans of average or noble means fast enough. America needs the Blue Light Special, if for no other reason than to signal that Lewis Carroll and George Orwell wrote fiction, that the world is not upside down, that the Age of Innocence has returned.
Let’s just hope it’s not the Age of Innocence described in Edith Wharton’s Pulitzer Prize-winning novel — and that an age of innocence truly once existed and is worth going back to to seek a cure for what ails us now.
Patrick
P.S. You’ve noticed, of course, that it has become increasingly fashionable to claim nobility and to blame the government if you get named in a Ponzi prosecution or a prosecution that alleges fraud in general. We have been reporting on the fraud allegations against Affiliate Strategies Inc. (ASI), the umbrella company under which the Noobing autosurf set up shop. Noobing targeted deaf people.
On Sept. 4, an unnamed party issued a news release with this bold headline:
“FTC on Rampage! Are they really out to help the Consumers or out to raise money?”
Among the assertions in the news release, which apparently was a third-party bid to position ASI and other companies as noble enterprises, was this:
“During our investigation of the tactics used by the FTC we wanted to see how the process was done to protect the consumer and the procedures they had to follow to prove that consumers were being harmed. To our amazement the FTC does not have to follow the law of the Constitution, and there is no Due process given to those that they claim are harming the public.”
The claim was made despite the fact the civil prosecution against ASI is occurring in a federal court under the watchful eye of a federal judge to ensure fairness for all parties — alleged perpetrators and alleged victims.
Federal investigators were described in the news release as “The “NEW AGED MAFIA.†The FTC was described as extorting “money from companies all across the country” in a bid to raise money “for the states that join them in the law suits.”
In late August, the court-appointed receiver in the case against ASI said an affiliated company named a defendant in the prosecution charged a 70-year-old Philadelphia man on Social Security $995 for the names and addresses of three entities that possibly could help him secure a grant to repair his deteriorating home.
One of the addresses proved to be the address of the Philadelphia Regional Office of the U.S. Department of Housing and Urban Development, which had been misidentified as a benevolent organization known as “World Changers,†according to court filings.
The companies named defendants in the FTC lawsuit were insolvent “and had less than one day’s operating cash requirements in their bank accounts,” according to the receiver.
“The Receiver’s work over the past three weeks suggests the Defendants’ operations were insolvent on the date [July 24] the [Temporary Restraining Order] was entered and that for at least all of 2009, Defendants operated only by signing up new victims faster than the old victims could obtain refunds,†the receiver said.
Stephen J. Klos, an 86-year-old church usher who sold elderly congregants in the Seattle area into a $3 million Ponzi scheme that began in 2004, has pleaded guilty to 10 counts of securities fraud, the office of King County Prosecuting Attorney Daniel T. Satterberg said.
