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Mar 09

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Another Ponzi Scheme Conviction

Twenty years is a long time to keep a Ponzi scheme going, but it finally caught up with R. Allen Stanford, the Texas tycoon who was recently convicted on 13 of the 14 counts brought against him.  Stanford, previously among America’s wealthiest with an estimated net worth of $2 billion, now faces more than 20 years for allegedly bilking investors out of more than $7 billion in a Ponzi scheme.

A Ponzi scheme is a type of investment fraud that sustains itself by paying claimed returns to existing investors with fresh money from new investors, while also lining the pockets of their creators. They often collapse when they fail to attract sufficient new investment to support the promised returns.  There are a number of common “red flags” that are often associated with Ponzi schemes, including:

  • Promised high returns with little risk
  • Returns that are unusually consistent
  • An implication that you are lucky to be included as part of the investment opportunity because of a special relationship
  • Investments that are sufficiently secretive or complex that the specifics of how returns are generated are difficult to identify
  • Lack of reasonable reporting
  • Difficulty in cashing out or receiving payments, or in many cases providing incentives to roll your returns into your investment

Many victims of Ponzi schemes later report that they had a nagging feeling that the investment was too good to be true, but were also afraid to miss out on such a lucrative opportunity.  It is a good reminder to trust your instincts when something seems awry.  Suspected Ponzi schemes can be reported to the SEC, who investigate and prosecute these claims.

About the author

Renee Howdeshell

Renee Howdeshell is a founding member of Fulcrum Inquiry, an accounting, finance and economic consulting firm that performs damage analyses for commercial litigation, forensic accountings, royalty & distribution audits, financial investigations, and business valuations. Ms. Howdeshell holds a degree in Finance and Marketing from the University of Virginia's McIntire School of Commerce and is a Certified Public Accountant (CPA) and a Certified Fraud Examiner (CFE). She has testified as an expert witness in federal court, CA state court and arbitration regarding the results of her work. She can be reached at (213) 787-4112 and her resume is available at www.fulcrum.com.

Permanent link to this article: http://betweenthenumbers.net/2012/03/another-ponzi-scheme-conviction/

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