Posted on Mon, Nov. 14, 2011
last updated: November 14, 2011 07:00:12 PM
WASHINGTON — A book to be published Tuesday and written by a somewhat obscure federal regulator uses real-world examples of recent financial fraud to help investors protect themselves from those who'd prey upon them.
Financial fraud seeped into the public psyche when Bernie Madoff's Ponzi scheme collapsed in December 2008, capturing headlines because of the celebrities and charities burned by him. However, there've been many similar crimes that never received national attention.
Bart Chilton is out to change that. A commissioner on the Commodity Futures Trading Commission, he's written the book "Ponzimonium: How Scam Artists are Ripping Off America." His goal is to spotlight what he views as an under-recognized problem.
"After Madoff, I started seeing all these scams ... and they weren't getting a lot of attention," Chilton told McClatchy. "I said it was amazing how many of these scams are going on and how people weren't aware of them."
Ponzi schemes involve paying past victims with investment funds from new investors who've been duped more recently.
At first, Chilton began writing op-ed pieces for local newspapers in places where a CFTC case was opened alleging financial fraud. Then he decided to pull examples together for a book, using 10 different fraud cases where formal civil prosecution occurred in 2009, the year after the near-collapse of the U.S. financial system.
"I tell the story of how they got away with it, the premise of their Ponzi scam and the claims they were making and how they used other people's money ... to get away with this stuff," Chilton said.
Fraud outlined in the book includes schemes to bet on foreign currencies, commodity pools and other forms of complex and risky investment. Cases include Florida high flier Sean Healy, who bought former NFL star Bernie Kosar's mansion with money from unsuspecting investors, and the suicide of North Carolina fraudster Bruce Kramer.
All the cases have a common thread — complexity and a desire for promised large returns on investment that lured ordinary investors into scams.
The book is written in plain English, not investment jargon. It includes a checklist of 20 "red flags" that should alarm investors, and it includes an investor bill of rights.
"Ponzimonium" is available through the Government Printing Office or Amazon.com; proceeds go to the GPO. Chilton worked with CFTC attorneys to cull evidence from actual probes, and the 72-page book is full of photographs of mansions, sports cars and luxury goods seized from fraudsters.
When financial markets cratered in late 2008 and early 2009, many Ponzi schemes began falling apart. That made 2009 a record year, with 31 CFTC civil cases brought against individuals or firms for Ponzi-like schemes. That record was surpassed in fiscal 2011, which ended on Sept. 30, with 32 civil cases brought.
"It's not like this was out there and it went away," Chilton warned. "It's out there and it's even worse."
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