Roger That

     What do Bernard Madoff and James Boswell have in common?
     I’ll tell you in a minute. First, let’s talk about Ponzi schemes.
     A search of the Courthouse News database reveals an alarming increase in those scams – from 12 lawsuits alleging Ponzi schemes in 2003, to 169 last year, to 132 through April 15 this year. At that rate, we’ll have 452 Ponzi lawsuits in 2009.
     Here’s how many cases a keyword search of “Ponzi” turned up in the CNS database of new legal filings:
     2003 – 12
     2004 – 43
     2005 – 46
     2006 – 59
     2007 – 74
     2008 – 169
     2009 until April 15 – 132
     That’s a pretty alarming growth in swindling – a 1,408% increase from 2003 to 2008, and, if filings continue at the present rate, a 3,766% increase from 2003 through 2009.
     There’s a lot of crooks out there. But they wouldn’t make money from Ponzi scams without a lot of people who think they can get rich quick by letting someone else do their thinking.
     I hate swindlers as much as the next guy. I would not object if we treated Ponzi scammers the same way they treated swindlers in Boswell’s London – hang them in public and sell beer to the crowd. That would reverse the trend pretty quickly, I imagine.
     But at a certain point, one has to ask the victims what the hell they thought they were doing.
     I have written for this page hundreds of stories about Ponzi scams. The promises the scammers make are, as a rule, simply unbelievable – 45% returns in 30 days, 100% returns in 90 days. Yet people fork over millions of dollars to them. I recall one guy who raised millions of dollars from his prison cell less than a month after he was thrown in there for the Ponzi scheme before that.
     Essential to any Ponzi scheme is that the first suckers in on it actually get some money. That’s the rope the crooks use to twist around the necks of the next ones and haul them in.
     I have no sympathy for Bernie Madoff, the king of the Ponzi scammers. I wouldn’t mind seeing him swing. And I do have sympathy for most of his victims – but not all of them.
     J. Ezra Merkin, a supposed financial genius, charged his clients $470 million to “manage” $2.4 billion of their money, though he simply forked it over to Bernie, who blew it all, if you can believe the New York Attorney General.
     The same day Andrew Cuomo accused Merkin of that, Mort Zuckerman sued Merkin for $40 million. Zuckerman said in his filing that he thought Ezra was his pal. He says he gave Merkin $40 million to “manage,” which Merkin forked over to Madoff.
     Zuckerman, who owns the New York Daily News and runs U.S. News & World Report, is one of the richest men in America.
     Now, pardon me, but what would you call someone who gives another guy $40 million, with one of the conditions being that he not ask what the guy does with it? I would call it dumb.
     Many of Madoff’s victims, probably most of them, are innocent people who only wanted to prepare for retirement or send their kids to college. But some of Bernie’s clients made millions of dollars, for years, from that Ponzi scam.
     And some of them, such as Merkin and Zuckerman, pride themselves on their financial acumen, and should have known better.
     Merkin, of course, has protested his innocence.
     We’ll see.
     It all reminds me of James Boswell. In his “London Journal” of 1762-63, young Jamie recorded wonderful evenings hanging out with Oliver Goldsmith, Samuel Johnson and assorted dukes and earls. Boswell had entry to that society, though he was only 22, because he was part of an exclusive club. He was the son of a Scottish Lord.
     Many a time, on the way home from an evening with those literary immortals, Boswell paid sixpence or a shilling to a whore, then had his way with her in a park or on London Bridge. When he got home, Jamie wrote how sorry he was to have consorted with such a low creature. On page after page, Boswell crowed about how he was improving himself as a man, what an impressive figure he was cutting in society – then he abused a poor prostitute he had just paid a nickel as “a little profligate wretch,” a “miscreant,” a “low creature.”
     One night, Boswell wrote, one of those poor women swiped his handkerchief from his pocket while he was “rogering” her. Boswell was incensed.
     I couldn’t help but think of Ezra Merkin, Mort Zuckerman and some other longtime members of Bernie Madoff’s club, who complain that someone swiped their hankies while they were just going about their business.

%d bloggers like this: