Psychopaths in Suits – Corporate Criminals in Our Midst

Recently another ponzi scheme was exposed after its evil mastermind,  Jeffery White, passed away in 2011, from a brain aneurysm at the age of56. Lucky for him.   Brown, one of the “investors” whom he bilked out of his life savings to the tune of $250,000.00, has stated “if he wasn’t already dead, I’d kill him.” Indeed.  The truly evil thing about White was that he knew Brown and his wife, Anne, and they were his friends.  Imagine how he treated his enemies?  Brown’s wife used to teach White’s wife, Henny, in grade school, hence the connection between Brown and White. It turned out to be a devastating connection, personally and financially. Too bad Anne didn’t teach Henny about business ethics.

Ponzi schemes are named after Charles Ponzi, an Italian businessman and con artist in the U.S. and Canada.  Charles Ponzi promised clients a 50% profit within 45 days, or 100% profit within 90 days, by buying discounted postal reply coupons in other countries and redeeming them at face value in the United States as a form of arbitrage.In reality, Ponzi was paying early investors using the investments of later investors. Some ponzi schemes also pay investors with their own initial investment, masquerading it as accrued profit. An interesting flick that presents a ponzi scheme (without calling it so) is Green Guys, about a group of 20-something hot shots who bilk unsuspecting investors for millions of dollars.

There are 5 main characteristics of a ponzi scheme:

1. The Benefit: A promise that the investment will achieve an above normal rate of return.
2. The Setup: A plausible explanation of how the investment can achieve these above normal rates of return.
3. Initial Credibility: The person running the scheme needs to be believable.
4. Initial Investors Paid Off: For a time, the investors need to make at least the promised rate of return.
5. Communicated Successes: Investors need to hear about the payoffs.

Steps in the Ponzi Scheme

The steps are as follows:

1. Convince a few investors to place money into the investment.
2. After the specified time, return the investment money to the investors, plus the specified interest rate.
3. Convince more investors to place their money into the system by referring to the profits of the earlier investors.
4. Repeat steps 1 through 3.
5. During step 2 at one of the cycles, break the pattern.  Escape with the money and start a new life. Or, in Jeffery White’s case, drop dead.

White’s known investors say they are out as much as $5 million. The scheme unravelled after White’s sudden death. Trustees of White’s estate became “extremely uncomfortable“with the discoveries they made. White solicited investments from many of his insurance clients, while treating their moneys as funds that were loaned to him for his general use. White’s business and personal accounts were intermingled, making the tracing of investments impossible.  At the time of his death, White was carrying more than $300,000 in credit card debt and was behind his time-share at Diamond’s Edge Muskoka Cottages. The vintage Porsche 911 Turbo he drove around the GTA was leased. There were no red flags but court documents show White had money problems dating back to the early 1990. Reassessment of his personal income taxes of the years 1996 to 2000 resulted in a substantial debt to Revenue Canada. Testifying at his tax court appeal White claimed his sister left him $1.3 million in debt.The judge in the case called White “vague” and his records “woefully inadequate.” By moving funds about through numerous bank accounts, he made it impossible to prove his case. In 2006, he dropped his appeals and paid $400,000 in arrears.

Psychopathy runs on a continuum with white collar criminals falling in the middle. They’re deceitful and egotistical. White-collar criminals might not physically destroy people, but they have no problem financially destroying them. This type of psychopath is high-functioning. They’re intelligent, have great interpersonal skills, are powerfully persuasive and able to disguise themselves very well. A psychopath is all about manipulation. They’re always assessing, “How can this particular job or person meet my needs? How can I exploit them?’” 

The list of white-collar psychopaths is almost endless. To a certain extent, most people compartmentalize and lead different lives. It’s normal for your work persona to be divergent from your family life. With psychopaths the compartmentalizing is much more exaggerated Jim Hammes, formerly a controller with a Cinncinnati-based company, embezzled $8.7 million of company money into a bank account in the name of a second company doing business with his company. He is currently a fugitive wanted by the FBI and has been on the run since 2009. Hammes also abandoned his two families, neither of whom knew about the other: he was married to two women and had children with both.

Frauds can be very deceptive in terms of their appearance, status and age. Joanne Schneider, a 71-year-old woman in Ohio was recently charged with operating a ponzi scheme and bilking $60 million dollars from 900 investors. The scheme unraveled when a Schneider family member became suspicious after his mother was promised a 16 to 20 percent return on her investment. Schneider’s criminal resume is impressive: securities fraud, selling unregistered securities, engaging in corrupt activity, misrepresentations in securities, theft, and money laundering. Schneider’s husband, Alan Schneider, played a lesser role in the scheme, pled guilty to security and theft charges. He got probation. She got 10 years. If she serves the full sentence, Schneider will be 81 when she is released from prison – either that or deceased from natural causes.