An Error in Judgment

By Christopher Zoukis

Some time ago, I came across short filler-article in the business section of the San Francisco Chronicle.  The title of the article indicated that five executives had been found guilty and would soon be sentenced.  Aha!  White collar crime, I thought.  And since I find white collar crime to be simultaneously fascinating and ludicrous, I read the article.  I am fascinated by what drives people to embezzlement, how they commit the crime and how it’s usually arrogance that trips them up.

The article named the five executives who had been convicted.  Then it went on and compared the fall of their company, NCFE, to the fall of Enron.  That’s quite a comparison, since Enron was the epitome of corporate greed, fraudulent business practices and financial collapse.  The shockwaves from the disintegration of Enron are still being felt today.  If it was comparable to Enron, why hadn’t I heard about it?  I was intrigued, so I did some digging.  My excavations turned up the following interesting information.

There’s a small town in Ohio, named Dublin, after the famous city in Ireland.  Commonly depicted as ‘gentrified modern,’ which is a quaint way of describing gold courses, strip malls and multi-plex theaters, Dublin – the one in Ohio, not the other one – is headquarters for Wendy’s International.  Most people have heard of the hamburger chain.  What they haven’t heard of is another big firm in the same city.

National Century Financial Enterprises.  Started in 1991, this outfit soon became the nation’s largest purchaser of hospital, physician and other health care receivables.  The buying up of receivables works like this.  NCFE buys the accounts receivable of small hospitals, medical clinics and nursing homes.  Because of their small sizes, all of these health-care providers are having money problems.  They are desperate because they have no money with which to operate, because they have to wait for payment from insurance companies.

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Proposal: Too Good To Be True: The greatest Ponzi schemes in history

By Christopher Zoukis

Chapter One:  a quick overview of what a Ponzi scheme is, along with a hypothetical example. 

Chapter Two:  what is and what is not a Ponzi scheme.  Pyramid schemes are not Ponzi schemes.  A bubble is not a Ponzie scheme.  Robbing Peter to pay Paul is not a Ponzi scheme.

Chapter Three:  520 Percent Miller.  William Miller opened for business in 1899, in the city of New York.  He called his company the Franklin Syndicate.  Miller was called “520 percent Miller” because he promised 10% interest per week on any money invested with his company.  He defrauded investors out of $1 million (in 1899 dollars).  After he was caught, Miller spent ten years in prison.

Chapter Four:  Between 1991 and 1994, a Romanian named Ioan Stoica ran a company called Caritas.  Caritas promised investors 800% interest on their investment.  A fantastic pledge, which was made even more fantastic by the promise that it would happen in six months.  No one thought it was too good to be true.  Over 400,000 people invested a total of $1 billion (US dollars).  When Caritas went under, it owed $450 million.  Stoica was given 7 years in prison for fraud.  But his gall knew no limits.  He appealed and the sentence was reduced to 2 years.  Then he appealed that sentence.  In the end, he received a sentence of 18 months in prison.  He pocketed $550 million.

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