Affinity Scams, Part 2

“A thief believes everybody steals."
Edgar Watson Howe
American Editor, Novelist and Essayist
1853-1937

"A thief passes for a gentleman when stealing has made him rich.”
anonymous proverb

“Obviously crime pays, or there'd be no crime.”
G. Gordon Liddy
1930

Before I sat down to write this, I read a document on the web site of the Minneapolis Star Tribune. The first page of the 75 page document identifies it as Case number 09-CV-1732 (MJD/JJK), filed in the United States District Court, District of Minnesota. It is the Second Amended Verified Complaint; it requests a jury trial. It proceeds to lists the names and addresses of 57 plaintiffs, and goes on to detail what appears to be their financial misadventures. Of the five individual defendants named in the Second Ameded Verified Complaint, one until recently used to host a radio show called "Follow the Money", the contact method for recruiting investors, many who then later became plaintiffs and more who are potential plaintiffs. For 75 pages the Second Ameded Verified Complaint "follows the money" from the accounts of the 57 plaintiffs into the accounts of the 5 individual defendants and 12 similarly named, intertwined business entities. From the limited information in this document, it doesn't look promising the plaintiffs will ever regain their money, or at least, not soon. How much trust in people they will have at the end of this ordeal will be a matter of individual character, shaped by this experience.

The information in these 75 pages was not entirely new. I have been following the news of this litigation since I first read an article about the original filing on July 7th of this year. Dan Browning of the Minneapolis Star Tribune has written a series of articles on this case, which appears to have many of the characteristics of affinity scams. It is the "Minnesota Madoff" case, in that people believed that it was possible to achieve extraordinary investment results by individuals who could miraculously outperform everyone else's results. As well, it also preyed upon associations by the listeners and investors in interests, political leaning and religion to the defendants.

Like the Madoff case, the people in this case, though more ordinary, average people instead of the wealthy or celebrities of the Madoff case, were people who didn't have access to specialized knowledge and expertise. They were assured they were being 'allowed in' because they shared a religious affinity, where Madoff used a social connection. The "Insider" people were presented as the people who knew secret stuff that most people, even smart people, didn't know. If the plaintiffs can be faulted in placing their trust in the defendants, such fault finding should probably be they believed there is such a thing as investment advisers who provide this kind of guidance to large investors and institutions, that there are people who have an edge, people who CAN earn returns that 'regular' people cannot.

How would such results be achieved? Apparently the idea allegedly sold to the plaintiffs is there are smarter ways to do things. This same idea was sold to many others including those who are not currently represented in this litigation but who may be shortly be added as either additional individual plaintiffs, or as members a class action. This 'smarter way' represented ideas supposedly othewise only available to the large investor, or 'institutional investor', to those who are richer and savvier than the rest of us, the 'haves' of the world. The pressure and the persuasion was put to them that they had to find new ways to cope, because the world was going to hell in a handbasket, especially economically. The sky is falling, the government is coming for you, or will, and this is how to survive.

Growing up, my father very sternly told me that no one can swindle you without your help. Not of course, your willing help, but it is something rather that is done with you, that engages you, in order for it to happen. I was taught that one of the essential aspects of swindling is greed or unrealistic expectations, that you think you can beat out someone or some 'thing' - a bank, a person you don't know or like, an insurance company, an evil entity of some kind that 'deserves' to be cheated, beaten, to lose for your gain, a system, a class or group of people that can be defined to fit the scam. "If it is too good to be true, it isn't" was something I heard, a lot. I always thought, growing up, that it was one of those things that parents all had to say; that if there was some kind of club, or handbook, or owners manual for parents, it was 'in there'.

So I was surprised to find that when I have spoken or corresponded with these people who are the alleged victims, they don't seem to be greedy people at all, far from it. What emerged was a sort of carrot and stick scenario. They were encouraged by the broadcasts of the radio presenters to be afraid, to be concerned, to worry. They weren't trying to get an unfair edge or to cheat anyone, not in the slightest. They were made to feel that they didn't know the important stuff, that they lacked the expertise of the investment advisers, and of course that essential ingredient, the 'carrot' to earn their trust, their shared faith and beliefs. There were two different, sometimes overlapping characteristics that were distinct about the radio broadcasts (in some cases supplemented by other media) that recruited the plaintiffs. One was a very sincere appeal to Christianity, and the other was an appeal to very conservative politics, politics which promoted fear from current events.

These people who have lost their money are very nice people, they are not just names and addresses on a page. I like them. They have worked hard; many of them are older, even elderly. Represented are those who have served in the military, those who are religious leaders; the kinds of people we recognize as being like our family members, friends and neighbors, people deserving of our respect. Should they have been more skeptical? Possibly; it is an easy thing for someone outside of this to claim that, too easy a temptation. This 75 page document, the second amended verified complaint, and at least one other supporting document, referred to as the Loos document for the person whose work product it is, suggests that what was involved was not so much a lack of skepticism. The claims of expertise were very convincingly supported by allegedly fraudulent information in the form of boldfaced, apparently intentional, repeated misstatements of fact, and what appear to be convincingly faked documents and other material.

As of this writing, Asst. U. S. Attorney Frank McGill, formerly the acting Minnesota U.S. Attorney, is rumored to be prosecuting one of the defendants, Trevor Cook; however McGill could just be assigned to assist investigations in matters such as obtaining search warrants, and to coordinate legal work for the multiple investigations. According to the articles by 'Strib' ace investigative reporter Dan Browning, numerous regulatory entities, both state and federal, as well as the FBI and possibly other law enforcement agencies are actively investigating the defendants' activities. IF the rumor about McGill is true, this is an interesting development. McGill was the attorney who replaced the disgraced former US Attorney for Minnesota under Alberto Gonzales, Rachel Paulose. According to this article, he appears to be quite familiar with the prosecution of white collar crime in this state: www.allbusiness.com/crime-law...fraud/12121096-1.

Don't just read what I write althoughthis is not going to be my last word on this subject. Read Dan Browning's articles, read as much of the original documents as you can. It is an education, no matter how much you think you know, that may surprise you. Browning's most recent article is : www.startribune.com/business/58510677.html?elr...Yyc... but readers can locate the other earlier articles on line as well.

It would be wrong to make this an issue of political belief, of right or left, liberal or conservative. It would be wrong to try to characterize this as a matter religious belief. It would be wrong to think you and I are so smart, so shrewd we would be immune. To make this about the crime and not about the right wing politics promoted by some of the defendants, I reached across that political 'divide' for help in gathering information and in disseminating information, from a politically active conservative friend I respect and trust. That gesture was initially rebuffed, but I understand the reasons; the door was left open for future cooperation. This story has political aspects, but at heart it is really about what is alleged to be the intentional, deliberate, callous theft of the life savings of very nice, trusting people. I must admit to having trouble wrapping my heart and mind around the very idea of that scale of calculated avarice, of the reality not theoretical greed and cruelty.

This is alleged civil wrongdoing; as yet there are no criminal convictions, and only rumors of prosecution. No jury has found any of the defendants guilty or responsible; this has not yet gone that far in the courts. It is early days. Until determinations are made, until all the investigations are complete, and all the many attorneys have present their cases, these are allegations and accusations, with supporting proof offered, but no decision from a judge or jury. Until that happens, and it will take awhile, estimations are as long as eighteen months, the defendants who are already named, and those who may be added to the list, are legally innocent until proven otherwise. It would be wrong to assert that in name only; it must be more real than something we give idle lip service.

It would also be a serious mistake to think affinity crimes only happen to other people, not to you, not to people you know, not to people about whom you care. When I first learned about this, it was not something I knew much about other than a little theory. Now I know more about the practical aspects, the reality of it. When I first started reading, it was something that happened to other people. Now I know some of those people, they are not abstractions any longer. I have the fortunate opportunity to try to help, and blogging is just one of the ways I can do that. The more people know and the better informed they are, the less chance there is of this happening again. It is a common crime, it happens with more frequency than most people realize. When the amounts are smaller, as is often the case, many people are too ashamed to let anyone find out they were victimized. What I write will not stop affinity crime, but if I work hard at researching, and if I write well enough, maybe it will happen less often, or in smaller amounts. If I can inform, if I can understand and share that understanding, maybe I can make the effects of THIS series of events less devastating for those individuals who have lost their life savings.

Because while these events sadden me near to tears, they also make me very angry. When I get a certain kind of angry, I have to do something. That 'something' usually turns into an adventure. I hope readers will share my adventure, and where it takes me.