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The Minnesota Madoff

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Mariah Blake’s article about Tom Petters is fascinating stuff. Petters used a Ponzi scheme funded largely by hedge funds, investors known to Petters and his associates through Christian groups, and the purchase of failing legitimate businesses to finance the classic lifestyle of the conservative wealthy-and-tasteless (high stakes slot machines! Yacht cruises with prostitutes, interns selected as potential sex partners, and cocktails involving Red Bull and citrus vodka!) All throughout this, he sought to get a pardon for his past crimes with the help of political backers ranging from Fritz Mondale to Michele Bachmann.

Among many other things, the Petters tale is an object lesson of the value inherent in being a responsible looking white guy in a suit. While Maddoff’s Ponzi scheme at least grew out of a legitimate operation, Petters was never anything but a con artist. And in the beginning, not a very sophisticated one — his basic strategy was to sell things he didn’t own and keep the money. And, yet. he was able to get away with a more elaborate and lucrative fraud for more than two decades, while accruing many of the markers of social respectability up to and including many powerful friends. There are too many examples of our fundamental regulatory failures to count, but this one is a doozy.

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  • Also classic:

    Petters calmly explained that the accusations against him were a farce; he had caught a rogue employee embezzling $10 million, and she had gone to law enforcement with trumped-up allegations of fraud.

  • wiley

    A sociopath and a white guy in a suit. What a combination. The sky is the limit!

  • Bill Murray

    Yacht cruises with prostitutes,

    was he trying to buy the Vikings?

    • Walt

      The demand for yacht cruises with prostitutes seems disproportionately high in Minnesota.

      • Josephus

        We’re a land of contradictions: Lutheran church ladies with ambrosia and hotdish and… cruises with prostitutes.

        • Hogan

          You have to expect a certain amount of that in the Land of 10,000 Lakes.

  • wengler

    His true crime was that he didn’t own a bank and didn’t steal hundreds of billions.

    Of course it took two decades to get him. He wasn’t violating any local park ordinance. Park law is sacred.

  • wiley

    Too bad there aren’t more hours in day. That article looks very interesting, and one thing that interests me about it is that like Madoff, this guy preyed on people who shared, or appeared to share the same religious sympathies. Sad but true that having “trust in the Lord” isn’t the same as having trust in your broker who claims to share your beliefs—or for that matter, having faith in your religious leaders.

    • ajay

      one thing that interests me about it is that like Madoff, this guy preyed on people who shared, or appeared to share the same religious sympathies.

      This is a common factor in many, many Ponzi schemes. Any potential mark is going to have two questions: 1) how come you can make much better investment returns than Vanguard or BlackRock or anyone? and 2) how come you’re offering this to me rather than anyone else?

      The answer to 1 is generally “well, keep this to yourself, but we’re doing something slightly dodgy”. Madoff’s investors thought he was using his contacts at NASD to front-run share placements. That also discourages people from probing too deeply into the scheme, because they’d rather not know.

      The answer to 2 is “well, we’re giving you this opportunity because we want to help out a fellow Jew”, or a fellow Christian, or a fellow LA bus driver or college alumnus or Dominican immigrant or whatever. They very often prey on sub-groups of the population. There was a famous one called “Women Empowering Women”.

      • gordoconhambre

        wow. You guys are playing the race card that I am too afraid to play myself. I am 29, Dominican and currently studying and working to be a futures trader/broker. Its interesting how white skin can open so many doors, for so many mediocre people in finance. It is simply amazing, Advisory funds that have never ticked above 10 percent returns, managing insane AUM. Mucho Dinero. As the world transitions its race games, wealth, populations trends, it will be interesting to see how the new brown money, treats old white money. Try cold calling with a Z in your last name…not too easy hombre! The sad part is that the fix is simple for these ponzi schemes, simply allow the customers to periodically login to their accounts themselves…DUH. Transparency is the answer. Also, there should be laws about Advisors, Traders and Brokers having to post their Returns percentages on their main web pages or some sort of govt database. Just my 2 cents. BTW, dont get me started on Funds of Funds…ayayay no me gusta!

  • gman

    I love the fact the article mentions Franken in the initial paragraphs and you must wait until much later to have the much deeper connections to Pawlenty, Coleman and Bachman.

  • sv

    All throughout this, [Petters] sought to get a pardon for his past crimes with the help of political backers ranging from Fritz Mondale to Michele Bachmann.

    A nit: it was actually Vennes, not Petters, who was seeking a pardon for his past crimes.

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