The man who brought the world’s most infamous fraudster to justice says that New Zealand is not immune to Ponzi schemes.
Harry Markopolos, the prime player in exposing Bernie Madoff and his US$65 billion fraudulent scheme, said that perpetrators of white-collar crimes were better educated, more sophisticated and more cunning than other types of criminals.
Complex formula
He said that Ponzi scheme operators carefully plan their strategies and target people who are vulnerable and easy to trust.
“Victims of such schemes do not understand capital markets and usually are those who have not saved enough for retirement. They are therefore disparate to believe anyone who promises high returns,” he said, addressing a conference of the newly formed Economic Crime Agencies Network (ECAN).
“New Zealand places too much trust to have proper internal controls,” he said.
The three-day conference, held at the Viaduct Event Centre in Auckland from February 11 to 14 at the Viaduct Event Centre, was hosted Serious Fraud Office (SFO) New Zealand.
Mr Markopolos said that Ponzi schemes were usually complex, involving strategies understood by only a few investors.
“Many schemes involve privately traded investments with no transparency. Black-Box strategies are common and no one is allowed to peer inside the magic box and see the secret formula. Returns from such schemes are usually steady but often not homeruns. They appear safe so that victims will willingly invest 100% of their assets,” he said.
Local cases
SFO Acting Chief Executive Simon McArley said that about seven Ponzi schemes were discovered in New Zealand over the past 18 months.
“We are suspicious about some and taken some to prosecution,” he said.
According to him, Allan Hubbard’s Aorangi Securities, Jacqui and Mike Bradley’s B’On Scheme and the still-under-investigation Ross Asset Management were recent cases.
“Investors have lost tens of millions of dollars as funds were recycled without being invested,” Mr McArley said.
Stephen Head, Commander of the City of London Police said that operators of Ponzi schemes knew the knack of attracting investors.
“They usually have strong interpersonal skills, and are compelling characters. They are very charismatic and people are drawn in by the size of their personalities. The internet has made it easier for them to find new victims,” he said.
Among the other participants were officials from SFO UK, the Federal Bureau of Investigation (USA), the European Anti-Fraud Office (European Union based in Belgium), Economic Crime Directorate (London City Police), Corrupt Practices Investigation Bureau (Singapore) Anti-Corruption Commission (Malaysia) and agencies representing a number of Asian countries.
They elected Eric Tan, Director of Singapore’s Corrupt Practices Investigation Bureau to chair ECAN during the coming year.
