I sometimes jokingly say that since I was once a politician, lying comes naturally to me. And we know how politicians typically rank on the scale of trustworthiness. Lawyers and used car salesmen are also among those who seem to garner little respect in the trust department. But I believe that historically, those investors who have met with great success and who have contributed to important causes have been held in the highest levels of our respect, esteem and confidence. But that has changed.
First, it was Bernie Madoff, whose multi-billion dollar Ponzi scheme was detected after 20 years of organized fraud, that apparently involved several of those who worked for him.
And this past week we learned of Russell Wasendorf, Sr.'s nearly 20 years of fraud, which resulted in the stealing of $100 million. In his case, he both admitted to the crime (in his suicide note) and claims sole responsibility for this action.
And while Wasendorf's stature and success may not have been as widely known as Madoff's, he was still one who garnered great respect from many in the industry, as well as those in his local community.
Fraud is nothing new, of course, and perhaps really isn't that uncommon. Our local paper today speaks about a New Brunswick (NJ) accountant who was found guilty of check kiting and defrauding two banks of $1.5 million. But this guilty party (Amro Badran) is not a public figure, as Madoff and Wasendorf were.
Those individuals who stole, but then gained public attention through their apparent good deeds, are ones who may have, by these same acts of generosity, been able to increase the degree of their illicit behavior.
I'm sure many are now wondering, who next? Or, what can we do to catch these folks sooner? I don't think there are any easy answers. Sadly, the risk of fraud by highly regarded investment professionals seems to be on the increase, though.
But also what is sad is that Madoff and Wasendorf tarnish our industry. A priest who is a family friend mentioned a few years ago how he was in a men's room, and a man and his young son were standing by the sink. Our friend was in his priestly garb (e.g., Roman collar) and the father told the boy to stay by him when he saw our priest. I.e., the scandal that has rocked the Catholic church had caused some to stereotype about priests, even though a very small percentage are guilty of child abuse.
Likewise, I am confident that a very small percentage of folks in our industry are guilty of fraud. But stories like these don't help in the "PR" department.