Saturday, October 04, 2008
RUBBER DUCKIES
Friday, October 03, 2008
CAN YOU SAY "PONZI SCAM"?
I doubt that you have ever heard of 67 year old Robert Dean White, but you really ought to hear what he has to say. Federal prosecutors have an extensive library of the imparted wisdom of Mr. White, and my personally favorite “cut” is his description of the parent firm he worked for, “The Petters Group Worldwide”, as “…a Ponzi scheme.” They have recently been replaying that little tune in every hedge fund board room in Greenwich, Connecticut. It has been the Musak of the Bush era Neo-con dead-end investment club we have all recently become investors in. This is what becomes of people who actually start to believe that there isn’t a dime’s worth of difference between the people running for public office. There is always a difference, even if it’s just their price tag.
Charles Ponzi (AKA Charles Ponei, AKA Charles P. Bianchi) was far from the first to invent this kind of scheme. He just put his name on it. He was an Italian immigrant who stumbled upon the International Postal Reply Coupon, a now defunct system of international postage. The price of IPRC stamps varied from nation to nation, and Ponzi convinced investors that he was buying the stamps cheaply in Italy, in huge bulk, and selling them for a profit in America. He promised a 400% return on investments and seemed to be making good on that promise. People actually paid him to take their money. Ponzi went from a penniless ex-con in 1919 to a millionaire in 1920: in July alone he made $420,000. And that was in 1920.
Then in August the Boston Post asked the U.S. Post Office how many IPRC’s Ponzi had actually exchanged and found out the number was zero. He was using new investments to pay off old investors, and pocketing a substantial profit. By September of 1920 Ponzi was in jail. The vast majority of his investors lost everything. A team of accountants searched valiantly for months but were never able to reconstruct where all the money had disappeared to. After serving his sentence and being deported Ponzi told an Italian reporter not to feel sorry for his victims, “Even if they never got anything for it, it was cheap at that price,” he said. “It was easily worth fifteen million bucks to watch me put the thing over.” Tom Petters, the 51 year old High School graduate behind The Petters Group World Wide (“Partnership Defined”), a self described $2.3 billion investment group with 3,200 employees, founded his first company when he was just sixteen. He leased an office in downtown St. Cloud, Minnesota, out of which he sold stereo equipment to college students. When his father found out about the venture the budding entrepreneur was pulled up by his short hairs and forced to close it all down. But Tom was just starting slow.
In 1988 he formed The Petters Group. In June of 2002 Tom and Ted Deikel bought the name and inventory of “Fingerhut” from Federated Department Stores. A year later he bought eBid.com. Two years later he shelled out $246 million for Polaroid. In October 2006 he joined with Whitebox Advisors to buy Sun Country Airlines. In February 2007 he bought the marketing company Juice Media Worlwide, and in November he became sole owner of Sun Country. In 2008 his acquisitions accelerated. He bought EducAsian in January, the magazine conglomerate Metropolitan Media Group in July and the charter airline Southwest Aviation and Enable Holdings, Inc., both in August. And in September of 2008 the F.B.I. raided John’s offices, his home and the home of Mr. Robert Dean White. Tom’s entire house of cards folded like…well, like a house of cards. Just a month prior to his personal Goetterdaemerung, Tom explained to the fawning students of the Carlson School of Management, “You’ve got to figure out how to leverage and move things forward and not backwards. Sometimes sideways and left and not always how you had anticipated.” But evidently Tom did anticipate what was coming because he is heard on one of the F.B.I tapes admitting that that he cheated on his taxes, and used an employee to create false documents for investors, but that he “didn’t know what choice” he had. I guess honesty was not a viable choice.The Feds allege that for ten years Tom has been showing investors purchase orders to prove he was selling merchandise to Walmart. But when one investor finally checked with Walmart they said the P.O. numbers were fake and they had never bought anything from any of Tom’s many, many companies. This revelation led to a Federal audit of PGW that showed $1.9 billion in the “in” drawer and $3.5 billion in bills, the “out” drawer. And since the Feds lack the imagination of the Wall Street types, owing more than you own equals bankruptcy. Ah, if they only had the imagination of Tom Petters or Charles Ponzi they would know that being in debt was just another opportunity. Have you ever noticed that none of these wise guys have any interest in history? To me that explains a lot.
- 30 -
PS:
Petters' cronies plead guilty in fraud scheme
By DAN BROWNING, Minneapolis Star Tribune October 8, 2008
"...Coleman, 42, of Wayzata, wearing a navy suit with orange pinstripes, ...and pleaded guilty to a single charge of conspiracy to commit mail fraud. Her guilty plea was one of three Wednesday. Robert Dean White, 67, of Excelsior, and Michael Catain, 52, of Shorewood, also admitted to their roles in the scheme, which involved the creation of false bank statements and other documents that were used to trick investors into funding what they called a giant Ponzi scheme...All three defendants said they earned millions of dollars by participating in the scheme. White said he got a salary and generous bonuses,...White has agreed to help prosecutors with the case and could receive a reduced sentence if he provides substantial assistance....Allan Caplan, (Ms. Coleman's) attorney, said Coleman realizes that means she "will be penniless" for the rest of her life..."She wanted to bring it to a screeching halt," Caplan said...(Petters)...was in another courtroom seeking to be released from custody pending his trial on charges of mail and wire fraud, money laundering and obstruction of justice. He lost that bid...."
Thursday, October 02, 2008
INNOCENCE LOST
- 30 -
Monday, September 29, 2008
SAY A PRAYER
crossing the Green Rive Basin over the Rocky Mountains they met a misbegotten bunch who had read of a “better way west”, the “Hastings Cutoff”, brainchild of Landsford Hastings, a better author than a trailblazer. And on August 31 the two groups elected George Donner as their leader and turned their backs on the established trail at Fort Bridger, Wyoming. Their numbers had grown to 89. The “Cutoff” was a disaster. It twisted and wound up and through and over the Wasatch Mountains. You cannot imagine the difficulties until you have walked a hundred yards up hill, straight through a dense wood. Now imagine trying to clear a path through those same woods for a Conestoga wagon, five feet wide and sixteen feet long, without springs, with iron sheathed stiff wooden wheels, pulled by four oxen and loaded with seven tons of everything you think you might require to start your life over. At the summit they walked themselves to the very edge of a cliff with no room to turn around, and had to unload the wagons and then lower them and their cargo and their oxen on ropes to the valley below. They rejoined the trail on September 26. The “Cutoff” had left them three weeks behind. After the mountains, came the desert, where, at the “Humboldt Sink”, an entire river is consumed by the heat. By the first week in October the bold romantics had started to die. A sixty year old man known to us only as Mr. Hardcoop, a farmer from Ohio, was the first member of the Donner Party to die. His feet had swollen to bursting, and he was abandoned beneath a sage brush in the Nevada desert. Finally, on October 15 they reached the valley of the Truckee River, and at Truckee Meadows, modern day Reno, they paused, spending six precious days gathering their strength for the hurdle that faced them; the front wall of the Sierra Nevada Mountains. Stand on the shore of Mono Lake (to the south of the Truckee) and you see what gave these romantics pause. An abrupt wall of granite rises 1,500 feet straight into the air. And that is only the first step of a staircase that quickly climbs to over 12.000 feet. The “notch” or “Pass” through the mountains that the Donner party sought out is 7,000 feet high. And there the moist Pacific air climbing the gentle western slope of the Sierra, meets two lakes (Tahoe and Donner) and produces 415 inches of snow in an average year. In an average year winter storms produce ridge line winds of 100 miles an hour and higher, and temperatures down to -45 F. It was into this that the Donner Party began to climb the last days of October, 1846. There was already a dusting of snow in the pass. And this was not to be an average year in the Sierra.It started to snow on October 31, 1846, Halloween. The party was already broken. A wagon had flipped over and snapped an axel, and George Donner and family had stopped along Alder Creek to repair it. Meanwhile the majority had pressed on six miles farther and actually reached the summit. They were at the very edge of safety. Had they been one day, maybe one hour, sooner, they would have made it. They would have all lived. But within hours of that first gentle flake floating down to melt on a human cheek, six feet of snow fell, driving the romantics back to the eastern shore of the lake where there was a cabin and level ground. And there they stayed. And there many of them died.There were ten major storms that winter. A January storm formed ice in San Francisco, and in March it snowed in Monterey. At Alder Creek, where the winter was not quite as harsh as at the summit, George Donner cut trees off at the top of the snow pack, leaving a record of what they faced. At the pass the snow was ten to fifteen feet higher. The wonder is not that so many died, or that they were reduced to cannibalism, but that any at all lived. Out of fifty-five males, thirty-two died, out of thirty-four women just nine died. All the single males over twenty-one years old starved to death. On April 29, 1848, Louis Keseberg was carried into Sutters’ Fort, in the Serra foothills. He was the last survivor of the Donner Party to be rescued. And Iabella Breen McMahon, who had been a one year old infant during that starvation winter, died in 1935 at the age of 79. She was the last survivor of the Donner Party to die. If you get the chance to walk Alder Creek meadows, or the trails around the Eastern edge of Donner Lake please, say a prayer for all of those who preceded her. And for all of us who are destined to follow.
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