BULL STREET - The art of the Con

A Russian Ponzi† No Less

The Russians have always been an extremely flexible people, they are well aware that they are going to be lied to by everyone and when things do not occur as they were supposed to, they only shrug their shoulders and continue their business knowing that this is the way things are here. Recently the people of Russia have had their money stolen by crooked local banks and ruinous inflation has taken much of what was left; the people determined that there must be a better way.† Thus, when MMM, came along offering Russian Peasants a better life, everyone was willing to listen. This appeared to be a company that had a novel approach to business and when they came calling, the people were ready to listen.

Their message was uniquely different. They were offering high returns to the people on their investments and these returns were guaranteed. Moreover, they were offering this sensational deal openly on television along with infomercials that had been meticulously put together. The ads that appeared in the local newspapers were tempting most importantly because the people that spoke in the company’s behalf were impeccable. Never in history had an offer like this ever been made and along with it a cadre of people representing among the most important celebrities in the nation, actually endorsing it. While media based fraud is highly unusual, however when you add a sprinkling of important celebrity endorsements, it becomes polarizing and impossible to resist.

In the United States, we are all familiar with a Mr. Ponzi, who once attempted to steal all of the money from everyone in Boston. He was quite successful in this endeavor and if he had not been stopped, we are sure that he was of a mind to go for everything in the United States. This was a man of high aspirations. The people at MMM, it seems, were advanced students of the Ponzi-type pyramid scheme, and thought that they could do him one better by actually stealing an entire country before anyone could be the wiser. Moreover, in this country, at this point in time, there were no regulators and everything goes here. But if you steal big, you have to arrange it so that you can enjoy the money you took. These folks had that problem solved.† After advertising their handcrafted fraud through the Russian newspapers and television, the perpetrator and mastermind, the president of MMM, ran for office and with some of the money garnered by this fraud bought himself a seat in the legislature by purchasing ballots.†

Eventually the massive fraud was uncovered and the people realized that they had been fleeced and yelled for MMM blood. Something like 20% of all people in the country were directly or indirectly affected by these crooks. Moreover, according to Russian Law, the president of MMM could not be prosecuted because he was now ensconced as a national legislator.† In real terms, his theft made Ponzi look like Little Lord Fauntleroy; it left tens of thousands of people penniless. Yet today, he serves in one of the highest elected offices in Russia and goes unpunished. [36]

Elsewhere, savvy investors might have smelled a rat earlier.† But this was post-communist Russia, where capitalism is wild, woolly and new.† The come-on, in any event, had been slick and seductive: pervasive TV commercials that wafted visions of apartments in Paris and vacations in California, and preposterous returns of 2,000% annually with no minimum investment.† With those tactics, it did not take long for 5 million Russians to pour money into the offices of the MMM investment firm, the country‚Äôs biggest and best-known stock fund.

The money was coming in so fast that MMM officials became hard pressed to bundle the currency investments into tidy packages and get them out of the country as fast as the money came in.† Many say that the logistic effort undertaken by company officers in secreting these funds ranks with the building of the Egyptian Pyramids at least in terms of economic engineering.† Naturally, everyone lost everything they had put into the fund, and they were made very unhappy in the process.† But this indeed was still Russia, and in Russia, there is always another day.†

In 1994, the then head of the CIA in an address to the United States Congress indicated that in a Russian poll in response to the simple question, "Who controls Russia?" a plurality of 23% responded, "The Mafia", 22% responded with, "No one", 19% responded, "I don't know", and only 14% responded "President Yeltsin".† Even chauvinist President Yeltsin indicated that Russia had evolved into "the superpower of crime".† And the head of the Federal Bureau of Investigation classified the Russian Mafia as, "the greatest long-term threat to the security of the United States."† Some say that Russia has evolved into a "Mafiocracy" which may accomplish in an economic sense, what Stalin and the Russian military were never able to do: that is, overpower the United States.† Russia, historically a builder of shoddy goods, has finally come up with an export that is world class: its criminals.† If taxes were paid to the central government on illicit earnings, Russians would be paving the streets of Moscow with gold.

 

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