Wall Street has a long history of con artists and crooks who bend and break the rules to benefit themselves. This usually leaves regulators scrambling to close the loopholes and specify grey areas in their regulations in order to prevent copycat con men.
There are only a few things you can count on in the world: death, taxes and Wall Street scams. Here are five of the biggest Wall Street scams of all time.
1. Sam Israel -- Bayou Hedge Fund Group
Total Scammed: $450 Million
Compared to some of the other names on this list, Sam Israel might seem like a lightweight, but if you were one of the people who invested your hard earned money in the Bayou Hedge Fund Group, nothing could be further from the truth.
Investors in this hedge fund were lied to about potential returns, saying the $300 million they invested in 1996 would grow to $7.1 billion in 10 years. After poor returns in 1998, investors were sent fake accounting reports so they really thought their money was performing well. In total, $450 million dollars was stolen from investors.
When Israel was finally caught, he attempted to fake suicide to avoid prison and appeared on America's Most Wanted. He was convicted of fraud, sentenced to 22 years in prison and fined $200 million.
2. Joseph Nacchio -- Qwest Communications International
Total Scammed: $3 Billion
In 2007, the SEC successfully sued Qwest Communications International's former CEO Joseph Nacchio for masterminding a $3 billion financial fraud scheme, and for benefiting from inflated stock prices and insider trading.
While CEO, Nacchio continually told Wall Street that aggressive revenue targets would be reached even as the company was tanking. He earned $52 million selling stock with the knowledge that it was headed for disaster. Nacchio was convicted of 19 counts of insider trading and ordered to pay $19 million in fines as well as return the $52 million in illegal stock trading.
In 2009, after a long appeals process, Nacchio began serving only a 6-year prison sentence.
3. Bernard Ebbers -- WorldCom
Total Scammed: $100 Billion
As the CEO of WorldCom, Bernard Ebbers grew the company into the second-largest telecommunications company in the United States by acquiring smaller companies. However, these rapid acquisitions left WorldCom heavily in the red, while Ebbers exaggerated the assets of his company by $11 billion dollars.
Unfortunately, it was investors who were the hardest hit when WorldCom stock, once worth $64 per share, plunged to around $1. The nearly one million people who owned stocks and bonds in WorldCom lost around $100 billion during its collapse.
Until the Madoff scheme, WorldCom was the biggest accounting scandal in United States history. Ebbers was convicted of fraud and conspiracy because of the false accounting practices and is serving a 25-year prison sentence.
4. Kenneth Lay and Jeffery Skilling -- Enron
Total Scammed: $74 Billion
Once the seventh-largest company in America and worth $68 billion, Enron came to a disastrous end in 2001 when the company filed for Chapter 11 bankruptcy. Kenneth Lay and Jeffery Skilling were at the helm of the energy trading company when it filed.
Lay, the founder of Enron, duped investors out of $74 billion dollars when he exaggerated the health of his company. Investors were left to deal with the consequences as Enron stock, which was previously worth $90 per share, plunged to less than $1 within one year.
In 2006, Lay was indicted of 11 counts of securities fraud and related charges. He died while awaiting his court sentence on vacation in Colorado. Skilling was fined $45 million and is serving a 24-year prison sentence.
5. Bernard Madoff -- Bernard L. Madoff Investment Securities LLC
Total Scammed: $18 Billion
$18 billion is a staggering amount of money, but that's how much total money Madoff's investors lost investing in this Ponzi scheme, now considered the biggest investment scam in history. How did it work? Madoff took money from individual investors and non-profit organizations but never invested the money.
Instead, he took money from new clients to pay his more established clients who wanted their money, thereby fooling them into thinking that he was getting an unparalleled return on their investment.
Meanwhile, he sent erroneous balance statements to every investor so that it appeared that their money was doing well and, in fact, multiplying in value. Over the duration of the scheme, $36 billion was invested, $18 billion was returned to investors and $18 billion is missing.
Individuals and institutions who invested were devastated. Some organizations were forced to close, while other individuals lost their entire retirement. Madoff is currently serving a 150-year sentence in the Federal Correctional Institution Butner Medium near Butner, North Carolina.
The Investing Answer: Investors hungry for market prowess and success look for quick ways to bolster their portfolio and earnings. The problem is, many high-return opportunities are actually investment scams.
Millions of smart and wealthy investors have fallen victim to these investment scams. It's a club you don't want to join. Be careful with your money, be thorough choosing any wealth management advisors and be weary of investing opportunities that seem too good to be true.
By Brian Reed, www.investinganswers.com
1970s* Banks were too small to create mega profits for themselves, economic problems, oil, etc.
1980s* Serious deregulation of banks began. This was in accordance to the ubiquitous ‘Trickledown’ Philosophy/Creed of the decade. In addition, the deregulation sprees introduced the concept of ‘moral hazard’ to the lexicon thereby enabling the S&Ls to create mega profits (for themselves). (The Garn-St Germain Depository Institutions Act of 1982 & other deregs.) Criminal prosecutions resulted for the more flagrant abuses. In 1988 George Bush is elected President. S&L problems are not even a part of the election debate.
1989* President Bush unveils S&L bailout plan in February.
• Savings & Loan Crisis #1 Largest taxpayer bailout of banks ever (including being larger than the most recent bailout).
• The Savings and Loan crisis of the 1980s saw more than 1,000 S&Ls collapse, costing the U.S. government (we the people) more than $100 billion.
1990s* Even though deregulating banks was a prime factor in the S&L Crisis, the FIRE sector convinces (scams) everyone, including Democrats, Republicans & basically all American people that even MORE deregulation was required. Various ‘making of offers no one seemed able or willing to refuse.’
1999 The Gramm–Leach–Bliley Act (GLB), also known as the Financial Services Modernization Act of 1999 effectively repeals Glass Steagall (put into place after investigation & analysis of factors leading to Great Depression of 1930s)
Coincidence? Hmmm.....
Present Day Banks are still too big. Too big to CARE in addition to still being too big:
• To fail
• To manage risk
• To bailout
• To allow to fail
Apparently, in the present day, there remains a good proportion of American People who are still:
• Too much in denial
• Too entranced/entertained by the bipartisan bickering to give a flying f***
• Too addicted to playing the ‘victim card’ to do much of anything else (except perhaps to whine)
• Too busy blaming small, mid, or especially BIG government to do much of anything else (except for bending over to the FIRE sector). When they say, "Bendover" the answer is, "How far?"
Because the FIRE sector is too big to ‘bully’ (oh puhlease), essentially their song remains the same, ‘Don’t rock the boat but dammitt keep on bailing.’
• = no reforms to address the Systemic Risk
Although ‘Trickledown Economics’ Philosophy/Creed is in its 2nd phase: ‘Golden Showers Economics.’
• Continue Corporation's 'Rights' full steam ahead
• Continue to offshore jobs as much as possible in order to save in labor costs, for benevolent tax treatment, etc.
• Continue to dismantle Labor Unions
• Continue to market privatizing (Corporation's Rights in full force).
• Rinse & repeat