Newspaper article The Christian Science Monitor

Recessions Expose Financial Scandals

Newspaper article The Christian Science Monitor

Recessions Expose Financial Scandals

Article excerpt

Low tide in the economy sometimes reveals financial scandals that otherwise might not have been easily detected.

That's the case once again as Bernard Madoff, the perpetrator of the largest financial fraud in history, pleaded guilty on Thursday to a Ponzi scheme that sucked in billions of dollars.

Some of the scandals, now and in the past, are discovered as a result of closer scrutiny as regulators roll up their sleeves to look for copycat crimes. Sometimes, companies mysteriously close their doors, causing investors and investigators to dig deeper. And, sometimes, the scams themselves come undone by the economic pressures around them.

"When the economy suffers, people reach out for their money, or what they think is there, because they need it to live or they psychologically want to know it's there," says Jim Cohen, a criminal law professor at Fordham University Law School in New York.

In this particularly recession, the scandals just keep on coming.

Investigators are trying to figure out what's happened to billions of dollars from Stanford International Bank in Antigua. Earlier this month, the Securities and Exchange Commission charged Sunwest, an operator of Assisted Living facilities, with a $300 million securities fraud. And on Wednesday, the SEC alleged a California company, Equity Investment Management and Trading was running a $40 million Ponzi scheme - where money from future investors is used to pay off money owed to past investors.

Barton Chilton, the head of the Commodities Future Trading Commission, told reporters at the end of February that more tips are rolling in every day. He termed it a "Ponzi paloosa."

Meanwhile, some experts believe that Mr. Madoff's plea of guilty to 11 felony counts will help some of his victims to get past their sense of loss. "People will feel some sense of relief," says Mr. Cohen. "There will especially be some relief that he is behind bars."

But, Cohen says the magnitude of his betrayal has shattered so many lives. "Some people may never get past this," he says. "This is not just your garden variety kind of thief. He betrayed his religion, religious organizations, and even his friends. …

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