Cons Targeting Jews: First Madoff, Now Stanford
A clear tactic has emerged from both Ponzi schemes: Exploiting the tight bonds of trust within Jewish communities to get at their money.
October 5, 2009 - 12:53 am
It took a long time for anyone to point out an obvious phenomenon about the $60 billion Bernard Madoff Ponzi scheme, the largest in history. It was that Madoff victimized thousands upon thousands of his fellow American Jews. By the time that phenomenon was recognized, it was too late for Americans to properly digest the intellectual nutrients it offered. The story was over.
But now it turns out that another Madoff-like Ponzi operation, this one the world’s second largest, also laid financial waste to Jews. This clearly is no one-off phenomenon.
As a story, the Stanford Financial Group of banks and “investment” houses got much shorter shrift than Madoff’s crimes, and so far no one has publicly connected it to a specific demographic of victim. But the Stanford Ponzi, started by former Texas health club owner R. Allen Stanford, hammered the 40,000 Jews of Mexico City to the tune of a half billion dollars, and to a lesser extent hit the smaller Jewish community of Caracas, Venezuela.
In February, the Securities and Exchange Commission charged Stanford with operating a “massive” fraud. All told, regulators believe Stanford attracted an estimated $8 billion from about 30,000 victims in Latin America, Europe, and the U.S. for purportedly safe investments like certificate of deposits (CD), albeit with a high return. About $6 billion is believed to be missing. Stanford, once on the Forbes 500 list, is now in federal custody facing 21 counts of conspiracy, fraud, bribery, and obstruction of justice. He insists he is innocent.
In Mexico, no one in the tightly entwined Jewish community is very eager to talk about it. But according to off-the-record interviews I’ve been conducting with Jewish leaders and members since July, Jewish schools and charities are devastated and struggling to stay open. Retirees lost everything. Once comfortable widows are suddenly broke and desperate. Young married couples lost wedding money. College education funds are gone. Inheritances passed down from beloved grandparents — gone. Huge capital losses are being felt in every corner of the community. Everyone either lost their own money or knows one or more people who did.
How did it happen, especially since Stanford was not Jewish and actually wore his Christianity on his sleeve? And is there — finally — a cautionary lesson to be learned by Jews and non-Jews alike who may have missed the lesson offered by the Madoff scandal?
Stanford, a southern Baptist who loved to project his religiosity in business, did what he did in Mexico by hiring a Mexican Jew with deep roots in the community to open and then run his operations there. That Stanford executive’s name is David Nanes. Nanes hired Jewish account executives from the community. This crew, by dint of that rather closed community’s interlocked kinship ties, burrowed under the cultural firewall straight to Jewish money.
Sofie Freiman, head of a Jewish charitable institution called Kadima which helps 250 developmentally disabled adults and children in Mexico City, explained that Nanes and his people exploited Jewish family trust bonds — and solid, though bogus, returns — to persuade her and her board to hand over most of Kadima’s endowment funds.
It’s all gone now, leaving plans to expand programs and the facility moribund. Kadima is struggling badly now. But that’s not what hurts the most, Freiman told me:
You would never think in your life, if you’re a widow, that a nice Jewish boy is going to fool you in a scam, because you know his mother and you never think he’s going to take advantage. This is where it’s most painful, that it was done by Jews.
No anti-Semitism is evident here, no more so than with Madoff. No, what happened here has to do with love of community.
To understand why this should matter to the non-Jewish world, it’s crucial to get that Mexican Jews, like Jewish minority communities scattered throughout the global diaspora, tend to share almost evolutionary trust in one another born from centuries of organized persecution and genocide in adopted lands. Over the eons in different nations, Jewish people have become almost genetically inculcated with the idea that, in inevitable times of trouble, help will ever only come from other Jews. An animal instinct for survival, if you will, born of shared culture, identity, religion, and external threat over time.
Stanford’s hiring a Mexican Jew to head the Mexico division’s sales of bogus, high-interest CDs was akin to a scientist placing a single strain of bacteria in a gel-filled petri dish. It spread extremely fast with no natural predators.
Nanes was born, married, and had children in the community. His roots there ran deep.
While it’s unclear whether Stanford thought to choose Nanes for his Mexico City Jewish connection, Nanes certainly knew that was where some money was to be had in an economically checkered country. Those who bought in and profited spread the word to loved ones they sincerely hoped could share in the profit.