Cons Targeting Jews: First Madoff, Now Stanford

Nanes and his Jewish sales force heavily advertised Stanford products in community publications.

He also dished out Stanford money as a corporate sponsor to every significant Jewish cultural event, said Renee Shabot, director of Tribuna, an organization that acts as a liaison between the Jewish community and the non-Jewish world. Stanford sponsored sports teams, arts, and Kadima's huge annual fundraiser:

“People got used to seeing the name, seeing their faces and so they trusted them,” Shabot said.

Nanes, who is laying low somewhere in the Houston area, doesn't deny that he went after Jewish clientele but he insists he believed at the time the products he was hawking were legitimate.

According to Nanes' Houston lawyer, Charles Parker, Stanford hired the 41-year-old MBA about ten years ago to take charge of opening up Mexico -- and more recently, South America -- to sales of financial products.  Neither U.S. nor Mexican authorities have accused Nanes of any wrongdoing, although serious alleged misdeeds are detailed at length in the San Antonio class action lawsuit and in a new book published in Mexico called The Paper Empire by Mexican journalist Gabriel Bauducco.

Parker said his client "never suspected anything was wrong," adding that Nanes and his wife "lost several million dollars, his parents even more."

Believing that Stanford products were legitimate, Nanes naturally decided to market them to the Jewish community because “that’s who he knew. That was the wealthiest community,” Parker said. It made sense for Nanes to recruit other Jews from the communities as sales officers because they also had extensive local connections there too, Parker said.

“And word spread, and people were happy,” Parker continued. “They got their return and passed it on to others. Everybody was pretty happy until everything went to hell in a hand basket.”

To be sure, many more non-Jews than Jews lost money in the Stanford theft. All told, regulators believe Stanford’s CD sales operations sucked in billions from about 30,000 victims in Latin America, Europe, and the U.S.

But more than half of all the estimated 4,000 victims in Mexico were Jews who lost some half a billion dollars. That kind of number packs an outsized wallop for such a small, defined community, according to San Antonio lawyer Ed Snyder.

Snyder is one of several Texas and New York attorneys representing well over 1,500 Mexican and Venezuelan victims in various lawsuits against Stanford, a number that is growing fast.

Snyder recounted how he first became aware of this one victimized demographic. On his first trip to sign up Mexican clients in February, he was surprised to encounter furious Hasidic Jews wearing yarmulkes and other religious attire, speaking Yiddish before switching to Spanish. Subsequent trips to sign up clients and to hear their stories more than confirmed Snyder’s initial impression:

“My perception is that the Jewish community in Mexico City, for various reasons, has been heavily impacted by the Stanford disaster,” Snyder said. “I think what you have here is a situation where that community was specifically targeted.”

A similar story is unfurling in Venezuela, where an even more insular Jewish community of 14,000 reports similar misfortunes from investing in Stanford, also the result of the company’s strategy to hire trusted Jewish salespeople from the community.

Chief Rabbi Penchas Brener, who represents Caracas’ largest synagogue, acknowledged that he lost $50,000 to Stanford from the endowment of an important local foundation he heads. That’s a substantial sum in a country where per capita income is less than a third of that in the U.S.

“I don’t know how hard it hit the community, but I know it hit,” Brener told me in August.

Brener said he felt almost no wariness about reaching out to one of Stanford’s “account executives,” a local Jewish man whose family he’d known for decades, to invest his foundation’s $50,000 reserve account. “I didn’t pay too much attention to the credentials,” Brener said. “They were Venezuelan Jews. They worked for a bank. He didn’t have to convince me; I called him. This was made easier, so to speak, by the fact that he was Jewish.”

So why care if you're not Jewish? Because a few years ago, while Madoff and Stanford were still raking in their victims’ nest eggs, the U.S. Securities and Exchange Commission released a fact sheet warning titled “Affinity Fraud: How To Avoid Investment Scams That Target Groups.”

In it, the SEC warned that Ponzi and pyramid scheme fraudsters had been exploiting the ethnic, religious, and other bonds they shared to gain the confidence of their victims. Koreans had ripped off fellow Koreans, African American hucksters hit black churches, and elderly con artists have ripped off fellow retirees.

It could happen to anyone who counts themselves as belonging somewhere.

That makes what happened to Jews in the Madoff ripoff -- and especially now with the Stanford Ponzi scheme -- a pretty teachable moment.