History of Greed: Financial Fraud from Tulip Mania to Bernie Madoff

At least $11 trillion was lost from the U.S. economy in 2008. The world was turned upside down and plunged into a deep recession, if not a depression. What happened? According to David E.Y. Sarna, author of HISTORY OF GREED (Wiley; September 2010; $29.95; 978-0-470-60180-8; Hardcover), fraud and greed had a lot to do with it. “The meltdown of 2008 has affected us all, and we are justifiably angry. But was the worst economic crisis in decades caused by blatant illegal acts or by some terrible combination of greed, naïveté, blunders, and just plain stupidity?  While stupidity and even greed are not a crime, the problems go well beyond simple greed, for there is no shortage of manifest criminality.”

From the earliest financial scams of the 17^th century through the headline-grabbing Wall Street scandals of our times, HISTORY OF GREED exposes the true and riveting stories of how both naïve and sophisticated investors were fooled by unscrupulous entrepreneurs, lawyers, hedge fund managers, CPAs, Texas billionaires, political fundraisers, music managers, financial advisers, and even former Mossad agents. Addressing the people behind the financial fraud, how they did it, and why people continually fall prey to scam artists, Sarna outlines what actions to take today to avoid becoming the victim of tomorrow's "too good to be true" investment opportunity.

The book presents a brief history of securities fraud, including frauds surrounding the first stock exchange—The Amsterdam Stock Exchange, the first naked short seller Isaac Le Maire, and the Tulip Bulb Scandal in the 1600s; the Mississippi Company Scandal and the South Sea Bubble in the 1700s; Nathan Rothschild’s market manipulation and John Sadlier’s bank fraud in 1800s, and of course the infamous Charles Ponzi in the 1910s before looking at financial fraud committed in past 30 years.

Sarna covers the wide breath of types of financial fraud, from securities fraud, naked short selling, public entity abuse, stock manipulation by company founders and executives, stock option fraud, Ponzi schemes, and accounting fraud.

Sarna presents a diverse cast of characters who committed these crimes, among them:

• “Crazy Eddie” Antar: Electronics discount chain Crazy Eddie (“Our prices are insane”) is a great model of modern financial fraud because of its lengthy time span (18 years) and its use of multiple methods, including skimming, underreporting of income prior to going public, overstatement of income after going public, laundering money, recording fictitious revenue, and illegally short selling.
• Anil Anand: This former CFO of Allied Deals orchestrated a $680 million fake commodities Ponzi Scheme that targeted 20 Banks worldwide.
• Lou Perlman: In 2006, it was discovered that the 1990s entertainment business manager for the famous American boy bands the Backstreet Boys and ‘NSync had perpetrated a major, long-running, and intricate Ponzi scheme, leaving more than $300 million in debt.
• Marcus J. Schrenker: An Indiana financial advisor who tried to fake his own death in January 2009 to escape financial fraud charges.
• R. Allen Stanford: The billionaire, fifth-generation Texan was accused of engaging in $92 billion fraudulent financial schemes that cheated 50,000 customers in 2009.
• Bernie Madoff: Madoff perpetrated the longest-running and most extensive Ponzi scheme run by individual in history, with an estimated $36 billion in losses and more than 8,000 victims. Sarna examines how Madoff got away with it, who helped him, who can be made to pay, and how the mother of all Ponzi schemes may turn out to be the mother of all legal squabbles.

HISTORY OF GREED details how markets are manipulated, books are cooked, Ponzi schemes are hatched, and how the government only closes the barn door once the cows have all escaped.