One of the many benefits of being a member of a local chapter of the CFA Institute is the weekly luncheons that feature guest speakers on a variety of topics that help financial professionals stay on top of important issues. I have to admit that I don't take full advantage of the many offerings, but I was grateful for the opportunity to meet with Tom Ajamie in early February, when he addressed his home-town crowd in Houston. Ajamie, who, with financial journalist Bruce Kelly, co-authored Financial Serial Killers: Inside the World of Wall Street Money Hustlers, Swindlers and Con Men, is a lawyer who deeply understands his subject matter, as he has devoted himself to fighting for victims of financial fraud successfully for many years. Sadly, he has many stories to share.
While Bernie Madoff grabbed headlines in 2008 and certainly introduced the term "Ponzi" to anyone not previously familiar with the scheme, this book addresses crimes that have been taking place long before the largest swindle ever and that continue to be uncovered afterwards. While the book is probably most useful to readers who aren't particularly savvy financially, the authors point out that even Alan Greenspan was taken in by Madoff. Investment professionals can read this book in order to understand the mind of the con man who might be preying upon his clients or potential clients. I would go so far as to suggest that investment professionals might benefit not only by reading the book, but perhaps gifting it to their clients as well. Unfortunately, a few bad apples have created an atmosphere of mistrust, and the laundry list that Ajamie and Kelly include near the end of the book should help make the clients of reputable professionals more comfortable.
The book is organized into chapters regarding specific swindles and interludes entitled "The Investment Industry Speaks" that address the reader from the perspective of investment industry executives. Each of the stories is very different in its details, including the type of perpetrator, the type of victim and the type of fraud, but Ajamie and Kelly do a good job of tying each of these vignettes into their broader message. A few of these stories may be familiar to you, like Ponzi, Bre-X (a famous gold scam) or a few hedge-fund collapses, but most of these are smaller scale and focused less on the general public than on a particular individual. My guess is that every reader will be able to relate to at least some of the victims.
Ajamie and Kelly cover several big-picture topics, like mortgage fraud, elder abuse, and private placements, among others, but Wall Street is certainly the genesis of most of the stories. The last chapter is one of my favorites - they cover the topic of "Why we Fall for Scams". It's not an answer that will flatter the reader, but it's important to understand how we put ourselves in harm's way potentially. The authors certainly don't ever blame the victim in the book, but this is as close as they come.
I highly recommend this book to those who are financially savvy and especially to those who are not. While the scale of Madoff's deception was certainly beyond comparison, con men and swindlers continue to victimize the innocent. The book does a good job of explaining the psychological issues that drive both the criminal and his victim, and we can all learn from the tragedies that are detailed and the specific advice that the authors share. The laundry list at the end of the book can help you avoid becoming a victim of financial fraud. Unfortunately, we can't count on the regulators to stop the inevitable scams. Kudos to Ajamie and Kelly for empowering the reader to avoid becoming a potential victim.
