Fraud, Scams and Cons

December 2, 2022

Fraud describes any dishonest or criminal deception or misrepresentation designed for an individual’s own advantage or to cause loss to another. The words scam and con are perceived as less harmful and are often thought of as trickery or lying when in reality, they are versions of fraud and should be treated as such.

William Thompson was a 19th century American criminal and con artist. A genteel and polite man, he would approach strangers and start a conversation leading up to asking them if they had the confidence to lend him their watch. He would depart and never return the watch. Before his arrest in 1849, the police dubbed him the ‘Confidence Man’ and that was most probably the origin of the term now commonly referred to as ‘con man’.

Another person responsible for coining a new phrase was Charles Ponzi and in this case, it was his name. Ponzi, a 20th century swindler promised between 50% and 100% profit within 45 to 90 days by purchasing discounted postal coupons in other countries and redeeming them in America at full value. The early investors were being paid with the proceeds of the later investors and we all know that it is a matter of time before this type of scheme collapses. He did not invent the scheme, but they are now known as ‘Ponzi schemes’.

We are probably familiar with some of the more recent scams and fraudulent schemes such as:

  • Elizabeth Holmes and Theranos – recently sentenced to 11 years.
  • Frank Abagnale – charming double life leading fraudster who was portrayed by Leonardo DiCaprio in a hit movie.
  • Jordan Belfort – used ‘pump and dump’ schemes buying worthless stock, driving up the price and then selling it all at once. Interestingly, he was also played by Leonardo DiCaprio in ‘The Wolf of Wall Street’.
  • Enron – the energy company created a complex accounting scheme to inflate profits. They managed to fool both investors and regulators before an eventual bankruptcy and loss of $74 billion.
  • Bernie Madoff – once thought of as an investment guru, he was sentenced to 150 years for what is considered the biggest ever Ponzi scheme.

Fraud has been around since before money was used – 2500 years ago Egyptian tax collectors faced harsh punishment for using purposely-inaccurate measures to weigh the grain taxes and skimming the difference. In the year 193 AD when money was regularly in use the elite Roman Praetorian Guard fraudulently sold the rights to the Roman throne to the highest bidder.

Here are a few less well-known scams and cons from history:

  • Gregor MacGregor – a Scottish financial con man who in the early 19th century invented his own country called Poyais in Central America and sold ‘government bonds’ to hundreds of investors. Scottish families even boarded ships to emigrate, but two thirds of them died from malnutrition and malaria.
  • William Chaloner – an English 17th century con man and counterfeiter started his career producing coins and finished it hanged in 1699 after being found guilty by none other than Sir Isaac Newton, Master of the Royal Mint.
  • William Rockefeller Sr. – an American con man who in the early 19th century masqueraded as a ‘botanic physician’ (fancy name for a travelling medicine man) selling garden berries as miracle health cures. A gifted entrepreneur, albeit on the wrong side of the law, he was the father of John D Rockefeller Sr. widely considered as the richest person in modern times.
  • Victor Lustig – well educated and fluent in multiple languages the con artist was born in Bohemia (present day Czech Republic). He started out conning rich ocean liner travelers into investing in his non-existent Broadway productions. He is infamous for selling the Eiffel Tower as scrap metal and attempting to do so again, but fleeing to the US to avoid arrest. He died in a US prison after being convicted of counterfeiting.

The rise of the internet has provided many more opportunities for con men and swindlers to take advantage of us and it seems to be on the rise. Everyone is vulnerable especially people going through difficult periods of change in their life. Our natural tendency to be impressed when someone just remembers our name sets the tone for a con man to get his or her ‘foot in the door’. From there a small favour with a positive result makes it easier to say yes to a bigger favour later.

Mostly people are good and decent so there is no need to be a complete cynic, but as the end of year holiday season approaches please be extra aware, ask more questions and have a healthy skepticism.

The actor, John Lithgow said ‘I’m a con artist in that I’m an actor. I make people believe something is real when they know perfectly well it isn’t’.

Warrick Asher

General Manager – Sales, BarnOwl.