John R. Emschweiller, Top Stories in U.S., Wall Street Journal (December 27, 2010)
"Hard times are generating a growing number of financial scams in which victims are tempted to invest money on the false promise of big returns, often from supposed caches of overseas money.
"Louis Michael Pihakis, an 80-year-old convicted swindler, was recently indicted in a Phoenix federal court for one such 'advance-fee' scheme, in which prosecutors allege he falsely promised business people multimillion-dollar investments from a nonexistent trust in return for an advance fee that was usually several hundred thousand dollars....
"...The current economic climate, with often-tight credit markets for small businesses and swooning housing prices, has given advance-fee crooks fresh opportunities, federal officials say. 'You have people in desperate situations. Suddenly someone gives them a ray of hope' by promising to solve their financial problems, said Robb Adkins, executive director of the Justice Department's Financial Fraud Enforcement Task Force. As a result, he said, advance-fee frauds have become a priority for the department.
"The Federal Trade Commission says consumer complaints related to advance-fee and credit-repair schemes more than doubled in 2009 to over 41,000 from about 17,000 in 2008, the latest figures available....
"...'We have victims who normally wouldn't have been sucked into such a scheme,' said Evan Davis, the case's lead prosecutor. 'But they were facing eviction. This was their last hope and they weren't asking questions.'..."
Desperation isn't GreedIt's one thing, when a 'clever' fellow buys 'never pay income tax again' advice: and later has frank and open discussions with IRS accountants. Or a 'get rich quick' scheme turns out to be the sort of thing Mr. Madoff became famous for.
People who fall for that sort of scam are victims, and sometimes lose a great deal. But the Lemming thinks that tax evasion and get-rich-quick efforts may often be motivated by greed.
When someone can't make mortgage payments, a sort of greed might have been involved. The Lemming can imagine someone buying more house that the person's finances could handle for a number of unpleasant, unreasonable motives.
On the other hand, someone could wind up defaulting on a mortgage because the person's just not good at math. Setting up terms for a mortgage can be a complicated process.
Then, there's things like getting sick and staying that way, being laid off: you get the idea.
Someone whose home or business is is imperiled by a mortgage gone bad faces a huge loss: and desperation can make folks somewhat less clear-headed than they'd normally be.
Making a Bad Situation WorseIn a situation like the one discussed in that article, targets of the (alleged) fraud "...'...were facing eviction. This was their last hope and they weren't asking questions.'..."
It's easy to say, for someone who's not about to be evicted from his home: but the middle of a crisis is not a good place to stop using common sense - and checking out what looks like a "last hope."
There seem to be few situations which are so desperate, so hopeless, so catastrophic: that a bad decision can't make them worse.
- "Madoff Mansion, Money, Ponzi Schemes, and Thinking
(October 16, 2010)
- "'Work at Home,' Transferring Money Overseas: What Could Possibly Go Wrong?
(November 3, 2009)
- "Nigerian Scams, Internet Safety, Fraud, and Human Nature: The Lemming Gets Wordy
(November 17, 2008)
- "Momentum Direct: Sounds Too Good to be True
(April 23, 2008)
- "Six Hours Past Thursday: Odd Name for a Good Blog
(October 6, 2007)