The 10 Biggest Investment Scammers of All Time
When we last checked in with legendary fraudster Bernie Madoff, the firm hired to distribute $4 billion to victims of his infamous Ponzi scheme has yet to release a dime of that money. The administrators of the fund, however, have pocketed a staggering $38.8 million in billings.
Madoff, who was arrested in 2008, remains in prison, convicted of one of the largest financial frauds in U.S. history, estimated at $64.8 billion. Among his ranks are "The Wolf of Wall Street" Jordan Belfort, the founder and CEO of Enron, who famously swindled more than $70 billion from their Houston headquarters, and even Charles Ponzi, the original Ponzi schemer himself. Here is a look at some more of the biggest investment scammers in U.S. history.
Certainly not the first investment scammer but perhaps the most infamous, Charles Ponzi came to the U.S. from Italy in 1903 seeking to make a fortune and restore his once well-to-do family's lost glory. He did indeed pocket millions, but at the expense of others. Ponzi famously promised investors returns of 50 percent in 45 days, which he paid with money collected from newer investors. Ponzi went on to make $20 million through this pyramid scheme, though it eventually collapsed and landed him five years in prison.
When ZZZZ Best went public in 1986, Barry Minkow at age 19 became the youngest person to lead a company through an IPO in American financial history. On "The Oprah Winfrey Show," he famously explained his success saying, "Think big -- be big. End of story." Unfortunately, ZZZZ was a big scam based on fraudulent documents and bogus sales receipts. By the time it all crashed, Minkow had defrauded investors of $100 million and was sentenced to 25 years in prison. After being released, Minkow was arrested twice, once for stock market manipulation and later for cheating the San Diego Community Bible Church out of $3 million.
Before Bernard L. Madoff Investment Securities, there was Bernard Ebbers and WorldCom. Under Ebbers' leadership, WorldCom grew to be the second-largest telecom company in the United States by gobbling up smaller companies. However, all the buying left the company in serious debt. Ebbers' response was to exaggerate company assets to the tune of $11 billion. When the company collapsed, about one million WorldCom investors lost $100 billion. For his part, Ebbers was convicted of fraud and conspiracy and sentenced to 25 years behind bars.
Sam Israel's escapades include providing fake accounting reports to investors, attempting a fake suicide to avoid prison, and later being the subject of an episode of "America's Most Wanted." It started with the creation in 1996 of Bayou Hedge Fund Group where Israel was CEO. The company raised $450 million from its investors, which Israel used to live lavishly. In 1998, when the company had poor returns, he even created a fake accounting firm to audit Bayou Hedge Fund Group and make it appear as if investors' money was growing. In the end, $450 million was stolen, and Israel was sentenced to 22 years in prison.
The son of a New York City longshoreman and bartender, Joseph Nacchio amassed his ill-gotten gains selling stocks he knew would plummet. The former CEO of Qwest Communications International earned $52 million from his $3 billion financial fraud scheme. Ultimately, Nacchio was found guilty of 19 counts of insider trading and ordered to return the $52 million. He was also required to pay $19 million in fines and was sentenced to six years in prison, only serving four.
Who doesn't remember the Enron scam? At its height, the company claimed revenue of nearly $101 billion, employed 20,000 people, and was the seventh-largest company in America. For six years running, it was named "America's Most Innovative Company" by Fortune. But much of that innovation was focused on institutionalized, systematic, and creatively planned accounting fraud under the leadership of founder Kenneth Lay and CEO Jeffrey Skilling. In the end, investors lost $74 billion. Lay was indicted on 11 counts of security fraud and died while awaiting sentencing. Skilling was required to pay a $45 million fine and is spending 24 years in jail.
The mastermind behind yet another pyramid scheme used to fund a luxurious lifestyle, James Paul Lewis Jr. is famous for running one of the largest and longest such scams in U.S. history. Over two decades, Lewis collected about $311 million from investors and promised high returns. He even went so far as to pay false dividends to make his investors think everything was on the up and up. But instead, that money was being used by Lewis to buy big homes and fancy cars. Eventually, Lewis stopped paying dividends and investors became suspicious. He was arrested in 2004 after a manhunt and sentenced to 30 years in prison. Lewis was also required to pay $156 million in restitution.
Jordan Belfort's rise and fall was chronicled in "The Wolf of Wall Street," the film directed by Martin Scorsese, starring Leonardo DiCaprio as Belfort. A former door-to-door meat and food salesman who went on to create the investment firm Stratton Oakmont, Belfort sold worthless stocks to unsuspecting investors. In addition, brokers at his firm would drive up the prices of stocks and then Belfort and partners would cash out, leading the stocks to collapse. Belfort was eventually indicted for securities fraud and money laundering. He was sentenced to 22 months in jail and ordered to pay $100 million in restitution to the 1,513 clients he defrauded.
On paper, Centennial Technologies sold PC memory cards. In reality, the company was delivering... fruit baskets? As bizarre as that may seem, there's more. The company's employees developed fake documents designed to appear as if they were recording sales. Emanuel Pinez and other company executives were cooking the books, even creating a phony list of receivables. Amid it all, the company's stock rose 451 percent to $55.50 a share. And between 1994 and 1996 the Wilmington, Massachusetts, company overstated its earnings by $40 million. The reality was far different however. The company lost about $28 million. And ultimately, more than 20,000 investors lost almost all of their money. Pinez was sentenced to five years in prison and ordered to pay $15 million in restitution.
The "CEO of fraud" is how one judge described Richard Scrushy, who during the 1990s required HealthSouth employees to falsify earnings reports. Scrushy told employees to inflate revenues and overstate net income for the company, which at the time was one of the largest for-profit health care service providers in America. By 2003, the government had caught onto the scheme, with the Securities and Exchange Commission revealing that HealthSouth had falsely reported $1.4 billion in revenue. What's more, HealthSouth CFO William Owens had been working with the FBI and captured Scrushy on tape admitting to fraud. The company's stock dropped from nearly $20 to 45 cents in just one day. After being acquitted of fraud, Scrushy was later convicted for money laundering, extortion, obstruction of justice, racketeering, and bribery. He was ordered to pay $2.87 billion in damages.