Sunday, April 04, 2010

Daughter turns mom in for Ponzi scheme

It seems to me that the stock market and various Wall Street doings are ponzi schemes. But they don't go to jail, they get bailed out by the government.

By Mike Celizic contributor
updated 10:28 a.m. ET, Fri., April 2, 2010

Would you have the courage to turn your own mother in to authorities in order to stop a Ponzi scheme?

That wasn’t a rhetorical question for Kim Flanigan, who faced just such a dilemma when it became apparent that her widowed mother was involved as both a participant and a recruiter for a classic get-rich-quick scheme that had already ensnared 100 or more people.

When Flanigan heard her mother trying to convince a widow with nine children to invest her life savings in the scheme, she knew she had no choice.

“That was my breaking point,” Flanigan told TODAY’s Ann Curry Friday in New York. Rather than watch a widow lose money she desperately needed, Flanigan called state and federal officials. Her courageous act would bring down a $50 million Ponzi scheme and put its three ringleaders in federal prison. For a time, Flanigan’s mother as well as an aunt were also under investigation, but authorities eventually decided they were more victims than victimizers and filed no charges.

One reason the scam worked so well is because it preyed on churchgoing people. The widow Flanigan’s mom was trying to recruit was a member of her church. One of the three ringleaders of the investment scheme was an associate pastor of a church in California.

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Such frauds are called “affinity schemes” because they prey on people with natural affinities.

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Kim and David realized early on that it was all a scam, but they couldn’t convince her mother or aunt of that.

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David Flanigan said that once people had invested their belief and their money in the scam, it was hard for them to back away and admit they’d been taken.

“They had a lot invested. No one wantsto feel that they were made a fool of, that they were taken advantage of,”

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