Charles Ponzi was born Carlo Ponzi, the only child of a family that lived comfortably in Italy. Although they had a comfortable life, they never lived up to the affluence Ponzi later bragged about. His family did have enough to send him to college, but he squandered the money and never received a degree.

Ashamed over disappointing his mother, Ponzi immigrated to the United States from Italy in 1903. He was certain that he would become rich there, and his mother would once again be proud of him.

Ponzi held many jobs, but none of them brought the success he imagined. After several years, he made an unwise decision to steal and forge a check, an act that go Ponzi a three year prison sentence. That was quickly followed by a two year prison term for smuggling illegal aliens into the United States.

After the second stint in prison, Ponzi began searching for the “opportunity” that would make him rich and famous. He believed in himself and his ability to come up with what he termed the next .Great Idea.. He had many ideas that never gained any real momentum, but it doesn’t appear that he initially set out to defraud anyone.

In Boston in late 1919, Ponzi finally came up with his idea to utilize postal reply coupons to generate investment returns. Postal reply coupons were a popular way to exchange letters with families overseas. They were meant to make it easier to send mail to other countries. A writer of a letter could purchase a coupon at the local post office to prepay the postage for a reply letter. The recipient merely turned in the coupon at his local post office for stamps.

There were no limits on the number of coupons that could be purchased or traded for stamps. Charles Ponzi determined that changes in currency exchange rates, coupled with the proper purchase and exchange of postal reply coupons, could create profits. And so the Securities Exchange Company came to be. Ponzi wisely chose an official-sounding name for his venture so as to appear legitimate from the start.

A few weeks ago, famed fraudster Barry Minkow was on 60 Minutes on CBS. Barry was a mere 22 years old when he was sent to prison for 57 counts of fraud, convicted of defrauding banks and investors with his company ZZZZ Best Carpet cleaning.

At age 20, ZZZZ Best was a $300 million company and Barry was the CEO. His fraud is so notorious, that colleges and universities regularly use the ZZZZ Best story as a case study in accounting classes.

Famed bounty hunter Duane “Dog” Chapman was arrested last week on federal charges of illegal detention and conspiracy in an alleged kidnapping three years ago. Also arrested were his son Leland Chapman and his brother Tim Chapman. The Chapmans are well-known for their A&E show, “[tag]Dog the Bounty Hunter[/tag]“.
The arrest is related to Dog’s capture of fugitive (and Max Factor heir) Andrew Luster on June 18, 2003. Luster was captured in Puerto Vallarta, Mexico after fleeing the United States during his trial on over 80 rape charges. Luster was convicted of the crimes and sentenced to 124 years in prison.

In an A&E television special about the Chapmans, a video shows Dog, his associates, and Mexican police taking Andrew Luster into custody in 2003. After the capture, the three Chapmans were arrested by Mexican officials. Allegedly, the group of Chapmans refused to transfer Luster to the Mexican police. This led to their arrest, and a video shows a Mexican official telling Dog that he is under arrest for “unlawful deprivation of individuals”. The Chapmans were held for a week, but were able to post bail and return to the United States. The three men said that the 7 days in the Mexican jail were hard to forget.

Dog, Leland, and Tim never returned to Puerto Vallarta for the July 15, 2003 court hearing, and a warrant was issued for their arrest.

On September 14, 2006, Federal Marshalls went to Dog’s residence in Honolulu with a warrant for his arrest. Leland and Tim Chapman were also arrested on the same day. They were taken to a federal prison, the same prison which housed some of their previous bounties. They were threatened over and over by these criminals. Due to the danger level, the Chapmans were all placed in the Secure Housing Unit (SHU) for their own safety.

The three were given $300,000 bail and relased with ankle bracelets and house-arrest restrictions. Dog fears that they could be extradited to Mexico. If they are put on trial in Mexico and convicted, they could spend 4 years in a Mexican prison.

In the words of Dog:

“Truth and justice has to prevail. It has to prevail. It has to.”

Welcome to this week’s [tag]Carnival of Fraud[/tag], the place for the discussion of all things scammy, criminal, and [tag]fraudulent[/tag].

The state of [tag]violent crime[/tag] in Milwaukee, unfortunately, has gotten very scary. But our elected officials don’t think that we have a violent crime crisis on our hands. And our [tag]criminal justice[/tag] system doesn’t seem to be very effective. At least the Enron executives are still being sentenced to prison.

In the world of computer security, a few things are going on. Microsoft came out with a new anti-virus product, but one blogger surmised that such a product wouldn’t be necessary if Microsoft didn’t have so many vulnerabilities in its products to start with. An analysis of the security (or lack thereof) of the Diebold Accuvote TS voting machine yielded some interesting results. And one study shows that computer data breaches are less likely to result in [tag]identity theft[/tag] than the loss of wallets or other personal items.

People are constantly competing for web traffic. Some sites like to artificially inflate their site views, but one poster points out why it’s really a pointless exercise and only makes the site owner feel good for a day or so.

Have you ever heard of people using social engineering to commit crimes?

And finally, this is an intersting article on how trying to positively influence a company’s PR can actually backfire.

Submit your blog posts for next week’s Carnival of Fraud!

Welcome to this week’s [tag]Carnival of Business[/tag]. Hopefully, you’re viewing this entry in your Firefox browser.

Businesses are always looking for ways to improve: how to have purpose, how to be more profitable, how to be better corporate citizens, and how to stay in contact with customers. [tag]Philanthropy[/tag] is one way for companies to be more involved in the community and generate positive PR. Developing a mission statement may also help a company to find its purpose and refine how it does business. Yet it is important for a company to consider the negative message that its PR efforts could send.

[tag]Branding[/tag] and marketing efforts are a necessary part of any successful business, and supermodel Tyra Banks has shared how she branded herself. Companies might also consider taking innovation to another level, literally. Business strategy is an important part of any successful company, and one blogger is looking for help with his strategy.

What should companies avoid at all costs? A good way to get themselves in trouble with the [tag]IRS[/tag] is to not have control of a [tag]tax[/tag] situation. Failing to have professional tax assistance is a big mistake.

Real estate is as hot topic today, and if you’ve been dying to buy property in North Cyprus, here’s your opportunity to learn more about it. If you’re in the Seattle real estate market, you might be interested in an analysis of why the Seattle real estate company Redfin is going to fail. Is dual agency in real estate transactions ethical?

On the topic of personal development, you can learn how to be pathetic. On the other hand, you might prefer to dream big and succeed. A new job might be just the thing to set you on the path to making your dreams come true. Your dreams may include wealth, and some people get wealthy by listening to their parents. Even if you are not wealthy today, you can begin to save money and work your way toward wealth. (Although buying a new car and rising oil prices may cut into your wealth!)

May you all have a prosperous week!

The Department of Labor reached a settlement with the estate of Kenneth Lay, former Enron executive. Lay was convicted on fraud and conspiracy charges earlier this year, and died on July 5th.

The settlement gives DOL a $12 million claim against Lay’s estate on behalf of participants in Enron’s pension plans. The actual amount recovered will depend upon the assets available for distribution from the estate.

The settlement doesn’t excuse Lay’s co-defendant Jef Skilling, who will be sentenced on October 23.

In my investigation of pyramid schemes and business opportunities, I had one particular interest. That interest was multi-level marketing (MLM) companies that sell skin care and cosmetics. These companies naturally appeal to women more so than to men.

Quite a few years ago, I became involved in one of the most well-known cosmetic MLMs, Mary Kay. The other major player in that market is Avon, and the much smaller and lesser-known players include Arbonne and Beauticontrol. There are many other extremely small players out there, as people realize how lucrative MLM can be for the owners of the companies (but not the participants, necessarily).

I first became aware of Mary Kay when I attended a party that a friend had in her home. Mary Kay operates on the typical in-home party model, something akin to the Tupperware parties that we all went to in the 80′s. We had several women get together to try the products, washing our faces and trying color cosmetics. I began to use some of the products, but wasn’t really committed to using them over any other brand.

A few years later, the same friend invited me to another Mary Kay party with a different representative. Again, I tried the products and liked the results. I went to a second party shortly thereafter, at which I was presented with Mary Kay’s “marketing plan”. A marketing plan is a fancy name for them telling you all the reasons why you should join their sales force and make zillions of dollars by selling the products.

At the time I heard the marketing plan, it sounded fun and it appealed to my entrepreneurial side. I was working in an auditor role, and thought that this might be a good way to supplement my income and build something of my own. I never intended to replace my career with Mary Kay, but I liked the benefits presented to me during this marketing session.

I have since discovered that my situation was not unlike most other women who sign up to become sales representatives with Mary Kay. The marketing plan promotes certain benefits that are designed to appeal to women, and it hit its mark with me.

Yahoo! Sports writers Charles Robinson and Jason Cole have been investigating Heisman Trophy-winning running back Reggie Bush and the allegations that he received improper financial benefits from sports agents while still in college.

In the article entitled Cash and Carry, the writers detail the gifts (money and otherwise) that Bush and his family received while he was playing at the University of Southern California. The total is believed to exceed $100,000.

Some highlights of the article:

• Gifts came from two sources: 1. Mike Ornstein and one of his employees. Ornstein is currently Bush’s marketing agent. 2. Michael Michaels and Lloyd Lake, who were pursing Bush to be the first client of New Era Sports & Entertainment.
• Gifts included airfare, limousines, and hotel accommodations for personal trips
• Cash payments of at least $1,500 a week were made to the Bush family
• $13,000 was paid by New Era for Bush to purchase and modify a car
• The Bush family lived rent-fee in Michaels’s $757,500 home in Spring Valley, California
• $28,000 was paid by Michaels to help clear up debt of the Bush family

Those implicated in this case are denying giving Bush or his family any benefits, monetary or otherwise. Bush was the second pick in the NFL draft, and got a six-year contract with the New Orleans Saints for $26.3 million. Ornstein has also helped Bush snag marketing deals worth about $50 million.

This week I participated in the 2,996 Tribute, to honor the 2,996 victims of 9/11 with one tribute per blogger. Please read my tribute to John Patrick Tierney.

The focus for this week’s carnival seems to either politics or crime and punishment. We start off with a post about George Bush cutting funding for community oriented policing programs which really weren’t being run properly or getting any results anyway.

We had some important primary elections this week, and in that spirit, we have a discussion of campaign reports and cash-on-hand for local politicians. In the continuing saga of Milwaukee crime, we had a moonbat D.A. candidate (not anymore!) who accused police of shooting a 13-year-old. The only problem was that the actual shooter had already turned himself in. In my line of work, we call that (turning himself in) a clue.

Sometimes, crime does not pay, and you’ve got to be held accountable. Local real estate developer Boris Gohkman must pay $90,000 in the civil suit regarding his Medicaid fraud. Oh, and let’s not forget about the Democrats who hired workers for a campaign on raising the minimum wage. They paid the workers less than minimum wage.

One blogger reminds us that if you receive a check in the mail and you don’t know what it’s for, it might not be yours!

And in one final post totally unrelated to politics, [tag]crime[/tag], or [tag]money[/tag], the Badger Tracker isn’t happy with the UW-Madison 24-point victory over Western Illinois.

Tyco International Ltd. still owes the Internal Revenue Service $50 million in income taxes related to capital gains that were not reported in its 1999 federal tax return.

The company’s former vice president of taxation, Raymond Scott Stevenson has been charged with filing a false corporate tax return, which underreported capital gains by $170 million. The IRS says that the income tax on the capital gains would add $50 million to Tyco’s 1999 tax bill.

According to the U.S. Attorney’s Office in Southern Florida, Raymond Stevenson was the vice president of taxation for Tyco until 2003. In 1999, he initiated a series of transactions which reduced the company’s state tax liability. However, the same transactions created $170 million in federal capital gains, but Stevenson failed to report that amount on Tyco’s federal return.

Stevenson has pleaded not guilty to the charge of tax fraud.