[BretLudwig]

Bernie Madoff as an "affinity scam"

"Because it's so much work to be a Mormon in good standing, Mormons
tend
to trust other Mormons, making them famously vulnerable to large scams
operated by the small number of conmen self-disciplined enough to have
spent years piling up credentials as good Mormons.

Bernie Madoff's $50 billion Ponzi scheme was rather like the kind of
"affinity scams" that have plagued Mormons. Madoff joined all the right
Jewish country clubs and gave to all the right Jewish charities, allowing
him to fleece some very deep Jewish pockets.

But the sophistication level of the victims is rather different. While
there are rich Mormons, overall Mormons are pretty middling in wealth
(depending on whether you measure per capita or per family), while
Madoff's victims weren't middling.

Why did members of the Palm Beach Country Club, various hedge fund
managers, and major league sports franchise owners fall for what appears
to have been a simple, old-fashioned scam in which implausible returns
are
seemingly delivered, but only by using new investors' cash to pay off old
investors? (By the way, the golf scores Bernie reported to the USGA for
handicapping were all in the eighties, as remarkably consistent as his
reported return on investment.)

One theory (and it's only a theory) is that more than a few of these
sophisticated clients assumed Bernie was cheating -- either through
insider trading or "front-running" -- and they wanted in on his illicit
profits.

They just never dreamed Bernie was cheating them.
And why did Bernie cheat them in particular? Because, these days, as
bankrobber Willie Sutton replied when asked why he robbed banks, "That's
where the money is."

http://isteve.blogspot.com/2008/12/b...nity-scam.html

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