On March 6, Allen Stanford was found guilty of running a massive Ponzi scheme that bilked some 30,000 investors out of more than $7 billion. TIME takes a look at other financial schemers through the years.
Allen Stanford
By Nick Carbone
His philanthropic ways earned him the title "Sir Allen" in Antigua, but to tens of thousands of people elsewhere, Allen Stanford is just a plain criminal. On Mar. 6, Stanford was found guilty of running a massive Ponzi scheme that bilked some 30,000 investors out of more than $7 billion. He was convicted on 13 out of 14 counts, including fraud and conspiracy, confirming to his one-time clients that their investments were simply padding Stanford's pockets. Stanford, 61, lived a luxe life between the Caribbean and southern U.S., filled with mansions, yachts and even a cricket pitch in Antigua. His personal net worth totaled $2.2 billion at its peak. The Texas mogul became one of the nation's richest men through his self-made financial firm based in both Houston and Antigua. But in February 2009, Stanford's lavish lifestyle came crashing down when the Securities and Exchange Commission accused him of defrauding his investors. The feds swooped in to seize his empire, alleging that Stanford's investment portfolios, with billions of dollars in their coffers, promised "improbable, if not impossible" returns. In their indictment, the SEC noted that Stanford's funds engaged in fraud of "shocking magnitude," showing investors massive returns and then engineering financial statements to "report investment income that the bank did not actually earn." The investors that were swindled out of their life savings waited three years for Stanford to meet justice. The former billionaire's attorneys claimed he suffered amnesia during a 2009 prison injury, but after undergoing a psychological evaluation, he was deemed fit for the trial, which began in January. His legal team is appealing the conviction and sentencing won't be for months, but Stanford faces up to 20 years in prison for the most serious charges against him.
William Miller, the Original Schemer
By Erin Skarda
Decades before schemes took the name "Ponzi," Brooklyn bookkeeper William Miller was busted for swindling investors out of their hard-earned cash. In 1899, Miller operated a business called the "Franklin Syndicate," in which he promised 10% interest on contributions each week. Miller — who was nicknamed "520 percent" due to the remarkable rate of returns he promised — claimed that he had an inside window into the way that profitable businesses worked, but in the end, he defrauded investors of $1 million — a sum equal to over $25 million in today's money. Despite the severity of his crime, Miller was sentenced to 10 years in jail for grand larceny and was released in five. Upon his release, Miller steered clear of the financial world, instead opening a grocery store on Long Island.
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Charles Ponzi
By Samantha Grossman
Although he did not invent the scheme that later came to bear his name, Charles Ponzi's scam was so extensive and initially lucrative that it brought national attention to the fraudulent operation for the first time. In 1919, the Italian immigrant promised investors they could yield considerable profits by purchasing international reply coupons from other countries and then redeeming them in the U.S for postage stamps. To legitimize the scheme, Ponzi established the "Securities Exchange Company" based in Boston. A steady flow of new clients allowed him to pay existing investors, while pocketing millions of dollars himself. But soon enough, the scheme began to raise eyebrows, eventually collapsing and bringing six banks down with it. Collectively, his investors lost an estimated $20 million.
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Tom Petters
By Alexandra Sifferlin
In 2010, Minnesota businessman Tom Petters was sentenced to 50 years in prison for fraud, conspiracy and money laundering as part of his $3.65 billion Ponzi scheme. It is considered the second largest Ponzi ring to Bernie Madoff's. Petters was the CEO and chairman of Petters Group Worldwide, a diversified company with assets like Sun Country Airlines and Polaroid. Petters and his partners convinced investors to give money to buy electronics that would be sold to retailers like Costco and Sam's Club. However, Petters instead diverted the funds to support his other businesses and pay back other investors. Petter's lavish living and deception ended when Vice President of Operations for Petters Co., Deanna Coleman, testified to helping Petters with his scheme for 10 years. Since Petters was 52 at his sentencing, he will likely spend the rest of his life behind bars.
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Norman Hsu
By Alexandra Sifferlin
Former Democratic fundraiser Norman Hsu was charged with operating a $60 million Ponzi scheme in 2009. According to the New York Times, big-name politicians like Hillary Clinton received contributions from Hsu, who pleaded guilty to 10 counts of mail and wire fraud as part of his fraudulent operation. Hsu acquired investors by promising high returns, but then paid early investors with funds from later ones, the Times reports. Hsu's scheme began to unravel when it was discovered he had failed to show up for sentencing in California in 1992 for his involvement in another case of defrauding investors. Hsu had skipped court and gone to Hong Kong, later returning to New York in 2003. When Hsu's outstanding warrant came to light, politicians who received contributions from Hsu like Hillary Clinton, Eliot Spitzer, Andrew Cuomo, Barack Obama and Al Franken, all donated the money to charity. Hsu is now serving 24 years in prison.
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Lou Pearlman
By Allison Berry
The Svengali behind the '90s boy-band juggernaut, Lou Pearlman was not the jolly music mogul he painted himself to be. After a failed career in aviation, Pearlman turned an eye to the entertainment industry. He set out to create other boy bands in the model of New Kids on the Block, which he did to great success, creating the wildly popular Backstreet Boys and 'NSYNC, as well as O-Town and solo pop star Aaron Carter. However, many of those acts went on to sue Pearlman for misrepresentation and/or fraud. But the most egregious claims levied against Pearlman came to light in 2006, when it was discovered that he had perpetrated an elaborate Ponzi scheme, defrauding investors to the tune of $300 million by creating an airline and airline service company which did not exist. He tried to flee, but was caught on the run in Indonesia and brought to court. In 2008, Pearlman said "bye bye bye" to his lavish lifestyle when he was convicted of conspiracy and money laundering and sentenced to 25 years in prison.
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Albanian Pyramid Schemes
By Erin Skarda
In 1997, the failure of a large-scale Ponzi scheme in Albania not only prompted the European country to fall into financial ruin, but also sparked a mass uprising that toppled the government and was responsible for the deaths of more than 2,000 people. A few years earlier, Albania began to transition into a liberalized market economy after years under the strict dictatorship of Enver Hoxha. The rudimentary financial system that was in place became dominated by pyramid schemes that promised participants substantial returns on their investments. More than two-thirds of Albania's citizens fell for the ruse, drawn in by the promise of wealth they had never experienced, as well as the government's endorsements of the funds from some of the largest companies. By January 1997, Albanians had lost approximately $1.2 billion and took to the streets to protest the government, which they believed were profiting from the schemes. As protests raged on, the country fell into a brief state of lawlessness before U.N. forces stepped in to restore order.
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Gerald Payne and Greater Ministries International
By Nate Rawlings
What makes the Greater Ministries International one of the most significant Ponzi schemes of all time isn't just the size of the money involved — nearly half a billion dollars — it was the way that Gerald Payne extracted that sum. In the mid 1990s, Payne preyed on nearly 18,000 people by telling them he would double their money through divinely-inspired investments. He invoked scripture to bilk people out of money, promising enormous returns and telling his victims he was investing on gold, silver and foreign debt. In reality, Payne was cashing hundreds of checks for just under the $10,000 reporting limit, which caught the eye of the IRS. When investigators traced their way to the checking account he shared with his wife, Betty, it contained nearly $20 million. When the Paynes were prosecuted, Gerald said that the money had been gifted, not invested. The couple later claimed that their First Amendment Rights as a church were being violated. When they were found guilty of felonies, Gerald received 27 years in prison and Betty twelve and a half.
See TIME's Brief History of Ponzi Schemes
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David Dominelli
By Nate Rawlings
When David "Jerry" Dominelli died in Chicago in 2009 it took two weeks for news of his death to reach the West Coast, where his financial frauds wreaked havoc on San Diego in the mid 1980s. In 1979, Dominelli opened an investment company in La Jolla, Ca. and promised early investors a 40 to 50 percent return. It was a classic Ponzi scheme, where Dominelli paid early investors with the money from new ones and conned Sab Diegans out of nearly $80 million. By 1983, when he had nearly 1,500 investors, demand for withdrawals led to bounced checks and the whole thing began to unravel. In 1985, San Diego Mayor Roger Hedgecock was convicted of conspiracy and perjury charges related to campaign contributions from Dominellini's hedge fund. He was forced from office, but he later appealed and accepted a plea deal for a single charge and served no jail time. Dominelli wasn't so fortunate. In 1985, he plead guilty to four felony charges and was sentenced to 20 years in prison, of which he served 10 and a half before being paroled to his native Chicago.
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Bernie Madoff
By Nick Carbone
The modern face of financial evil is Bernie Madoff, the former Nasdaq chairman who was convicted of running a $50 billion Ponzi scheme. Madoff, a Wall Street bigwig, used his credentials to gain clients' trust, easily maintaining it with an average 10.5% annual return for nearly two decades. But according to the SEC, the returns made by his self-founded firm Bernard L. Madoff Investment Securities LLC were fudged: Madoff was paying off old investors with money received from new investors. The fraudulent fund impacted not only thousands of individuals but charitable organizations, university endowments, and even publicly-traded banks. After admitting to his sons that he was struggling to pay investors, they turned him in. Madoff was arrested on December 11, 2008 and charged with criminal securities fraud. SEC documents quote him explaining the scheme was "all just one big lie, though he had kept it up since at least 1991. But he said in court, "As the years went by, I realized that my arrest and this day would inevitably come." Madoff pleaded guilty to 11 felony counts and was sentenced to 150 years in prison. "I cannot adequately express how sorry I am for what I have done," he added, though his bilked investors likely had little reason to believe him.
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