International Ponzi Schemes: Draining the Poorest of the Poor

Ponzi schemes…fraud…perp walks…These terms have become part of the American vernacular. As damaging as ponzi schemes have been to the citizens of America, equally as shocking is the heartless defrauding of people in developing countries where victims of a scheme lose their miniscule $1.25 a day pay to conniving ponzi perpetrators. The thieves behind these international Ponzi schemes have preyed on people desperate for relief from poverty-stricken lives. Unlike the mythical legend, Robin Hood, who tried to lift the circumstances of the poor, this group of “reverse Robin Hoods” have no legal forest to hide in, and no band of merry followers willing to conceal them.

cash from ponzi scheme

What is a Ponzi Scheme?

A Ponzi scheme is a fraud—pure and simple. In these international cases, people and organizations worked together to con starving citizens who lack financial literacy and cling onto any glimpse of hope for economic improvement. The schemes involve convincing people that handing over a small sum of money will result in an unbelievably high return with little risk. If this sounds too good to be true, you are probably right. Yet, how can one blame people who are struggling to keep their families from abject poverty hoping that they can get ahead without the continuous, back-breaking labor that has become the focus of their lives? It is true that in good times some people in a Ponzi scheme can make money, but when a catalyst, like a global economic crumbling, robs the Ponzi scheme of the money that feeds it no one wins.

Who would prey on these people in times of economic crisis? Surely these thieves have limited themselves to when times were remotely prosperous…right? Recently reported cases imply otherwise.

Benin 2010:

Investment Consultancy and Computer Services (ICC) perpetrated a fraud against the people of this small, west African country of Benin. The New York Times (2010) reported that the ICC is known for their benevolence and link to the local government. Leveraging this reputation, ICC was able to con 130,000 citizens of the country’s 9 million people to turn over most—or all—of their life savings (Ponzi, 2010, September 2).  “Officials estimate … losses of approximately $180 million – a big sum in a place where most subsist on less than $2 a day and [earners] have extended families counting on them” (Nossiter, 2010, A4). As a result the people of Benin are publically protesting against the government causing with the result being economic and political unrest.

Darfur 2010:

Two elected councilmen in the African region of Darfur, Sudan, were implicated running a Ponzi scheme that resulted in the loss of approximately $175 million and three lives in the course of a riot to protest the losses. Not only were these men, and potentially 56 other accomplices, responsible for protecting the people of the region in their governmental posts; but they were also ex-policemen. The government is carefully considering the process of paying reparations to the victims while abiding by Islamic Sharia’a law.

Haiti and Sierra Leone 2009:

Naturally, Haitian Americans want to help their homeland and Sierra Leone—two of the poorest countries in the world. This left an opening for an investment swindler to drain the savings of Haitian Americans by agreeing to fund business ventures in the U.S. and their homelands in exchange for personal investments. In a span of two years, between 2007 and 2009, George Theodule, CEO of a financial services company called Creative Capital Consortium, implemented this Ponzi scheme resulting in losses of approximately $23.4 million. The return promised was 100 percent in 90 days (Boodhoo, 2009). This “too-good-to-be-true” scheme of a fellow Haitian American fed on people’s worry and empathy for the families left in Africa after devastating economic and natural disasters. True, the historically devastating earthquake of 2010 was yet to shake the country, but Haiti is no stranger to natural disaster. Take a look at this story (LINK TO:  http://www.telegraph.co.uk/news/worldnews/centralamericaandthecaribbean/haiti/6978919/Haiti-earthquake-history-of-natural-disasters-to-hit-the-country.html) from The Telegraph for a history.

The Loss in Africa:

“Nearly 40 percent of Africa’s Gross Domestic Product (GDP) is lost annually in corruption related practices,” according to the Director of Kenya Anti-Corruption Commission (KACC) Professor. PLO Lumumba (Africa’s GDP Lost, 2010, para. 1). This continent, rich in natural resources, has the ability to sustain itself, but a persistent “brain drain” of professionals leaving their home country and fraud contributes to the factors holding Africa in poverty.

Professor Lumumba sums it up eloquently saying, “Africans should desist from relying on divine intervention to solve their economic problems. The fight against corruption should be seen as a spiritual war, if we are to realize our vision to stamp out this deadly obstacle” (Africa’s GDP Lost, 2010, para. 6).

 


 

References:

40% of Africa’s annual GDP lost to corruption say experts. (2010, August 21). Sudan Tribune. Retrieved from http://www.sudantribune.com/spip.php?article35935

Nossiter, A.  (2010, August 19). Ponzi scheme may unmoor Benin, an anchor of stability :[Foreign Desk]. New York Times  (Late Edition (east Coast)),  p. A.4.  Retrieved from Banking Information Source. (Document ID: 2114054491).

NCP figures behind Darfur Ponzi scheme, says Sudan justice minister. (6  May). McClatchy - Tribune Business News.  Retrieved from ProQuest Newsstand. (Document ID: 2025752561).

Niala Boodhoo.  (19  November). Man to settle charges he stole millions from Haitian Americans with Ponzi scheme. McClatchy - Tribune Business News.  Retrieved from ProQuest Newsstand. (Document ID: 1903621211).

Pringle, C. (2010, September 16) Spotlight on the Ponzi scheme in Benin: Analysis and implications. Consultancy Africa Intelligence. Retrieved from http://www.consultancyafrica.com/index.php?option=com_content&view=article&id=547:spotlight-on-the-ponzi-scheme-in-benin-analysis-and-implications&catid=87:african-finance-a-economy&Itemid=294

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Soma Jurgensen is a Business Program Coordinator and full-time instructor for the School of Business at Rasmussen College in Brooklyn Park, Minnesota. She has worked in business for more than 10 years at companies including Minnesota Orchestra, Minnesota Parent Magazine, and General Mills. Soma received her M.B.A. in Marketing from the University of St. Thomas. Her experience spans a great number of marketing functions: sales, promotions, public relations, marketing, and management. Her favorite part of the job is to teach students interested in sales and marketing degrees and through face-to-face interaction.

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