What is the impact when a fraud is perpetrated and the possibility of recovery is dismal? How do people deal with the emotional impact of distrust created when scammed? Those questions are central in the recent sentencing of Thomas Mitchell who ran a 15 year Ponzi scheme targeting 150 retired train and bus drivers in L.A. Sentenced to 9 years in prison, Mitchell will be facing his consequences, but what about his victims?
Excerpts from a CNN article state the following:
Even after the man who stole 67-year-old Frances Wills’ entire life savings was sentenced to nine years in prison, she still didn’t feel as if justice had been served.
Mitchell will begin his sentence on Sept. 23. But it may take longer for Wills — who still can’t sleep at night or stop crying — to move on.
“I’m still hurting inside,” she said. “Nine years is not enough for what he’s done to all these people. We want him to suffer like we suffered.”
“It looks like there’s just no money to be had, so there’s nothing we can do,” said Anand. “It’s sad because many of these people are in terrible, terrible circumstances.”
“I used to get up at 2:30 a.m. to get to work driving my bus,” said Wills, who lost the $156,000 she had saved from her job as a Long Beach Transit bus driver for 23 years. “And then for him to just take it out of greed — I want to know: What did he do with our money?”
The judge at Mitchell’s sentencing invited victims to tell their stories in court. One woman took 30 pages of notes with her and didn’t leave until she was completely done. Others were such emotional wrecks they couldn’t stand to address the court.
“The whole courtroom was full of tears,” said Wills. “All Mitchell did was sit there and look stupid. There were a lot of people in there who wanted to slap him upside the head.”
According to court documents, Mitchell promised his clients returns of up to 12.5% on their investments to lure them in, but would then only invest “a miniscule fraction” of their money. He would make monthly payments to keep his clients from worrying — and which many used for living expenses.
Notice one of the biggest evidences that a fraud is happening is an UNREASONABLE PROMISE. In the lectures I give on fraud prevention, I generally share that victims fall into the PIT. That means the first part of the PIT is an Unreasonable PROMISE. Mitchell promised his clients (victims rather) returns of up to 12.5%. That’s a NEON sign flashing SUCKER I’m ABOUT TO ROB YOU!
But Mitchell meanwhile used the rest of the money his clients had invested for himself. By the end, he didn’t even have enough money to pay his victims the monthly stipends.
Wills relied on those monthly checks from Mitchell. When they stopped coming, she had to sell her home and move into a mobile home. She can’t afford to pay her bills or fix her broken-down car. And she had to apply for food stamps a few weeks ago and now asks her children to help her out.
Some of the other victims duped by the Ponzi scheme include Bobby Bradley, a 70-year-old retired bus driver who lost his life savings of $215,000 and is now looking for work again.
An MTA service attendant, Charles Black, said he watched 23 years of his life go down the drain when he found out his entire retirement stash — $250,000 — was gone.
Mitchell’s own cousin, Robbie Gilbert — who lost $150,000 in retirement savings to Mitchell — wasn’t able to make it to the sentencing. But she said the fact that he will be behind bars for the next nine years is enough to ease her anger for the time being.
There are three components of most frauds from the perspective of the VICTIMS: (1) Promise; (2) Illusion and (3) Trust.
Let’s look at what was reported and see if we can find those components. ILLUSION – according to reports Mitchell used funds from other victims to pay earlier victims creating the Illusion that there were actually returns from investments taking place.
Ah, but the hook that gets VICTIMS in – in the first place – is the PROMISE. Here the promise was a return (plus principle) of up to 12.5%. I can’t speak to why…but in every case it seems clear that “investors” seem to gravitate to something that “others can’t have” – some call it greed. I think, rather than greed, we have a psychological desire to be above average and if someone offers something that seems real that is “off limits” to the average guy…then we are more apt to bite. Guess it’s DNA to want what we can’t or shouldn’t have…just think of the apple. (Some readers will get that!)
Now, let’s be honest. A PROMISE of a 12.5% return is not reasonable and ANY PROMISE of a guaranteed return should give us a moment to pause and investigate further!
The funny part about a Ponzi Scheme is that the ILLUSION that supports the PROMISE actually creates the TRUST needed to perpetuate the scheme. More times than not, the “investors” VICTIMS actually are the ones that turn others on to the “scam” without having any knowledge that they are luring others into the trap!
The Ponzi scheme only collapses when the source of funding dries up. Most of the time, the scheme gets so large and top heavy (the need for additional funding becomes so great) that it collapses on itself.
So…the FBI suggests the following which is worth repeating:
So how can you avoid being victimized by a Ponzi scheme? A few tips:
Be careful of any investment opportunity that makes exaggerated earnings claims.
Exercise due diligence in selecting investments and the people with whom you invest—in other words, do your homework!
Consult an unbiased third party, like an unconnected broker or licensed financial advisor, before investing.
If you were victimized by Thomas Mitchell and have wisdom to share with others about how to avoid being scammed, please share!
YOUR COMMENTS ARE WELCOME!