I don’t know about you, but when I read about the collapse of a pyramid scheme that takes down wealthy, well-educated investors and nonprofits, I shake my head and wonder how such smart people made such (in hindsight) dumb choices.
The answer, in part, seems to lie in affiliation, or the cultural, ethnic and religious ties that seem to form a powerful lure for even the brightest and most successful individuals and institutions. Think Bernie Maddoff and Yeshiva University. In the 1990′s John Bennett, Jr. and his Foundation for New Era Philanthrophy spread a net that swept in many conservative Christian institutions and individuals, causing much heartburn and soul-searching. In a potential sign that the Jewish community is still grappling with the aftermath of the Madoff scandal, I found this wry reference.
Reporters sometimes seem uneasy weaving religion organically through a business story, even when its clear that it was a factor. So congratulations to Michael Forsythe and Allison Fitzgerald of Bloomberg for doing such a good job in examining the insular culture nurtured by Allen Stanford, alleged perpretrator, along with two of his executives, of an 8 billion dollar “Ponzi scheme.”
(And they even explain, for forgetful readers, what a “Ponzi scheme” is: “an investment scam in which new money is used to pay off earlier investors.”)
Forsythe and Fitzgerald’s vibrant story starts with this apt anecdote, illustrating the idea that in Stanford’s world, faith and finance were as tight as PB & J:
When Jason Green wanted his team of financial advisers to sell more of Stanford International Bank’s certificates of deposit, he knew where to turn: Proverbs 13:11.
“Wealth from get-rich-quick schemes quickly disappears; wealth from hard work grows,” Green wrote, citing the biblical passage in a 2005 e-mail to his U.S.-based “Superstars” team. He was pushing them to sell $62.5 million of CDs in three months for the chance to earn a trip to Zurich to meet the company’s founder, R. Allen Stanford.
Interviews with 21 current and former employees over three years show that religious faith, personal ties and the iron grip of Stanford himself created a culture that helped promote the bank’s CDs, the center of what the Securities and Exchange Commission calls an $8 billion “massive Ponzi scheme.”
A quote from financial advisor Hank Mills later in the story plays off the anecdote that follows in a way that Mills undoubtedly didn’t intend:
“We all seemed to be of common yolk,” said Hank Mills, 49, a Stanford financial adviser, in an interview. The sales people “seemed to be involved in their community, in churches.”
In a 2004 training video, Mills recounts how he received a phone call from a dying man who then agreed to have Stanford manage his money.
“We pray together,” Mills says in the video. “He shares his financial picture, and he decides I’m the person that he wants to involve with his family to take care of them when he leaves.”
Obviously, the quote doesn’t mean that Mills (who is not apparently among those being sued by the SEC) is guilty of anything except perhaps shrewdly grasping a marketing opportunity. But it does give you a wonderful window into the culture, which was apparently one in which prayer was routine. The two writers also take a look at the family ties that connected Stanford employees-and possibly, as a few quotes imply, made it tougher for those who suspected fraud to penetrate the alleged high-level financial monkeyshines–and easier to label whistleblowers as troublemakers.
It seems as though religious, specifically Christian affiliation was just one thread in the many ties that bound Stanford employees. Although this is a business story, and Fitzgerald and Forsythe don’t have a lot of time to get into the nuts and bolts of denominations and particular beliefs, they still do an excellent job of showing how both the apparent reality and the trappings of faith permeated the Stanford International corporate culture-even to the end.