10 Greatest Frauds

1. Charles Ponzi was one of the biggest swindlers in US history, and gave his name to the Ponzi "pyramid" scheme allegedly used by Bernard Madoff on Wall Street. Orchestrated after the First World War, Ponzi's fraud centred on "international postal reply coupons", designed to allow mail to be sent internationally. By acquiring these coupons abroad and exchanging them for higher value postage stamps in the US (essentially a form of arbitrage), Ponzi was able to make around a 400 per cent profit. Though this was not illegal, Ponzi advertised for investors to his scheme, promising them fantastic returns. He paid handsome windfalls to a handful of investors, which brought people flocking to his newly-formed Securities Exchange Company [SEC]. People mortgaged their homes and poured their savings into the company, which was accumulating colossal liabilities. Existing investors were paid off with the money of new investors. At the peak of his fraudulent scheme in 1920, Ponzi was making around $250,000 per day, an enormous sum for the time. The authorities slowly came to realise that, in order to cover all the investments made in the SEC, there would have to be 160,000,000 postal coupons in circulation. There were in reality only 27,000. Ponzi was indicted on 86 counts of mail fraud and sentenced to five years in prison in 1920.

2. Kenneth Lay was the founder of Enron, whose spectacular implosion in 2001 lead to one of the biggest fraud cases in history. Lay was convicted of fraud for duping investors over the health of Enron's finances before it plummeted into bankruptcy. Prosecutors accused lay of pocketing over £40 million of investors' money, and Lay was charged with 11 counts of securities fraud. Enron was worth $66 billion at its peak, and collapsed with billions of dollars of investors' money. Lay died before he could be sentenced in 2006.

3. Barings, the oldest merchant bank in London founded in 1762, collapsed in 1995 after the original "rogue trader", Nick Leeson, lost £827 million in speculative trading, mainly on the futures markets. Leeson was head derivatives trader in Singapore for the bank and was supposed to be arbitraging - profiting from the differences between markets by simultaneously buying on one and selling on another. Instead, it emerged, he had been betting on the future direction of the Japanese markets, and his unhedged losses snowballed as he tried to cover his bad gambles. He was sentenced to six and a half years in a Singapore prison, and is currently CEO of Irish football club Galway United.

4. Alves dos Reis perpetrated one of the biggest frauds in history in the 1920s by forging documents to print around 100 million Portuguese escudos (around $150 trillion in today's money) in official bank notes. While in jail for forging cheques, Alves dos Reis hatched a plot to convince a London-based printing company to make 200,000 500 escudo notes (around 1 per cent of Portugal's GDP at the time) for use in Portuguese colonies such as Angola. He then laundered the money and profited from 25 per cent of the proceeds. Rumours of fake banknotes were circulating, but, as the notes were not technically fake, the scheme flourished until journalists realised that Reis's newly-formed bank was offering low-interest loans without receiving deposits. He was jailed for 20 years in 1930.

5. Jerôme Kerviel nearly brought Société Générale to its knees with fraud worth £3.7 billion in early 2008. "Le rogue trader" made €50 billion of unauthorised trades and futures positions, but argued that SocGén knew what he was doing and turned a blind eye, a claim strenuously denied by the bank, who are pursuing Kerviel on charges of breach of trust, falsifying documents and computer abuse.

6. Bernard Ebbers, director of WorldCom, exaggerated the assets of his media company to the tune of $11 billion. He was sentenced to 25 years in jail in 2006 for falsely reporting the finances of WorldCom and cooking the books to cover the true nature of WorldCom's costs and losses. It was, in 2002, the largest ever Chapter 11 bankruptcy filing, only overtaken by the collapse of Lehman Brothers earlier this year. Ebbers cannot expect to be released from prison before 2028.

7. Ramón Báez Figueroa was arrested in 2003 for massive banking fraud in the Dominican Republic. He laundered money and concealed information from the Dominican government as part of a fraud scheme worth $2.2 billion, two-thirds of the national budget of the Dominican economy. The resulting bank bailout pushed inflation in the country to 30 per cent, and the devaluing of the peso triggered the failure of two other national banks. Báez Figueroa, who was famous for his allegedly shady relationships with high-ranking politicians and journalists, was sentenced to 10 years in jail.

8. Graham Halksworth would have been the world's biggest ever fraudster...if he had not been caught. The former Scotland Yard scientist tried to authenticate $2.5 trillion of US Treasury bonds that he claimed had been secretly issued by the US government in the thirties to undermine the Communist revolution in China. He was jailed for six years in 2003.

9. Sheridan Cox, the son of a British Army officer, allegedly defrauded investors around the world out of £520 million in an infamous "boiler room" scheme. He is still wanted for buying up dormant "shell" companies quoted on obscure stock markets and selling their shares through front companies to over 5,000 investors in Britain, Australasia and South Africa. He was convicted in absentia of a £30 million fraud in a Belgian court, and is wanted by the Taiwanese authorities for fraud worth over half a billion pounds.

10. Conrad Black, the disgraced media magnate, was convicted of nearly £30 million of fraud concerning newspaper firm Hollinger International, which used to own the Daily Telegraph. The peer was jailed for six and a half years for taking money owed to investors in the form of "non-compete" payments from the sale of newspaper titles. He last month made a plea to outgoing US President George Bush to commute his sentence, but can reasonably expect it to be refused.

10 Greatest Frauds 10 Greatest Frauds Reviewed by Bobby on 9:35 AM Rating: 5

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