30 of the biggest scams in modern history
30 of the biggest scams in modern history
In 1849, police in New York City arrested a man named William Thompson. Charismatic and "a man of genteel appearance," according to a New York Herald report from the time, Thompson approached strangers, engaged them in conversation, and won their confidence, which he then used to convince them to part with their money or valuables. Prior to his arrest, authorities dubbed the prowling swindler the "Confidence Man," the first time the phrase was ever used to describe what would soon be shortened to "con man" or "con artist."
An old proverb cautions that "a fool and his money are soon parted," and con artists justify carrying out that parting with one of Murphy's Laws: "It is morally wrong to allow suckers to keep their money."
Some of history's most brazen, most brilliant, and most lucrative swindles have occurred in the modern era; sometimes the caper was carried out with computers, sometimes with blank checks, and even once with a three-wheeled car. Some scam artists have received unsurvivable prison sentences, others have been glorified on the big screen, and others have been sprung from prison in exchange for helping law enforcement prevent scams and even to run scams of their own.
Some frauds were carried out by charismatic and confidence-inducing individuals, while others were the work of massive corporations that were supposed to be operating under the watchful eye of government regulators. Either way, their fortunes were built on the dashed hopes, ruined dreams, and empty pockets of their victims.
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Swindlers sell the Brooklyn Bridge
The street smart have long taunted the naive and gullible with the phrase, "If you believe that, I've got a bridge to sell you." The statement is an homage to the long line of con artists who began "selling" the Brooklyn Bridge almost as soon as it was completed in 1883 to suckers who thought they had scored the deal of a lifetime. In 1899, con artist and future mayor Peaches O'Day sold the bridge for $200, William McCloundy served two-and-a-half years in Sing Sing prison for selling the bridge in 1901, and George C. Parker sold it several times over the course of his life.
Charles Ponzi earns infamy for his name
Scams that borrow from Peter to pay Paul—that is, use payments from new "investors" to satisfy promises made to previous victims—are known as Ponzi schemes. The most famous con artist in modern history, Charles Ponzi raked in $15 million over the course of 18 months by promising outrageous short-term profits of 50% to 100% when he was, in fact, just shuffling money from one person to the next while keeping most for himself. Ponzi was convicted in 1920, imprisoned, paroled, continued running other scams, was imprisoned again, and finally was deported to his native Italy.
Lou Blonger scams the West
At the same time Ponzi was running his scam in New York, the reign of a towering figure from the Old West was coming to an end. Lou Blonger and his brothers worked and conned their way across the Western frontier and eventually organized all of the major con men, grifters, and scam artists in lawless and violent Denver into a single underworld operation that continued for decades. The Civil War veteran, who hobnobbed with Wild West giants like Doc Holliday, Bat Masterson, and the Earp brothers, was convicted in 1924 and died in prison.
Baker estate con
In December 1936, 28 people were indicted in what was then the biggest mail fraud scheme in history. The fraud revolved around the fabulously wealthy Jacob Baker of Philadelphia, who had died while his estate remained unprobated and therefore remained open to claims by anyone named Baker—or so the swindlers wanted Bakers across America to believe. Purporting to represent the estate, the swindlers collected $3 million from 3,000 people who paid to stake their claims. In reality, there was no Jacob Baker, and no such estate ever existed.
McKesson and Robbins scandal
Today, McKesson Corporation is one of the largest health care companies in the world, but in 1938, when it was still McKesson and Robbins, it was at the heart of one of the biggest frauds of the century. A career criminal named Philip Musica, who, during Prohibition, used a pharmaceutical company as a front for bootlegging operations, bought the drug company and quickly enlisted his brothers to set up fictitious partner companies. They inflated assets to the tune of hundreds of millions of dollars in today's money and skimmed millions, which they then distributed to themselves via the fake partner companies, in a scam that changed America's accounting and auditing laws.
Quiz show scandals
By the end of the 1950s, quiz shows were so dominant that "The $64,000 Question" became the first show ever to topple "I Love Lucy" from the #1 spot. As many as 24 quiz shows were on at any one time, and the competition was so fierce that many started cutting corners until a long-reigning "Twenty One" champion contestant claimed the show was rigged. His accusation, and the many others that would soon follow, were never proven, but they sparked criminal and Congressional investigations, and so much public outcry that every single quiz show soon went off the air—until 1963, that is, when Merv Griffin came up with "Jeopardy," a show that would reassure skeptical audiences by giving the contestants the answers first and then making them respond in question form.
Payola radio scandal
Almost immediately after he wrapped up the quiz show hearings, a powerful Congressman named Oren Harris launched an investigation into Payola, the name given to a common practice in the record industry that had recently been publicly decried by President Dwight Eisenhower himself. In Payola scams, the record industry manufactured hit songs by paying DJs large sums of money to give their records extra air time. Since the airways were public, the 1960 Payola hearings investigated the practice as a breach of the public trust.
Catching Frank Abagnale Jr.
Leonardo DiCaprio has portrayed more than one scammer on this list, and the first is Frank Abagnale Jr. of "Catch Me if You Can" fame. A grifter from his teenage years when he used gas cards to pay for thousands of dollars worth of dates, Abagnale passed millions in bad checks, posed as a doctor, a lawyer, a professor, and even an airline pilot while charming his way through multiple double lives in a series of cons around the world. A massive manhunt ended with his capture in France in 1969, but he received an early release from prison on the condition that he help law enforcement foil con men and forgers like him.
Equity Funding insurance scam
In the 1960s and 1970s, the Equity Funding Corporation of America became a Wall Street sweetheart through its highly successful and profitable sale of life insurance policies that were tied to mutual funds. Unfortunately for investors and policyholders, 60,000 of those policies were fake, and the company sold the fake policies to reinsurance companies for a profit, sold other phony policies to pay the premiums on the originals, and even faked the deaths of policyholders to collect the benefits. The company declared bankruptcy in 1973, and several top executives went to prison.
Crazy Eddie's lives up to its name
What started as a single electronics store in Brooklyn, N.Y., in the 1970s became Crazy Eddie's, one of the biggest retail chains in the region with some of the most memorable commercials ever produced—all of which was supported by one of the biggest frauds in the modern era. Before the company went public, founder Eddie Antar hid money, filed false paperwork, and paid employees in cash to avoid payroll taxes. After it went public, he pumped some of the money he had been skimming back into the company to make it appear more profitable so he could sell his stock at an inflated price. As the 1980s came to a close, the jig was up, his stores were bankrupt, and Antar was sentenced to six years in prison.
The Dale: A scam on 3 wheels
In the 1970s, during the height of the gas crisis, a con artist named Geraldine Elizabeth Carmichael created the 20th Century Motor Car Corporation and unveiled the Dale, which the company pitched as the answer to the fuel crisis. Claiming 70 mpg, the futuristic-looking, three-wheeled car quickly attracted $30 million in investment and $3 million in advance sales. An investigation by Car and Driver, however, revealed that there were no manufacturing plants, no research-and-development facilities, no production plans, and no car.
An American hustler creates Abscam
In the late 1970s, the FBI launched Abscam, an elaborate and controversial government corruption investigation that brought down a half-dozen members of Congress. The man the agency enlisted to run the program, which included fake Arab sheiks offering bribes to lawmakers, was Melvin Weinberg, who was facing prison time for a long string of masterful scams he had been running with his girlfriend. The 2013 blockbuster "American Hustle," which was based on this scam within a scam, earned 10 Academy Award nominations, including a Best Actor nod for Christian Bale, who played Weinberg.
ZZZZ Best Cleaners Ponzi scheme
In 1986, ZZZZ Best Cleaners founder Barry Minkow took his carpet-cleaning company public, and the firm was quickly valued at more than $300 million. Just seven months later, however, it was revealed that ZZZZ Best Cleaners was actually a front for a Ponzi scheme. The company went bankrupt, its assets were liquidated for just $64,000, and Minkow was sentenced to 25 years in prison. Minkow founded the company in high school from his parents' garage, and soon embarked on what would become an elaborate scheme to defraud investors and mislead regulators.
Praise the Lord Ministries
In 1988, televangelist Jim Bakker was indicted on federal charges—the final demise of what had been the biggest Christian radio and television empire on Earth. Jim Bakker and his wife Tammy Faye had been bilking their supporters, viewers, and investors, a fact that came out only in the wake of a far more salacious scandal. After Bakker paid church-secretary-turned-actress Jessica Hahn nearly $300,000 to keep quiet about a sexual affair of disputed consensuality, the public learned about the financial scam, and Bakker landed a 45-year sentence, which was later reduced to eight years. He now hawks doomsday prepper equipment online.
Ivan Boesky insider trading scandal
Ivan F. Boesky was once a giant among financial speculators, but in 1987 he became a symbol of the excesses of the decade. Boesky was sentenced to three years in prison for purchasing inside information and then using that information to illegally sell securities for more than $50 million in profit.
Charles Keating Savings and Loan scandal
Charles Keating's crimes found easy cover in 1980s Wall Street culture, where loose regulations and outsized political influence allowed the financier to use his Lincoln Savings and Loan as a base for his crimes. By the end of the decade, it was obvious that Keating had been looting his federally backed bank, gambling his investors' life savings with risky junk bonds, and dumping massive amounts of money into political campaigns. After a scheme that cost taxpayers $3.4 billion, Keating was hit with a federal civil racketeering and fraud suit that eventually landed him in prison, but not before a group of lawmakers dubbed the Keating Five, headed by Sen. John McCain, tried to intervene on his behalf.
Jordan Belfort becomes the Wolf of Wall Street
Jordan Belfort might have disappeared into obscurity had he not published a successful memoir called "The Wolf of Wall Street," which was adapted for the screen in a blockbuster movie starring, once again, Leonardo DiCaprio. Belfort spent 22 months in prison after stealing more than $100 million as part of a drug- and sex-fueled frenzy of corporate theft based on a so-called pump-and-dump scheme, where Befort would buy large amounts of worthless stock to drive up its price and then sell his shares all at once.
James Paul Lewis Jr. launches Financial Advisory Consultants
In January 2004, James Paul Lewis Jr. was arrested in a Houston motel by authorities who charged him in an $814 million nationwide scam that bilked thousands of victims. Lewis operated his Financial Advisory Consultants firm as a giant Ponzi scheme for 20 years, failing to ever make any real investments and instead, as with all Ponzi schemes, using money from new victims to pay earlier investors.
Sam Israel III
Sam Israel III founded Bayou Hedge Fund Group in 1996, which quickly attracted hundreds of millions of dollars in investments. The fund, however, was a Ponzi scheme, and to avoid reporting poor returns, Israel created a phony accounting firm to audit Bayou in an effort to reassure investors. After bilking his clients out of $300 million, the jig was up. Israel was arrested, convicted, and sentenced to 20 years, but in one of the more bizarre twists in fraud history, Israel faked his own suicide. He went on the run and was quickly captured.
Although the coming wave of corporate crime would soon make his scam look standard, Charles Forbes masterminded what in 1998 might have been the greatest accounting scandal in history. The CEO of Cendant, a travel and real estate company that evolved into Avis Budget Group, Forbes was eventually convicted and sentenced to 12 years in prison for creating a web of corporate lies that deceived investors and wiped out $14 billion of market value in a single day.
In 2000, a man named Emanuel Pinez was sentenced to five years in prison and ordered to pay $150 million in restitution for running a scam through his company, Centennial Technologies Inc. Just four years earlier in 1996, it was the top performer on the New York Stock Exchange. Among other frauds, the PC memory card maker inflated earnings, once even sending fruit baskets at Christmastime and reporting the gifts as products delivered to customers. About 20,000 investors lost $150 million.
In 2002, Reed Slatkin pleaded guilty to 15 counts related to a Ponzi scheme he ran for 15 years that snared 800 wealthy investors who dumped nearly $600 million into the scam. The co-founder of EarthLink and an ordained Scientology minister, Slatkin had high-level contacts in both Hollywood and the tech world, and his victim list included big names like Greta Van Susteren and Giovanni Ribisi. He was sentenced to 14 years in prison, was released from a halfway house in 2013, and died of a heart attack two years later.
Like Keating in the '80s, the name Enron has come to embody the corporate greed, white-collar theft, and impotent regulations that defined Wall Street the early 2000s. The energy giant's top brass orchestrated a massive web of accounting lies designed to inflate profits, conceal debt, and fool both regulators and investors. Once a Wall Street darling, Enron's stock peaked at $90.75 and plummeted to just 26 cents a share, causing shareholders to lose $74 billion in what was then the biggest corporate bankruptcy in history.
In 2002, Tyco CEO Dennis Kozlowski and several other top company executives were charged with falsifying reports, using Enron-esque accounting tactics, and lying to regulators while pilfering the company and scamming its investors for hundreds of millions of dollars. They used the looted profits to finance cartoonishly lavish lifestyles that included a $6,000 shower curtain and $15,000 umbrella stand. Kozlowski served six-and-a-half years in prison and was released in 2015.
Telecom giant WorldCom filed for bankruptcy in 2002 just one month after its auditor, Arthur Andersen LLP, was convicted for its role in the Enron scandal. The company's collapse and the loss to investors that followed dwarfed even Tyco and Enron thanks to a simple but effective fraud. WorldCom executives inflated income and cash flow by listing expenses as investments—CEO Bernard Ebbers was sentenced to 25 years in prison.
HealthSouth was once one of the largest health care services companies in the world, but between 1996 and 2002, it served as a piggy bank for its leaders. Top executives perpetrated a $2.8 billion fraud based on the same accounting tricks Enron, WorldCom, and Tyco were allowed to conceal for so long. Richard Scrushy and other top executives were sentenced to prison for their roles in concealing debt, inflating profits, filing false reports, and, like their contemporaries, using the ill-gotten gains to finance outrageously lavish lifestyles.
At the peak of the housing bubble in 2006, mortgage giant Fannie Mae was ordered to pay $400 million for the actions of its top executives, which included manipulating the company's accounting, paying unearned maximum bonuses to themselves, and conspiring to cover up their actions. In the months that would follow, Fannie Mae would play a key role in what was arguably the greatest scam in American history—the 2008 recession and the mortgage lending and investing practices that caused it.
Real life 'War Dogs'
David Packouz and Efraim Diveroli were two ambitious young arms dealers in their early 20s when they landed a massive $300 million government contract to acquire more than 100 million rounds of ammunition and deliver it to American-backed fighters in Afghanistan. The pair radically boosted their profits by breaking their contract and buying cheap Chinese-made ammo, a fact that the pair knew and went to great lengths to cover up. In the 2016 film "War Dogs," Diveroli was played by Jonah Hill, who also starred alongside Leonardo DiCaprio in "The Wolf of Wall Street."
In 2008, a little less than 90 years after Charles Ponzi became famous for the swindle that bears his name, Bernie Madoff fell from grace after the Ponzi scheme to end all Ponzi schemes came crashing down around him. Madoff, however, managed to keep his financial juggling act in the air for decades, starting as early as the 1970s. Once considered to be one of the world's greatest investors, Madoff in 2009 pleaded guilty to engineering the biggest Ponzi scheme in history, which gobbled up $19 billion, much of which represented the life savings of his close friends and family members—Madoff remains in prison serving a 150-year sentence.
The disastrous Fyre Festival has been in the news lately thanks to a Netflix documentary that exposed the inner workings of the 2017 calamity, which was billed as an expensive and ultra-luxe music festival for industry elites and VIPs. Thanks to false advertising, overpromising promoters, and a comedy of errors, the guests instead found themselves stranded in the Bahamas in unhygienic and crude accommodations with a dangerous shortage of supplies and, most famously, cold cheese sandwiches. The festival's creator, Billy McFarland, was sentenced to six-and-a-half years in prison.