Saturday, June 20, 2015

Fraud and Dickens

This piece, from 2014, was in response to a writing class task about Dickens.

In Martin Chuzzlewit, Dickens describes the workings of the Anglo-Bengalee Disinterested Loan and Life Assurance Company. It is a fraudulent organisation run by the con-man Montague Tiggs (or Tiggs Montague); specifically it is a Ponzi scheme which attracts investors with promises of high returns. However payouts come from the money given by the victims rather than from any profits.
Ponzi schemes (named after Charles Ponzi, who was not born until 1882, 38 years after Chuzzlewit was published and 12 years after Dickens’ death) are nothing new. The Roman Empire had insurance scams, fake investment schemes and real estate bubbles. The interesting thing to me is the con, or confidence part of the con-game. Montague Tiggs has connections throughout London society. He gives lavish dinners and has very posh offices. Various people who, and it is important to be clear on this, are definitely not employed by the company talk up what a wonderful opportunity it is.
Charles Ponzi was an Italian immigrant to the US and most of his clients were from the Italian-American community. This kind of crime is known as affinity fraud, in which the confidence in the con-man comes from them having something in common with the victims. The con-man is seen as ‘one of us’ and uses the connections in the community to promote his schemes.
In 2008 Bernie Madoff, a Wall Street investor, was arrested for securities fraud. Investigators estimated that the size of his firm’s liabilities was in the region of $57 billion, although they recovered $36 billion in assets, making it the largest fraud in US history[1]. Up until his arrest Madoff was prominent in the American Jewish community, who were amongst his biggest investors. His offices and lifestyle were those of a successful Wall Street investor. Although many financial firms were suspicious and did not deal with him, he continued to attract new customers right up until his arrest.
Some people have suggested that we need a new Dickens for the 21st Century. In this, as in many other cases, perhaps we should start by paying attention to the Dickens we already have.

[1] Although not the largest in history. That continues to be debated, but a leading candidate is Alvos dos Reis who instigated the Portuguese Bank Note crisis of 1925, one of the causes of the 1926 coup d’etat. It indirectly lead to the regime of António de Oliveira Salazar, prime minister (and effectively dictator) of Portugal from 1933 to 1968, an economist who stabilised the economy as Finance Minister.


More on Martin Chuzzlewitt can be found in my review of the book, part of my (re-) read of Dickens.

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