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back to article Former US POLITICIAN gets 6 years in slammer for FACEBOOK SCAM

A former candidate for governor of Oregon has been sentenced to six years in prison for convincing investors to hand over millions of dollars for Facebook shares he never owned. Craig Berkman got people to hand over $13m by pretending that he had access to stocks in companies like Facebook, LinkedIn, Groupon and Zynga before …

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Anonymous Coward

Serious lack

of due dilligance in the investment industry.

Who am I dealing with

What am I investing in

Is this for real

Who am I employing

How does he do business

Can he be trusted

Seems like no-one bothered to ask these questions about Berkman.

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Re: Serious lack

Seems like no-one bothered to ask these questions about Berkman.

Oh, I'm sure many people did, but others couldn't see past the "moneymoneymoneyMINE". As the old truism goes, you can't con an honest man.

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Re: Serious lack

"As the old truism goes, you can't con an honest man".

True enough, Phil. But you must surely admit that our spiffy hi-tech lo-morality modern world leaves a lot more latitude in the definition of honesty.

If you adopt the old-fashioned view that something is probably dishonest if it brings a greater financial return than the market rate for your particular skills and experience, pretty well every way of getting rich is dishonest.

But in the absence of social disapproval, a personal feeling of guilt isn't enough to stand in most people's way.

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Re: Serious lack

"As the old truism goes, you can't con an honest man".

True enough, Phil.

Yes, but only for very small values of "enough". Studies of successful cons have repeatedly shown that "honest" victims, motivated by concern for someone else's well-being, are highly vulnerable.

While greed is a powerful incentive for a con, so is altruism (or the desire for the psychological reward that accompanies performing a good deed, depending on how cynical you are).

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So when do our politicos in the UK face doing porridge for the biggest Ponzi scam of all:- National Insurance?

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Anonymous Coward

biggest Ponzi scam of all:- National Insurance?

NI is not a Ponzi scheme; no taxation is. The truth is that money is like energy; it is impossible to store large amounts for extended periods. There is no meaningful sense in which I can pay money into a bank account now and then withdraw it in 20 years time. During that 20 years, it has somehow to have been invested so as to retain the underlying asset value when I paid it in. Without economic activity, money is worthless.

Taxation works slightly differently; I pay money to the government now to provide services, some of which I do not currently need. Some of the money I pay in, therefore, is spent on other people. When I need those services, the cost is borne by payments made by other people who don't currently need them.

A Ponzi scheme would mean that I was persuaded to pay taxes on the basis that I would get back more than I was giving. This isn't the case here.

The dishonesty in a Ponzi scheme is the impossible promise of profit used to persuade people to invest, not the idea that I am part of a grand scheme in which I agree to pay to support other people now in the expectation that when the time comes other people will pay to support me, which is part of the social contract.

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Re: biggest Ponzi scam of all:- National Insurance?

AC but still a resonable defence of NI. Have an upvote.

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Coat

Re: biggest Ponzi scam of all:- National Insurance?

if we say electricity rather than energy we can use some conventions....;-)

Society is the circuit.

Money lost in moving it is resistance. So VAT is a huge resistor between all consumers and goods.

Credit cards are like batteries with resistors on inputs and outputs (you pay, merchant pays)

Taxation is like having a resistor between your employer and you. Some gets lost in the transfer.

Banks are gigantic capacitors that give out electricity, but don't make it. The generation station is the govt printing presses that turns a number in a spreadsheet into a quantity of charge. Unfortunately, because the circuit already has a lot of charge, it becomes harder and harder to put more in, so a high voltage (more cash) is needed.... Inflation is the ohmic loses on the resistors heating up...

The best thing about the circuit modelling analogy is that we can say that being rich or poor is like having a personal voltage (potential). Only parts of the circuit with an equal or lower voltage will be accessible...

Ok that's enough need to get my coffee...

P.

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Re: biggest Ponzi scam of all:- National Insurance?

"Without economic activity, money is worthless".

Then why is it that a quantity of gold today will buy the same amount of most basic commodities as it did 2000 years ago? It's utterly immaterial whether it's been invested, stored in a bank, or in a hole in the ground.

"The dishonesty in a Ponzi scheme is the impossible promise of profit used to persuade people to invest..."

Not necessarily. The expectation of getting a large return helps to make a Ponzi scheme more attractive. The basic dishonesty is the assertion that investors will get SOMETHING back - when in fact only a very few of them will. In that sense, NI is exactly like a Ponzi scheme. The assumption that there is an entity called "the government" that will faithfully repay its debts is utterly unfounded. Instead, there are just a bunch of people, each doing what seems best for himself. If it seems best to cabinet members that pensioners should be cheated, that's what will happen.

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Gold is not money

Then why is it that a quantity of gold today will buy the same amount of most basic commodities as it did 2000 years ago? It's utterly immaterial whether it's been invested, stored in a bank, or in a hole in the ground.

.

Because gold isn't money. Money is a creation of the state, and has value because the state says it does and requires it be accepted as payment for debt - including and especially for debts to the state (i.e. taxes) That means if I owe you $50, you can't insist I pay you in gold. If I offer you a $50 bill, you must accept it as payment for that debt. That doesn't stop you from saying you have an old bike to sell, but will only take gold, but that won't be considered a sale under the law but an exchange.

Gold is a good, and as such is more similar to other goods such as cans of tuna, iPhones and classic Ferraris than it is to dollar bills. Any good can be traded for another good, if the parties agree, but the value each good depends on the needs of the person. If you want a car and have gold, and the other guy has a car and wants gold, you may be able to come to an arrangement. If he has a car but doesn't want gold you're SOL.

In contrast to gold and other goods, a dollar has a fixed value, in terms of the state, because taxes are denominated in dollars. If you owe $1000 in taxes on April 15th and hyperinflation strikes and what you could buy with $1 on March 15th cost $1000 on April 15th, you still owe only $1000 in taxes.

The value relationship between goods changes all time. When gold was $1800, it required approximately 1/3 oz of gold to buy an iPhone. Now it requires approximately 1/2 oz of gold. Did iPhones become more valuable, or did their price go up by 50%? Of course not.

If a solar flare took out power across the entire western world with no hope of restoring it for years, iPhones would become valueless and cans of tuna would become much more valuable. If the state somehow survived the "price of gold" in dollars might shoot way up, almost without limit if hyperinflation set in, but an ounce of gold would still buy far fewer cans of tuna than it does today.

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Re: biggest Ponzi scam of all:- National Insurance?

Nice defence;- but not quite true.

Like many governmental schemes over the years, what is now viewed by the authorities as general taxation was originally set up for a specific purpose:- your vehicle tax disc was called a "Road Fund Licence" for many years after it ceased having anything to do with just road building & maintenance.

So NI (or National Insurance - the clue's in the name) was originally set up to provide very basic social security benefits for which you paid a premium.

Then some 'bright spark' thought that these funds can just be added to general tax funds instead of ring-fencing them for their intended purpose with the idea that we'll let future taxpayers worry about paying the entitlements to those who've compulsorily invested.

Result? Unfunded pension liabilities, massive increases for higher-echelon civil servants, and smaller benefits for original investors with start dates deferred way beyond the original 'contractual date'.

On the basis of "If it walks like a duck, looks like a duck, and quacks like a duck then it's probably a duck', National Insurance has turned out to be a Ponzi scheme.

And no amount of politico-speak, equivocation or sophistry will convince me otherwise.

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One down, which is good....

It is good to see somebody getting jail time for financial shenanigans. However, I do somehow wonder whether this was because he cheated (rich?) investors. Swindling poor people out of their homes by selling them mortgages you know they cannot afford, or breaking the financial system leading to untold hardship for many poorer people does not seem to carry any penalty. For the LIBOR scandal financial penalties have been handed out to the banks, but the responsible bankers seem to get off scot free, to name just a single instance.

But let's take a balanced view: One down, many more to go .....

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In other news...

Greedy man cons other greedy men and goes to prison.

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Anonymous Coward

Re: In other news...

Interestingly, Madoff conned some very intelligent people. He was able to do this because, once he had got some on board, other people were convinced that people like that would not be taken in by a fraud. When dollar bills are waved in front of people, it's amazing how few seem able to realise that if someone claims to be able to beat the market by a factor of 3, something is wrong.

I've seen this with a distant cousin who is a highly intelligent man with a successful business but is very prone to having money taken off him by fraudsters. He is convinced that there is a "system" that is manipulated by clever operators, and that the trick is to find people who are part of the system, because even if what they are doing is in a legally grey area, they probably won't get caught/are too important to be prosecuted. He doesn't seem to be able to take on board that, if this was indeed the case, why would they need to find outside investors?

And then there were the people (including the Guardian newspaper) who failed to see anything odd about banks in a small country like Iceland with few resources, that were somehow able to offer three times the going rate for bank deposits.

Someone from the FSA has tried to blame governments, arguing that the Thatcherite giveaways primed people to believe that get rich quick schemes were viable. I think there's some truth in that

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Re: In other news...

The legal issue is con rather than greed. But sure if you listen to Boris greed it good (at least in moderation and greed is ever so moderate).

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Berkman, who had unsuccessfully run for governor as a Republican in 1994

I first read that as 'Berkman, who had unsuccessfully run for governor as a Reptilian in 1994'. I think I need to lie down and stop drinking from the crazy fountain.

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Coffee/keyboard

Re: Berkman, who had unsuccessfully run for governor as a Republican in 1994

I need a new keyboard (and another cup of tea) and it's not even Friday.

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Re: Berkman, who had unsuccessfully run for governor as a Republican in 1994

Is there a difference???

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Boffin

Is a candidate for governor not classed as a politician until he actually becomes governor?

For instance, a mate of mine had trials at Carlisle United when he was 14, I wouldn’t say he was an ex professional football player.

(insert joke about not being a professional football player even if he had managed to play for Carlisle)

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Someone is a profession runner if they come fourth in a race so it's resonable to describe him as an ex-politican as he had to act like one to get even that far.

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As the old saying goes...

First he had the experience and I had the money. Then I had the experience and he had the money.

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Re: As the old saying goes...

...or as a friend of mine says, these people are very good at "making our money theirs".

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Anonymous Coward

Please people, if you're going to invest money with someone then do it with someone with a decent name.

Madoff - Made off with your money.

Berkman - Berk by name, berk by nature.

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Go

I'm shocked, SHOCKED...

That a bankster (and a Republican one to boot) actually did a perp-walk, and will be sharing quarters with his new best friend Bubba.

Will wonders never cease?

("Berkman", eh?...figures....)

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Happy

Re: I'm shocked, SHOCKED...

"That a bankster (and a Republican one to boot) actually did a perp-walk, and will be sharing quarters with his new best friend Bubba."

He probably thinks it's more a "Stride of pride."

Until the bit about Bubba of course.

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Anonymous Coward

There are two types

There are two types of politicians. Ones that have been caught and those that have yet to be caught.

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A fool and their money...

...are soon parted.

It seems that this guy was good at cultivating fools. Then he took their money.

So, this is news??

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