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Tuesday, 12 April 2011


"What a miserable thing life is: You're living in clover, only clover isn't good enough."
Bertold Brecht.

On Friday of last week I received the following email: "Congratulations your email address was randomly selected from 5 million email addresses, you have won £550,000 on the UK National Lottery. Contact our claims department for immediate payment". 

I'm still waiting for a reply to my sceptical answer. My sister in the UK did enquiries and came to the conclusion that this was a scam.

How does the scam work? Once they have aroused your interest, you are told, that to facilitate payment you must pay a sum of money into a certain bank account. In British £'s this amount may not seem a large amount, but in ZARands it adds up to a sizeable amount. After payment of this amount all contact is cut off by the perpetrators of the scam. Yet every year you hear of people being caught out. 

The reason so many people are conned by this scam? Greed! 

This email got me thinking about greed and materialism. We live in a world where people want to get rich, not work for these riches over decades, but get rich quick. Why do they want to get rich? Well, they think lots of money will give meaning to their lives, and make them happy. 

The scam that I was a target of was motivated solely by greed, people who want to get rich without having to work hard for it.

Now I've got nothing against being rich, and I would have been very happy if the email had happened to be true. £550,000 ads up to almost R6 million. This kind of money invested, even at 7% at one of our banks would have you living in luxury. But would that have made me any happier than I am now? As Abraham Lincoln once said: "A man is as happy as he decides to be". If I was unhappy with the way my life is now, I doubt that a huge amount of money will make me any happier.

Quote: "It's preoccupation with possessions, more than anything else, that prevents us from living freely and nobly". Thoreau.

The most famous type of scam is the Ponzi scam, named after Charles Ponzi, an Italian immigrant to the USA, who was arrested in 1920 for running such a scam. The scam promises huge profits to investors. It relies on a ongoing cash flow from new investors. Old investors get paid "dividends" out of this money. Eventually outflow exceeds inflow and the scam collapses. The perpetrator often manages to get away with huge amounts of money.

Police photo Charles Ponzi 1910.

Ponzi schemes are not new. One such scheme is mentioned in "Little Dorrit." by Charles Dickens, in 1857. In 1716 a Scot by the name of John Law, ran such a scheme in France, the so called Mississippi Bubble, this scheme collapsed in 1720, leading to a financial collapse in Europe. John Law fled France. 

In recent times we have the Ponzi scheme of Bernard Madoff, which fleeced thousands out of billions of US$. Madoff and the people who invested in his scheme had no need for more money. Most of them were multi millionaires, and some even billionaires. But greed drove them to put their money in this scheme. All these people had more money than they could spend in a lifetime. But as someone once said: "How much is enough? Just a little more."

In 2009 South Africa's largest Ponzi Scheme was uncovered,it was estimated to exceed 10 billion ZARand, about 1.3 billion US$. This scheme was perpetrated by Barry Tannenbaum, the son of the founder of South Africa's biggest pharmaceutical company. So he wasn't a poor boy who needed money, he had more than enough.

This scheme offered profits to investors of up to 200% per annum. One of the investors in this scheme was the ex CEO of South Africa's largest retail chain, he in vested R20 million. You would think that a man of his experience and financial knowledge would know better! But greed blinded him. Some smaller investors who took out mortgages on their houses, cashed in pension plans and other investments, lost everything.

And Mr Tannenbaum? He is sitting pretty in Sydney Australia. 

The moral of the story? If it's too good to be true, it usually is.

Quote: "Earth provides enough for every man's need, but not enough for every man's greed." Ghandi.



Shoreman said...

Hi Patrick. Yes, there are a bazillion of those scams out there and they even pick up your email address off your blog. I get about 2 a month and just delete them. If you win a lottery you certainly don't have to pay to get the money.


Gaelyn said...

I personally think there should be a Greed Tax. But the greedy rich just don't get it. Guess it's a disease I just don't have. Well said!

I get at least a dozen a day but never open them.

Gorges Smythe said...

I've always heard that an honest man can't be scammed.