In a move that illustrates the importance of state securities regulators, Louisiana prosecutors charged William J. Chaucer of Ponchatoula, Louisiana with operating a Ponzi scheme that raised more than $11 million from at least 200 investors. Chaucer is in jail awaiting a hearing on bond.
Chaucer owns Chaucer Holding Company and several other companies and allegedly used them in connection with the scheme. Authorities say that he delivered on the promise of high returns for nearly 20 years, but also diverted large sums to fund an extravagant lifestyle for him and his wife, Miss Senior Louisiana 2008.
Authorities detailed some of the extravagant spending. One investor, an attorney, said that he grew concerned about his investment when he attended lavish parties thrown by Mr. and Mrs. Chaucer. ”I’ve been to a party at the White House,” said the lawyer, “this was more extravagant than that.” Authorities also accused Chaucer of spending more than $400,000 on Mardi Gras, $11,800 on plastic surgery, $20,000 on jewelry, and $6,000 on his wife’s participation in beauty pageants.
Notice two things about this case. First, notice that it operated for about 20 years. Most Ponzi schemes last no longer than five years. That Chaucer kept his alleged scheme operating for that long suggests that he is one of those people who were born with the charisma gene. All Ponzi operators have it. You have met people like this. You trust them instinctively. But, that ability to receive trust without earning it is no more than a trait, like having red hair. If you trust your financial adviser because he seems so trustworthy, you might as well decide to trust him because of his hair color.
Also notice the extravagant spending. It is so common in Ponzi cases that I believe the SEC could round up every operating Ponzi scheme by getting a list of every owner of a Maserati or Lamborghini and finding out which owners purport to earn their money by managing other people’s money. If the person who has any part of your nest egg spends money like a trust fund baby on a weekend spending bender, get your money back NOW!
Before you entrust any part of your nest egg to a broker or anyone else, get an investigative report on the broker and/or the investment. Banks figured out a long time ago that it is not wise to rely solely on law enforcement. When they handle what is valuable to them (cash) they hire private protection (armored cars and armed guards). If you want to keep what it took you so long to save, hire private protection.
So 200 investors over the course of 20 years and not one called the Louisiana Commissioner of Securities and asked if he was legitimate? Was he licensed as a broker-dealer;agent or investment advisor? Neither Louisiana nor the SEC in Atlanta had any person inquire at all and this guy was totally under the radar; or were there some phone calls that were poorly handled that, had they been handled correctly would have ended this “Canterbury Tale” years earlier?
PS How do you get expunged arbitration results; I can’t even get a list of the arbitrators in District 5. All you can get are a very few and, as I understand it, you have to file for arbitration to get that.
R. Gambel:
Thanks for this one. My experience is that no one makes a phone call until the checks stop coming. If investors are getting paid on schedule they are reluctant to call regulators for fear that their suspicions are justified. They wonder what will happen to their money if the SEC shuts down the investment. They could ask for a redemption if they think the thing is a fraud, and this is where the agonizing decision comes. If they take their money out and call the SEC, they might save a lot of people a lot of money. But that idea battles with their desire to continue receiving the returns. So, they stay half deliberately ignorant and keep cashing the checks, until . . . Tragic.
As to the expunged actions, the record of the expungement shows up in Lexis. Several years ago we started pulling those agreed awards and notices of dismissal and putting them in our database. Bottom line, if you ask Lexis the right way you can get at least something that won’t show up on the CRD.
Peace,
Pat