But Dreier is more like the classic con man of legend, stage and screen: an amoral, audacious rapscallion who pulls off a massive fraud mostly because no one can believe anyone would do anything so crazy:
According to prosecutors, for more than four years Dreier sold hundreds of millions of dollars' worth of bogus debt obligations to nearly 40 investment funds run by 13 of the nation's most sophisticated asset managers, including the likes of Fortress Investment Group, Elliott Associates, and hedge funds later acquired by Perella Weinberg Partners and Blackstone Group. Throughout its existence the scheme could have collapsed at any instant, if just one of dozens of duped hedge fund officials had ever run into real estate developer Sheldon Solow - the head of the duped company supposedly issuing most of the notes - at a cocktail party.
As Dreier dug himself ever deeper into criminality and debt, he resorted to ever more desperate measures to postpone the day of reckoning. He and his accomplices talked their way past receptionists of companies they weren't affiliated with; plopped themselves down in empty conference rooms; and then hosted meetings at which they pretended to be people they weren't. The scam succeeded for as long as it did because none of his victims could conceive that anyone of Dreier's stature would act with such monumental recklessness, selfishness, and self-destructiveness.
Almost as an afterthought, Dreier is alleged to have filched about $40 million from his clients' escrow accounts - including $10 million that he stole after his arrest before authorities could get a receiver appointed to seize control of his law firm and ambulance it into bankruptcy. To the 260 innocent attorneys who toiled for him at Dreier LLP's tony offices in Manhattan, Albany, N.Y., Los Angeles, Pittsburgh, Santa Monica, and Stamford, Conn., Dreier bequeathed unpaid salary checks, unreimbursed expenses, lapsed malpractice and health insurance policies, potential civil liability, and untold damage to reputations. An attorney's stock in trade is sound judgment and wise counsel. "To have hitched one's star to a thief," as a lawyer for one of Dreier's former partners puts it, is a stain that won't easily wash out. Most of Dreier's betrayed former colleagues did not return calls or e-mails, and all but one of those who did asked not to be identified.
I can kind of understand what Madoff did, if it is indeed true that he initially thought his fraud was just a temporary thing. Not condone it, nor really picture myself deciding that it was better to falsify the books than to 'fess up to clients. But understand it. The instinct to CYA is a normal human emotion. But there's no instinctive drive to run crazy scams faking bonds.
Even more, I don't understand people committing these kinds of crimes where they are virtually certain to get caught. Madoff probably didn't start out knowing that the house of cards would eventually have to come tumbling down--presumably, at least some embezzlers actually have succeeded in dipping into the till and then replacing their takings afterward. By the time he did know, it was too late to get out. But Dreier is like Michael Bellesiles, or that guy at Bell Labs who faked potentially Nobel Prizewinning research. What's the point of enjoying your fifteen minutes of fame at the price of utter, certain ruin?
It is, as the Fortune writer points out, fascinating. Except unlike the cases of Bellesiles or Bell Labs, this fellow cost people a lot more than time and anxiety. How did he look himself in the mirror in the morning? At the end of the Fortune piece, that's still a mystery to me.
My guess would be that he assumed once he "had enough" he would get out of dodge and live high on the hog. And of course, that date keeps getting pushed further into the future as "enough" gets defined further and further upwards when you realize how "easy" this all seems.
Then again, why do people smoke that first cigarette?
People smoke the first cigarette as an act of rebellion usually. As for his motives though, that's a massive act of self-delusion. Maybe some people can deceive themselves that well, but if you work in high finance for that long, you -know- you'd eventually get caught. At some point someone will try to cash out the bond, and the whole thing will unravel.
Might have been a sheer thrill thing. For a certain type of person, the act of deceiving very smart people, and pulling all sorts of social engineering feats can be quite a rush. Think Frank Abignale (check fraudster/fake airline pilot/fake doctor/fake lawyer/fake some other stuff too).
You should really read the whole linked Fortune article. The guy's a real piece of work.
The article basically shows that Drier had no morals or scruples. He'd do anything for money and was obsessed with all trappings of wealth. I assume that he could not obtain the wealth he wanted legally so he resorted to other means.
We read of small time embezzlers all the time. They always fritter away the stolen money on trappings of wealth, like an expensive Mercedes, a fancy boat, etc. Dreier seems to have simply taken that to the highest level. Without those trappings of wealth, he wouldn't be happy, and he was willing to do anything to get what he wanted.
Regarding why a scientist would fake "potentially Nobel Prizewinning research," read Isaac Asimov's novel "Whiff of Death," a story based on such faking. Asimov, a chemist by original training, correctly and insightfully gives the reason: because the scientist is absolutely certain his theory is correct. Thus, even if he fails to obtain the correct result, other scientists, more capable than he, will eventually obtain the correct result, which he only announces. These experiments by others "confirm" his original experiment. But the Nobel will go to the original experimenter, even though his work is really faked.
Most physicists now think Sir Arthur Eddington faked the results that confirmed Einstein's general theory of relativity. But Einstein was actually correct. I personally believe, but cannot prove, that there is a more recent Nobel Prize Winning experiment that was faked, once again because the experimenter believed the theory was correct (it was) and that therefore his fakery would never be proven.
Since this motivation to fake experiments is well-known to professional scientists, most of us never believe the claims of confirmation of an experimenter's own theory. And we never accept a single "confirmation."
If you have free time and enjoy that sort of thing, please read one or both of some recent books by Sir Terry Pratchett: Going Postal and Making Money.
Sir Terry clearly understands the con-man mentality. At one point the protagonist is asked, "Do you expect to get away with it?" His response: "I'm never sure, but you get the best view from the point of no return."
Regards,
Ric
I personally believe, but cannot prove, that there is a more recent Nobel Prize Winning experiment that was faked
Which one? Reines for the neutrino? Well?
Physicist, has the jury spoken on the allegation that the Millikan oil drop experiment was faked?
Anyone: Perry going (or, more to the point, not going) to the North Pole?
has the jury spoken on the allegation that the Millikan oil drop experiment was faked?
How could you fake that? There's no theoretical value for e that you could be "confirming."
I don't think that Michael Bellesiles thought he faced certain ruin, and it almost didn't happen. He had plausible stories and lots of defenders. If it wasn't for the dogged efforts of a few people (e.g. Cramer and Lindgren) he would have pulled it off and kept his prize and position. Also he would have been a hero to the people who's views he favored.
has the jury spoken on the allegation that the Millikan oil drop experiment was faked?
I thought the story was a little more complicated. The original oil drop results were WRONG, not faked. And then all the confirming results were close, within the expected error of the original result, but each succeeding result was a little bit (higher/lower whatever) until the average result was gradually dragged to where we now believe the correct answer is.
So nobody ever proved previous work incorrect, they just pushed the boundary of the acceptable result until over time the answer was changed quite a bit. It's an example of a strange, don't rock the boat, type social confirmation. But one that got there eventually.
"The hardest working man in America' is what Clifford in the Financial Times said of Madoff. Think of all those reports that he sent out giving trades and dates which came up to profits, all made up but checkable, correltable with real prices, sent to people who were knowledgable in finance.
What we know about Madoff suggests that he may have become an almost accidental crook, like many of the accounting fraudsters of yesteryear
Really? How can you say that when we know he never made a trade(for the fund that was bilking investors)? He wasn't accidental.
Truly, Dreier's story is awesome. As a lawyer, I'm horrified; as a writer of fiction, I'm inspired. Someone who writes true crime will make a mint (though as the story implies, if Dreier wants to talk, that might redound to his victims' benefit).
Oddly enough (perhaps not) the people who are Accidental Scammers seem to do the most damage often getting to billions, not just millions
think of the Nick Leason type or the French young banker who lose money on trades and run up billions more losses in trying to make their money back. At some point people think this is so easy, "I can do this for a while" though they must know they will have to face reckoning. Madoff probably strated as an accidental then kept the game going, lived large and basically "retired" to prison
The other con men, like Drier, must be sociopaths. Criminals with criminal intent are usually morally and mentally flawed, even if they are otherwise intelligent. Yes, most people never get away with crime. Drier's crimes were so audacious he probably got more thrill pulling off the chutzpadik capers than getting the money.
Wikipedia speaks:-
"There is some controversy over the use of selectivity in Millikan's results of his second experiment measuring the electron charge raised by the historian Gerald Holton. Holton (1978) pointed out that Millikan disregarded a large set of the oil-drops gained in his experiments without apparent reason."
That's "fake" according to the instruction normally given to students.
Accident? Accident? These behaviors aren't accidents!
The ideology of amoral "free markets" has been drilled into our cultural mythology. Cheating, stealing, and deception are not only the norm in our culture, they are lauded as marks of the superior man---so long as that man pays homage to the 11th Commandment: Thou shall not get caught.
A sleazy lawyer can provide an ounce of cure, but a clever accountant provides a pound of prevention.
Those who are intent on cheating and stealing will do so under any kind of regulatory regime, loose or draconian. Grandpa always said, "Locks are made for honest folks."
I think there are two motivations going on - both the result of the swindler thinking he's smarter than his dupes and everyone else:
First is thinking he can get away with it for a while, then he'll be able to wind it up without his dupes being the wiser, and him being very rich. Of course, winding it up is harder than he thinks, while continuing to run it makes him a little richer.
Second is that someone who pulls off scams like Dreier think that if they can get away with the things he does, that nobody will ever check him and he'll be able to fake it if they do.
Bellesiles was clearly relying on the fact that people don't actually check, especially sources which aren't on the internet. How many people are in a position to check the paper records of the Contra Costa County Historical Society? (It's only open TWTh 9-4, and not always even those days.) Especially when he claimed, falsely, that the records were San Francisco County records, gave the wrong name for the archive, and stated, incorrectly, that they didn't have a website. (Just to deter any attempts to check.)
To some degree, most other fraudsters rely on people's laziness about checking.
Why did John Lott think he could get away with his "Mary Rosh" fraud?
http://en.wikipedia.org/wiki/John_Lott#Mary_Rosh_sock_puppet
(No, posting under a pseudonym is not in itself fraud. Inventing a persona to strengthen your credibility--having "Mary Rosh" say that she was a student of Dr. Lott and could testify to what a great teacher he was--definitely *is* fraud.)
The only difference between shorting a restaurant a $2.50 soft drink the waitress forgot to put on the bill, and shorting some dupe $250k of investment money, is that of scale. Once you tell yourself that nobody is really getting harmed, and that you can put yourself at some sort of advantage by maintaining the illusion, one step readily builds upon another -- especially if you're getting away with it every time. Do it on the small scale a few times, and the scale quickly increases.
In Dreier's case, he evidently had an unfulfilled inner spy/thespian that broke out as the stakes got higher, but at that point he couldn't possibly go back, so why not play it for all it was worth?
Okay, the only difference is scale and opportunity. Maybe you're thinking of misdelivered packages, for which the law states that the recipient may consider it a gift. That policy is there for everyone's benefit because it disincentivizes some possible types of fraud.
Simply put, a person who knowingly takes $2.50 in a dishonest manner has not really shown in any different character than a person who bilks people out of $250k or whatever. "Hey, it was their mistake to omit it from the tab" is simply one more layer of justification by which taht person will look themselves in the mirror the next morning and not feel a troubling from their conscience.
Most people will never have the opportunity to play with sums of money like those handled by Dreier, but the moral aspects are no different. Once you convince yourself that it is okay to walk away with money that plainly belongs to another party in the room, how high you go is merely the mechanics of risk behavior.
"Once you convince yourself that it is okay to walk away with money that plainly belongs to another party in the room, how high you go is merely the mechanics of risk behavior."
(eye roll) I hate that slipper slope crap most of the time, and I hate it here. We spend our lives making reasonable distinctions, and there is one here.
If your time is valuable--and isn't everyone's?--you may decide that spending time correcting the wait staff's error simply is not something they can reasonably expect.
I doubt I would waste the ten minutes necessary to correct a $2.50 error. I simply might toss some extra tip money and be done with it. I also would not ask for a correct bill if they overcharged me by that amount. (I have actually shrugged that off before.)
If you feel that correcting the $2.50 error is worth your time, so be it. But it is less a moral issue and more a time value matter when talking about spare change amounts.
Spartee, who said anything at all about a slippery slope? Megan's question was how a guy can do something like this and live with himself. My reply is, many people do a thing like this, and in terms of their own scale and opportunities, they think very little of it precisely because it falls within their own relative scale and opportunities.
By your own admission, you would be unlikely to simply walk away from a restaurant error, and might at least rectify it by throwing extra money on the tip pile -- an entirely reasonable solution since the waiter or waitress will be docked out of their tip collections if/when the omission is discovered later, and your time may, in fact, be limited. On the other hand, I was once out on business travel with a coworker who was almost adamant that a similar error NOT be brought to the waitress' attention, which struck me as utterly bizarre since we had the whole evening to kill, he was making an income at least twice what the waitress could be making as a full-time employee of that restaurant, the amount was nothing to him regardless of that, and besides, the company was paying for the entire dinner check.
In the grand scheme of things, he wasn't really going to measureably harm anybody with his actions, but give a guy with that kind of attitude access to, say, somebody's 401(k) accounting, and guess what happens next.
"The only difference is scale? Surely the fact that one is legal and one isn't might be a minor difference, too?"
I'm not so sure that someone who knowingly lets himself be undercharged in a restaurant is not in fact guilty of theft. Obviously the chance of being prosecuted for it is zero, because (a) the amounts involved are *de minimis*, (b) it's impossible to prove that the customer was aware he was being undercharged, and (c) everybody except the most scrupulous do it. But technically I think it is illegal.
You have to show me the statute (any state) on that one. I'm pretty sure that's not "technically illegal" to not pay a bill not rendered. (Wow, that's a whole lot of negatives in there. You'd think I was a lawyer...)
Marc - I don't know what culture you live in, but I was raised to believe that being fair and honest were virtures and marks of the superior man. "Free markets" are not about doing whatever you want but about allowing the free flow of capital and the freedom of individual actors to make deals they choose to make. Free market capitalism works best when everyone has good information and nobody is cheating. This is well understood by anyone who knows anything about economics. People who commit fraud or otherwise lie or cheat are not acting according to free market ideology.
As Quint X says, these people will cheat under any system and, in fact, heavily regulated and controlled systems probably make it easier to cheat as there are more ways to game the system.
I wouldn't be surprised if there werer a correlation between how close a market approximates an ideal free market and a lack of corruption.
Two points:
1. The notion that Madoff and Drier are "typical" of ... (Fill in the blank with something you disapprove of.) The stories of both men were in the news which means they almost never happen and aren't typical of anything. Instead they are sui generis.
2. Why didn't the auditors for the Madoff investors sniff him out from the first? Surely the first question from FamousUniversityEndowment auditors along the lines of "Mr M, we're the owners of X% of your assets, which you say comes to $Y. Who is the repository of those assets?" would have unraveled the whole fabric.
Regards,
Bill Drissel