Mr.
Schiff: Hi, welcome to "FBI 100, A Closer
Look." I'm Neal Schiff of the Bureau's Office
of Public Affairs along with FBI Historian Dr.
John Fox. John, Ponzi Schemes. What are they?
Dr.
Fox: "Well Neal Ponzi Schemes are a fraud
named after a Boston guy named Charles Ponzi back
in the turn of the century, a hundred or so years
ago. Ponzi came up with the idea that he would
get investors to give him money for a false investment.
And what he would do is use new investor's money
to pay off the original investors. So people thought
that they were actually making money. Eventually
Ponzi's idea was that he would get enough new
investors coming in and that he would just run
away with the money."
Mr. Schiff: This activity happened in a big
way in 1984 in California?
Dr. Fox: "In 1984 a French businessman
named Jean Claude Leroyer began a Ponzi scheme
by which he would sell parts of a company called
Metro Display that was supposed to be selling
advertising at bus stop shelters throughout Southern
California. He pitched the plan to a lot of people
and ended up raising about $48,000,000. But of
course he was using some of the later money that
he was bringing in to pay off his earliest investors.
Of course, eventually the whole plan fell apart
because he wasn't able to keep paying off as he
brought in money."
Mr.
Schiff:
What did FBI agents find out was going on?
Dr.
Fox: "As Leroyer kept bringing in new investors
he was using some of that money to pay off some
of his original investors to keep them happy for
awhile as he continued bringing in new people.
But he was also diverting sums of it; making major
repairs on his house and socking away other amounts
so that he was taking advantage of the money that
he was bringing in. Eventually, of course, it
all caught up to him and the whole thing started
to fall apart. The Bureau started to get involved
in the investigation because of the fraud going
on; it issued a number of search warrants; confiscated
computers; worked with the IRS to start tracking
some of the tax implications of the whole thing.
Eventually Leroyer had to plead guilty to Filing
False Tax Reports, Mail Fraud and some other violations."
Mr.
Schiff:
From the FBI's Public Affairs office, along with
Bureau Historian Dr. John Fox, I'm Neal Schiff
with "FBI 100, A Closer Look."
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