Spring 2021

The Greatest Financial Scandals in History!

here’s a reason why shows like “Dateline” and “20-20” are so popular. T Sometimes it seems as if we have an insatiable need to get into the dark and twisted mind of a criminal. And, while no industry is exempt from these psychopaths, when it happens in my field, I tend to sit up and take notice.

We’re all familiar with and his nefarious Ponzi scheme that robbed billions of dollars from families and charities to fuel his excessive and selfish life- style. Madoff committed an estimated $64 billion in fraud and was sentenced to over 150 years in prison.

The of 2008 was bad news for a lot of companies. But no other firm took it harder than , a 150-year old investment bank that filed for Chapter 11, citing $639 billion in assets and $619 billion in debt.

Lehman Brothers had bet big on the housing market, and on subprime mortgages in particular. When the bottom fell out, they looked down and realized that they were done as a company. It was later revealed that, in the months before their bankruptcy filing, they tried to hide the extent of their losses by disguising $50 bil- lion in subprime mortgage debt as $50 billion in cash. No one was ever prosecuted for this due to a lack of evidence.

Before it filed for bankruptcy in 2002, Worldcom was the second-largest telecom- munications company in the country. But when the company’s internal auditors dis- covered $3.8 billion in fraudulent revenues from 1999 to 2002, things went south in a hurry. They would eventually file for bankruptcy, costing investors $180 billion and 30,000 people their jobs.

In the year 2000, you would be hard-pressed to point to a more successful compa- ny than , a Texas-based energy company that was worth an estimated $60 billion. But that all came to a swift halt by the end of 2001. Because all that suc- cess Enron was having, was actually just a big, fat lie! Sure, it looked like the com- pany was just raking in the cash, but that outstanding revenue and company growth wasn’t happening. In fact, the company was actually losing money, but through a lot of illegal accounting gymnastics, they reported that they were profiting in the billions.

When this massive coverup was brought to light, it took down everyone from their CEO, Kenneth Lay, along with countless other Enron executives and their account- ing firm, Arthur Andersen. In the US in the late 80s and early 90s, over a thousand savings and loan associa- tions failed, leaving massive losses and costing investors and taxpayers hundreds

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Client Profile

Jennifer Bonner

We’re so excited to introduce you to our client and friend, Jennifer Bonner! Jennifer, a local girl from Newnan, attended the University of West Georgia, followed by Pharmacy School at the Uni- versity of Georgia. She was introduced to us by one of our other favorite clients, David Stewart . . . also a pharmacist.

Jennifer, who always displayed a strong passion for helping people, was drawn to the healthcare field. Her interest in pharmacy started in high school when she was taking Chemistry. Her teacher put a compound on the board and explained that it was the structure for a drug that could alter a person’s body. Jennifer found this so compelling, she knew then she wanted to learn more about the body and how med- ication could alter it.

Currently working at Publix, she really enjoys educating her patients and breaking information down for them in a way they can easily understand. And, as you can imagine, her role has evolved over the past year due to the Pandemic. With many doctor's offices limiting in–office visits, offering virtual only appointments or closing entirely, patients have turned more toward pharmacists for information on their health. Jennifer says the need for pharmacists to convey meaningful information and reassure patients has really enhanced her joy of working in the field.

As if 2020 wasn’t already busy enough professionally, she also found time to get married! Jennifer and her husband, Robert, tied the knot in June at the Atlanta Botanical Gardens. They opted for a small ceremony – just the two of them! Rob- ert and Jennifer were introduced by friends several years ago and one of their very first dates was at the Botanical Gardens! Not surprisingly, the venue has a lot of sentimental value to them.

Jennifer is also a proud mom of five year old Avery, who loves Legos and playing board games. It seems as if he has also inherited his mom’s love of learning. Only in Pre-K, Avery loves to ask questions about everything and is even learning basic multiplication!

We’ve genuinely enjoyed getting to know Jennifer over the past couple of years. Her compassion and commitment are admirable, and we’re thankful there are people like her in the world . . . especially during times like these. Her favorite quote, from the Dalai Lama, is very poignant: “Our prime purpose in this life is to help others. And if you can’t help them, at least don’t hurt them.” Finally, she has a life mantra to try to “always make a positive, meaningful impact" in whatever she does.

I’m stuck between "I need to save money” and “you only live once!” ~ Erma Bombeck

Scandals (Continued from Page 1) of billions of dollars. The poster child for this crisis was financier Charles Keating who acquired Lincoln Savings and Loan in 1984 and promptly had them make a bunch of risky (but potentially more profitable) bets and investments. After years of mounting losses that were kept hidden from regulators, Lincoln Savings and Loan went bankrupt in 1989. The firm was seized by the US government and Keating was sent to jail. Bondholders lost over $250 million, and the government ended up on the hook for $3.4 billion.

In the 1980s, supposed “whiz kid” Barry Minkow started a carpet cleaning business called ZZZZ Best Cleaners. The busi- ness grew quickly, mostly due to its successful “insurance restoration” work, which allowed it to secure some pretty big loans and investments. The company went public in 1986 and was in talks to purchase other large carpet cleaning compa- nies to expand its reach even further, but in 1987 the whole thing came crashing down. Turns out, ZZZZ Best Cleaners was actually a massive Ponzi Scheme. While the business’s carpet cleaning service was legitimate, its “insurance restoration” division was a sham, and the investors who’d put so much money into the company were left in a lurch. Minkow was arrested and sentenced to 25 years in prison, but was released in 1995. (He has since gone back to jail for - among other things - defrauding his church).

If you bought a book of matches in the 1920s odds were good that you were contributing to Swedish industrialist and fi- nancier ’s global empire. In the aftermath of World War I, Kreuger amassed a virtual monopoly, owning around 75 percent of match producers worldwide, earning him the nickname “The Match King.” But when the market crashed in 1929, some of the more “innovative” accounting practices that Kreuger had invented to keep his empire afloat were revealed. Kreuger had made his business seem far more profitable than it actually was. In 1932, as his vast web of financial schemes collapsed, Kreuger shot himself in a Paris hotel room. You didn’t really think Enron invented this ap- proach, did you?!!?

And who can forget the godfather of the 20th Century financial scandal - Charles Ponzi! He was an Italian con man who operated throughout the U.S. and Canada in the early 1900’s. In 1920, he became famous for the scheme that now bears his name. Essentially, Ponzi would ask people to invest in his business, promising them a 50% profit in 45 days. And for a while, it seemed to be working. Investors began to get back their returns as promised, and they were so jazzed about it that they reinvested their money immediately back into his business.

Everything was going great until, suddenly, it wasn’t. It turns out that Ponzi’s crazy returns weren’t the result of shrewd trading. In fact, Ponzi was simply using money from new investors to pay out “profit” to old investors. Because so many people were reinvesting, he was able to keep the scheme going for a long time. All in all, the losses from Ponzi’s scheme totaled $20 million, and he went to prison. But while Ponzi himself stopped, his legacy lives on, as evidenced by some of the scoundrels that followed him!

The “Teapot Dome Scandal” might have a silly name, but it’s the reason President Warren G. Harding’s is always ranked high up on all those “Worst Presidents Ever” lists. In 1922, Harding’s Secretary of the Interior, Albert Bacon, leased the oil reserves at Teapot Dome Oil Field in Wyoming to an oil exec named Henry F. Sinclair for much, much less than they were worth. In return, Sinclair showered Bacon with hundreds of thousands of dollars in gifts, bribes, and interest-free loans. Once the scheme was exposed, Bacon became the first-ever Cabinet member to go to prison.

In the early days of America, a pair of rogue bankers named Alexander Malcomb and William Duer orchestrated the Panic of 1792. They attempted to buy up all the U.S. debt securities offered by the First Bank of the (the precur- sor of the Fed). Unfortunately, Malcomb and Duer decided the best way to pay for these securities would be to not actually pay for them! They cooked up a scheme to buy the debt securities using fake personal loans they gave to each other, and this had the effect of driving the price of securities way up. When their fake loans collapsed and their creditors came knocking, the prices for securities fell, sparking a bank run. Luckily, Treasury Secretary Alexander Hamilton was able to stabilize the market and prevent the U.S. economy from collapsing. If history teaches us anything it is that criminals will continue to push the limits of our financial system using any means possible to line their own pockets. And, today, they can do it with a handful of keystrokes without ever leaving their home! So, if you are ever approached with an offer that just sounds too good to be true, treat it with a good dose of skepticism . . . or, better yet, let us know and we’ll research it for you. - Ray First-Class Mail U.S. POSTAGE 59047 PrintingForLess.com

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Office Hours: Monday - Thursday 8:00 am - 5:00 pm Friday 8:00 am - 12:00 noon www.RayDunlap.com

It’s officially been a year since Covid hit and most of our world has been turned upside down. I don’t know about you, but with this gorgeous Spring weather in the air, and vaccines rolling out, I’m feeling op- timistic that life will return to some semblance of normalcy in the near future.

I’m hopeful that one day VERY soon, we will be able to, once again, fill this section with travel pictures from our wonderful clients!

We hope you’re all still hanging in there! -Allison

Securities and Advisory Services Offered Through Commonwealth Financial Network. Member FINRA & SIPC, A Registered Investment Advisor. SECURITIES AND ADVISORY SERVICES OFFERED THROUGH COMMONWEALTH FINANCIAL NETWORK, MEMBER FINRA, SIPC