Will Wave of New Anti-Ponzi Laws Work?

Will Wave of New Anti-Ponzi Laws Work? - 3-12-2009

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Will Wave of New Anti-Ponzi Laws Work?
Tresa Baldas

Law.com. March 12, 2009
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EXCERPT: State lawmakers and Congress are trying to tackle Ponzi schemes through legislation, but lawyers are skeptical about whether new laws can stop the scams, much less snare them. With plenty of fraud statutes already on the books, attorneys argue, it's not more laws that are needed but more oversight and more victims who are willing to come forward to name the con artists. "Our fraud statutes can certainly cover these schemes -- it's just that the government needs to be aware of them, and the only way to be aware of them is if an investor smells a rat, or an accountant or lawyer smells a rat," said Paul Monnin, a partner at DLA Piper and a former federal prosecutor who prosecuted several Ponzi schemes. "You can have all the FBI agents in the world, and unless they're involved as investors, they're not going to know about [a fraud] unless someone drops a dime." And files a lawsuit. "A nonlegislative way to address this is to encourage civil plaintiffs who suspect themselves of having been defrauded in a larger scheme to contact the authorities," Monnin said. In recent months, several Ponzi schemes have popped up across the country. It started with disgraced financier Bernard L. Madoff, charged in December with running a $50 billion Ponzi scheme that defrauded millions of investors. Shortly after came the arrest of 76-year-old Arthur Nadel, a Florida fund manager and philanthropist who was charged in January with defrauding investors at six Florida-based hedge funds of potentially $300 million. Meanwhile, lawmakers across the country are taking a crack at Ponzi schemes through legislation. A proposed bill in Florida would give a special team of elite state prosecutors the power to prosecute Ponzi schemes by adding securities fraud and money laundering to the list of crimes they can prosecute.

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