Legal News

Our Ponzi Nation: Is Florida the Capital?

By Ashby Jones

Arthur Nadel ran his operation out of Sarasota. Scott Rothstein’s law firm was HQed in Fort Lauderdale. Bernie Madoff raised gazillions from wealthy folks in and around Palm Beach. Allen Stanford brought in a lot of money funneled through Miami. Orlando boy-band promoter Lou Pearlman got a prison sentence last year of 25 years for crimes related to a $300 million Ponzi scheme.

Were we Jerry Seinfeld, we might ask this: “What’s the deal with Florida?” Why so many Ponzi-esque investigations, allegations and, yes, convictions?

Down at the St. Petersburg Times’s Venture blog, reporter Robert Trigaux recently attempted to answer the question. For a little help, he checked in with LT Lafferty, a former federal prosecutor and current white-collar defense lawyer at Fowler White Boggs in Tampa.

For starters, Lafferty completely agrees with the premise behind the question: that things are, well, different in the Sunshine State. In Trigaux’s column, Lafferty calls white collar crime a “booming industry” in Florida. In a follow-up conversation with us, he called the situation “all encompassing,” arguing that the crime boom in Florida has touched everything from mortgage fraud to securities fraud to health-care fraud to public corruption. (On Tuesday, for instance, the Florida Supreme Court approved Governor Charlie Crist’s request to empanel a special grand jury focused on public corruption.)

“It’s a crisis of sorts across the full spectrum,” says Lafferty. “We’re seeing it everywhere right now.”

When we asked Lafferty for some rationales behind the trend, he echoed what he’d told Trigaux.

From a Ponzi-scheme perspective, I think it’s partly because of the demographic of southeast Florida. The state has no income tax, so it attracts some affluent citizens, many of whom are also looking for a place to retire with good weather. It’s my opinion that some of these people are willing to take more risk with their investments. It’s these people who are the likely targets of Ponzi scheme artists.

The other main reason, surmises Lafferty, has less to do with Florida per se, and more to do with law enforcement at the federal level, generally. He says:

After 9/11, a lot of money was funneled into investigating terrorism, moved away from investigating fraud and other forms of white-collar crime. But the economic crisis has brought about a bigger push on the part of federal law enforcement. There’s a greater number of agents pursuing these types of case, more total investigations. We’re seeing the fruit of those efforts bear out.”

So is Lafferty seeing an uptick in work as a result? “Absolutely,” he says. “[Our department] had a record year in 2009 and anticipates an even bigger year in 2010.”

Full post as published by Law Blog - WSJ.com on December 03, 2009 (boomark / email).