Who’s Cheating America?: Murky Waters

image credit: tallahasseegrapevine.com

I try to avoid politics here on the blog as much as possible. (Except when I’m writing books about it.) But if there’s one viewpoint I expect all thoughtful Americans to share it’s the old 90s slogan: Work Hard And Play By The Rules.

We can all agree on this, surely! We want hardworking people who play by the rules to do well. We can disagree with what this means for governmental policy, but I don’t really think anyone can disagree with the idea that working hard and playing by the rules should be valued by our society. (If you prefer instead laziness and/or cheating, you’re in a different political universe.)

With that in mind, I’m introducing a new series. Who’s taking shortcuts? Who’s not playing by the rules? I’m not focusing on the big scandals, whether they be financial institutions or the well-covered trials and tribulations of the politicelebrity class.

Rather, I’m focusing on the little guys. The next-door neighbors who bend the rules, who cross the lines. The get-rich-quick schemers. The ones who aren’t working hard. The ones who aren’t playing by the rules.

America, who’s cheating?

Here’s a story about a man named Waters who lived in Massachusetts. He opened a rare coin business – oh, you know those kind of guys! Passionate about their hobbies. A little nerdy. You see them in the mall, standing behind their counter, and you think: well, god bless him, he’s probably been collecting coins since he was a kid. Now he ekes out a living at it.

And you also think:

That store will be closed in six months.

Right? Coin collecting? Why not just open a juice bar or a bookstore? Doomed, doomed, doomed. Well, this man also decided to open up a couple of other entities: a broker-dealership (i.e. seller of stocks) and an investment adviser (i.e. someone who handles other people’s money).

So far, so good. That shy little coin collector has a real job on the side. Nothing dishonest about that.

Except… maybe there was.

The U.S. Attorney for the District of Massachusetts charged Waters with an array of securities fraud and other violations on October 17, 2012. On November 29, 2012, Waters pleaded guilty to sixteen counts of securities fraud, mail fraud, money laundering, and obstruction of justice arising out of both the conduct that is the subject of the Commission’s civil action and a criminal scheme through which Waters defrauded clients of his rare coin business out of as much as $7.8 million.

Oh no! What was happening? Ripping off other collectors? Maybe he was just smarter than they were? Knew more about the coins? Maybe he was just very good at buying and selling?

Under this scheme, Waters defrauded coin customers out of as much as $7.8 million by selling coins at prices inflated, on average, by 600% and by inducing coin purchasers to return coins to him, on the false representation that he would sell those coins on the customers’ behalf, when, in fact, he sold most or all of the coins and kept the proceeds for himself.

Ouch. Anything else?

The criminal information further alleges that Waters engaged in money laundering through two transactions totaling $77,000.

Well, what’s a little money laundering among friends? And anyway, it’s not like he lied about it when he was caught. He fessed up right away, didn’t he?

Finally, the criminal information alleges that Waters made multiple misrepresentations to Commission staff, including that there were no investors in his investment-related partnerships, in order to conceal the fact that investor money was misappropriated in a fraudulent scheme. Waters is charged with obstruction of justice related to this conduct.

D’oh! But apart from the coin issues, what about the investment advisory business? Surely he helped people there, right? Made money for their pensions? Exercised prudence?

According to the criminal information, from at least 2007 through 2012, Waters used fictitious investment-related partnerships to draw in investors, misappropriate their investment money, and spend the vast majority of it on personal and business expenses and debts.

They were sophisticated investors, I trust? Pension funds? Investment banks?

Waters is alleged to have raised at least $839,000 from at least thirteen investors, including $500,000 from his church in March 2012.

His church??? So depressing.

So what happens to this cheater? Does crime pay in America? Not always!

As a result of his guilty plea to this criminal conduct, Waters was sentenced on April 26, 2013 to 17 years in federal prison and three years of supervised release, and was ordered to pay $9,025,691 in restitution and forfeiture.

And final judgment was entered by a Massachusetts federal court on December 4, 2013.

Remember, everyone! Beware the Comic Book Guy, the Coin Collector Guy, the Baseball Card Guy, and the Smiling Philatelist. Particularly when they’re also offering to invest your money in fictitious investment-related partnerships.

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