Like Madoff, Jones was a smooth operator trusted by all
Financial adviser didn't just fit in with the right crowd, he belonged to it
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by L. IAN MacDONALD
The Gazette, Wendesday, July 15, 2009
As Ponzi schemes go - if that's what it was - it's hardly on the scale of Bernie Madoff (rhymes with made-off) defrauding investors of $65 billion, but as a local story, the $50-to-$100 million lost by Earl Jones is impressive enough.
Large or small, Ponzi schemes all work the same way - investors receive monthly returns not from investments, but from the deposits of new investors. When the money runs out, the money man either turns himself in, as Madoff did, or skips the country, as Jones might have.
Large or small, the sense of betrayal is also the same - not only did people invest their money, often their life savings, they invested their trust. For the most part, they are people of a certain age, who woke up one day shocked to discover that not only had they lost everything, but that they had given their trust to a smooth operator who won their confidence because he was one of them.
It's one thing to be taken to the cleaners, quite another to be left standing naked on a street corner.
So now residents of Montreal's West Island have a poignant sense of empathy for the plight of the close-knit Jewish communities of New York and Palm Beach. Not only did they get taken down, they got taken in.
Well, why wouldn't they? Bernie Madoff was a pillar of the community, summers in the Hamptons, winters in Palm Beach, golf at the exclusive Palm Beach Club, pinnacle of the Jewish establishment in Florida. You were lucky if Bernie took your money, until it turned out he took you for your money.
Similarly, Earl Jones was a member in good standing of the West Island community - resident of a trendy Dorval condo development, member of the local chamber of commerce, board member of the Lakeshore Hospital Foundation. And member, with his wife, of the prestigious Royal Montreal Golf Club, oldest in North America, home to Canadian Opens, site of a President's Cup.
He didn't just fit in with the right crowd, he belonged to it. This is exactly the kind of cover con-artists look for. It's much easier to run the con if the victims regard you as one of their own. Charles Ponzi himself, the immigrant who was famously busted in Montreal, would undoubtedly have envied such a perfect cover.
So why would people have handed over their life savings to someone who wasn't a registered investment dealer or broker? Precisely because they knew him, or they knew someone who knew him, or heard of someone who knew him.
Not only that - he had a good track record, steady returns of eight per cent in good times and bad. Except that there isn't anyone who made an eight-per-cent return on their portfolio in 2008. If you were invested in cash and equivalents, you might have made two per cent. As for the stock market, the Dow was off 33 per cent in 2008, and so was Toronto.
But apparently it was only when small monthly cheques, in amounts like $300, started bouncing, that investors' suspicions were aroused. Perhaps they thought until then that in Earl Jones they had found a safe port in an economic storm. On the one hand, it's wishful thinking; on the other, the cheques apparently kept coming.
Then again it takes a certain kind of con artist, one totally lacking in scruples, to prey on widows, who might be naive about money, but like to think of themselves as good judges of character. He seemed so kind, so personable, so anxious to help.
Other investors who should have known better have again been reminded of one of the hard truths of investing - if something seems too good to be true, it usually is. That doesn't make the reckoning any less bitter, or diminish the understandable rage.
Bernie Madoff's victims at least had the satisfaction of seeing him humiliated in court, apologizing to them, and expressing remorse to his own family, before being bundled off to jail to serve a 150-year sentence.
In the case of Earl Jones, aggrieved investors should not expect such consolation anytime soon. An arrest warrant would not lead to an arrest, not if he's on a beach in a country with which Canada does not have an extradition treaty. Someone might find him, which isn't the same as getting him.