America’s history of fraud began in colonial times. The earliest business scams involved phony health cures and remedies. As soon as the Pilgrims landed on Plymouth Rock, colonial hucksters were hawking snake oil and other deceptive medicines. Medical frauds and quack medicine had a Second Coming when they exploded in the age of Internet charlatanism: Do you want to lose weight? Do you want a pill to cure cancer? We’ve got it. Step right up…
Historically, on America’s timeline of scam artistry, quack medicine was followed by real estate and land swindles, as westward expansion saw robber barons fleece shareholders out of property. The stage was set for corruption: the U.S. government swindles big businesses, big businesses scam workers, and workers look to get rich or die trying trading insider secrets or bending the laws to ride the gravy train. It’s like propping up a house of cards.
Scams come in all forms. The smooth talking car salesman wants to sell you a lemon, and the phony travel agent wants to book you a hotel in the Caribbean that doesn’t exist. It’s all the same; they want your money. There are Ponzi schemes and Pyramid schemes, land banking scams and mail-order-bride scams; there are quick-talking boiler room salesmen pitching phony investments and promising the road to riches, and corrupt stockbrokers and financiers using other people’s riches to amass their own false fortunes. Here are the 10 biggest scams in American history.
10. Insider Trading
The Great Wall Street Rip Off began with insider trading. There’s a fine line between risk assessment and betting on corporate takeovers, and the odds improve when white-collar grifters get a little help from their friends. After amassing a fortune of over $200 million by gambling on corporate takeovers, Ivan Boesky was charged with insider trading in 1986, the first high-profile Wall Street insider trading scam of its kind. Nicknamed “Ivan the Terrible,” the stock trader took a plea deal, cooperated with the SEC, informed on his fellow cronies, and received only a 3½-year sentence. By 2004, even the world’s most famous homemaker, Martha Stewart, was in on insider trading. She received a 5-month prison term for selling shares of ImClone Systems based on insider information.
9. The Balloon Boy Hoax
The Heene family got their 15 minutes of fame in 2009, when parents Richard and Mayumi claimed their son 6-year old Falcon was in a homemade, flying saucer shaped helium balloon that broke loose from their Colorado home. Media coverage exploded. Local TV helicopters chased the balloon for 50 miles, combining gonzo journalism and reality TV in a “white bronco” moment tailor-made for the 21st century. When the balloon finally landed three counties away, however, 6-year old Falcon wasn’t inside. A manhunt ensued. Panic. Did the child fall out of the balloon? It was later reported that Falcon was hiding in his home’s attic throughout the entire ordeal. Richard and Mayumi Heene scammed the media in order to gain publicity for a TV show Richard was working on.
8. James Frey’s A Million Little Pieces
Writer James Frey rocked the literary establishment and shamed Oprah Winfrey when it was discovered that his 2003 best-selling memoir A Million Little Pieces was really a million little lies. Frey’s book was released as a factual memoir, a confessional that recounted his battle with drug and alcohol addiction and skirmishes with the law. A Million Little Pieces was a New York Times bestseller, Oprah selected it for her Book Club, and Frey was the toast of the literati. Only Frey’s book was more of a work of fiction than a factual memoir. In 2006, The Smoking Gun revealed inaccuracies, lies, and embellishments in the book. Frey hit the media circuit, including Oprah’s couch, to apologize for the scam.
7. The Baker Estate Swindle
In 1839, Jacob Baker died, leaving an estate and land tract in Pennsylvania worth over $3 billion. Baker’s heirs formed a legal association, and they placed ads in newspapers asking anyone with the last name “Baker” to contribute a small fee to help recover a share of their rightful inheritance. There was only one problem: Jacob Baker was a fictional creation, and there was no rightful inheritance. The “Baker heirs” were really a group of swindling businessmen led by William Cameron Morrow Smith. These con artists were able to fleece over $25 million from real Pennsylvania Bakers before the scam was discovered and shut down in 1936.
6. Identity Theft and Fraud
The “Nigerian prince email scam” was one of the first widespread hacks to sweep America, plundering the bank accounts of thousands of trusting Internet users. Since then, identity theft and fraud has blossomed and bloomed like Dark Net fractals. Credit card data theft increased 50 percent from 2005 to 2010, according to the U.S. Department of Justice, and in 2013, cyber thieves stole 40 million credit card numbers from Target –the biggest retail hack in U.S. History. From online fraudsters posing as possible romantic partners on dating sites to back alley thugs setting up card skimming devices on ATM machines, the biggest scams in America are being done electronically.
5. Barry Minkow and ZZZZ Best
The go-go ‘80s was a financial schemers paradise, a Garden of Eden for Wolf of Wall Street wunderkinds looking to make a quick and illegal killing. In 1988, 21-year old entrepreneur Barry Minkow and 10 associates were charged with fraud, money laundering, and racketeering in connection with Minkow’s industrial rug cleaning firm, ZZZZ Best. While ZZZZ Best had a stock value on paper of over $200 million, the company didn’t really exist. Moreover, it was funded by credit-card thefts. According to the U.S. Attorney for Los Angeles, the case was the most massive and elaborate securities fraud perpetrated on the West Coast in over a decade.
4. The Pfizer Scam
In 2009, Pfizer, the world’s largest drug company, received the biggest criminal fine in U.S. history for fraudulently misbranding and mispromoting medicines and paying kickbacks to compliant doctors. The $2.3 billion record lawsuit punished the New York-based company for misbranding the painkiller Bextra, and for risking lives by promoting the drug for uses that were not approved by regulators. Other medicines linked to the scandal include Geodon, an anti-psychotic drug, Lyrica, and Zyvox. The fines were the result of a six-year investigation that began when John Kopchinski, a Pfizer sales rep, blew the whistle on the company’s unethical conduct.
3. The Bernie Madoff Ponzi Scheme
Bernie Madoff orchestrated the largest Ponzi scheme in U.S. history, bilking over $65 million out of unsuspecting investors and non-profit organizations. As early as 1999 financial analysts claimed the returns by Madoff’s company were theoretically impossible, but the Ponzi scheme didn’t begin to fall apart until 2008, when investors requested $7 billion back and Madoff didn’t have the money to pay them. Madoff eventually confessed his crimes to his sons, calling the asset management unit of his firm “one big lie.” In 2009, the Bernie Madoff pled guilty to 11 federal felonies, including securities fraud and money laundering. He was sentenced to 150 years in prison.
2. Tax Scams
In 2014, the U.S. Treasury received more than 20,000 complaints about tax fraud. Using sophisticated phone scams with spoofed caller identification, cyber criminals conned Americans out of more than 1$ million in tax money. What made 2014 bad, however, wasn’t the amount of money stolen by criminals, but the fact that thieves hit victims in every state; the wide-ranging breach of security showed a permeable and deeply flawed system. Many callers posed as IRS agents, told victims they owed back taxes, and then demanded wire transfers or pre-paid credit card payments. The scammers then made follow up calls and emails –the latter had seals that mimicked the real IRS insignia –until innocent taxpayers finally paid.
1. Enron Bankruptcy
The largest bankruptcy in American history, corporate America’s moral failing, jail time for a high-riding chief executive officer and 15 other execs – the Enron debacle is the crown jewel of corporate scams. In 2001, the Houston-based Energy giant filed for bankruptcy after allegations of accounting fraud. The scandal, which wiped out over 78 billion in stock market value, was aided by a cabal of crooked bankers and advisors. Pensioners and shareholders lost their life savings. Twenty thousand Enron employees lost their jobs. Jeff Skilling, former president of Enron, is serving a 24-year sentence. The Enron scam led to a $7.185 billion class action settlement, the largest of all time.