Monday, August 23, 2010

Between The Rock and a Hard Place

I's the b'y that built the boat, and I's the b'y that sailed her,
Thanks to the fed the outport's dead,
Is I the b'y that failed her?

The Destruction of Newfoundland's Outport Communities
On July 1, 1916, at Beaumont-Hamel, on the opening day of the Battle of the Somme, no unit suffered greater losses than that of the Royal Newfoundland Regiment. Afterwards, the Divisional Commander said an odd thing: "It was a magnificent display of trained and disciplined valour, and its assault failed of success because dead men can advance no further." Of the eight hundred and one men to face that hell on earth, just 68 answered roll-call next morning. If anything, the remainder of the century would treat Newfoundlanders with less courtesy.
Proudly calling itself "Britain's Oldest Colony," Newfoundland's semi-autonomous status was ordained by King Henry VII's letters patent to John Cabot. The Cod-fishing grounds of the Grand Banks were a known and jealously-guarded secret among a few close-mouthed Basque, Irish, and Viking fishermen -- but the immediate effect of Cabot's 1497 voyage was to spread the word: In the New World there were fish to be had in such unimaginable profusion a man might almost walk upon them! In his 1620 "Brief Discourse of the Newfoundland," Englishman John Mason remarked, "Cods so thicke by the shoare that we heardlie haue beene able to row a Boate through them." It is impossible to overemphasize the historical significance of the Codfish. Called the "Faithful Friend" by the Portuguese, this boneless, skinless staple would not only sustain Catholic Europe over centuries of Lenten seasons and meatless Fridays, it alone kept far-flung colonies (including slave colonies) nourished and productive. Something never before seen in such abundance would reliably feed the world over the next 500 years.
For three hundred of those years, English, French, Basque, Spanish and Portuguese fishermen arrived on the Newfoundland shore for a share of seasonal plenty before heading back to winter in European ports. Since most of these sojourners were themselves, employees or indentured servants, Newfoundland's permanent population growth remained sluggish until the Napoleonic Wars at the close of the eighteenth century. The sudden inrush of southeastern English and southwestern Irish settlers introduced to Newfoundland cultural traditions that would endure as if preserved in a bell jar. Between 1804 and 1884, the island population increased ten-fold, to 200,000 souls, with immigration slowing to a mere trickle after 1840. A hundred years after that, with the highest birth rate in the country, the native-born comprised over 98 per cent of Newfoundland's 1940 population. Fishing had by then evolved into a family affair and a way of life wholly dependent on the annual shoreward migration of the Northern Cod. As James Yonge, Plymouth Surgeon, remarked in 1670: "The middle or end of June came the capling, a small sweet fish and the best bait, and when they come we have the best fishing, the cods pursuing them so eager that both have run ashore." By 1934, 1,292 small fishing settlements straggled along Newfoundland's rocky coast. Only 100 of these had populations over 500. So scattered and strung-out were the small outport settlements that the only outfitters prepared to set up shop in such commercially rugged climes were those who relied upon the autocratic "truck" system of credit. When, at some crucial juncture, a demand for payment was made, the usual solution was to "pay" with precious finished fish -- allowing unscrupulous merchants to "buy low and sell high" at every turn. Each year the merchants raced to dump fish in the market as early as possible, each hoping to get the kind of prices that prevailed before the dumping began. Such ruinous competition inevitably led to gluts of poorly cured fish. These gluts drove down prices, but the merchants continued to profit; controlling as they did the prices of supplies they bartered for the fish. It was a system that kept the market depressed and fishing families and real money-in-hand relative strangers for centuries. According to a 1760 English description, the Newfoundland merchants were "infamously intent on Trade, proud of their quick raised fortune, unsociable amongst themselves and envious of any success that strangers who settle among them meet with. Remember, we are not in Newfoundland to buy fish but to sell goods." - Newman and Company, 1850

Under such conditions, the Depression of the 1930s would hit Newfoundland folk especially hard, and for the first time, one-in-six were "away" looking for work. Among those back home, there was a growing sense that the whole world was beginning to pass them by -- with some justification. Given the eccentric outport settlement patterns, electric, telephone, water and sewage services were virtually unattainable. A 1934 health survey found that there was just one hospital bed for every 644 Newfoundlanders -- a poor showing against the then-American rate of one bed per 130 persons. With the establishment of WWII bases and the arrival of tens of thousands of American and Canadian servicemen, the long years of privation came to an end, but as always, the price was unjustifiably high: Newfoundland contributed more than its fair share of War Brides. By 1949, there were 1,187 (mostly mission) schoolhouses in Newfoundland -- of which, 778 were single-room affairs. While much of this poverty could be laid at the feet of an archaic and inefficient economy, there's little doubt that Newfoundland was ready for big changes. What it got was Joey Smallwood. Socialist, journalist, union organizer, publisher, and pig farmer, Smallwood was the best-known personality in Newfoundland, broadcasting nightly on radio as "The Barrelman". He would single-handedly dominate provincial politics over the critical years 1949 to 1972. In 1950, a visiting British wag observed how he towered above his colleagues: "Mr. Smallwood obviously enjoys his position as the head of a one-man government." Desperate to bring Newfoundland into the Canadian fold, he played shamelessly on the yearnings and ambitions of the outport fishermen. Smallwood's confederation movement was generously, if anonymously, underwritten by the federal Liberal Party and, having once achieved the barest victory in the confederation referendum, his hastily-organised provincial Liberal Party urged voters to "let Joe finish the job!" There were, in fact, two votes: in the first referendum, a return to responsible government won, but as there had been three options (independence, Canada, or Britain) a run-off referendum was arranged to decide between independence and confederation with Canada. Hasty infusions of money meant that before the campaign was out, Smallwood and his confederate forces had spent almost five times as much as the combined opposition. Smallwood found his strongest support among the fishing folk of the outport communities, and -- by a stroke of incredible good fortune or something else -- electoral boundaries, redrawn after 1949, gave a preponderance of seats to those very communities! In the time-honoured way of Canadian politicians, this "man of the people" would repay voter loyalty with betrayal and the utter destruction of their way of life.Note fish drying in foreground
Don't vote confederation,
Now that's my prayer to you,
We own the house we live in,
Likewise our schooner too;
But if you vote Joe Smallwood,
And his line of French patois
You'll always be paying taxes
To the man up in Ottawa.
- a fisher boy's plea to his mother
"The Hero of '48"

While he did, indeed, deliver a massive programme of public works, infrastructure upgrading, unemployment insurance for fishermen and a host of other social welfare state goodies, in true Newfoundland fashion, these came at incalculable cost. There were other, scandalous endeavours, like the Stephenville linerboard mill, the Come By Chance oil refinery, and the Rothschild-backed Brinco scheme that, even in Canada, might well have toppled a less messianic politician. Worse, for the first time, the fishery was being professionally "managed," by far-distant Ottawa bean-counters, more attuned to flow-charts than the joyous, primordial ebb and flow of the Cod themselves. The length of the Cod fishing season was determined, not by anything so prosaic as the life-cycle of the Cod, but by requisite employable earnings weeks to qualify for pogey. In due course, politically correct mainland sentiments would condemn both the logging and sealing industries, and, shamed out of their more traditional sources of income supplementation, hard-pressed fishermen only grew ever more dependent on a ruinous cycle of sole reliance on the already hard-pressed Cod. Unsurprisingly, the Hibernia Oil Fields were likewise deemed a federal, not provincial, resource. The island's loss of autonomy would by no means deliver those elusive economic securities: on the contrary, as poverty and unemployment mounted, out-migration became a permanent feature of post-confederation Newfoundland.
Meanwhile, the fact that Atlantic Cod stocks were in trouble was, by unanimous consent, simply ignored. In the 1870s, the fishery accounted for over 95 per cent of Newfoundland's annual exports; by 1920, seventy-one per cent; by 1930, thirty-seven per cent. Nor had Newfoundland developed any alternate economic base over those years -- the fish stocks were simply being systematically depleted by increasingly sophisticated foreign fishing fleets and increasingly desperate domestic fishermen. It was a problem with a long pedigree. Over the furious protestations of Sir John A. Macdonald, Britain and the US concluded the convivial Treaty of Washington in 1871. Under this instrument, Americans were free to fish Canadian waters for twelves years, and Britain walked away with a cool $5,500,000 weighing down its pockets. Since Newfoundland was technically a British -- not Canadian -- possession there was little Macdonald could do, other than mourn: "Here go the fisheries ... we gave them away." Britain would assuage Macdonald by extending a loan to help get his CPR up and running. That didn't help the Cod. As usual, the costs to Newfoundland were incalculable. There was an enforced moratorium on the fishery during WWII, and the tremendous recovery of stocks indicated that the resource badly needed a break it was just not going to get. In 1949, Joey Smallwood declared: "The fisheries are NOT finished. Anyone who says they are, is wrong." Thus, the typical Northern Cod catch, 150,000 tonnes in the 1940s, peaked out in 1968 at 810,000 tonnes. From this killing spike it was all downhill until July 1992, when the Cod Fishery closed.
But Cod don't vote. On April 17, a scant 10 days before the 1997 federal election call, Liberal Fisheries Minister Fred Mifflin announced that 6,000 tonnes of Cod might now be taken from the northern Gulf of St. Lawrence and off the west coast of Newfoundland, and 10,000 tonnes from the southern Newfoundland coast! And Atlantic voters fell in line. Such games -- with Cod and fishermen serving as pawns -- have prompted scientists to call for "a complete separation of science and government" (an odd spin on science as secular religion). One scientist said: "Irrespective of whether or not cod should be fished, this process stinks." The September, 1999 Marshall decision by the Supreme Court has only exacerbated fishy politics, putting large numbers of native fishermen on the water, in season and out. In PEI, the Department of Fisheries is actually buying back non-native licences to present to native band councils. The current Fisheries Minister, Herb Dhaliwal, a Sikh, brings to the embattled fisheries department a wealth of experience -- in the taxi industry. But worse, after fifty years of stupendously poor management, the Canadian fishery is not even about fish anymore -- it's about native land claims. It might have all been so different had Canada chased off foreign interlopers in timely fashion and resisted the urge to underwrite our own giant masticating factory trawlers, but managing the world's biggest Cod fishery was a complex and subtle affair. As always in Canada, it is meddling and social engineering that puts a spring in the bureaucratic step. In the end it would not be the foreign fishing fleets that were "dealt with," but local fishermen.
Joey Smallwood swore he would "drag Newfoundlanders kicking and screaming into the twentieth century." And, in a bitterly ironic way, that's just what he did. The last Father of Confederation's solution? In a word -- resettlement.
In 1949, a bare half of all Newfoundlanders enjoyed electrical services. As far back as 1933, the Amulree Commission noted that Newfoundland, "has always been, first, and foremost, a fishing country; the settlements are, therefore, situated in places from which fishing could most easily be conducted. The original settlers, in making their homes, paid little attention to what they considered relatively unimportant factors; such as, ... the lack of amenities." Well, if it was inconvenient to bring utilities to the outport residents, why not bring outport residents to the utilities? Better yet, why not put modernized filleting, freezing and cold-storage fish-processing industries at the hub and heart of these progressive centralized "growth centres"? After all, despite the many warning signs, the fish would always be there, wouldn't they? Under federal and provincial auspices, three major resettlement programmes took place between 1953 and 1975.
Sorting scallops, 1965 The first most outport people heard about the scheme was when Smallwood made a public announcement that hundreds of small communities and thousands of people could expect to be affected by "centralization". Stalinist implications aside, it's almost impossible to imagine the havoc such an announcement would wreak on small, insular communities: all the old enmities would be revived as rumours flew that this one or that had made application for relocation. New enmities would percolate as the most ambitious prevailed upon his neighbours to sign up. Adult children and their parents might well find themselves on different sides of the dispute, thanks to differing compensation schemes. Additional pressures were brought to bear once it was known that a certain proportion of the community had to agree to move or all would "lose out". After all, the province had said it could not guarantee medical, educational, or utility services to hold-outs. Hadn't Smallwood said he was discontinuing coastal ferry, postal, and freight services? There were rumours too, that government agents would be sent out to see to it that there was nothing left to return to. No one knew whether or not his particular community was on the block, but underlying it all was the heartbreaking prospect of leaving your centuries-old home place -- the font of your earliest memories, -- and abandoning the graves of your forefathers to the whistling winds.
It is a mark of just how impoverished the outport communities were to think that between 1953 and 1965 alone, 110 outport settlements vanished utterly, the residents given the pitiful sum of just $150 from welfare services to pull up stakes. Clearances in all but name, sudden demand drove up housing prices in the new "growth centres" and one study estimated it would take the displaced a minimum of 20 years to replace all that had been left behind. The sight of a house being towed across the bay was commonplace throughout the resettlement years. No one seemed unduly concerned that poorly educated fishermen might not be able to compete in urban areas where unemployment rates already averaged 20 per cent -- or that fishing grounds around settled areas were reserved for long-time residents, not penurious newcomers. Even the much-loathed merchants lost out: not only did their customers vanish overnight, there was no compensation plan for shops, stores, wharves or sheds. Under a final scheme, the householder's pay-off reached a magnanimous $1,000 (plus $200 per household member), but under this disposition, government officials would dictate where the newly-homeless would be permitted to settle. In other words, the household would only receive assistance if and when they agreed to move to a region approved by a committee of federal and provincial bureaucrats. Between 1965 and 1972, 3,876 households and 19,197 persons were "evacuated". More and more, federal health dollars were dedicated to addressing "lifestyle problems" associated with the relocations.
Towing a house, Bonavista Bay, 1961 "They cheat us and rob us and continue to say, that our only salvation is leaving the Bay." - Joe Byrne
Predictably, no good came of the massive uprooting of the outport people. The centralized fish processing industry would die with the Cod. Subsequent polling found that in some cases, no single member of a dispersed community was willing to admit that he or she had ever wanted to move. Those who went willingly felt they had been seduced with false promises, while the remainder continued to feel they had been pressured and driven out. Some Canadians now regard Newfoundland as a fiscal sinkhole of doomed regional development schemes -- but honestly -- is that attributable to some previously unseen innate Newfie sloth and profligacy, or the congenital genius of the federal-provincial decision-making mob? For too many, resettlement was just a first step on the way to leaving Newfoundland for good. Faithful to some few traditions at least, the latest (2000) election had the Liberal Party talking about a limited Cod fishery in the near future, despite the fact that Cod stocks are showing absolutely no sign of recovery. And Atlantic voters fell in line. Through it all, Newfoundlanders endure with characteristic good grace, good humour, and, as always, ever more out-migrations. From the highest in the land, Newfoundland's birthrate today is even lower than that of its old rival, Quebec (the other lowest birth rate in the country).
Newfoundland Child with Cod For some peculiar reason known best to themselves, federal politicians prefer to reserve their gushing sympathy and generous funding for the ubiquitous Third World refugee. As we're told, "shattered lives" and "displaced people" are defined as -- and ONLY as -- UN Convention refugees. Too many well-meaning Canadians would seem to agree, viewing the Third World refugee as an inherently noble, suffering protagonist. In contrast, the ill-used Newfie, after generations of battling the vicissitudes of the Atlantic, is relegated to the butt of jokes as the eternal simpleton and clod. Outside Newfoundland, the deportation of the Acadians and the internment of the Japanese excites much disapproval, but in terms of forced population movements, these pale beside the destruction of the outport communities. The same thing was done to traditional Eskimo settlements, and with the same result: traditional life-styles do not survive population centralization.
O hear us when we cry to
Thee For those in peril on the sea Just why the Liberal Party wants all Canadians to feel ashamed about the treatment of all minority groups -- past and present -- is mysterious enough. Why we must at the same time, remain indifferent to the shabby treatment of one of our oldest distinct resident groups is a certifiable imponderable. For some perverse reason, we just don't care that these programmes eliminated 300 traditional Newfoundland communities, (about a quarter of the whole). So what if resettlement finally affected 30,00 to 40,000 Canadians? So what if more than 40,000 Atlantic Canadians lost their livelihood when the Cod moratorium was imposed? Perhaps Atlantic and B.C. fishermen are too busy trying to find work elsewhere to ask Ottawa for their very own "family reunification" plan. What matter if Newfoundlanders were displaced and remain uniquely disadvantaged by the bargain they made with "The Canadian Wolf"? And if Ottawa mismanaged the Cod out of existence in fewer than 50 years, who really cares? Certainly not the UN: did they censure Canada, as when illegal Chinese boatpeople were "forced" to wear prison garb of supposedly ill-omened colour? It's easier to import votes than to restock desertified oceans. The shameful lesson of the demolition of the outports is not much taught outside of Newfoundland -- for once the resettlement programme had come under a cloud, it was allowed to die in peaceable disgrace and no official statistics have ever been published.
Watch in particular the attractive bait which
will be held out to lure our country into the Canadian mousetrap
    Her face turns to Britain, her back to the Gulf.
    Come near at peril Canadian wolf.
    - Anti Confederate Toast
Shouldn't we all have felt some protective sense of kinship toward places like: Bareneed, Famish Gut, Here and Now, Empty Basket, Calves Nose, Cow Head, Topsail Head, Cape Onion, Horse Chops, Little Cat Arm, St. Jones Within, Nancy Oh, Come-by-Chance, Run-by-guess, Heart's Desire, Heart's Content, Heart's Delight, and Little Heart's Ease?
If you read the sundering of Newfoundland as a metaphor (or blueprint) for the ecological and cultural destruction of Canada as a whole, it only proves that -- when we really apply ourselves -- we can overcome almost any natural advantage.
Deemed to be one of the three best movies of all time, How Green was My Valley laments the passing of another traditional way of life -- that of a Welsh mining family. It was not the sea that provided for their wants -- but that passing was at least noted. Like the peal of church bells from the bottom of a lake -- listen: "I can close my eyes on my Valley as it is today -- and it is gone -- and I see it as it was when I was a boy. Green it was, and possessed of the plenty of the earth ..."

            A wet sheet and a flowing sea,
            A wind that follows fast
            And fills the white and rustling sail
            And bends the gallant mast.
          • - Allan Cunningham(1784-1842)

Sunday, August 22, 2010

History of American Scams

The lords of Enron cooked their books. They overstated their profits by hiding a billion dollars in losses, thus driving up the price of their stock. Their accountants winked at the subterfuge, then shredded the documents. Before it all came crashing down in the largest bankruptcy in history, the executives got rich while their employees and stockholders got screwed.

It's an outrage! It's a scandal! And it is, of course, a time-honored American tradition.

America has a grand and glorious history of stock chicanery. In the early days of our history, stock market skulduggery was a perfectly respectable way to achieve wealth, although not quite as respectable as slave trading or stealing land from the Indians.

Much of America's awesome industrial colossus was built o­n financial scams. The 19th-century railroad barons considered stock fraud an indispensable business tool, as much a part of their working lives as bribing legislators or hiring Pinkertons to beat the bejesus out of union organizers.

Stock scamming is the kind of crime that attracts people who are well-bred, well-dressed, well-mannered. Financial crooks tend to be respectable, patriotic folks who demonstrate their patriotism by giving large sums of money to America's hardworking politicians, asking nothing in return except perhaps the teensy tiniest little amendment to the tax code.

Some of the greatest names in American history made their fortunes through shameless chicanery—Vanderbilt, Morgan, Rockefeller, Stanford, Gould, Kennedy. But you don't have to be a blue blood to succeed at financial swindling. America is the land of opportunity, a place where a poor Italian immigrant named Charles Ponzi could rise from rags to riches by inventing a scam so beautiful that it still bears his name.

"Really, there is no limit to the cons and swindles that have been seen over the years," says former labor secretary Robert Reich, a connoisseur of big-money scams. "The human mind is capable of inventing very innovative products and services—and also extraordinarily innovative swindles."

The Enron scandal brings back fond memories of the great American scams of yore. Here is a rogue's gallery of America's financial crooks, a small sampling of the scalawags, schemers and scoundrels who have bilked and swindled Americans over the centuries:

Wall Street's First Scandal

In the 1790s, when stocks were sold outdoors o­n Wall Street, speculator William Duer nearly destroyed the fledgling market.

British-born, Eton-educated, a former member of the Continental Congress and a New York judge, Duer had made his fortune selling supplies to George Washington's army. After the Revolution, Alexander Hamilton appointed him assistant secretary of the treasury, but Duer quit the job when he learned that federal law prohibited Treasury officials from speculating in federal securities.

Free of this inconvenient rule, Duer promptly began using his inside knowledge of the Treasury Department to speculate in bank stocks, using large sums of money borrowed from banks and his rich friends. Meanwhile, an audit of Duer's books at the Treasury Department found $238,000 missing. Hamilton ordered the Treasury to sue Duer for the money.

That caused Duer's financial empire to collapse, which bankrupted many of his creditors, bankers and brokers, which in turn caused a financial panic o­n Wall Street. While Duer went to debtors' prison, 24 Wall Street brokers met under a buttonwood tree in 1792 to draw up the first rules to regulate trading.

" 'Tis time," Hamilton wrote, "there should be a separation between honest Men & knaves, between respectable Stockbrokers . . . and mere unprincipled gamblers."

"Finding that line of separation," wrote John Steele Gordon in "The Great Game," a history of Wall Street, "has occupied the finest minds of Wall Street and the government ever since, with mixed results at best."

Robber Barons

The Civil War was quite unpleasant for many Americans but it was great for Wall Street.

Many of the era's foremost robber barons—J.P. Morgan, John D. Rockefeller, Andrew Carnegie, Jay Gould—dodged the draft by paying $300 to hire a substitute. This modest investment left them free to spend the war years getting rich instead of getting shot. Many o­n Wall Street, including Morgan, made a fortune speculating in gold, the price of which rose against the dollar with each defeat of the Union Army. Appalled, President Lincoln announced that he hoped every gold speculator "had his devilish head shot off."

Meanwhile, Morgan was financing a deal to buy 5,000 rifles from an Union Army arsenal in New York for $3.50 apiece, then sell them to the Union Army in Virginia for $22 each. The rifles were defective—causing soldiers to shoot their thumbs off—but a judge ruled the deal legal. Morgan earned a 25 percent commission, plus interest.

But those profits were peanuts compared with the money made in the railroad business after the war.

In the 1860s, the federal government subsidized the building of a transcontinental railroad by granting millions of acres of free land to two railroad companies, the Union Pacific and the Southern Pacific. Eager to line their pockets at the expense of their stockholders, Union Pacific management formed a dummy construction company with an impressive-sounding French name, Credit Mobilier, and hired Rep. Oakes Ames as president. Credit Mobilier charged Union Pacific about $100 million to build the railroad—nearly twice what the job actually cost. The rest of the money went to Credit Mobilier's stockholders, a group that included many of Ames's congressional cronies and Vice President Schuyler Colfax, who had been bribed with cheap stock to look the other way.

There were congressional hearings and angry editorials and a federal lawsuit, but ultimately the scammers of Credit Mobilier went free, considerably richer for their very modest labors.

Fleecing the Commodore

The most colorful stock swindle in American history came in 1868, when Commodore Cornelius Vanderbilt, proprietor of the New York Central Railroad, attempted to take over the rival Erie Railroad, which was controlled by three of the most crooked rascals ever to sell stock—Daniel Drew, Jay Gould and Jim Fisk.

Vanderbilt, o­ne of America's richest men, instructed his brokers to buy every Erie share they could find. Drew, who was Erie's treasurer, responded by printing up more Erie shares—tens of thousands more. Peeved, Vanderbilt prevailed upon a judge he had o­n his payroll to issue an injunction forbidding Erie to issue any more stock. Drew responded by getting a judge who was o­n his payroll to order Erie to keep printing stock.

"If this printing press don't break down," said the flamboyant Fisk, "I'll be damned if I don't give the old hog all he wants of Erie."

When Vanderbilt's judge issued a warrant for the arrest of Drew, Fisk and Gould, the trio fled across the Hudson River to New Jersey with $7 million of Vanderbilt's money. They took up residence in a Jersey City hotel and hired cops armed with cannons to protect them from arrest.

Next, the battle shifted to the legislatures of New York and New Jersey, where agents for each side generously spread around bribe money, hoping for favorable legislation. Gould himself appeared in Albany, carrying a trunk that was, the New York Herald reported, "stuffed with thousand-dollar bills which are to be used for some mysterious purpose in connection with legislation."

Ultimately, Vanderbilt failed to take over the Erie. But he wasn't hurt too badly: He managed to unload his 100,000 Erie shares in London. The real losers in the affair were Erie's other stockholders, who saw the value of their shares diluted by nearly half.

Ponzi's Scheme

Charles Ponzi came to America around the turn of the 20th century, a poor Italian lad armed with nothing but a dream and a devious mind.

He started out with small swindles that didn't always pay off—he was jailed in Atlanta and Montreal—but he refused to give up his dream.

In Boston in 1919, Ponzi founded the presciently named Securities and Exchange Co. and guaranteed investors a 50 percent profit in 45 days. And he kept that promise—for a while. The first investors were paid with money obtained from later investors. Thrilled, they touted Ponzi's magic to their friends. By the summer of 1920, Ponzi was taking in $250,000 a day—so much cash that he was stashing it in desk drawers, file cabinets, even wastepaper baskets.

He bought hundreds of suits, a dozen gold-handled canes, a limousine and a 20-room mansion in the tony Boston suburb of Lexington. He should have taken the money and run. He couldn't keep paying early investors with the money from later investors, particularly since he wasn't actually investing the money. The Boston Post unmasked his scam and he spent a decade in jail.

On his way to prison, a reporter asked him to explain his actions, saying that the public deserved an explanation.

"The public deserves exactly what it gets," Ponzi replied. "No more, no less."

Master of Hounds

After the stock market crashed in 1929, Congress investigated Wall Street, exposing countless instances of chicanery, skulduggery and plain old fraud. Liberals called for the creation of a federal agency—the Securities and Exchange Commission—to regulate and police the market.

Richard Whitney, president of the New York Stock Exchange, disagreed. Whitney told Congress that the stock exchange could police itself without any interference from meddlesome bureaucrats.

Alas, Whitney proved to be an imperfect spokesman for his message. Despite his impressive Establishment credentials—Groton, Harvard, master of hounds at the prestigious Essex fox hunt—Whitney was as crooked as a pretzel. He formed a company to produce an apple liquor called Jersey Lightning but the hooch didn't sell and the company's stock tanked. So Whitney started stealing. First he stole $150,200 worth of bonds belonging to the New York Yacht Club. Then he stole $667,000 from the Stock Exchange Gratuity Fund, which had been set up to aid the widows and orphans of brokers.

Caught by stock exchange officials in 1937, Whitney demanded that they cover up his crimes. "After all, I'm Richard Whitney," he said. "I mean the stock market to millions of people."

When he was sentenced to five to 10 years in Sing Sing, cynics chortled as they recalled the title of his much-quoted speech to the Philadelphia Chamber of Commerce: "Business Honesty."

Slippery as Oil

At first, Anthony "Tino" De Angelis was known as "the salad oil king." Later, he became known as "the great salad oil swindler."

A former Bronx butcher, De Angelis was the president of Allied Crude Vegetable Oil, a major player in the commodities markets of the 1950s and '60s. Allied borrowed millions of dollars to speculate in vegetable oil futures. The loans were secured by warehouse receipts for millions of pounds of salad oil that Allied stored in huge petroleum tanks in Bayonne, N.J.

But the tanks were not full of salad oil. They were full of water, with just enough oil floating o­n top to fool the inspectors. De Angelis had conned some of America's biggest banks and investment firms out of $175 million. When the scandal broke in 1963, it nearly bankrupted two large brokerage houses.

De Angelis spent seven years in federal prison—years he later described as among the best of his life. "There you had peace. It was tranquil," he said. "You come outside and try to make a living and all the big guys try to shoot you down."

Phony, Phony, Phony

"It was like fixing a horse race," recalled o­ne of the masterminds of the Equity Funding swindle of the 1960s and '70s. "We were always rigged to win."

Equity Funding sold an investment package that was a combination of mutual funds and life insurance. Customers bought a mutual fund whose dividends paid the premiums o­n the insurance policy. Equity then sold the insurance policies to reinsurance companies. This was profitable but not profitable enough for Equity's officials. They decided they could make more money by creating fake insurance policies, selling them to the reinsurance companies and pocketing the money.

This fraud worked well for nearly a decade. Equity officials made millions and Equity's stock rose from $6 to $90. But in 1973, says Charles R. Geisst, author of "Wall Street: A History," the scam collapsed when an Equity employee, dissatisfied with the size of his Christmas bonus, blew the whistle. After that, Equity went bankrupt, investors lost $300 million and a dozen Equity honchos went to prison.

The Wall Street Journal explained the scam to its readers in o­ne of the most delightfully surreal paragraphs ever to grace its august pages:

"The customers didn't exist. Their mutual fund shares didn't exist. The funded loans didn't exist. The phony customers' phony pledges of their phony fund shares to buy phony insurance ultimately became numbers o­n a computer tape, which then printed out phony assets for Equity Funding Corp.'s phony books."

Greed Is Good

"Greed is all right, by the way—I want you to know that," Ivan Boesky told an audience of business students in 1985. "I think greed is healthy. You can be greedy and still feel good about yourself."

Boesky lived those words. He made hundreds of millions of dollars trading in stocks and bonds but he always wanted more. In an interview, he admitted that he fantasized about climbing atop a huge pile of silver dollars: "Imagine—wouldn't that be an aphrodisiac experience?"

Seeking ever more wealth, Boesky paid Dennis Levine, an investment banker with Drexel Burnham Lambert, millions of dollars for inside information o­n corporate takeover bids. Boesky then used the information to speculate in the companies' stocks, making tens of millions more. It was insider trading at its most lucrative.

When Levine was caught by the SEC, he ratted o­n Boesky. When Boesky was caught, he ratted o­n several other Wall Street wheeler-dealers—including Michael Milken, Drexel's legendary "junk bond king." Boesky even lured Milken to a hotel room, where they discussed their illicit deals in a conversation recorded using a microphone hidden in Boesky's clothes.

When the smoke cleared, Boesky served about 18 months in prison and paid a $100 million fine. Milken did three years and paid $200 million. Drexel went bankrupt.

Boesky's story inspired the 1987 movie "Wall Street," with Michael Douglas playing a reptilian character named Gordon Gekko—who recited, nearly word for word, Boesky's now-legendary "greed is good" speech.

Wall Street's Next Scandal

The list of financial scandals goes o­n and o­n: Ivar "The Match King" Kreuger, Bernie Cornfeld, Robert "Fugitive Financier" Vesco, the savings and loan crooks of the '80s. Now, as congressional committees, investigative reporters and the SEC struggle to unravel the Enron scandal, concerned Americans might be forgiven for wondering:

Given the history of wheeling, dealing, scheming and scamming in the world of high finance, can we expect to see more of these scandals in the future?

"It's never going to change," says Gordon, the Wall Street historian. "As long as there's a great deal of money to be made o­n Wall Street, there will always be people of dubious morals coming up with new ways to fleece the sheep. Welcome to capitalism."

Sunday, August 15, 2010

War Veteran Honoured

Lieutenant-governor unveils plaque for Gambo PoW

Lt.-Gov. John Crosbie was in Gambo last Sunday to help unveil a plaque honouring the life of a Second World War veteran who spent three years overseas as a prisoner of war. Matthew Thomas Brown, 87, died at his home in Gambo on Jan. 4. Known as Uncle Matt within the community, he was predeceased by his wife Mabel Brown, who passed away three years ago.
“It is an honour to be asked to honour such a man as Matthew Brown, with such a distinguished record he had serving in World War II,” said the lieutenant-governor following the unveiling of the plaque during a ceremony held at the Village Green. In addition to the plaque, a tree has also been planted in Mr. Brown’s honour.
The event was held as a part of the annual Smallwood Days celebration.“Anybody who has been to Beaumont Hamel knows what all our veterans of World War I and II suffered,” said Lt.-Gov. Crosbie.
At the age of 17, Mr. Brown left Gambo and his forestry work for the United Kingdom to train with the British Royal Navy in England and Scotland as part of the Second World War effort. He was deployed to serve on the HMS Bedouin, a Tribal-class destroyer. It served in the 1940 Battle of Narvik off the Norwegian coastline.
The ship, on its way to Malta, was sunk by a pair of Italian torpedo bombers on June 15, 1942, leaving 28 dead.
After nine hours in the water, Mr. Brown was one of 213 men taken as a prisoner of war by the Italian Navy, the beginning of what became a three-year ordeal for the young man.
He was brought to Italy, and once British forces gained control of the country, he was transported to Poland, where he took on forced labour duties in a coal mine for 19 months.
On Dec. 26, 1944, Mr. Brown began what was called a ‘death march’ through Germany, Czechoslovakia, and Austria. The forced winter march went on for 1,600 miles. He obtained his freedom on May 1, 1945.
Nelson Granter, a member of Branch #41 Royal Canadian Legion in Eastport, said it was hard not to know Mr. Brown through his continued presence in the community, particularly at events recognizing past and present war efforts.
“He has been a tribute to the Royal Canadian Legion, and he has constantly encouraged and pushed for remembrance.”

Hardships at home

Mr. Granter put into perspective how Mr. Brown’s experience in Europe affected himself and those at home. Initial letters sent home said he was missing, with no information concluding whether Mr. Brown was dead or alive.
“We seldom think of the home front. When Matthew Brown and his good buddy, Sylvester Hiscock, sailed away to war, they left people at home – people who were concerned and worried.”
Mr. Granter read a letter sent from the Royal Naval Barracks in Chatham, England shortly after the events on the HMS Bedouin.
“Dear Madame. I deeply regret having to inform you that your son, Matthew Thomas Brown, ordinary seaman, has been reported as missing while on war service. There is insufficient evidence at the present time to show whether your son may be alive or not.”
A letter dated July 12, 1942 offered a more encouraging story, as read by Mr. Granter.
“Dear Madame. With reference to my letter of the first of July, official information has now been received that your son is a prisoner of war in Italy.”
Communications were eventually received from Mr. Brown, but were heavily censored to paint a more pleasant picture of what took place during his stint as a prisoner of war.
“In the postcards, everything sounded so rosy. They said, ‘I am doing great. Everything is good. I’m well cared for.’ But that was a false-front, because from prisoner of war camp, postcards would be censored.”
In fact, Mr. Granter said Mr. Brown spent 13-hour work days cold and hungry. The hunger reduced him to eating lice, and Mr. Granter said Mr. Brown used to jokingly refer to the lice as his best friend, as it was the only item a prisoner had plenty of.
In the years since the war, Mr. Brown was known for appearing at Remembrance Day ceremonies, and at the most recent one prior to his death, he spoke to students at Smallwood Academy in Gambo.
“He presented his original navy (beret) to the school. Uncle Matt didn’t normally say much, but that day ... it was just awesome,” said Mr. Granter. “There was absolute silence, and I think even the youngest children knew they were listening to someone significant. “Unfortunately, two months later we lost Uncle Matt, but Uncle Matt’s memory will live forever in Gambo.”

Published on August 5th, 2010 by  "The Gander Beacon"
Submitted by Roderick Brentnall