International Law

University of Miami Used in Massive Ponzi Scheme

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Abbie Boudreau and Scott Zamost from CNN are reporting a new Ponzi scheme, with the Florida University implicated.

"A Florida man used facilities at the University of Miami to run a multimillion-dollar Ponzi scheme and recruited school employees for the operation, angry investors and investigators tell CNN.

Andres Pimstein, a UM business school graduate, has confessed to operating the scheme in which some investors were promised returns of 18 percent, Miami-Dade County police said.

People across the country lost an estimated $30 million in the scheme, which collapsed this year, said Wayne Black, a Miami private investigator hired by one investor"

What is interesting about this is this Ponzi scheme is that it appears that the authority or prestige of the University of Miami innocently enabled this fraud.

The reporters claim that

"Pimstein had a joint bank account with the university's director of contract administration, Alan Weber, according to bank records.

Black said investor meetings were held in a UM conference room used by Weber, and as many as three dozen current and former UM employees -- including two former senior university officials besides Weber -- bought into Pimstein's operation.

"It was about making money, and then it turned into [Pimstein] being the center of attention," Black said.

"Him being important to these people that were friends. He played baseball with them. He knows their kids, in some cases."

And we have the classic buying of the sales staff for the Ponzi scheme:

"Several investment groups besides the one at UM were set up, and those groups recruited new investors, Black said.

"That investment group leader thought it was real," Black said. "He or she got points, got a percentage off the top of all their investors so they would solicit more investors." for the Ponzi scheme.

Joint bank accounts, meetings in the UM conference room, and current and former UM employees.

Hmm, sounds to me like UM conferred apparent authority on this Ponzi scheme.

Where is the regret or social proof factors?  Will follow this some more to figure out how this Ponzi scheme grew so quickly.  

Anyone have some inside insights?

Full post as published by Misleading Advertising Law on August 20, 2008 (boomark / email).