Wednesday, May 27, 2009


A few weeks ago, my wife and I watched Catch Me if You Can, which is based the life of the famous con artist, Frank Abagnale Jr. Since watching the movie, I keep thinking of a line from the movie, attributed to Mr. Abagnale:
Why do the Yankees always win? The other team can't stop looking at the pinstripes.
Even today, it seems that we can't stop staring at the pinstripes. For example, a great deal of Bernie Madoff's ability to perpetuate his Ponzi scheme came from the reputation he had developed and the respect he was given. In another example, the SEC recently filed suit against Global One, an investment firm run by a Texas A&M finance professor and another man who was both an attorney and a CPA. From the SEC Actions Blog:
Fake records coupled with the identity of the defendants — a professor from a well known university and an attorney/CPA — certainly helped induce investors to purchase shares. Fake bank records and the phony account statements sent to investors periodically also facilitated the fraud.
While trust plays a vital role in helping society to function properly, we can't forget to exercise a healthy dose of skepticism in making investment decisions. "Pinstripes" have many shapes and forms, including titles, such as successful businessman, professor, CPA, attorney, respected civil servant, church leader, etc. Pinstripes can also be relationships such as friend, colleage, or even family member. No matter who is pitching an investment to us, we have to remember to subject that investment to close scrutiny or we run the risk of being conned. Let's quit staring at the pinstripes and see potential investments for what they really are.

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