WHEN YOU CON YOUR OWN
Gregory Rodriguez

Los Angeles Times
Dec 22, 2008
CA

Will Madoff’s scheme go down as the affinity fraud of all time?

We’re obsessed with race and ethnic relations in the U.S., so much
so that we tend to believe that most crime, violent or otherwise,
is committed across racial, ethnic or religious lines. We make a
special category for "hate" crimes. Governments compile statistics on
them. Journalists, always looking for the next great divide, eagerly
read intergroup conflict into just about any form of antisocial
behavior.

To a point it makes sense — we know that humans are capable of
terrible atrocities against the "other." But in other ways, the focus
on such crimes leads us to forget that the overwhelming majority of
criminal activity is intra-ethnic, not inter-ethnic. The news about the
financially ruinous criminal acts confessed by Bernard L. Madoffis a
stunning example. Madoff is Jewish, and so are most of his victims. He
ran in privileged circles, and so did they. Forget strangers —
Madoff’s alleged $50-billion fraud is a good example of the fact that
it’s people like us who can easily be our biggest enemies.

Consider the data about who does what to whom. From 1976 to 2005,
86% of white murder victims were killed by whites. In that same
period, 94% of black victims were murdered by blacks. And victimizers
and victims don’t just share racial categories, they also tend to
know each other. We’ve all heard the statistic that the majority of
victims killed by handguns are murdered by people they knew. Likewise,
according to the Department of Justice, three in four women who have
been raped and/or physically assaulted since age 18 are victimized
by men they either know, dated or were once or currently married to.

Cons, like violence, tend to be intra-ethnic and
intra-communal. Between 1998 and 2001, more than 90,000 investors
in 28 states lost more than $2.2 billion in what the Securities
and Exchange Commission calls "affinity fraud" schemes, in which a
member of an affinity group targeted and took his neighbors, friends
or co-religionists. Madoff’s scheme could take the affinity-fraud cake.

The element of betrayal in any "intra" crime makes it especially
devastating. That’s because, in these cases, trust — which is crucial
for intimate relationships and society at large — is destroyed. When
we’re wronged by the people we’ve let into our circle — or worse,
the people we’ve loved — the heartbreak adds insult to injury.

Only two years ago, the SEC issued a warning about a rising tide of
affinity fraud. These scams, it said, "exploit the trust that exists
in groups of people who have something in common."

Perpetrators of affinity fraud often succeed by claiming that because
they are "just like" their investors, they are in a unique position
to help them. They also leverage group pride. One recently indicted
scammer said he wanted to create more black millionaires; another
said he was "proudly Hispanic." Others can highlight the tensions
between their affinity group and others, sometimes accusing outsiders
of keeping them out of investment markets.

The government’s list of such frauds shows that ethnic groups and
churches are especially vulnerable. According to the SEC, in Glendale,
an Armenian American took other Armenian Americans for $19 million,
and elderly Jehovah’s Witnesses and Korean immigrants have also been
targeted. Pyramid schemes like the one Madoff said he ran– where
later investors provide the return for those who get in earlier — are
especially common. Indeed, Charles Ponzi, who gave pyramid schemes his
name in the 1920s, mostly defrauded his fellow Italian Americans. In
part because these crimes do target identifiable groups and shatter the
victim’s notions regarding the relative trustworthiness of their group
members, University of Maryland law professor Lisa M. Fairfax argues
that affinity fraud should be added to the roster of hate crimes.

I’m not sure that it makes sense to add to or change that definition —
hate crimes are complicated enough to understand and prosecute. But
Fairfax’s notion that affinity fraud deserves special notice is worth
considering. You might be tempted to say that Madoff only hurt his
own, but don’t be too smug if you and yours weren’t among them. The
destruction of the social fabric inherent in Madoff’s actions affects
us all. When trust is defeated, everyone loses.
From: Baghdasarian