Lots and lots of little white lies

We may not breed multi-billion fraudsters like Bernie Madoff, says Matthew Lynn, but the small-scale, everyday deception of investors and mortgage lenders became a fact of British life during the boom years

Marc Duchesne certainly knew how to spend it. The founder of a small hedge fund called Benchmark Asset Management, this East Finchley-born trader put together a collection of cars that included a Ferrari Enzo, a Rolls-Royce Phantom, a Bentley Arnage and several Hummers.

He blew £60,000 on cosmetic dentistry, presumably so he could smile as he picked up another Bentley, and another £1 million refitting his flat and chartering private jets.

It was the earning of it that Duchesne – who changed his name from the rather less stylish Spinks – had trouble with. Benchmark, despite its name, turned out not to be benchmarking anything. Investors were promised an improbable return of 11 per cent a month, but most of their money disappeared as soon as it was invested. After the fraud was uncovered, Duchesne was sentenced to four years in jail.

That is just one example among many that have emerged so far this year. Perhaps the most over-used aphorism of the financial collapse is Warren Buffett’s saying that only when the tide goes out do we discover who is swimming naked. It is over-used for a reason: it’s a bitingly accurate description of a financial system that built up layer upon layer of deception during the great bubble. A lot of people have turned out to be swimming without any togs on.

Indeed, the closer we look at the boom, the more it appears to have been based on frauds and deceptions. Of course there were some outright conmen out there; but more worryingly, a lot of people were deceiving themselves as well as their investors and clients.

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Glenn

June 27th, 2009 7:19pm Report this comment

A con says as much about the victim as the conman. Clearly both are greedy.

People scream and yell when they've been had but never take responsibility for their own greed and stupidity. No doubt some who are truly innocent but most are just plain greedy.

If it sounds to good to be true, 99.9% of the time it is.(I'm sure there's rare cases where spectacular returns are generated honestly but certainly not year after year.)

JohnAnt

July 21st, 2009 4:12pm Report this comment

Re mortgage fraud (or rather, the tacit complicity between lender and borrower, as the lenders knew perfectly well what was going on!) - You use the past tense, but loose lending and fraudulent applications are still rife. Deposits are borrowed, jobs and salaries invented, BTL intentions concealed. The lenders are not competent enough to check.
Housing Bubble & Crash Pt II is on its way.

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