"It's a deal," said Garner smoothly, with a humble smile and a reserved chuckle, "you can pay for it in the morning."
As he looked around the table, Garner further sized up the six marks that he had lined up in as many months since he had set up his operation in an area on the south end of Manhattan known as the East Village. They were a well-dressed and tightly wound group in their early thirties who spent their days in the pressure cooker environment of the financial markets. Some were traders and some were analysts. All had more money than they knew what to do with and all wanted even more money. Actually, as Garner had figured out, it wasn't really the money they were after. Most of these marks would not notice a few hundred thousand dollar change in their net worth. Money was just a way of keeping score. What they were looking for was an investment with a big payoff; especially, an investment that most people did not know about. Some would call this gambling. But the semantics were lost on this crowd that only cared about winning and loosing, most winning.
"We had a good quarter and I wanted to celebrate a little," he explained.
"This is all the celebration I need," said McAllister pulling a check out of his pocket and waving it about for everyone to see. The check was from Garner, made out to McAllister for two hundred thousand dollars. "Any time you can get a hundred percent return on your money in three months," he continued, "it's a good investment in my book."
"I realize that I am not telling you anything that you don't already know," Garner replied, "but whenever you are willing to take on additional risk, you can reap greater rewards."
"All too true," remarked McAllister Simpson, "In fact, you do so well, that I'd like to give this check right back to you and let you use it for another three months."
"I won't take it," replied Garner, "its too risky to let your money ride like that. You gave me $100,000 to invest. You got $200,000 back. Take your check, cash it and give me $100,000 back. That way you are only risking the net gain and not touching your original investment."
It sounded so sensible and conservative that the marks felt that Garner not only offered a tremendous investment opportunity, but was also doing his best to look out for their money. It was exactly the feeling that Garner wanted to put across.
"Now, tell your friends," Garner continued, "but only your trusted friends. I have to be a little careful about who I let into this deal. I think you know why."
The six marks nodded soberly as though Garner were a temperance preacher commenting on the evils of alcohol. They all had checks in their pockets representing twice the money they had invested with him three months ago. They had taken the bait and loved it. In another three months he would be handing out more money and widening the circle.
About six months ago Garner had relocated to the East Village in the lower east side of Manhattan. He had leased an expensive apartment and started hanging around the watering holes of the well-heeled Wall Street yuppies. He began confiding to a few carefully chosen marks about some "gray market" investment opportunities.
The "gray market", according to Garner, was a collection of investors who put together a loose venture capital company that would loan money out for high-risk, possibly illegal endeavors. The implication, which Garner was very careful to never specifically articulate, was that the money would be used to fund drug purchases. If the drugs were confiscated coming into the country, the money would be lost. If the drugs made it in, the investors would get a tremendous return on their money. Either way, the investors were safe. If the drug courier were busted, there would be no way to trace the money back to the investors.
Of course, there was no such thing as a gray market. That was something that Garner made up to cover a classic Ponzi scheme. It was a sweet con and Garner reveled in his ingenuity whenever he thought about it.
A Ponzi scheme is an investment scam in which earlier investors are paid premium returns out of the investment funds provided by later investors. The phrase 'robbing Peter to pay Paul' is frequently used to describe it. In order for the con man to come out ahead on a Ponzi scheme, he has to abscond with the money before the investors catch on to him. If he bails too quickly, he will not make enough money. If he waits too long he won't be able to find enough new investors. If he pulls out at just the right time, he will leave the latest round of investors holding worthless investment notes.
However, pulling a classic Ponzi scheme on the Wall Street crowd probably wouldn't work. No doubt they had all heard of this classic con. That was where the 'gray market' came in. These marks thought that they were making great returns because of the illegal uses that the loans were being put to. It used a clever diversion and played right into the greed of the marks. Further, when Garner decided to bail, nobody would report him because they would not go to the police complaining that they had lost money investing in drug purchases. And all that is what made it sweet. But what made it the sweetest of all was that Garner was pulling a classic Ponzi scheme on a group of Wall Street sharpies. It didn't get any better than this.
At the next meeting of the investors, Garner handed out fat checks for all the marks.
"You'll notice that your checks include the return on your initial investments, plus commissions for the people you brought in," Garner explained. "now I want to caution you about the other people you bring in. We want to keep this club somewhat exclusive."
In reality, Garner wanted his marks to bring in as many others as they possibly could. But making it sound like an exclusive investing club was one of the ways he kept the marks on the line and avoided suspicion. Over the next month money would pour in, in greater magnitudes, and Garner figured that in just two more turnarounds, he would make the money he wanted from the scam and disappear.
"This check is computer printed," observed Sarah Feinman, a narrow faced, nervous woman in late twenties, "are you sure we cannot be traced?" Sarah's bulging eyes darted from face to face at the table reading the reactions of the other investors.
"I am quite sure," replied Garner confidently. "First of all, my client list is encrypted on my home computer. I used an evolving key that feeds into a key-generating program. That generated key is used for encryption. In order to decrypt the list, I need to know the key and the exact date and time of the encryption. It would take a super computer years to crack the encryption. Second, the check is made out to cash. So if anybody wanted to track you guys they would have to get the original checks and make out your signatures. The point is that although this is good money for you guys, it is small potatoes in the scheme of things. It would take far, far more effort than it is worth to try and uncover the original investors. That is the beauty of the whole idea."
Of course, that explanation was entirely fiction. It had been made up before hand to address exactly that question. The true was that it took Garner two days to figure out how to print checks on his computer from a text file.
"Will we do this well every quarter," asked Bob 'The Canary' Morrison. Bob was called 'The Canary' because he was like the canary in the coalmine, having an uncanny ability to sense when investments were in trouble. When Bob began to fidget, the other traders knew it was time to change positions. Garner thought it was a bit of risk having Bob on the inside circle, but as long as he kept Bob happy, the others would follow.
"Not necessarily," Garner explained. "We've had a couple of good quarters in which no deals have gone sour. If one of the investment deals fails, the return will be less."
"So, you can't really loose everything," Bob asked, "Unless, all the deals collapse?"
"That's the beauty of it," replied Garner with a confident smile. "the worst you'll do, is have to live with less return."
After the next quarter, Garner was careful to pay out only 73% return, claiming that a few of the deals had gone under. The marks were a little unhappy, but Garner reminded them that they had still make 73% in a single quarter. Bob 'The Canary' began to shift a little uneasily in his chair.
Garner decided to have one more payout, which would increase the number of investors another order of magnitude. So when the next quarter ended, Garner paid out a generous125% to each of his investors. It took nearly all the money he had left from his settlement. But, if his calculations were correct, he would get more than ten times the settlement in new investments. Leaving him a cool profit of 1000%.
Garner had it all worked out perfectly. He knew just how many times he could turn around profits and grow the circle of investors without attracting attention. He knew exactly how much he could pay out and exactly how much he would get back. He had picked his marks carefully and even Canary Bob wouldn't be a problem.
But the forces that propelled Garner though his life were the larger forces that he did not consider. Garner had his next quarterly pay out as planned and waited for the next round of investments to come in. But they never did. He waited a week and still nothing. So, he called McAllister Simpson to find out what had happened.
"It was a sweet deal you were offering," said McAllister, but this Wall Street crowd is very fickle when it comes to investing.
"What do you mean?" Garner asked, trying not to sound alarmed.
"Well, several things actually," McAllister explained, "first, the stock market took a nose dive and lost 20% of its value last week. There are a lot of bargains to be had and many of your investors are putting their money in equities instead."
"But, stocks don't pay nearly as well as I do," Garner challenged.
"True," said McAllister, "but equities are fairly solid. We have a saying on Wall Street that anything that sounds too good to be true, probably is. Most of your investors were just gambling with you rather than investing. When the market dived, it brought them back to their senses."
Garner sat stunned, unable to say anything.
"Further," McAllister continued, "Canary Bob said he was pulling out his money, and as much as the traders and analysts claim to have minds of their own, they do tend to follow the crowd. When Bob pulled out, the word got around in an afternoon and everybody else pulled out."
"So does this mean that you guys no longer want to double your money every three months?" asked with an edge in his voice.
"Look Garner," McAllister confided, "your deal was a sweet deal and it was fun while it lasted, but the Wall Street crowd has no loyalty and they have moved on to other things. I wouldn't be looking for any more money from them. But we are grateful for what you did for us so far."
It was the darkest moment in Garner's life. He felt empty. He felt alone. And he felt desperate. He had gambled everything and lost. He had enough money left over to last him for a few months, but he was essentially broke. He owed money on his apartment. He owed bar tabs and entertaining bills. He was in his mid twenties with no marketable skills and no nest egg to rely up. All he could do was to leave town and resort to his standard cons to build himself back up again.
"This is the low point of my life," thought Garner, "how could it ever get any worse?"
Little did Garner know, he was about to find out.