EDITORIAL - Be aggressive against financial scams

The fact that a US federal judge has sent away Mr David Smith for 30 years for bilking investors out of an estimated US$220 million in his grand Ponzi scheme should not be taken to mean an end to that kind of scam in Jamaica, or that Jamaicans have learnt their lesson.

For although Mr Smith admitted that his currency-trading operation was a charade, there are people who, hoping to recoup their lost capital, remain in denial and would wish to give him another shot.

Such people are not merely unsophisticated investors, unaccustomed to the ways of the markets, but they are ignorant of the adage that when investments appear too good to be true, they usually are. Those desperately hopeful investors include people of a certain credibility, whose less-than-thoughtful statements might be interpreted to mean regulators were intemperate in going after people like Mr Smith, to the detriment of those who lost money.

Take, for instance, Mr Godfrey McAllister, a former insurance agent and man of many causes, who once enjoyed a high profile in Jamaica and was a loud voice on many issues. In his latest incarnation, Mr McAllister is chairman of an organisation called the Association of Concerned Olint Members (ACOM) - Olint being the vehicle that Mr Smith used to perpetrate his fraud.

On the day before Mr Smith was sentenced, and in the midst of speculation over how much time he would spend in jail, Mr McAllister told this newspaper: "The quicker he can get out of prison, the quicker we can get our hands on him, because we believe that he knows where the money is, knows where the money has been sent, or has the ability to trade the money all over again."

The last remark, especially, is peculiar. It seems to suggest that ACOM believes that if Mr Smith was not in jail, he could get on with the business of playing the currency markets, thereby earning money to repay clients.

Mr McAllister's remark is, on the face of it, a piece of monumental naivety, with which we would have no problem if it was merely to the bane of Godfrey McAllister himself. But Mr McAllister is not without some influence. We assume that he did not install himself chairman of ACOM, but that the organisation's members elected him as their leader.

Voice of influence

Mr McAllister's statements, therefore, are likely to carry weight, at least with ACOM members - and perhaps to others who may perceive him a credible voice from the world of finance and the arena of public affairs. And he appears to imply Mr Smith had legitimately traded currency with the Olint funds and could do it again. Or worse, persons might infer that ACOM would wink at Smith's shady dealings once investors got back their money.

If the regulators were wrong to go after David Smith and unfairly flexed their muscles in engineering a clampdown, the same case may be argued, disingenuously, for others who operate outside the regulatory framework. The fact, however, is that Ponzi schemes are frauds that victimise most people who put their cash in them, notwithstanding the handful who benefit at the expense of the majority.

The problem is not that the regulators were overly aggressive in going after people like David Smith. It's that they were too slow and not aggressive enough. The upshot: the ruin of many lives.

The opinions on this page, except for the above, do not necessarily reflect the views of The Gleaner. To respond to a Gleaner editorial, email us: editor@gleanerjm.com or fax: 922-6223. Responses should be no longer than 400 words. Not all responses will be published.