Just a Little Bit of Fraudby
William L. Anderson Out of principle, I don’t play the state lotteries. If I were to win, I suspect I would be in the position of the Orthodox Rabbi who snuck in a game of golf on the Sabbath and hit a hole-in-one. Who could he tell? Nonetheless, there are many reasons to oppose state lotteries, which still do not provide the odds that the old "numbers" games run by the Mafia used to have. The "numbers rackets," of course, were illegal; state lotteries are promoted everywhere one can turn, even though they are inferior to what the "criminals" offered. However, until today, I did not realize that maybe the real criminals reside in the lottery offices. This bit of news confirmed my lack of desire to purchase lottery tickets, although I always have been under the impression that while the odds are stacked against those who purchase tickets, nonetheless there is a least a "1" on the left-hand-side of the fraction, as in "1 in 1,000,000." However, I now realize that in many cases, the proper number is "0," as in "no mathematical chance whatsoever." According to news accounts, this is the situation in many states:
Now, imagine that a brokerage house on Wall Street was operating a mutual fund for which those who purchased the shares not only were receiving zero return, but also could not get their money back once they put it in. Furthermore, assume that the operators of this fund were advertising that "investors" could receive fabulous returns far in excess of what they put in, even though they knew those returns did not exist. It would not take long for government agents to swoop in on that fund and lead the fund managers in handcuffs to waiting patrol cars. There would be no letup in the public and media condemnation of these scoundrels and a federal jury would convict them and a judge would have them sentenced to a few thousand years in federal prison. However, what will happen in Virginia and other states that have openly defrauded people who purchase lottery tickets? Nothing. Read on:
It is obvious that the "players" who purchased zero-return tickets did not know about the fact they were buying a pig-in-a-poke, despite what the lottery directors might say. And don’t think for a second that knowledge of risk by purchases of fund shares would save the mutual fund directors from being convicted and imprisoned. Moreover, even if "players" could win smaller prizes, the fact that an unwinnable grand prize was front-and-center in the advertising makes the sales fraudulent. So, what is to be made of this situation? The government holds state lotteries and their leaders to much different standards than it holds for people working in private businesses. No lottery spokesperson or director will receive a visit from a federal or state law enforcement agent. No prosecutor will seek indictments, and no jury will convict, and no judge will sentence. The next time someone is hauled out of a Wall Street office in handcuffs, as was the recent case with Ralph Cioffi and Matthew Tannin, formerly of Bear Stearns, remember that federal authorities are making claims against them that they never would make against their own, no matter how dishonest or egregious the behavior. In the case of Cioffi and Tanner, prosecutors cherry-picked emails that they sent each other regarding concerns about the funds, conveniently leaving out the other emails that told a story that contradicts what the prosecution is claiming.
One can bet that there will be no public vilification of these crooked lotteries. The New York Times will not demand indictments, and federal prosecutors will oblige, choosing to target others. Thus, the fraud will continue, blessed by the politicians, the prosecutors, and the judges. July
9, 2008
Copyright © 2008 LewRockwell.com
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(While
it is true that Cioffi took $2 million in personal funds out of
the hedge fund he was helping to manage, he put that money in another
Bear Stearns fund, but left $4 million of his own money in
the original hedge fund, something the ancients once called diversification.
The prosecution and the New York Times did not see fit to
share that tidbit of information with the public.)
