Gaining From Reputation
From the 3rd part, Petters himself knew how to milk a good reputation. He donated millions of dollars to fund education, forming the Petters foundation, which provide grants and scholarships to selected universities. He even has a Center for Leadership, Ethics and Skills Development within the Farmer School of Business. Imagine, a convicted fraudster like Petters funding this kind of a center. Petters was able to polish his public image that everyone who met him said he was always smiling, and its difficult not to like a person like him. After all, who would dislike a generous billionaire philanthropist? But not everyone has bought the success and generosity that Petters is showing. For example, Richard Bookbinder, a portfolio manager at Bookbinder Capital Management, who hired an investigations firm in New York to cross-check Petters, before deciding if he would do business with him. He found inconsistencies in Petters’ background, and pending lawsuits.
Be Aware of Ponzi Schemes
The best way to ensure that a particular style of Ponzi schemes like this don’t happen again is to do a careful background checking of your investment opportunities. It is also important to diversify your investments and don’t put all your eggs in one basket, as the popular saying goes. However, at that time it was difficult, foolish and even insulting to do a background check of a prominent person such as Tom Petters. A philanthropist donating millions of dollars to champion education, has a foundation to fund scholars and was even a member if not a chairman of the board of trustees in well-known universities is very far from being an operator of a large Ponzi scheme. But, still, it pays to be safe, really safe, at times than sorry, especially if you’re investing a hard-earned money.
The Tom Petters case is one of the classic examples of Ponzi Schemes that corrupted billions of funds. I hope you learned something from today’s essay.