Stanford caught out – at long last

Published: February 20 2009 20:01 | Last updated: February 20 2009 20:01

J.K. Galbraith once proposed a measure of the economic cycle called the “bezzle”: the inventory that has been purloined from investors. In fat years, the bezzle grows as auditors relax. In the lean years, it shrinks as investors become cautious. The allegations against Bernard Madoff and, now, Sir Allen Stanford suggest the bezzle is large – but shrinking.

Mr Madoff’s alleged $50bn Ponzi scheme appears to have been a classic confidence trick. Rather than demanding money upfront, he seems to have encouraged investors by suggesting they pour their cash into his funds gradually. By turning some investors away, he seems to have reassured his customers that they were benefiting from some kind of specialised inside track. In truth, he may just have been building the steadily increasing flow of money he needed to keep going. Full Story>>