Crime

Brown, Paul. The Rocketbelt Caper. Newcastle upon Tyne: Tonto Press, 2007. ISBN 0-9552183-7-3.

Few things are as iconic of the 21st century imagined by visionaries and science fictioneers of the 20th as the personal rocketbelt: just strap one on and take to the air, without complications such as wings, propellers, pilots, fuselage, or landing gear. Flying belts were a fixture of Buck Rogers comic strips and movie serials, and in 1965 Isaac Asimov predicted that by 1990 office workers would beat the traffic by commuting to work in their personal rocketbelts.

The possibilities of a personal flying machine did not escape the military, which imagined infantry soaring above the battlefield and outflanking antiquated tanks and troops on the ground. In the 1950s, engineers at the Bell Aircraft Corporation, builders of the X-1, the first plane to break the sound barrier, built prototypes of rocketbelts powered by monopropellant hydrogen peroxide, and eventually won a U.S. Army contract to demonstrate such a device. On April 20th, 1961, the first free flight occurred, and a public demonstration was performed the following June 8th. The rocketbelt was an immediate sensation. The Bell rocketbelt appeared in the James Bond film Thunderball, was showcased at the 1964 World's Fair in New York, at Disneyland, and at the first Super Bowl of American football in 1967. Although able to fly only twenty-odd seconds and reach an altitude of about 20 metres, here was Buck Rogers made real—certainly before long engineers would work out the remaining wrinkles and everybody would be taking to the skies.

And then a funny thing happened—nothing. Wendell Moore, creator of the rocketbelt at Bell, died in 1969 at age 51, and with no follow-up interest from the U.S. Army, the project was cancelled and the Bell rocketbelt never flew again. Enter Nelson Tyler, engineer and aerial photographer, who on his own initiative built a copy of the Bell rocketbelt which, under his ownership and subsequent proprietors made numerous promotional appearances around the world, including the opening ceremony of the 1984 Olympics in Los Angeles, before a television audience estimated in excess of two billion.

All of this is prologue to the utterly bizarre story of the RB-2000 rocketbelt, launched by three partners in 1992, motivated both by their individual obsession with flying a rocketbelt and dreams of the fortune they'd make from public appearances: the owners of the Tyler rocketbelt were getting US$25,000 per flight at the time. Obsession is not a good thing to bring to a business venture, and things rapidly went from bad to worse to truly horrid. Even before the RB-2000's first and last public flight in June 1995 (which was a complete success), one of the partners had held a gun to another's head who, in return, assaulted the first with a hammer, inflicting serious wounds. In July of 1998, the third partner was brutally murdered in his home, and to this day no charges have been made in the case. Not long thereafter one of the two surviving partners sued the other and won a judgement in excess of US$10 million and custody of the RB-2000, which had disappeared immediately after its sole public flight. When no rocketbelt or money was forthcoming, the plaintiff kidnapped the defendant and imprisoned him in a wooden box for eight days, when fortuitous circumstances permitted the victim to escape. The kidnapper was quickly apprehended and subsequently sentenced to life plus ten years for the crime (the sentence was later reduced to eight years). The kidnappee later spent more than five months in jail for contempt of court for failing to produce the RB-2000 in a civil suit. To this day, the whereabouts of the RB-2000, if it still exists, are unknown.

Now, you don't need to be a rocket scientist to figure out that flitting through the sky with a contraption powered by highly volatile and corrosive propellant, with total flight time of 21 seconds, and no backup systems of any kind is a perilous undertaking. But who would have guessed that trying to do so would entail the kinds of consequences the RB-2000 venture inflicted upon its principals?

A final chapter covers recent events in rocketbelt land, including the first International Rocketbelt Convention in 2006. The reader is directed to Peter Gijsberts' www.rocketbelt.nl site for news and additional information on present-day rocketbelt projects, including commercial ventures attempting to bring rocketbelts to market. One of the most remarkable things about the curious history of rocketbelts is that, despite occasional claims and ambitious plans, in the more than 45 years which have elapsed since the first flight of the Bell rocketbelt, nobody has substantially improved upon its performance.

A U.S. Edition was published in 2005, but is now out of print.

December 2007 

Cowan, Rick and Douglas Century. Takedown. New York: Berkley, 2002. ISBN 0-425-19299-7.

This is the true story of a New York Police Department detective who almost accidentally found himself in a position to infiltrate the highest levels of the New York City garbage cartel, one of the Mafia's fattest and most fiercely guarded cash cows for more than half a century. Cowan's investigation, dubbed “Operation Wasteland”, resulted in the largest organised crime bust in New York history, eliminating the “mob tax” paid by New York businesses which tripled their waste disposal charges compared to other cities. This book was recommended as a real world antidote to the dramatic liberties taken by the writers of The Sopranos. Curiously, I found it confirmed several aspects of The Sopranos I'd dismissed as far-fetched, such as the ability of mobsters to murder and dispose of the bodies of those who cross them with impunity, and the “mad dog” behaviour (think Ralph Cifaretto) of high ranked top-earner wiseguys.

September 2004 

Douglas, John and Mark Olshaker. The Cases that Haunt Us. New York: Scribner, 2000. ISBN 0-684-84600-4.

June 2001 

Krakauer, Jon. Under the Banner of Heaven. New York: Anchor Books, [2003] 2004. ISBN 1-4000-3280-6.

This book uses the true-crime narrative of a brutal 1984 double murder committed by two Mormon fundamentalist brothers as the point of departure to explore the origin and sometimes violent early history of the Mormon faith, the evolution of Mormonism into a major mainstream religion, and the culture of present-day fundamentalist schismatic sects which continue to practice polygamy within a strictly hierarchical male-dominated society, and believe in personal revelation from God. (It should be noted that these sects, although referring to themselves as Mormon, have nothing whatsoever to do with the mainstream Church of Jesus Christ of Latter-day Saints, which excommunicates leaders of such sects and their followers, and has officially renounced the practice of polygamy since the Woodruff Manifesto of 1890. The “Mormon fundamentalist” sects believe themselves to be the true exemplars of the religion founded by Joseph Smith and reject the legitimacy of the mainstream church.)

Mormonism is almost unique among present-day large (more than 11 million members, about half in the United States) religions in having been established recently (1830) in a modern, broadly literate society, so its history is, for better or for worse, among the best historically documented of all religions. This can, of course, pose problems to any religion which claims absolute truth for its revealed messages, as the history of factionalism and schisms in Mormonism vividly demonstrates. The historical parallels between Islam and Mormonism are discussed briefly, and are well worth pondering: both were founded by new revelations building upon the Bible, both incorporated male domination and plural marriage at the outset, both were persecuted by the existing political and religious establishment, fled to a new haven in the desert, and developed in an environment of existential threats and violent responses. One shouldn't get carried away with such analogies—in particular Mormons never indulged in territorial conquest nor conversion at swordpoint. Further, the Mormon doctrine of continued revelation allows the religion to adapt as society evolves: discarding polygamy and, more recently, admitting black men to the priesthood (which, in the Mormon church, is comprised of virtually all adult male members).

Obviously, intertwining the story of the premeditated murder of a young mother and her infant committed by people who believed they were carrying out a divine revelation, with the history of a religion whose present-day believers often perceive themselves as moral exemplars in a decadent secular society is bound to be incendiary, and the reaction of the official Mormon church to the publication of the book was predictably negative. This paperback edition includes an appendix which reprints a review of a pre-publication draft of the original hardcover edition by senior church official Richard E. Turley, Jr., along with the author's response which acknowledges some factual errors noted by Turley (and corrected in this edition) while disputing his claim that the book “presents a decidedly one-sided and negative view of Mormon history” (p. 346). While the book is enlightening on each of the topics it treats, it does seem to me that it may try to do too much in too few pages. The history of the Mormon church, exploration of the present-day fundamentalist polygamous colonies in the western U.S., Canada, and Mexico, and the story of how the Lafferty brothers went from zealotry to murder and their apprehension and trials are all topics deserving of book-length treatment; combining them in a single volume invites claims that the violent acts of a few aberrant (and arguably insane) individuals are being used to slander a church of which they were not even members at the time of their crime.

All of the Mormon scriptures cited in the book are available on-line. Thanks to the reader who recommended this book; I'd never have otherwise discovered it.

December 2005 

Larson, Erik. The Devil in the White City. New York: Vintage Books, 2003. ISBN 0-375-72560-1.

It's conventional wisdom in the publishing business that you never want a book to “fall into the crack” between two categories: booksellers won't know where to shelve it, promotional campaigns have to convey a complicated mixed message, and you run the risk of irritating readers who bought it solely for one of the two topics. Here we have a book which evokes the best and the worst of the Gilded Age of the 1890s in Chicago by interleaving the contemporary stories of the 1893 World's Columbian Exposition and the depraved series of murders committed just a few miles from the fairgrounds by the archetypal American psychopathic serial killer, the chillingly diabolical Dr. H. H. Holmes (the principal alias among many used by a man whose given name was Herman Webster Mudgett; his doctorate was a legitimate medical degree from the University of Michigan). Architectural and industrial history and true crime are two genres you might think wouldn't mix, but in the hands of the author they result in a compelling narrative which I found as difficult to put down as any book I have read in the last several years. For once, this is not just my eccentric opinion; at this writing the book has been on The New York Times Best-Seller list for more than two consecutive years and won the Edgar award for best fact crime in 2004. As I rarely frequent best-seller lists, it went right under my radar. Special thanks to the visitor to this page who recommended I read it!

Boosters saw the Columbian Exposition not so much as a commemoration of the 400th anniversary of the arrival of Columbus in the New World but as a brash announcement of the arrival of the United States on the world stage as a major industrial, commercial, financial, and military power. They viewed the 1889 Exposition Universelle in Paris (for which the Eiffel Tower was built) as a throwing down of the gauntlet by the Old World, and vowed to assert the preeminence of the New by topping the French and “out-Eiffeling Eiffel”. Once decided on by Congress, the site of the exposition became a bitterly contested struggle between partisans of New York, Washington, and Chicago, with the latter seeing its victory as marking its own arrival as a peer of the Eastern cities who looked with disdain at what Chicagoans considered the most dynamic city in the nation.

Charged with building the Exposition, a city in itself, from scratch on barren, wind-swept, marshy land was architect Daniel H. Burnham, he who said, “Make no little plans; they have no magic to stir men's blood.” He made no little plans. The exposition was to have more than 200 buildings in a consistent neo-classical style, all in white, including the largest enclosed space ever constructed. While the electric light was still a novelty, the fair was to be illuminated by the the first large-scale application of alternating current. Edison's kinetoscope amazed visitors with moving pictures, and a theatre presented live music played by an orchestra in New York and sent over telephone wires to Chicago. Nikola Tesla amazed fairgoers with huge bolts of electrical fire, and a giant wheel built by a man named George Washington Gale Ferris lifted more than two thousand people at once into the sky to look down upon the fair like gods. One of the army of workers who built the fair was a carpenter named Elias Disney, who later regaled his sons Roy and Walt with tales of the magic city; they must have listened attentively.

The construction of the fair in such a short time seemed miraculous to onlookers (and even more so to those accustomed to how long it takes to get anything built a century later), but the list of disasters, obstacles, obstructions, and outright sabotage which Burnham and his team had to overcome was so monumental you'd have almost thought I was involved in the project! (Although if you've ever set up a trade show booth in Chicago, you've probably gotten a taste of it.) A total of 27.5 million people visited the fair between May and October of 1893, and this in a country whose total population (1890 census) was just 62.6 million. Perhaps even more astonishing to those acquainted with comparable present-day undertakings, the exposition was profitable and retired all of its bank debt.

While the enchanted fair was rising on the shore of Lake Michigan and enthralling visitors from around the world, in a gloomy city block size building not far away, Dr. H. H. Holmes was using his almost preternatural powers to charm the young, attractive, and unattached women who flocked to Chicago from the countryside in search of careers and excitement. He offered them the former in various capacities in the businesses, some legitimate and other bogus, in his “castle”, and the latter in his own person, until he killed them, disposed of their bodies, and in some cases sold their skeletons to medical schools. Were the entire macabre history of Holmes not thoroughly documented in court proceedings, investigators' reports, and reputable contemporary news items, he might seem to be a character from an over-the-top Gothic novel, like Jack the Ripper. But wait—Jack the Ripper was real too. However, Jack the Ripper is only believed to have killed five women; Holmes is known for certain to have killed nine men, women, and children. He confessed to killing 27 in all, but this was the third of three mutually inconsistent confessions all at variance with documented facts (some of those he named in the third confession turned up alive). Estimates ran as high as two hundred, but that seems implausible. In any case, he was a monster the likes of which no American imagined inhabited their cities until his crimes were uncovered. Remarkably, and of interest to libertarians who advocate the replacement of state power by insurance-like private mechanisms, Holmes never even came under suspicion by any government law enforcement agency during the entire time he committed his murder spree, nor did any of his other scams (running out on debts, forging promissory notes, selling bogus remedies) attract the attention of the law. His undoing was when he attempted insurance fraud (one of his favourite activities) and ended up with Nemesis-like private detective Frank Geyer on his trail. Geyer, through tireless tracking and the expenditure of large quantities of shoe leather, got the goods on Holmes, who met his end on the gallows in May of 1896. His jailers considered him charming.

I picked this book up expecting an historical recounting of a rather distant and obscure era. Was I ever wrong—I finished the whole thing in two and half days; the story is that fascinating and the writing that good. More than 25 pages of source citations and bibliography are included, but this is not a dry work of history; it reads like a novel. In places, the author has invented descriptions of events for which no eyewitness account exists; he says that in doing this, his goal is to create a plausible narrative as a prosecutor does at a trial. Most such passages are identified in the end notes and justifications given for the inferences made therein. The descriptions of the Exposition cry out for many more illustrations than are included: there isn't even a picture of the Ferris wheel! If you read this book, you'll probably want to order the Dover Photographic Record of the Fair—I did.

March 2006 

Lee, Henry and Jerry Labriola. Famous Crimes Revisited. Southington CT: Strong Books, 2001. ISBN 1-928782-14-0.

March 2001 

Leeson, Nick with Edward Whitley. Rogue Trader. London: Warner Books, 1996. ISBN 0-7515-1708-9.

January 2003 

Leeson, Peter T. The Invisible Hook. Princeton: Princeton University Press, 2009. ISBN 978-0-691-13747-6.

(Guest review by Iron Jack Rackham)
Avast, ye scurvy sea-dogs! Here we gentlemen of profit have crafted our swashbuckling customs to terrify those we prey upon, and now along comes a doubly-damned economist, and a landlubber at that, to explain how our curious ways can be explained by our own self-interest and lust for booty. Why do we who sail under the skull and crossbones democratically elect our captains and quartermasters: one pirate, one vote? Why do all pirates on the crew share equally in the plunder? Why do so many sailors voluntarily join pirate crews? Why do we pay “workman's compensation” to pirates wounded in battle? Why did the pirate constitutions that govern our ships embody separation of powers long before landlubber governments twigged to the idea? Why do we hoist the Jolly Roger and identify ourselves as pirates when closing with our prey? Why do we torture and/or slay those who resist, yet rarely harm crews which surrender without a fight? Why do our ships welcome buccaneers of all races as free men on an equal basis, even when “legitimate” vessels traded in and used black slaves and their governments tolerated chattel slavery?

This economist would have you believe it isn't our outlaw culture that makes us behave that way, but rather that our own rational choice, driven by our righteous thirst for treasure chests bulging with jewels, gold, and pieces of eight leads us, as if by an invisible hook, to cooperate toward our common goals. And because we're hostis humani generis, we need no foul, coercive governments to impose this governance upon us: it's our own voluntary association which imposes the order we need to achieve our highly profitable plunder—the author calls it “an-arrgh-chy”, and it works for us. What's that? A sail on the horizon? To yer' posts, me hearties, and hoist the Jolly Roger, we're off a-piratin'!

Thank you, Iron Jack—a few more remarks, if I may…there's a lot more in this slim volume (211 pages of main text): the Jolly Roger as one of the greatest brands of all time, lessons from pirates for contemporary corporate managers, debunking of several postmodern myths such as pirates having been predominately homosexual (“swishbucklers”), an examination of how pirates established the defence in case of capture that they had been compelled to join the pirate crew, and an analysis of how changes in Admiralty law shifted the incentives and brought the golden age of piracy to an end in the 1720s.

Exists there a person whose inner child is not fascinated by pirates? This book demonstrates why pirates also appeal to one's inner anarcho-libertarian, while giving pause to those who believe that market forces, unconstrained by a code of morality, always produce good outcomes.

A podcast interview with the author is available.

June 2009 

Markopolos, Harry. No One Would Listen. Hoboken, NJ: John Wiley & Sons, 2010. ISBN 978-0-470-91900-2.

Bernard L. “Bernie” Madoff was a co-founder of NASDAQ, founder and CEO of a Wall Street firm which became one of the top market makers, and operator of a discretionary money management operation which dwarfed hedge funds and provided its investors a reliable return in markets up and down which no other investment vehicle could approach. Madoff was an elder statesman of Wall Street, respected not only for his success in business but also for philanthropic activities.

On December 10th, 2008, Madoff confessed to his two sons that his entire money management operation had been, since inception, a Ponzi scheme, and the next day he was arrested by the FBI for securities fraud. After having pleaded guilty to 11 federal felony charges, he was sentenced to 150 years in federal incarceration, which sentence he will be serving for the foreseeable future. The total amount of money under management in Madoff's bogus investment scheme is estimated as US$65 billion, although estimates of actual losses to investors are all over the map due to Madoff's keeping transactions off the books and offshore investors' disinclination to make claims for funds invested with Madoff which they failed to disclose to their domicile tax authorities.

While this story broke like a bombshell on Wall Street, it was anything but a surprise to the author who had figured out back in the year 2000, “in less than five minutes”, that Madoff was a fraud. The author is a “quant”—a finance nerd who lives and breathes numbers, and when tasked by his employer to analyse Madoff, a competitor for their investors' funds, and devise a financial product which could compete with Madoff's offering, he almost immediately realised that Madoff's results were too good to be true. First of all, Madoff claimed to be using a strategy of buying stocks with a “collar” of call and put options, with stocks picked from the S&P 100 stock index. Yet it was easy to demonstrate, based upon historical data from the period of Madoff's reported results, that any such strategy could not possibly avoid down periods much more serious than Madoff reported. Further, such a strategy, given the amount of money Madoff had under management, would have required him to have placed put and call option hedges on the underlying stocks which greatly exceeded the total open interest in such options. Finally, Madoff's whole operation made no sense from the standpoint of a legitimate investment business: he was effectively paying 16% for capital in order to realise a 1% return on transaction fees while he could, by operating the same strategy as a hedge fund, pocket a 4% management fee and a 20% participation in the profits.

Having figured this out, the author assumed that simply submitting the facts in the case to the regulator in charge, the Securities and Exchange Commission (SEC), would quickly bring the matter to justice. Well, not exactly. He made his first submission to the SEC in May of 2000, and the long saga of regulatory incompetence began. A year later, articles profiling Madoff and skating near the edge of accusing him of fraud were published in a hedge fund trade magazine and Barron's, read by everybody in the financial community, and still nothing happened. Off-the-record conversations with major players on Wall Street indicated that many of them had concluded that Madoff was a fraud, and indeed none of the large firms placed money with him, but ratting him out to The Man was considered infra dig. And so the sheep were sheared to the tune of sixty-five billion dollars, with many investors who had entrusted their entire fortune to Madoff or placed it with “feeder funds”, unaware that they were simply funnelling money to Madoff and skimming a “management and performance fee” off the top without doing any due diligence whatsoever, losing everything.

When grand scale financial cataclysms like this erupt, the inevitable call is for “more regulation”, as if “regulation” ever makes anything more regular. This example gives the lie to this perennial nostrum—all of the operations of Madoff, since the inception of his Ponzi scheme 1992 until its undoing in 2008, were subject to regulation by the SEC, and the author argues persuasively that a snap audit at any time during this period, led by a competent fraud investigator who demanded trade confirmation tickets and compared them with exchange transaction records would have uncovered the fraud in less than an hour. And yet this never happened, demonstrating that the SEC is toothless, clueless, and a poster child for regulatory capture, where a regulator becomes a client of the industry it is charged to regulate and spends its time harassing small operators on the margin while turning a blind eye to gross violations of politically connected players.

An archive of original source documents is available on the book's Web site.

October 2011 

Novak, David P. DownTime: A Guide to Federal Incarceration. Vancouver, WA: Davrie Communications, 2002. ISBN 0-9710306-0-X.

I read this book in the interest of research, not career planning, although in these days when simply looking askance at some badge-wearing pithecanthropoid thug in a U.S. airport can land you in Club Fed, it's information those travelling to that country might be wise to take on board before getting on board. This is a 170 page letter-size comb bound book whose camera-ready copy appears to have been printed on a daisy wheel printer. I bought my copy through Amazon, but the publisher appears to have removed the book from the general distribution channels; you can order it directly from the publisher. My comments are based upon the March 2002 edition. According to the publisher's Web site, the book was completely rewritten in January 2004, which edition I've not seen.

August 2004 

Pinnock, Don. Gangs, Rituals and Rites of Passage. Cape Town: African Sun Press, 1997. ISBN 1-874915-08-3.

July 2001 

Rabinowitz, Dorothy. No Crueler Tyrannies. New York: Free Press, 2003. ISBN 0-7432-2834-0.

October 2003 

Reasoner, James. Draw: The Greatest Gunfights of the American West. New York: Berkley, 2003. ISBN 0-425-19193-1.

The author is best known as a novelist, author of a bookshelf full of yarns, mostly set in the Wild West, but also of the War Between the States and World War II. In this, his first work of nonfiction after twenty-five years as a writer, he sketches in 31 short chapters (of less than ten pages average length, with a number including pictures) the careers and climactic (and often career-ending) conflicts of the best known gunslingers of the Old West, as well as many lesser-known figures, some of which were just as deadly and, in their own time, notorious. Here are tales of Wyatt Earp, Doc Holliday, the Dalton Gang, Bat Masterson, Bill Doolin, Pat Garrett, John Wesley Hardin, Billy the Kid, and Wild Bill Hickok; but also Jim Levy, the Jewish immigrant from Ireland who was considered by both Earp and Masterson to be one of the deadliest gunfighters in the West; Henry Starr, who robbed banks from the 1890s until his death in a shoot-out in 1921, pausing in mid-career to write, direct, and star in a silent movie about his exploits, A Debtor to the Law; and Ben Thompson, who Bat Masterson judged to be the fastest gun in the West, who was, at various times, an Indian fighter, Confederate cavalryman, mercenary for Emperor Maximilian of Mexico, gambler, gunfighter,…and chief of police of Austin, Texas. Many of the characters who figure here worked both sides of the law, in some cases concurrently.

The author does not succumb to the temptation to glamorise these mostly despicable figures, nor the tawdry circumstances in which so many met their ends. (Many, but not all: Bat Masterson survived a career as deputy sheriff in Dodge City, sheriff of Ford County, Kansas, Marshal of Trinidad, Colorado, and as itinerant gambler in the wildest towns of the West, to live the last twenty years of his life in New York City, working as sports editor and columnist for a Manhattan newspaper.) Reasoner does, however, attempt to spice up the narrative with frontier lingo (whether genuine or bogus, I know not): lawmen and “owlhoots” (outlaws) are forever slappin' leather, loosing or dodging hails of lead, getting thrown in the hoosegow, or seeking the comfort of the soiled doves who plied their trade above the saloons. This can become tedious if you read the book straight through; it's better enjoyed a chapter at a time spread out over an extended period. The chapters are completely independent of one other (although there are a few cross-references), and may be read in any order. In fact, they read like a collection of magazine columns, but there is no indication in the book they were ever previously published. There is a ten page bibliography citing sources for each chapter but no index—this is a substantial shortcoming since many of the chapter titles do not name the principals in the events they describe, and since the paths of the most famous gunfighters crossed frequently, their stories are spread over a number of chapters.

July 2006 

Rhodes, Richard. Why They Kill. New York: Vintage Books, 1999. ISBN 0-375-70248-2.

January 2002 

Tarnoff, Ben. Moneymakers. New York: Penguin, 2011. ISBN 978-1-101-46732-9.

Many people think of early America as a time of virtuous people, hard work, and sound money, all of which have been debased in our decadent age. Well, there may have been plenty of the first two, but the fact is that from the colonial era through the War of Secession, the American economy was built upon a foundation of dodgy paper money issued by a bewildering variety of institutions. There were advocates of hard money during the epoch, but their voices went largely unheeded because there simply wasn't enough precious metal on the continent to coin or back currency in the quantity required by the burgeoning economy. Not until the discovery of gold in California and silver in Nevada and other western states in the middle of the 19th century did a metal-backed monetary system become feasible in America.

Now, whenever authorities, be they colonies, banks, states, or federal institutions, undertake the economic transubstantiation of paper into gold by printing something on it, there will always be enterprising individuals motivated to get into the business for themselves. This book tells the story of three of these “moneymakers” (as counterfeiters were called in early America).

Owen Sullivan was an Irish immigrant who, in the 1740s and '50s set up shop in a well-appointed cave on the border between New York and Connecticut and orchestrated a network of printers, distributors, and passers of bogus notes of the surrounding colonies. Sullivan was the quintessential golden-tongued confidence man, talking himself out of jam after jam, and even persuading his captors, when he was caught and sentenced to be branded with an “R” for “Rogue” to brand him above the hairline where he could comb over the mark of shame.

So painful had the colonial experience with paper money been that the U.S. Constitution forbade states to “emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts”. But as the long and sordid history of “limited government” demonstrates, wherever there is a constitutional constraint, there is always a clever way for politicians to evade it, and nothing in the Constitution prevented states from chartering banks which would then proceed to print their own paper money. When the charter of Alexander Hamilton's First Bank of the United States was allowed to expire, that's exactly what the states proceeded to do. In Pennsylvania alone, in the single year of 1814, the state legislature chartered forty-one new banks in addition to the six already existing. With each of these banks entitled to print its own paper money (backed, in theory, by gold and silver coin in their vaults, with the emphasis on in theory), and each of these notes having its own unique design, this created a veritable paradise for counterfeiters, and into this paradise stepped counterfeiting entrepreneur David Lewis and master engraver Philander Noble, who set up a distributed and decentralised gang to pass their wares which could only be brought to justice by the kind of patient, bottom-up detective work which was rare in an age where law enforcement was largely the work of amateurs.

Samuel Upham, a successful Philadelphia shopkeeper in the 1860s, saw counterfeiting as a new product line for his shop, along with stationery and Upham's Hair Dye. When the Philadelphia Inquirer printed a replica of the Confederate five dollar note, the edition was much in demand at Upham's shop, and he immediately got in touch with the newspaper and arranged to purchase the printing plate for the crude replica of the note and printed three thousand copies with a strip at the bottom identifying them as replicas with the name and address of his store. At a penny a piece they sold briskly, and Upham decided to upgrade and expand his product line. Before long he offered Confederate currency “curios” in all denominations, printed from high quality plates on banknote paper, advertised widely as available in retail and wholesale quantities for those seeking a souvenir of the war (or several thousand of them, if you like). These “facsimiles” were indistinguishable from the real thing to anybody but an expert, and Union troops heading South and merchants trading across the border found Upham's counterfeits easy to pass. Allegations were made that the Union encouraged, aided, and abetted Upham's business in the interest of economic warfare against the South, but no evidence of this was ever produced. Nonetheless, Upham and his inevitable competitors were allowed to operate with impunity, and the flood of bogus money they sent to the South certainly made a major contribution to the rampant inflation experienced in the South and made it more difficult for the Confederacy to finance its war effort.

This is an illuminating and entertaining exploration of banking, finance, and monetary history in what may seem a simpler age but was, in its own way, breathtakingly complicated—at the peak there were more than ten thousand different kinds of paper money circulating in North America. Readers with a sense of justice may find themselves wondering why small-scale operators such as Sullivan and Lewis were tracked down so assiduously and punished so harshly while contemporary manufacturers of funny money on the terabuck scale such as Ben Bernanke, Tim Geithner, and Mario Draghi are treated with respect and deference instead of being dispatched to the pillory and branding iron they so richly deserve for plundering the savings and future of those from whom their salaries are extorted under threat of force. To whom I say, just wait….

A Kindle edition is available, in which the table of contents is linked to the text, but the index is simply a list of terms, not linked to their occurrences in the text. The extensive end notes are keyed to page numbers in the print edition, which are preserved in the Kindle edition, making navigation possible, albeit clumsy.

December 2011 

Wright, Tom and Bradley Hope. Billion Dollar Whale. New York: Hachette Books, 2018. ISBN 978-0-316-43650-2.

Low Taek Jho, who westernised his name to “Jho Low”, which I will use henceforth, was the son of a wealthy family in Penang, Malaysia. The family's fortune had been founded by Low's grandfather who had immigrated to the then British colony of Malaya from China and founded a garment manufacturing company which Low's father had continued to build and recently sold for a sum of around US$ 15 million. The Low family were among the wealthiest in Malaysia and wanted the best for their son. For the last two years of his high school education, Jho was sent to the Harrow School, a prestigious private British boarding school whose alumni include seven British Prime Ministers including Winston Churchill and Robert Peel, and “foreign students” including Jawaharlal Nehru and King Hussein of Jordan. At Harrow, he would meet classmates whose families' wealth was in the billions, and his ambition to join their ranks was fired.

After graduating from Harrow, Low decided the career he wished to pursue would be better served by a U.S. business education than the traditional Cambridge or Oxford path chosen by many Harrovians and enrolled in the University of Pennsylvania's Wharton School undergraduate program. Previous Wharton graduates include Warren Buffett, Walter Annenberg, Elon Musk, and Donald Trump. Low majored in finance, but mostly saw Wharton as a way to make connections. Wharton was a school of choice for the sons of Gulf princes and billionaires, and Low leveraged his connections, while still an undergraduate, into meetings in the Gulf with figures such as Yousef Al Otaiba, foreign policy adviser to the sheikhs running the United Arab Emirates. Otaiba, in turn, introduced him to Khaldoon Khalifa Al Mubarak, who ran a fund called Mubadala Development, which was on the cutting edge of the sovereign wealth fund business.

Since the 1950s resource-rich countries, in particular the petro-states of the Gulf, had set up sovereign wealth funds to invest the surplus earnings from sales of their oil. The idea was to replace the natural wealth which was being extracted and sold with financial assets that would generate income, appreciate over time, and serve as the basis of their economies when the oil finally ran out. By the early 2000s, the total funds under management by sovereign wealth funds were US$3.5 trillion, comparable to the annual gross domestic product of Germany. Sovereign wealth funds were originally run in a very conservative manner, taking few risks—“gentlemen prefer bonds”—but since the inflation and currency crises of the 1970s had turned to more aggressive strategies to protect their assets from the ravages of Western money printing and financial shenanigans.

While some sovereign wealth funds, for example Norway's (with around US$1 trillion in assets the largest in the world) are models of transparency and prudent (albeit often politically correct) investing, others, including some in the Gulf states, are accountable only to autocratic ruler(s) and have been suspected as acting as personal slush funds. On the other hand, managers of Gulf funds must be aware that bad investment decisions may not only cost them their jobs but their heads.

Mubadala was a new kind of sovereign wealth fund. Rather than a conservative steward of assets for future generations, it was run more like a leveraged Wall Street hedge fund: borrowing on global markets, investing in complex transactions, and aiming to develop the industries which would sustain the local economy when the oil inevitably ran out. Jho Low saw Al Mubarak, not yet thirty years old, making billion dollar deals on almost his sole discretion, playing a role on the global stage, driving the development of Abu Dhabi's economy, and being handsomely compensated for his efforts. That's the game Low wanted to be in, and he started working toward it.

Before graduating from Wharton, he set up a British Virgin Islands company he named the “Wynton Group”, which stood for his goal to “win tons” of money. After graduation in 2005 he began to pitch the contacts he'd made through students at Harrow and Wharton on deals he'd identified in Malaysia, acting as an independent development agency. He put together a series of real estate deals, bringing money from his Gulf contacts and persuading other investors that large sovereign funds were on-board by making token investments from offshore companies he'd created whose names mimicked those of well-known funds. This is a trick he would continue to use in the years to come.

Still, he kept his eye on the goal: a sovereign wealth fund, based in Malaysia, that he could use for his own ends. In April 2009 Najib Razak became Malaysia's prime minister. Low had been cultivating a relationship with Najib since he met him through his stepson years before in London. Now it was time to cash in. Najib needed money to shore up his fragile political position and Low was ready to pitch him how to get it.

Shortly after taking office, Najib announced the formation of the 1Malaysia Development Berhad, or 1MDB, a sovereign wealth fund aimed at promoting foreign direct investment in projects to develop the economy of Malaysia and benefit all of its ethnic communities: those of Malay, Chinese, and Indian ancestry (hence “1Malaysia”). Although Jho Low had no official position with the fund, he was the one who promoted it, sold Najib on it, and took the lead in raising its capital, both from his contacts in the Gulf and, leveraging that money, in the international debt markets with the assistance of the flexible ethics and unquenchable greed of Goldman Sachs and its ambitious go-getters in Asia.

Low's pitch to the prime minister, either explicit or nod-nod, wink-wink, went well beyond high-minded goals such as developing the economy, bringing all ethnic groups together, and creating opportunity. In short, what “corporate social responsibility” really meant was using the fund as Najib's personal piggy bank, funded by naïve foreign investors, to reward his political allies and buy votes, shutting out the opposition. Low told Najib that at the price of aligning his policies with those of his benefactors in the Gulf, he could keep the gravy train running and ensure his tenure in office for the foreseeable future.

But what was in it for Low, apart from commissions, finder's fees, and the satisfaction of benefitting his native land? Well, rather more, actually. No sooner did the money hit the accounts of 1MDB than Low set up a series of sham transactions with deceptively-named companies to spirit the money out of the fund and put it into his own pockets. And now it gets a little bit weird for this scribbler. At the centre of all of this skulduggery was a private Swiss bank named BSI. This was my bank. I mean, I didn't own the bank (thank Bob!), but I'd been doing business there (or with its predecessors, before various mergers and acquisitions) since before Jho Low was born. In my dealings with them there were the soul of probity and beyond reproach, but you never know what's going on in the other side of the office, or especially in its branch office in the Wild East of Singapore. Part of the continuo to this financial farce is the battles between BSI's compliance people who kept saying, “Wait, this doesn't make any sense.” and the transaction side people looking at the commissions to be earned for moving the money from who-knows-where to who-knows-whom. But, back to the main story.

Ultimately, Low's looting pipeline worked, and he spirited away most of the proceeds of the initial funding of 1MDB into his own accounts or those he controlled. There is a powerful lesson here, as applicable to security of computer systems or access to physical infrastructure as financial assets. Try to chisel a few pennies from your credit card company and you'll be nailed. Fudge a little on your tax return, and it's hard time, serf. But when you play at the billion dollar level, the system was almost completely undefended against an amoral grifter who was bent not on a subtle and creative form of looting in the Bernie Madoff or Enron mold, but simply brazenly picking the pockets of a massive fund through childishly obvious means such as deceptively named offshore shell corporations, shuffling money among accounts in a modern-day version of check kiting, and appealing to banks' hunger for transaction fees over their ethical obligations to their owners and other customers.

Nobody knows how much Jho Low looted from 1MBD in this and subsequent transactions. Estimates of the total money spirited out of 1MDB range as high as US$4.5 billion, and Low's profligate spending alone as he was riding high may account for a substantial fraction of that.

Much of the book is an account of Low's lifestyle when he was riding high. He was not only utterly amoral when it came to bilking investors, leaving the poor of Malaysia on the hook, but seemingly incapable of looking beyond the next party, gambling spree, or debt repayment. It's like he always thought there'd be a greater fool to fleece, and that there was no degree of wretched excess in his spending which would invite the question “How did he earn this money?” I'm not going to dwell upon this. It's boring. Stylish criminals whose lifestyles are as suave as their crimes are elegant. Grifters who blow money on down-market parties with gutter rappers and supermarket tabloid celebrities aren't. In a marvelous example of meta-irony, Low funded a Hollywood movie production company which made the film The Wolf of Wall Street, about a cynical grifter like Low himself.

And now comes the part where I tell you how it all came undone, everybody got their just deserts, and the egregious perpetrators are languishing behind bars. Sorry, not this time, or at least not yet.

Jho Low escaped pursuit on his luxury super-yacht and now is reputed to be living in China, travelling freely and living off his ill-gotten gains. The “People's Republic” seems quite hospitable to those who loot the people of its neighbours (assuming they adequately grease the palms of its rulers).

Goldman Sachs suffered no sanctions as a result of its complicity in the 1MDB funding and the appropriation of funds.

BSI lost its Swiss banking licence, but was acquired by another bank and most of its employees, except for a few involved in dealing with Low, kept their jobs. (My account was transferred to the successor bank with no problems. They never disclosed the reason for the acquisition.)

This book, by the two Wall Street Journal reporters who untangled what may be the largest one-man financial heist in human history, provides a look inside the deeply corrupt world of paper money finance at its highest levels, and is an illustration of the extent to which people are disinclined to ask obvious questions like “Where is the money coming from?” while the good times are rolling. What is striking is how banal the whole affair is. Jho Low's talents would have made him a great success in legitimate development finance, but instead he managed to steal billions, ultimately from mostly poor people in his native land, and blow the money on wild parties, shallow celebrities, ostentatious real estate, cars, and yachts, and binges of high-stakes gambling in skeevy casinos. The collapse of the whole tawdry business reflects poorly on institutions like multinational investment banks, large accounting and auditing firms, financial regulators, Swiss banks, and the whole “sustainable development” racket in the third world. Jho Low, a crook through and through, looked at these supposedly august institutions and recognised them as kindred spirits and then figured out transparently simple ways to use them to steal billions. He got away with it, and they are still telling governments, corporations, and investors how to manage their affairs and, inexplicably, being taken seriously and handsomely compensated for their “expertise”.

June 2019