The largest Ponzi scheme in Canadian history

A Ponzi scheme is a form of fraud in which belief in the success of a nonexistent enterprise is fostered by the payment of quick returns to the first investors by using money invested by later investors. Gary Sorenson and Milowe Brost, of Alberta, Canada, ran such a scheme with reasonable success raking in over two-hundred million dollars from unsuspecting investors. The two men invested in worthless shell companies with names such as Syndicated Gold Depository SA and Base Metals Corp LLC and convinced thousands of middle-aged investors to part with their savings with the promise of low-risks and high returns (McKenna 2015). Brost and Sorenson’s scam ran for a decade before unraveling and in 2015, years after being accosted, they were sentenced to twelve years in prison.

Snider (2009) notes that during the dawn of the 20th century as finance capitalism began its ascent to hegemonic dominance, the Canadian government was forced to address the realities of nation building and developing natural resources. The industries involved however, particularly mining, were susceptible to repeated cases of fraud in the market. This is because mining has always been a very popular investment and Sorenson and Brost’s “mining and refining companies” were seen as low risk; if the price of gold goes higher then a gold mining company’s worth could be expected to rise as well. This was something that Brost took advantage of; as a salesman he was said to be able to “sell a refrigerator to an Eskimo” (McKenna 2015. 1) and had no problem convincing vulnerable investors to hand over their life savings on the promise of guaranteed high returns. Investors were taken to conferences and tours where they could see small gold refining plants giving the whole operation a sense of legitimacy (McKenna 2015).

David Friedrichs (2004) examined the Enron et al. case to see if he could find an explanation as to the corporation’s motives. I find that he makes a few interesting points that I feel can be used to identify Brost and Sorenson’s reasoning behind their fraud. Friedrich notes that greed is often used as an explanation for white collar and corporate crime which, as a simplistic explanation, can easily be attributed to the offenders; however there are other factors outlined in his discussion. I believe that there was a certain amount of dramaturgy that influenced the two partner’s decisions. As mentioned earlier, Brost was said to be a stellar salesman and was able to convey an image of trust and respectability that could subdue any fears potential investors may have had; the two were able to capitalize on this image and, from an outside perspective, it may have even been one the main reasons that they started this scheme. They had confidence in their ability to keep their investors happy, and in the dark. It is also important to examine the two men’s personality or individual attributes that may have influenced their actions. When Friedrichs (2004) examined the top personnel at Enron, they were uniformly described as lacking in basic integrity, and greedy. Media had reported on the individual greed of some of the executives at Enron and reported million dollar mansions, vacation homes, yachts, jets, and so on (Friedrichs, 2004). In many of the articles concerning Brost and Sorenson there were similar findings; the two men had spent an extravagant amount of money on their lavish lifestyle.

Hundreds of victims in the Brost and Sorenson case lost everything. They had invested their life savings and mortgaged their houses; many of these people have had to return to work, it has eroded marriages, and even caused some victims to end their lives (Slade, 2015). During the trial there were more than 600 victim impact statements submitted and Just Robert Hall noted that they were motivated by greed with no regard to the effects their actions were having on people (Slade, 2015). Across the board the media has condemned their actions. McMullan (2006) examines truth-telling institutions in regards to corporate and white collar crimes. He focuses on the Westray disaster and how the media registered news as truth from 1992-2002. The media acts as an important tool for the production of truth, and as McMullan observes “when business crime is reported, it tends to be concentrated in up-market newspapers or on specialist pages and to be framed in ways that demarcate it from “real” crime”  (McMullan, 2006. 908). He projects a negative view of the way media portrays upper class crime, claiming that these crimes are often downplayed.

I found that in the case of Brost and Sorenson the media, as a whole, was very concise in how it viewed the duo. Although the two were not a part of a corporation they were still upper class, “white collar,” men and the media’s response to their crime is powerful and condemning; the duo’s integrity and ethics are questioned and there is a clear theme of criminality. McMullan (2006) observes at one point in his research that the press seems inclined to present white collar criminals as immoral, but not as criminals. I find the way the media describes Brost and Sorenson a pleasant contradiction to McMullan’s argument about the press, as they don’t appear to be holding anything back against the pair. Unfortunately as the case came to a close, Judges told the victims that they would be unable to retrieve the invested monies as they were likely hidden in offshore accounts or gone; and many of the victims, and their families, pushed hard for the pair to be given the maximum sentence allowed of 14 years, although at the end, as stated, the judge sentenced them to twelve years in prison (Slade, 2015).

 

References

Daryl Slade, 2015. “Decade of greed puts Ponzi schemers behind bars for 12 years.” Calgary Herald. http://calgaryherald.com/news/crime/brost-and-sorenson-get-12-years-for-   massive-Ponzi-scheme.

Friedrichs, David. 2004. Enron et al. Paradigmatic White-Collar Crime Cases for the New Century. Critical Criminology 12(2): 113-132.

McKenna, Barrie. “Largest Ponzi scheme in Canadian history exploited boom time Alberta.” February 16, 2015. The Globe and Mail. http://www.theglobeandmail.com/report-on-   business/largest-ponzi-scheme-in-canadian-history-exploited-boom-time- Alberta/article23010870/.

McMullan, John. 2006. News, Truth, and the Recognition of Corporate Crime. Canadian Journal of Criminology and Criminal Justice 48(6): 905-939.

Snider, Laureen. 2009. Accommodating Power: The ‘Common Sense’ of Regulators. Social and   Legal Studies 18(2): 179-197.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s