Multi-million Ponzi fraudster ordered to pay £1 compensation

This Ponzi scheme fraudster conned investors out of more than £300 million. Yet he will only have to pay £1 in compensation.

My one-time lunching companion Nicholas Levene is currently five months into his thirteen year stretch – probably at one of Britain's more palatial prisons – for defrauding investors out of an estimated £316 million via a Ponzi scheme. 

That's one of those plans which offer exceptionally good returns, but only if you get in early enough. You get the money from the cash paid in by new entrants to the scheme. When the deposits fail to more than match the withdrawals, the whole house of cards collapses.

Nick (thankfully, no relation) has just been ordered to pay his victims £1. Yes, just a single pound coin. And he has been given seven days to find the cash. That should not be difficult even out of meagre prison earnings. It won't go far in compensation.

Should we feel sorry for them?

But – and this is a view shared by others – I don't have too much sympathy with the losers. They were the rich and often famous.

With the sort of money he needed to fund his super-charged lifestyle (my lunch with him was low cost as this was before he become obsessed with really big bucks) and his gambling habits, there was no point in trying to rip off people with a few thousand.

He needed millionaires – and he got them.  The court was told last November that victims included Sir Brian Souter and Ann Gloag, the brother and sister founders of the Stagecoach transport group, and top London restaurant owner Richard Caring whose properties included The Ivy and Le Caprice.

The question remains why these super-charged business folk fell for him. When I met him, a decade and more before his Ponzi scheme, I thought him a charming chancer.  Had he offered me, as he did his victims, an investment opportunity which was labelled super-safe yet boasted a return many times that of a savings account, I would have questioned how he did it. 

And I suspect I would not have been happy with the explanation. What he ended up with was a too-good-to-be-true investment.

The making of a fraudster

Nick left school at 16, became a tea boy at a firm of stockbrokers, then – when I met him – he was a middling sort of person at a firm of City money brokers. He was not rich. In fact, he used to mark his personal bottle of Scotch after each glass with his signature to stop other people taking a free drink.

[SPOTLIGHT]But by 2004, he was worth £16 million with a lifestyle his own father found “beyond comprehension and understanding”. Besides the chauffeur-driven Bentley, he hosted £10,000-a-day pheasant shoots, owned villas in Israel and held a £588,000 bar-mitzvah party for his son in Battersea Park in 2009 with a top girl band.

Nick got to rub shoulders with the rich, whether famous or out of the limelight. The more he surrounded himself with the trappings of success – and the successful themselves – the more he attracted others. Madoff used the same formula. It may be that the super-rich know somewhere inside themselves that it only takes one lucky break to add several zeroes to the bank account. 

Look at some of the Russian oligarchs. Just how did they go from zero to financial hero?

Money breeds money

Their secret is that money breeds money.  Fraudsters, and especially those who take on some of the richest people around, have to be strong, controlling characters. The street mugger uses a knife or gun.

The scamster uses force of personality.

The more they surround themselves with glamour, success, and promises of high returns (although not as high as the real rich enjoy when they are on a roll), the more they attract others who want some of that to rub off onto them. Investors should ask questions, but they don't want to be seen as too aggressive in case the “wonderful deal” is withdrawn.

Fraudsters know that cutting people out of a scheme is a form of punishment and hence a method of discipline  – it's like when one of my own scamster callers starts to get aggressive and threatens that I won't be able to invest.

As my psychologist friend puts it: “Fraudsters are able to make people want to believe them. They don't want to be excluded from anything which looks easy. Yes, there is some greed, but without greed, or hunger for money, they would not have got to where they are now."

I am not sure how the losers will share that one pound coin between them. Perhaps, they could buy a bottle of cheap cola and drown their sorrows.

More on scams:

These scammers have cloned an entire company!

These sick scammers are taking advantage of war and death

The fraudsters who rely on the good name of others

ICSS: this premium rate number rip-off will cost you a fortune

Phishing - the simple scam that will never die

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