Pigeon Fever: Ponzi Schemes Still Thriving

Morley Safer Takes a Look at Why People Are Too Trusting and Gullible

The ancient wisdom that there's a sucker born every minute has been especially pertinent given the financial disasters of the past few years. So it's time for a short and painless test: are you sometimes just too trusting? Do you invest in things you don't really understand? Are you also a bit greedy? Then, you too could be suffering from "pigeon fever."

"Pigeons" are what con men call their victims.

After a year of revelations about Bernard Madoff, who cheated investors out of billions, you might think Americans have wised up. Fat chance.

Prosecutors and regulators tell us that even in this age of skepticism, Ponzi schemes like Madoff's are thriving. One regulator even calls it "ponzimonium."

Why are there so many pigeons around? 60 Minutes correspondent Morley Safer asked a few people who should know.

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"As a student of con games and deception, were you at all surprised by the Bernie Madoff scam?" Safer asked Ricky Jay.

"Would you be surprised if I told you that I predicted it?" he replied.

We approached Jay, America's foremost card sharp. He's an actor, sleight of hand artist, a man with an encyclopedic knowledge of con men past and present.

He told us of a talk he gave seven years before Madoff's fall.

"Beware of someone well established in the industry," he warned.

It was a lecture on financial fraud to a gathering of police officers in 2001.

"I would also beware of someone who will rely heavily on an affiliation with an investor group, be it religious, ethnic, or geographic," he told the group.

He was describing Madoff to a T.

"I think these elements will make the market ripe for any sort of pyramid or Ponzi scam," Jay said.

"And that is pure Bernard Madoff," Safer remarked.

"It's pure Bernie Madoff. But can I tell you another element of the con? That I actually made this page on Photoshop last night and put it into this bulletin. And I did that to prove a point, and the point is…," Jay told Safer, showing him a doctored magazine.

"You got me," Safer said.

"…you set it up by saying that I was a student of cons and that I'm knowledgeable in that area," Jay explained.

"And so, you allowed my supposed expertise to make you believe this is true. This magazine is true. I really have lectured to this group of police against confidence crime. Everything is true except for this page which I slipped in last night."

So what's the moral? Trust no one?

"We wouldn't want to live in a world where we couldn't be conned because in effect we would then be living in a world where we mistrusted or refused to trust anyone. So this is the price we pay," Jay said.

And pay we have: in the wake of the Madoff scandal, Ponzi perp walks have become a marathon.

There's Texas financier Allen Stanford, accused of a $7 billion Ponzi scheme; Minnesota businessman Tom Petters, convicted recently of a $3 billion scam; and Park Avenue lawyer Marc Dreier, mastermind of a "mere" $400 million Ponzi scheme that landed him first on "60 Minutes" and then in federal prison.

"I thought if someone would ever interview me on a program such as yours, it'd be for something good I've done, not something humiliating I've done," Dreier told correspondent Steve Kroft.

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