Sean Mueller said one thing...
but Sean Mueller knew another.
I was at a party recently talking about the Deceptology blog and deception in general when someone asked me about Ponzi schemes. He wanted to know the psychology behind the Ponzi scammer.
I said that some of these Ponzi schemers promise more than they can deliver, get in over their head and keep the lie going. That's why they feel justified in spending money on things like expensive homes and cars and country clubs, because any frugality might be seen as a lack of confidence.
A few days later, I read a story about Ponzi scammer Sean Mueller being sentenced to 40 years in prison.
Besides ripping people off, Mr. Mueller's story previously had gotten national attention because he stole from former Denver quarterback John Elway. Also, after he was caught, Mr. Mueller created a bit of drama when he threatened to commit suicide by jumping off the top of a parking garage.
Over fifty victims watched in the courtroom when he was sentenced. Some of the individuals lost over half a million dollars. Their reactions were predictable. They wished he had gotten more jail time, since he could be out in 20 years. They talked about a disabled person who was conned. They thought he was only remorseful because he'd been caught.
But what I found most interesting were Mr. Mueller's words (in The Denver Post) about how his scam began:
"At the end of a quarter the market went against me very strongly. I panicked, and I sent out a falsified report," he said. After that, he continued the scheme, trying to recover the money, he said.I wasn't familiar with the phrase "make them whole," so I did a search. To "make one whole" is the legal concept of paying or awarding damages to a victim so they're back where they were before someone else got involved. So Mr. Mueller was trying to dig himself out of the hole he dug by at least returning his investor's original investment.
"I was scared and trying to make my clients whole," he said. "I knew that if my situation was discovered, I would be unable to make them whole."
Which means he lost his client's initial investment, never mind the 12% to 25% returns he promised on those investments.
Of course, all this time he lived an extravagant lifestyle, with three houses, expensive cars and, yes, country club memberships. That's because if he wasn't extravagant, someone might have noticed, confidence could have dropped, and people might have wanted to withdraw their money, causing the whole thing to collapse.
The judge said Mr. Mueller seemed genuinely remorseful, and the case was "less sheer greed, and more ego and hubris."
In his mind, Sean Mueller was justified in trying to keep the scheme going, because if he stopped before his investments recovered, he would lose his client's initial investment and be unable to "make them whole."
That's why he wrote fake documents saying that he managed $122 million, when he only had $15 million left of the $20.6 million he collected.
And in the end, the 42-year-old Mr. Mueller had about $9.5 million in his accounts, with about $140 million in liabilities.
Mueller sentenced to 40 years for bilking investors - The Denver Post>>
Mueller Gets 40 Years For Hedge Fund Ponzi Scheme, FINalternatives>>
Sean Mueller pleads guilty in Ponzi scheme that ripped off John Elway, others for $71 million, Westword (includes the Arrest warrant, affidavit, and offense information:>>
Millions lost as web snared trusting prey, The Denver Post>>