Chapter Nine

The Ponzi Principle

“What are you doing?” I asked Lynda.

“Writing on my iPad.”

Patience, Jeff. “I can see that, my lovely wench. What are you writing on your iPad?”

“Call me that again and I’ll give you a free taekwondo demonstration. You won’t like it.” What, you don’t like being called lovely? “I’m brainstorming ways to get into the story with a different angle.”

Welles Faro, as expected, had broken the story of Scotland Yard’s investigation of Arthur James Phillimore with another huge top-of-page-one column in The Daily Eye. The other London papers, meanwhile, were absorbed with comparatively trivial matters like the torrential rains battering the British Isles, Prince Philip’s continuing hospitalization, and the Euro 2012 football (a.k.a. soccer) tournament which had opened the day before in Warsaw with a 1-1 tie between Greece and Poland.

“But we’re on our honeymoon!” I protested.

“Honeymoon, yes. Vacation no. And aren’t you supposed to be working, too?”

Oh, that. It was Saturday morning, before breakfast. We’d been in London since Wednesday. Although Mac had already done some of his business at King’s College before we arrived, and was going to go back, I hadn’t yet made that trek. We’d been busy with other things. Eventually we would have to justify the deal I had struck whereby I was considered to be on the clock for St. Benignus part of the time in London because I would be working up publicity on the exchange program.

“I’ll get around to it,” I promised.

It wasn’t that I hadn’t been thinking of the college. In fact, I missed the campus, as well as Erin, my nieces and nephews, Popcorn, and even Oscar. I liked to travel, but it seemed that we’d been away so long. Well, it didn’t help any to dwell on that. I tried to scrunch up my homesickness into a little ball and shove it to the back of my mind. At least the love of my life was with me.

“So what’s on your to-do list today?” I asked.

“First,” Lynda said, “I need to get an interview with that Assistant Commissioner, Andrew Madigan. He’s the wheel behind the investigation.”

“That sounds like a conflict of interests, or at least an oddity. Madigan and Phillimore, if not friends, are at least more than nodding acquaintances. They’re both members of the Binomial Theorists.”

“Good point.” She typed. “I’ll ask him about that. I also have to find out more about how this fraud worked. Faro’s breathless column this morning was heavy on shock and pretty skimpy on facts.”

“Faro said it was a Ponzi scheme. The Ponzi principle is simple enough.” Knowing that I pay attention to this stuff, Lynda was all ears. Wait, scratch that. Sitting on our bed in her yellow satin pajamas, bent forward to type on the iPad on her lap, it was obvious that she was not all ears. But she was paying attention to what I was saying. I diverted my eyes from her shapely body so that I could pay attention to what I was saying, too.

“A Ponzi scheme is a fraudulent investment scam in which existing investors are paid out of money coming in from new fish entering the pipeline. Even though the investors are getting a huge return on their money, the scammer is getting even more. And eventually it all collapses because there aren’t enough new investors to keep it going forever. I think most of the time the legal authorities step in before it gets to that point. If it gets big enough that hundreds of investors are involved, eventually somebody smells a rat.”

“And why is it called a Ponzi scheme?”

“It was named after one of your countrymen, an Italian immigrant named Carlo or Charles Ponzi. He worked a scheme like this in the early 1920s in Boston. But the idea was around long before him, and keeps getting resurrected for new generations of suckers.”

“Wasn’t that Madoff business a Ponzi scheme?”

I nodded. “The biggest of them all, so far. It all came unraveled at the end of 2008, during the Great Recession, when a lot of his clients panicked and wanted to cash out. That’s when they found out there wasn’t any cash and their investments were essentially worthless. I don’t know how many thousands of investors Bernie Madoff bilked, but I know they ranged from well-heeled individuals to big-name charities.”

“I followed it at the time, but I’m sure not as closely as you. How much money was involved?”

Numbers are not her strong suit. “That’s hard to say. Some of the early estimates were as high as $65 billion missing from client accounts, but - ”

“Billion?” Lynda’s eyes widened.

“With a ‘b.’ But that figure was probably too high because it included a lot of investment gains that never really existed and therefore wasn’t actually money lost. I think the bean counters figured out that Bernie Madoff and his associates actually stole somewhere between ten and eighteen billion. Whatever the real number was, it got Bernie a hundred and fifty years in federal prison.

“Next up among the big Ponzi schemers was a guy named R. Allen Stanford. He was convicted a few months ago in Texas of bilking investors out of more than $7 billion. I think he’s going to be sentenced later this month.”

“How do you remember all that stuff, Jeff?”

“I’m very good with numbers” - yours are 38-28-38! -“and I’ve always been interested in investments.”

“So when’s my birthday?”

“December first.” Good thing I remembered that number! “You’ll be thirty-one.”

She didn’t linger on that topic. “Why do people fall for these scams and schemes?”

I smiled ruefully. “The idea of wealth without work or risk never seems to lose its appeal. When the stock market is down, as it was at the end of the last decade, and interest rates on CDs are in the low single digits, I guess it’s hard to remember the old rule that if it seems too good to be true it probably is.”

She regarded me shrewdly. “I’ve been following your advice on my 401(k) for years, Jeff. I hope you haven’t - ”

I protested with my hands. “Not to worry! Don’t you remember? You were going to put it all into Grier Media Corp. stock, but I talked you into a prudently diversified portfolio of stock and bond mutual funds which I rebalance periodically in light of your projected retirement date.”

“Whatever that means,” she muttered, going back to her typing.

Financial planning and saving are not Lynda’s strong suits. She does fairly well at spending, though.

I was about to explain to her that, thanks to my wise advice, her retirement portfolio was growing nicely when I heard a rap at the door. I looked through the eye-hole. My brother-in-law was standing in the hallway, filling up the view available through the wide-angle lens.

“It’s Mac,” I reported to Lynda. “You’d better get decent.”

“I’m always decent, darling. I’ll put on a robe.” Marry a wordsmith and that’s what your conversations are apt to be like.

When I let Mac in, he gave evidence of being under the influence - of caffeine.

“Good news, Jefferson!” he boomed. “Ms. O’Toole has granted us an audience at Deadly Hall.”

“Don’t call it that,” I said. “That name gives me the creeps.”

“Besides,” Lynda added, tying the belt around her robe, “it’s a Faro-ism.” Are you saying he’s not your favorite Anglo-American journalist covering this story?

Mac bowed graciously. “As you wish.”

He thought we could get a start on planning the day while Kate was finishing her shower. Heather O’Toole was expecting us around noon.

“When are we going to King’s College?” I asked. “We’re actually supposed to be working on this trip, remember?”

Mac waxed indignant. “I assure you that thoughts of my beloved popular culture program have never been far from my mind. Tomorrow night, before the debate on the King’s College London campus, we are dining at Simpson’s in the Strand with Professor Ralston as well as Sir Stephen Fresch.” Althea Ralston, no doubt some dry-as-dust academic, was the moderator of the debate as well as Mac’s principal connection on the KC campus. “I also have an appointment with her on Monday, at which time you will accompany me and photograph the campus, interview her, etc. -whatever it is you do.”

“And he does it very well,” Lynda said stoutly.

We decided that today was to be our museum day, so we spent the morning at the fabulous British Museum. It was hardly spoiled at all by Mac’s lectures on the way. “Holmes once had rooms just around the corner from the Museum on Montague Street,” he informed us as we set off.

“Didn’t that guy in the ‘Blue Carbuncle’ hang out at the British Museum?” Lynda asked.

“Indeed he did,” Mac confirmed, “and at the nearby Alpha Inn, which most scholars believe is actually...”

And so forth. By the time we got there, Mac had discussed in excruciating detail how the British Museum is mentioned in five Sherlock Holmes adventures.

Looking like a Greek temple, Britain’s national museum is one of the world’s greatest collections of, well, everything - about eight million permanent items, according to the guidebook I flipped through. One of the special exhibits was on Shakespeare. We practically had to pull Mac away from it to get to Headley Hall by noon. He thinks he’s Falstaff.

The logistics of getting there had been worked out in the morning, but it wasn’t easy. Lynda initially balked at Faro’s offer to drive us.

“I hate being dependent on that throwback to the Brass Age of journalism,” she sulked.

“I can understand that,” Kate said.

“Sure.” I nodded. “I’m simpatico, too, but let’s face the facts: If it weren’t for Faro, we wouldn’t be getting into Headley Hall at all.”

Lynda rolled her eyes. “I wonder what his angle is. He’s not helping us out of the goodness of his heart.”

“Perhaps” - Mac added that word at the beginning of the sentence just to appear modest - “Faro would like to see Sebastian McCabe in action.”

Kate insisted that she had no desire to go along. “I have to catch up on some long-distance mothering,” she said grimly, holding up her smartphone.

I had a feeling some virtual fireworks were on her agenda.