Why am I not surprised by this story about Failed Hanover Finance Director Mark Hotchin? Hotchin was promised 160pc interest
Hanover director Mark Hotchin invested $560,000 in a Ponzi scheme that promised a 160 per cent return over just two months.
His ill-fated foray into what his lawyer described as "Looney Tunes Investments", is thought to have lost him about $225,000.
The investment was of his own money, but when the Ponzi scheme fraudsters were prosecuted, Mr Hotchin gained a court order to keep his involvement secret from investors and protect Hanover.
He was a victim of the sham get-rich-quick schemes in 2002 but the director and co-owner of the Hanover group of companies can only now be named after a legal challenge by the Herald to overturn the suppression order.
Kerry Finnigan, a director and chief executive of the Hanover group at the time, was also a victim investing $120,000 but ending up out-of-pocket by just a small amount. He also succeeded in having his name suppressed when the case was prosecuted by the Serious Fraud Office in 2004-05.
Yesterday, investor Tom Brosnahan, who poured a "substantial sum" into Hanover-owned United Finance in 2008, said the pair's involvement in the Ponzi scheme and then name suppression was the latest in a long line of injustices.
So here we have more people claiming to be better at managing our money than us bunnies ever could be, getting sucked into a scheme that promises, up front, 160% return per annum. Imagine if you will the mindset needed to even half believe such twaddle; then imagine what it takes to dump half a mil of your own money into such a scheme, then the level of cognitive dissonance needed to continue to claim that you "know" what you are doing.
Of course, they DID understand that if anyone ever discovered his blind greed and all-consuming stupidity his "business" was finished, which leads to a pretty clear deduction that these people knew exactly what they were doing, and it wasn't managing other people's money.
Still, I have little sympathy for the "investors" in these finance companies. When you hand your hard earned dollars to someone who makes that kind of claim you cannot possibly know enough to feel safe, as this story shows. To do so breaks my 3 rules of money management.
- Never let anyone else make decisions about your money
- See rule 1
- No, really, see rule one.
I also have rule 3a which is that if I am not smart enough to understand, and explain to someone else exactly how a particular scheme works, I should not go near it.
It helps that I have rule 3b as well which states that I am at least as smart as these guys and if I can't figure it out, its probably a scam and if it isn't, I don't deserve to share in the benefits because I'd be a free rider. and that ain't ethical.
But then unethical financial activity and free riding is now the modus operandum of our society. Its a good thing its ending and we are moving back to the model of work hard, spend less than you earn, save the difference, have no debts and stop dreaming about life in the fast lane.
Nice to hear your thoughts again Earl !
Posted by: David | April 14, 2011 at 11:27 PM