If greed is good (until, invariably, it isn't), it's equally good to both individuals and institutions, and often leads them both to stray from core investing principles, not even to mention common sense.
It's often hard to draw the line between where individual investor responsibility ends and where a financial fraudster duping the poor, unsuspecting investor begins their nefarious scheming.
Sometimes, investors make it easy for us to just heap the blame on them.
We spend countless hours online researching everyday purchases on Amazon, reading through hundreds of reviews of $99 juicers and $9 headphones for our iPhones. When an individual buys a car or home, the decision is an agonizing, deliberative process, during which countless sources of information and verification are consulted.
Yet people will throw money at a financial advisor who says "act quick" and who is referred to them by a friend or family member, without even sitting down at the computer and typing the advisor's name into Google.
Seriously? Seriously. Even in the post-Bernie Madoff era, individuals still haven't learned to do something as simple as Google a financial advisor before entrusting the advisor with their assets.
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Last week, a sad chapter in an investment fraud that Google could have prevented came to a close, with the fraudster being locked up for the next four years and nine months and required to pay back the $2.4 million he stole from investors.
Yet the really incredulous part of this second-rate Madoff's tale is that the fraud was hiding in plain sight from investors. Janamjot Singh Sodhi ran a Ponzi scheme promising high rates of return in a relatively short period of time, soliciting funds from 2005 and all the way up until September 2011.
Sodhi was able to continue attracting millions from investors, even through the fall of 2011, and even though in January 2006 the New York Stock Exchange permanently debarred him, and in January 2009, the California Department of Corporations ordered Sodhi to cease and desist from engaging in the business of an investment advisor in California.
It seemed difficult to believe that investors didn't even do a simple Google search. It seemed much more likely that they were confused by an alias this fraudster used. Not the case, said a spokeswoman in the U.S. Attorney's Office for the Eastern District of California, which prosecuted Sodhi: "He did not use an alias; investors could have found the information about his debarment through an Internet search."
Sodhi's fraud was cookie-cutter. What should drive one nuts, in the opinion of Bill Singer, a lawyer with Herskovits PLLC who specializes in investor fraud, is the fact that investors didn't even perform minimal due diligence.
"Forget about hiring an attorney or paying for a background check. If you just typed his name into Google you could find out that before he solicited you he was barred by the NYSE and threatened by the state of California. ... People spend more time buying a used car for $2,000 than giving $10,000 or $1 million to someone they never met or checked out to invest."
Tracy Coenen of forensic accounting firm Sequence, put it simply, "Google is your best friend." She allows that not all people—especially older people—are good at using a computer, let alone a search engine. Internet information can also be hit or miss. However, the fact that promoters tend to have a history should make one err on the side of caution if the Internet turns up anything.
"I go to Google whenever a case is going on and try to find historical information and very often find things," Coenen said.
The corrupting power of money, even theoretical money, is a much surer thing than the promise of investment returns, and that corrupting power often ensures investor blindness.
Michael Goldberg, a lawyer and investor fraud specialist with Akerman Senterfitt, said in a $50 million scheme where he represented investors, individuals were told that the company's products were stored in a warehouse in a Puerto Rico. One of the investors was in Puerto Rico on vacation and decided to go visit the warehouse. It turned out that the address he was given for the warehouse was actually for a parcel of vacant land.
"Shockingly, the investor ignored this glaring evidence that something was wrong and continued to invest both his and others funds into the scheme," Goldberg wrote in an email.
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For Singer, there is only one good thing to come out of this latest coda on garden-variety investment fraud, at least, in his tough love, make no apologies, assessment of investor responsibility.
"We are better off having these people lose money. We need them out of the investing gene pool," he said. "If people won't uphold their end of the bargain, we're wasting a lot of time. To go after Sodhi with a federal prosecutor and get the FBI involved in a trial and now incarceration; that's a lot of money and all could have been prevented if someone just Googled him. You've got to wonder what else you can do? You can't protect people from their own greed and stupidity."
But you can teach them how to use Google, or remind them to use it, and not just for Amazon purchases.
—By Eric Rosenbaum, CNBC.com.