How to Buy Influence
Here is part of the press release:
At all times relevant to the charges, Hsu operated and was the Managing Director of two companies, Components Ltd. And Next Components Ltd. (the "Companies"), which purported to provide investment programs that extended short-term financing to businesses. Hsu recruited victims by guaranteeing high rates of return on short-term investments. After receiving money from investors, Hsu, for a time, repaid both the victims' interest and principal as promised. Believing Hsu to be trustworthy and the Companies to be legitimate and potentially profitable, victims often agreed to roll-over their invested funds into new investments with Hsu, contribute additional, larger sums of money to the scheme, or recruit friends to invest with Hsu. In reality, however, the Companies were merely vehicles for Hsu's Ponzi scheme, in which money owed as returns to older investors was paid with money received from newer investors, and Hsu never invested the money in the manner he represented to his victims. In the end, Hsu defrauded his victims out of more than $60 million.In an effort to raise his public profile and thereby convince more victims to invest in his fraudulent scheme, Hsu pressured investors to contribute tens of thousands of dollars to various candidates for President of the United States, the United States Senate, and the United States House of Representatives.
Hsu made victims believe that failure to make political contributions to candidates he supported would jeopardize their investment relationship with him, and put their money at risk.
At first glance, I though this was less sophisticated than the Enron ponzi scheme. But, on second thought, I like the idea about buying a reputation: putting the squeeze on your victims to buy you influence with politicians. I haven't seen that before. The usual move is to buy the politicians directly with your victim's money. But this appears to be a fairly clever innovation - require the contribution directly from your victim. I wonder if it is more effective, or just another device to stall the eventual bankruptcy of the fraud?
Others have wondered what the purpose of the funding raising was in the Ponzi scheme.
But his pursuit of political and business funds at the same time – from many of the same people – leaves unclear which was the end and which was the means. Was Hsu hoping to leverage his political affiliations to boost the credibility of his business? Or did he intend the more than $2 million he bundled in political donations in four years to curry favor for some as-yet-undetermined goal?"Never once, that I ever came across, did he seem to have a particular policy or issue agenda," said Hassan Nemazee, one of Clinton's top New York fundraisers. "The only thing he ever seemed to want was to get his photo taken."
All I can see in an attempt to buy reputational status. Maybe I am missing something here?
