Free You Can't Cheat an Honest Man by James Walsh Page B

William Maloney, Hertz’s division vice president of travel industry sales. Maloney made a point to add that Hertz would not work with Nu-Concepts.
    The Lure of Travel Remains Strong
    When the court ruling on Elizabeth Brown’s lawsuit mentioned the “glamour of the travel industry,” it was talking about a very strong draw. Travel is something that people—especially people of modest means—dream about. Those dreams are a great tool for pushing a Ponzi scheme.
    One scheme based in Alaska took advantage of people’s passion for travel—and mania for airline frequent-flier miles. In 1996, the SEC filed a complaint against Raejean S. Bonham, who operated a program called World Plus out of her home near Anchorage.
    World Plus was supposed to make its money by reselling blocks of frequent-flier miles. The pitch was that, if you invested money with Bonham, she would repay in either cash or frequent-flier certificates worth 10 times what you put in. (For the record, frequent flier miles are only transferable under certain conditions and never redeemable— legitimately—for cash.)
    The SEC said that World Plus was simply a Ponzi scheme that took in more than $50 million from 1,192 investors over more than five years, making it one of the largest scams in Alaska’s rough-and-tumble history.
    Case Study: LPM Enterprises
    The standard against which all travel-related Ponzi schemes must be compared is Louisianan Lynn Paul Martin’s LPM Enterprises. Like some character from a Damon Runyon story, Martin was equal parts villain and clown. He recruited investors to provide his company with capital to purchase huge blocks of airline tickets for Las Vegas gambling junkets. He claimed to have made arrangements with various hotel/casinos in Las Vegas to reimburse LPM Enterprises for the cost of the tickets plus about 10 percent as a “finder’s fee.”
    According to the pitch, LPM Enterprises could make this 10 percent as often as it could send planeloads of players to the desert. Martin told investors that the ticket purchase/reimbursement cycle took about six weeks. Therefore, money invested with LPM Enterprises could generate about 80 percent each year in profits.
    The mechanics of the deal were complicated enough that they should have sounded warning bells for experienced investors. Martin asked investors to make funds available in cashier’s checks. In return, each investor received two post-dated company checks: One for the principal and another for a share—normally 75 percent—of the finder’s fees generated by the principal. If an investor wanted to reinvest at the end of a month or quarter, he would simply swap checks with Martin, delivering another cashier’s check to cover any increase in the principal.
    In many cases, Martin’s investors rolled over their principal investment, which meant they only cashed the interest checks. “If somebody asked to see [contracts or financial documents], he’d refuse, saying, ‘If you don’t like the way I’m handling it, here’s your money, you’re out.’ But nobody had the guts to do that,” one lawyer would later explain.
    Martin insinuated that everything about LPM Enterprises—including details about other investors—had to be kept secret because most of the customers were sensitive to any publicity. “Most of those people going to Vegas weren’t going with their wives, if you know what I mean,” said one investor. “So they traveled under other names. They didn’t want people to know what they were doing.”
    The way Martin approached potential investors was well thought out. He usually only approached people he’d already met in some earlier business context. And he usually invited the potential investor to bring along a friend or associate. The friend or associate was invited along to make the potential investor feel more comfortable—in theory, to provide a voice of skepticism. As often as not, though, the friend ended up investing, too.
    In a