David E. Y. Sarna’s History of Greed: Financial Fraud from Tulip Mania to Bernie Madoff (Wiley, 2010) is a disappointing book. The author transforms a potentially fascinating topic into little more than an annotated laundry list. With the exception of Madoff, to whom he devotes four chapters and some eighty pages, the other varieties of financial fraud get short shrift—on average a mere eight pages each.
The book’s cast of villains is also curious in that they are disproportionately Jewish. Sarna is obviously a practicing Jew who is proud of his heritage; he starts the book with his grandmother’s disdain for luftgescheften and luftmenschen. Yet where he could easily illustrate a scam with non-Jews he often goes out of his way to find a Jewish culprit. For instance, boiler rooms are commonly associated with the Russian mafia yet Sarna doesn’t even mention them; instead, he recounts the misdeeds of Stanley Cohen and his family.
One of the more convoluted scams deals with manufacturing trading volume. The illustrative tale is based on an actual story but has been “augmented a bit with details from other stories that also all really happened.” Three men were involved—Ken, the promoter; Eli, CEO of “Dreck Minerals”; and Jacob, owner of a day trading operation. The goal was to have sustained trading volume of 150,000 to 200,000 shares a day so that Eli could get his drilling operation funded. Jacob asked Ken for a million shares to run the program and half a million for himself. Ken then asked Eli for two million shares to run the program and half a million to manage the program. Eli agreed to have his cousin Boris in Israel send two and a quarter up front; the shares would come out of the Turks and Caicos Islands. They would go to a bank account held in the name of the First Abyssinian Church of South Carolina. (As Ken explained, “I have a buddy who is a Hasid. He called a buddy of his, a rabbi in South Carolina, and he spoke to the pastor [of the black church], who made it happen for me in the spirit of ecumenism.”) The plot thickens as Ken knows that Eli will sell as much as he can into the volume that Jacob will create; he convinces four traders in Canada to buy and he himself starts to sell short as soon as the price rises. And on the scam goes.
Unfortunately, the definitive history of financial fraud has yet to be written. Sarna provides at best a starting point.