Victims of the Jamaican Madoff Face Second Scam

international | anti-capitalism | opinion/analysis

Wednesday July 29, 2009 21:48

by Billy Wharton - Socialist Party USA

socialistzine at gmail dot com

With every disaster a new opportunity emerges. Respectable capitalists swoop in quickly– operating in complete legality but equally willing shake down as many people for as much money as possible. PwC has employed the amazing hubris and grotesque efficiency typical of capitalism. No carcass to slim; no pocket book too picked.

After an episode of speculative euphoria, popular anger may target many things – promoters previously consider with high esteem, exotic financial instruments and all sorts of illegal schemes. But, what is not often questioned is the financial system itself. Jamaicans bilked out of millions by scam artist Carlos Hill may be asking just such questions as they wrestle with the legal side of the financial system. Hill, Jamaica’s version of Bernard Madoff, conned more than 40,000 investors out of a total of $7 billion. Now, nearly two years into the investigation, victims are being told to expect the recovery of only pennies on the dollar. The problem now is not the evasive Hill, but a greedy North American auditing firm.

Fresh off a 10-year sentence in US Federal Prison for mail fraud, Carlos Hill employed the time honored strategy of an operator – tell the people what they want to hear. Irrational stock euphoria ran as high in Jamaica in the 1990s as it did in many other parts of the world. Wild stories about individual investors converting thousands into millions became standard mythological fare. Yet if even a few of these stories were based in fact, such opportunities had waned by the early 21st century. Expectations did not. Hill’s Cash Plus Company met these desires with an offer of a 10% monthly return. This was not a pyramid scheme, he argued, because Cash Plus offered a diversified set of assets – in the distribution, gaming, telecommunications, entertainment, security development, industrial and financial services' sectors. (Jamaica Observer, 3/4/2007)

By 2008 the bubble had burst on Wall Street and at Cash Plus. An increasingly evasive Hill drew the attention of Organized Crime investigators Jamaica and the ire of mainstream bankers. Then, as the global stock market went into freefall, Cash Plus ceased payments to investors. Hill was arrested, the company declared bankrupt and investors scrambled to recoup losses.

Here the story takes an interesting departure from the Madoff case. Though Madoff appears to have done a fairly skillful job of secreting away his profits, Hill left substantial physical assets – estimated in the billions. This raised the expectations of investors who hoped to reclaiming something approaching 50 cents on the dollar. That is, until Pricewaterhouse Coopers (PwC) appeared on the scene.

PwC is an American company which offers auditing and advisory services globally. The company has had its own scandals including the 2007 Tyco case in which they admitted to carrying out a multi-billion dollar accounting fraud. Despite this, a Jamaican court appointed PwC as the administrator of the Cash Plus assets. Here begins the second, legal round, of investor fleecing.

The PwC administration prevented Carlos Hill from liquidating company assets. It also allowed PwC to put themselves on the clock. Estimates at hourly consultation fees range from US$175 to US$450 or, about more than double what a local Jamaican firm might charge for equal work. To pay the resulting fees, the court has set aside four large properties the value of which amounts to more than $350 million. As a result of this second bilking, PwC informed investors this week that they should ratchet down expectations to something like a recovery of 5 to 16 cents on the dollar. Further fees will be associated with the sale of each Cash Plus asset.

Cash Plus and PwC, two faces of the global financial system. One a sleazy gutter-capitalism peddled by operators like Madoff and Hill. The other perfectly willing to use legal means to strip the carcass dry. With every disaster a new opportunity emerges. Respectable capitalists swoop in quickly– operating in complete legality but equally willing shake down as many people for as much money as possible. PwC has employed the amazing hubris and grotesque efficiency typical of capitalism. No carcass to slim; no pocket book too picked.

***
Billy Wharton is the editor of The Socialist and the Socialist WebZine. His articles have recently appeared in the Washington Post, Monthly Review Webzine, The Indypendent, Common Dreams and Links International Journal of Socialist Renewal.

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Victims of the Jamaican Madoff Face Second Scam