Fraud: 2. (Law) An intentional perversion of truth for the purpose of obtaining some valuable thing or promise from another.
Valuable a. 1. Having value or worth; possessing qualities which are useful and esteemed; precious; costly; as, a valuable horse; valuable land; a valuable cargo. If you sell me one share of stock, then in exchange I will give you some money, which has "value or worth", and so is "valuable". If you lied about the share of stock, then that was fraud, and it doesn't matter whether you spend the money on your sick grandmother, or donate it to the church, or spend it on a bottle of Chivas. It's still fraud. * * * Jed Rothwell wrote: > Stephen A. Lawrence wrote: > >> > I have not been following the story. Is there evidence that they >> > benefited financially? It isn't a fraud unless someone is defrauded. >> >> They had investors. I think that says it all. > > Not necessarily. As I said, it depends on how they spent the money. (I > have no idea how the people at Steorn spent the money.) And as I said, no it doesn't. Securities fraud depends on what you say, and on whether people give you money. It doesn't depend on what you spend it on. > > >> See above. Mills has investors, and his claims have encouraged them to >> invest. Either he's right, or he's mistaken, or he's committing fraud; >> there's no fourth possibility. > > I do not think there is any chance he is committing fraud, because, as I > said there are much easier ways to commit fraud. So? I don't think he's committing fraud either, but I don't think your argument gets you to first base in proving it. People do all kinds of things "the hard way". And if Mills *IS* committing fraud, I warrant that it's not just for the money, and reasoning founded on the notion that he is just trying to maximize his income is not going to lead you to the right conclusion. > Fraud does not involve > locking yourself in a lab for decades, slaving over mass spectrometers. > If it fraud, you just pretend to be working, while actually you are at > the beach getting a tan. That's the common image of a fraudster, yes. If they're sensible that's what they do. If they're sensible they mostly don't get into this situation to start with, tho. You can't apply "common sense" arguments to predict their behavior. >> But in any case, regarding the question of where the money went, how do >> you know what he spent it on? > > I do not know, but I have heard from people who visited Mills and have > connections that all of the money appears to be spent on research. Of > course this is only a rough estimate, but there is no sign that millions > have been pocketed. > > >> Perhaps more to the point, has Mills, personally, drawn no salary? > > That's hardly called for! Yes it is called for, given the point I was trying to make, which is that *IF* he has been lying about his results, *THEN* he is committing fraud: He took money from people based in part on his results, and he spent at least some of it on himself. If those results were faked, then that is certainly fraud. > Unless he is fabulously wealthy, he deserves a > reasonable salary. His investors cannot expect him to live on air. > > If he is paying himself $200,000 a year, I would call that borderline > fraud. $1 million per year would be out-and-out fraud. No, that's wrong. Please do not mix up the word "fraud" with the word "bad". In for a penny, in for a pound; it is or it isn't, and it doesn't depend on the amount of money involved. It is fraud if and ONLY if he lies about it to his investors. If he draws a salary of a million a year, *AND* he either discloses that in the Prospectus for the company, or he doesn't say anything about it and only discloses the total amount spent on salaries (including his fat one), then he didn't lie about it and that outsize salary, by itself, is NOT FRAUD. >> > If he was dishonest he would take the >> > money and run, instead of spending it on mass spectrometers. >> >> The kind of argument you're positing doesn't work in cases of massive >> fraud . . . > > I mean that people like Madoff do not actually do any work. False. Read some more about Madoff's slide down. He did invest it, at least to start with, and slid into the Ponzi scheme only when the investments went south and he needed to jazz up results for what he supposedly hoped would be a short term. How many researchers and inventors have gone that same route when the initial results didn't pan out, and the idea they had turned out not to work as they had expected? "We'll just adjust the results a little until we get the experiment to work better..." I don't know but I'm sure the number is nonzero. The Dark Side is always calling, and when things go wrong, some people answer the call. AFAIK Madoff's company never stopped investing, either -- in fact they couldn't, it would have been screamingly obvious if they had no investments at all. There's only so much you can cook the books before they turn completely to mush. And finally, if you think running a massive Ponzi scheme, involving billions of dollars, is "no work" I suggest you talk to an accountant about how they can possibly spend their entire workday just keeping track of where money's going. > Madoff did > not invest the money. He just spent it. If he had invested it and lost > it, without telling anyone, that would be accounting fraud but not a > Ponzi scheme. If he invested it, lost it all, and told everyone in their > monthly statements, that would not be fraud. It would be bad luck or > incompetence. Right. The point is he LIED about it. That makes it fraud. > > By the same token, reliable sources tell me that Mills and his > colleagues are working hard at the lab. If he spends all of the > investment funds and does not succeed in making a useful or at least a > convincing gadget, that would not be fraud either. Again, it would be > bad luck or incompetence. Perfectly legal, as long as he tells the > investors what is happening, and informs them up front that his venture > is risky. > > >> Madoff stayed until the money ran out and the roof fell in -- he had no >> exit strategy, as far as I can see. > > That's true. But most Ponzi scheme operators do have an exit strategy -- > they run. He was too famous to run, I guess. I don't know why he didn't run. I merely observe that, from where I'm sitting, his behavior made no sense. And that conclusion gives the lie to any argument that says some scammer would not do what they did because it "would not make sense". Perhaps he wasn't doing it just for the money; as you say, he was famous. > >> And note well: Madoff spent an >> awful lot of the money paying out 'interest' on people's investments. >> He didn't just run off with the whole pile; if he had, he'd be living in >> luxury today on some South Seas island. > > That's how a Ponzi scheme works. You have to pay the early investors to > make the "take" grow exponentially. You kite it up and then just before > it collapses, you grab the money and run. Madoff did not run, but most > Ponzi operators do, as I said. He acted like a bank robber who stands on > the street in front the bank counting the cash until the cops show up. > He seems addled. Yet he's obviously a smart dude.
