Archive for Wednesday, January 18, 2012

Brownback’s tax reform adviser named in lawsuit that alleges Ponzi scheme

January 18, 2012


— Arthur Laffer, the supply-side economist who was hired by Gov. Sam Brownback to help shape the governor's tax overhaul, is being sued in Texas for allegedly being part of a Ponzi scheme, according to reports.

Laffer is chairman of Laffer Associates of Nashville, Tenn., and was an economic adviser to former President Ronald Reagan.

Brownback's office has said Laffer is being paid $75,000 to help with the governor's tax reform measure the governor unveiled last week. Laffer is scheduled Thursday to speak with Kansas legislators on the tax plan.

In the lawsuit, Laffer is accused of lending his name to fund managers who diverted $3.1 million from investors in what plaintiffs call a Ponzi scheme.

The fund managers are David Wallace, Costa Bajjali and the Laffer Frishberg Wallace Economic Opportunity Fund.

Courthouse News Service reports that an employee at Laffer Associates said that Laffer had severed ties with the Laffer Frishberg Wallace Economic Opportunity Fund.

According to the CNS report from Jan. 11: A Laffer Associates employee told the service in a telephone interview that Laffer has severed ties with the Laffer Frishberg Wallace Economic Opportunity Fund.

"He was affiliated with them at one time, but he's not anymore," the employee told the agency, according to reports.


deec 5 years, 6 months ago

Uh oh. another 1%er caught with his pants down?

ksjayhawk74 5 years, 6 months ago

Yea, he might have severed ties with them. But obviously he was there when the Ponzi scheme was being orchestrated. If he wasn't there, then why is he named in the lawsuit?.

Ron Holzwarth 5 years, 6 months ago

"But obviously he was there when the Ponzi scheme was being orchestrated."

That is possible, but not necessarily true. Read my comment below.

Ron Holzwarth 5 years, 6 months ago

"If he wasn't there, then why is he named in the lawsuit?"

Are you implying that no innocent person has ever been accused of a crime?

Paul R Getto 5 years, 6 months ago

Irony abounds. Maybe Sam's strange little businessman jesus can represent Mr. Laffer in court. This man's fiction has been common for nearly 40 years and hasn't help the economy. Strange days, these are.

matthew2600 5 years, 6 months ago

Maybe he can be replaced with someone from a diploma mill.

Ron Holzwarth 5 years, 6 months ago

This is a fact about many, but of course not all, Ponzi schemes:

They do not all start out as Ponzi schemes. Some began as legitimate businesses that later had financial difficulties. And then, in an attempt to cover losses, some books were "cooked".

(That is of course assuming that they kept books at all.)

One little thing leads to another, and after a while, the only way to keep the enterprise going is to morph into a full blown Ponzi scheme.

For an excellent example of that, carefully examine the business model of Charles Ponzi. At first, yes, the plan worked, it was 100% legitimate, and there was no fraud involved at all.

But after a while, things went on a downhill slide, and the only way to keep the business in the black was to pay off the earlier investors with new investor's money.

Just because the 'Laffer Frishberg Wallace Economic Opportunity Fund' later operated as a Ponzi scheme later certainly does not mean that it had always been a Ponzi scheme.

If you don't believe me, all I can say is this: Go read some history.

And also, do some research until you can clearly define the difference between a Ponzi scheme and a pyramid scheme. It is amazing how many do not understand the difference.

deec 5 years, 6 months ago

Regardless whether this was an intended or unintended Ponzi or Pyramid scheme, is this the sort of ethics we want advising government on taxes?

Paul R Getto 5 years, 6 months ago

Given Muscular Sam's "ethics" I'd say yes.

Ron Holzwarth 5 years, 6 months ago

It was not necessarily unethical when he was involved. Just like Charles Ponzi's plan was not at all unethical - when he first started anyway.

Until all the facts are in, it's best to not pass judgement.

ksjayhawk74 5 years, 6 months ago

So it's like someone didn't mean to kill a hooker when they set up the date, but things just kind of went there...

Ron Holzwarth 5 years, 6 months ago

Well in that case, yes a crime certainly did occur. The reality is that many unscrupulous individuals resort to a Ponzi scheme rather than go bankrupt and dissolve the company, which would be the ethical thing to do.

beatrice 5 years, 6 months ago

Lots of people get named to lawsuits, which then get tossed out of court. I don't think we should convict this guy of being heavily involved with a Ponzi scheme until at least some evidence is presented.

Calling this guy a crook right now, thus indicating Governor Brownback is a crook as well, reminds me of those who want to imagine President Obama as a molotov cocktail throwing radical because he once served on a charitable board with Bill Ayers.

Paul R Getto 5 years, 6 months ago

+1 Good point; let the process work. Regardless of the outcome of this case, Mr. Laffer has made a good living selling his voodoo economics for quite some time. Got to give him credit for that.

just_another_bozo_on_this_bus 5 years, 6 months ago

I don't know if he's a "crook," but he's certainly a peddler of economic snake oil.

Ron Holzwarth 5 years, 6 months ago

These are the two fundamental rules of investing:

1) Never invest more than 5% of your portfolio in any one investment vehicle. 2) Never invest in any investment vehicle that you do not thoroughly understand.

Many people do not follow rule # 2, and that is why Ponzi schemes are possible. And if you don't follow rule # 1, a Ponzi scheme can totally wipe you out.

Those two rules are very simple, but many people that are investing money don't follow them.

question4u 5 years, 6 months ago

This is another piece of news that will no doubt make businesses flock to Kansas. Nothing says stability better than a state budget that's been influenced by an advisor named in a lawsuit over a Ponzi scheme. Step right up prospective businesses, don't worry about the smoke and mirrors. Come to Kansas and Flim-Flam Sam will be glad to guarantee that you won't be left with deep regrets in a state with a decaying infrastructure, a deteriorated educational system, a debased quality of life, and laws that prevent anyone from fixing the mistakes.

If Sam's going to drive Kansas at 75 miles an hour, wouldn't it be a good idea to keep his eyes open while he does it?

jafs 5 years, 6 months ago

Boy, you just can't make this stuff up!

Ron Holzwarth 5 years, 6 months ago

I certainly do know what you mean. I can think of many examples in my own life that no one would ever put in a fictional novel, because it sounds simply impossible. And, it is very important for a fictional novel to be believable.

But, all of those things really happened.

“‘Tis strange – but true; for truth is always strange; Stranger than fiction.” - Lord Byron (George Gordon Byron)

“Truth is more of a stranger than fiction.” - Mark Twain

Bob Forer 5 years, 6 months ago

It seems like everytime I turn around the brownback administration appears to have shot itself in the foot again. How many lives does this guy have? There have been countless suggestions that he be recalled. But we can't recall him unless a group of folks gets together, plots out a strategy, and gets to work.

I am game. Anyone else?

oldbaldguy 5 years, 6 months ago

Speaking of Brownback appointments. What was the real reason for Siedlecki leaving? I have heard some things that indicate a family values dysfunction.

just_another_bozo_on_this_bus 5 years, 6 months ago

Has Laffer returned any fees/profits he got from this "venture?"

Shane Garrett 5 years, 6 months ago

As my lawyer friend advised, deny every thing and sue every one.

Ron Holzwarth 5 years, 6 months ago

"When the law is against you, argue the facts. When the facts are against you, argue the law. When both are against you, call the other lawyer names." - Origin Unknown

tomatogrower 5 years, 6 months ago

Wow, Brownback sure hangs with a bad crowd. Ponzi schemer, goons from Florida, guys too lazy to earn a real college degree. My mother always told me that I would have the same reputation as those I hung out with, even if I wasn't like them. Just saying.

WilburNether 5 years, 6 months ago

Well, as long as people are naming alleged Ponzi scheme operators in lawsuits, how about naming the United States Government for running the biggest Ponzi scheme ever? That would, of course, be Social Security.

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