Fraud and the American Dream: toward an understanding of fraud victimization

Authors: Adam Trahan (Indiana University), James W. Marquart (University of Texas at Dallas), Janet Mullings (Sam Houston State University)

Publication: Deviant Behavior

Year: 2005

Focus Area: Profile

Relevance: By examining a single $19 million fraud and its victims in detail, this article serves as a case study of investment fraud.

Summary: This article uses the example of a Ponzi investment scheme to analyze the behavior and motivations of victims of fraud.  Based on a previous article relating the American Dream to perpetrators of crime, this theory provides a new sociological  perspective on fraud victimization.

The author emphasizes the role of “the American Dream” as capitalist drive:

  1. requires constant pursuit of money for its own sake (86% of victims indicated that there was no specific purpose for their investments other than wanting more money.)
  2. emphasizes the end result instead of the means of acquisition
  3. focuses on individual gain without consideration for the impact on others

This set of priorities has been proposed as a partial explanation for the United States’ high crime levels.  This article suggests the “American Dream” may also underlie the motivation of fraud victims.

  • By focusing on the possible gains and de-emphasizing the method of obtaining them, consumers ignore the risks in investment.
  • Particularly when traditional investments fail at downturns in the economy, the incessant monetary drive of “the American Dream” provokes riskier, desperate action.
  • This urgency promotes poor, hasty decision making, and increases the appeal of fraud.

The authors also identify a particular context that, in combination with a fraud ploy, makes an investor likely to become a victim: the deification of money in society and a common belief in the status it provides.  This is not a function of personal greed, but rather an aspect of the economic culture. Fraud victims may be more thoroughly “indoctrinated” than non-victims.

Author Abstract: American culture and the practices of government focus an overwhelming majority of attention on violent ‘‘street’’ crime. As a result, very little is known about the victims of fraud. In order to contribute to this literature, a case study is provided that examines the victim population of a Ponzi scheme. Data are provided on the general characteristics of the victims, their investments, and the growth of the scheme. A theoretical model is formulated from Messner and Rosenfeld’s work in Crime and the American Dream. This paper expands the concepts of this theory by providing evidence that it can be used to explain victim behavior.

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