This post is a multi-part series on Joel’s sentencing brief which was filed on the criminal case docket back in September 2015. I’ll tag the posts with “Joel’s Sentencing Brief” so if you miss a part, you’ll be able to find it easily.
As usual, all page numbers listed are the PDF’s page number, not the page number listed at the bottom of the printed page. It’s easier for you to jump to the appropriate page this way.
Part 3 – Security Through Obscurity
Nothing about the offense conduct at issue here was sophisticated. Ponzi schemes, by their nature, are not complex or intricate, and NASI was a particularly primitive Ponzi scheme.
HA! NASI set the bar really low for Ponzi schemes if their own lawyer called the whole operation “primitive.” I realize that the lawyer was really saying that they weren’t trying to hide anything, that they didn’t use shell companies or anything, but they kind of did. They invested money into Fuel Doctor, another scam. They loaned a fuck-ton of cash to Oasis and then the loan just kind of disappeared. They also funded Oasis, bought trailers and then moved those assets around. I don’t know the details on that. The Receiver is still working on it.
They maintained NASI’s record with no accounting or record-keeping system, such that they hand-wrote and mailed their own checks when paying investors.
As some of you have read before, I’m a bookkeeper. Been doing it for fifteen years, even during my six-year stint in retail. And I can tell you that this argument does not help their whole “we weren’t trying to hide anything” schtick.
I mainly work with QuickBooks. I have maintained books using Excel. I have maintained books using handwritten ledgers (client was a technophobe). It is entirely possible to have clear and concise books no matter what system you use. Ed was an accountant, and given his age, knew how to run manual ledgers properly. If I know how to do it at 36 with no formal education, he should be able to do it at 70-something for the simple fact that he’s an accountant. There is no good reason for their books to be in the state that they were. Not unless they were intentionally making things more difficult.
Don’t get me wrong. Handwritten ledgers are obviously more error-prone than Excel ledgers, which are in turn more error-prone than an accounting package like QuickBooks or Peachtree. Math errors happen. Sometimes you forget to enter a transaction. But given this:
In fact, the company’s books were so primitive and basic that the Receiver has needed to rely on Mr. GIllis and Mr. Wishner to identify and notify investors regarding the Receivership.
That’s a lot worse than a few discrepancies or using a rudimentary system. I learned an important phrase years ago when I learned how to program: Security Through Obscurity. It basically means to rely on the secrecy of a system to keep it secure as long as no one knows it’s there or it’s so messed up that no one can figure it out but you. It’s not a good idea in practice.
But it can work for a while and it did for the Dickwad Duo. Their books sucked. They can shrug and say “gee-whiz by golly, I ain’t no good with numbers” but the fact remains that they made it difficult to untangle the mess they created and yet somehow was magically able to assist in identifying investors. It also negates the argument that they were too old to manage their finances because they clearly weren’t too old to remember information about thousands of investors on a monthly basis and then later use that memory to “help” the Receiver piece together the books.
The next post will be reviewing some of the letters from Joel’s beloved supporters. There’s a lot of letters, so I won’t be addressing each one individually.