Claus Foerster – broker indicted in $3 million Ponzi scam

As we have repeatedly stressed, every choice has a consequence. In saying that, I must pause for a moment and tell you that when I talk to groups about choices and consequences, I sometimes spot a couple of people (usually toward the back) who are elbowing one another and snickering just a bit. Of course I would never say anything but there’s a little voice that goes off inside of me going, “Uh-oh!” I’d never do that many say.  I suspect that at one time Claus Foerster said that.  Now he’s indicted for a ponzi scheme.

I know all too well where arrogance can lead.

Those who have the opportunity to do wrong and to make bad choices are often enveloped in arrogance. This malady especially applies to the financial community. Some really do fancy themselves as the smartest guys in the room.

“Oh Wall Street,” you might say. “Well, that’s a big city thing. It could never happen ‘here.’”

In fact, unethical behavior can happen anywhere. The legal consequences of that unethical behavior can, in fact, happen to anyone, even to the “smartest guys in the room.”

Greenville: Not Far from Wall Street

It was with interest (and a knowing nod) that I just read about the consequences that have come down for Claus C. Foerster, 55, of Spartanburg, South Carolina in an article by Anna Lee for the Greenville News. The piece by Ms. Lee was entitled: Greenville broker indicted in $3 million Ponzi scam.

“Mr. Foerster has defrauded clients of about $2.8 million while employed as a financial adviser at Morgan Keegan & Co. and Raymond James Financial Inc. in Greenville, according to a five-count indictment handed down in federal court Tuesday.”

He carried out his unethical behavior for 15 years, as he had his clients put their money into a completely fake company by the name of SG Investment Management. The company did absolutely nothing and invested nothing. It was total fiction. He took their money for his own amusement. What should be so disturbing to all of us was that this man traded other people’s trust for his own greed.

His clients took their hard-earned money from their brokerage accounts (at Foerster’s suggestion) and had them write checks that were payable to SG Investments. Now, please understand this: just like Wall Street’s infamous Bernard (you can call me “Bernie” Madoff), Foerster issued totally fictitious earning statements. Every so often, he’s write a check to his trusting clients that he created or would return a portion of the obtained funds to some clients to make it look like their funds were actually invested and earning profits.

Foerster was a registered broker at various investment houses prior to landing in Greenville, including a stint on Wall Street. He was no “newbie,” and knew exactly what he was doing. As with any Ponzi scheme, it all imploded on him as people wanted their money back. He didn’t have it.

Despite believing he was the smartest guy in the room, his lack of ethics could land him in jail for the rest of his life plus huge fines in the hundreds of thousands of dollars.

What is needed

People in the financial community are required to have “ethical training.” However, I would submit the training is rather trite and tepid. There is little emphasis placed on the true consequences of unethical behavior. To be completely honest, those who train brokers and CPAs don’t speak from either experience or deeper issues of understanding of why a man or woman would commit such fraud.

Unfortunately, very early on in my career (now more than 20 years ago), I was one of the “smart guys” in the back of the room. I was charged with a felony for playing with other people’s money. Though I repaid every penny, apologized to everyone, and indeed, served some jail time, I learned first-hand where bad choices can lead.

I can’t do anything about the past, but I view my role as preventing others, men like Mr. Foerster, from heading down the same painful road. He is about to experience the full-force of his unethical actions.