If Rothstein was a mini-Madoff, then Sean Healy was a mini-Rothstein. But as you'll read in this week's feature, "mini" doesn't do Healy's larger-than-life MO justice: He blew the nearly $16 million he stole from 40 investors on exotic cars, a $2.4 million country club mansion (plus $2.3 million in upgrades), private jet trips, strip clubs, elite resorts, and little Versace goblets with gold wings. And it took him only about ten months.
The biggest question I had when reporting the story is likely the same thing you'll wonder while reading it: With four kids and no real exit strategy, what could have possibly been going on inside Healy's head? To this end, I spoke with Jim Walsh, author of You Can't Cheat an Honest Man: How Ponzi Schemes and Pyramid Frauds Work... And Why They're More Common Than Ever. He had some enlightening answers, after the jump:
There really is no way out with a Ponzi scheme, so where does this delusion to run one come from?
Deluded might be a good word. I think this guy from a young age wanted Heat tickets. He wanted the box seats. And this is what you get with many of them. I'll wager that he wasn't raised in grinding poverty. He probably was working-class, lower-middle class, but somewhere in his background, he had access to wealth. He saw wealth. And that's where you get Madoff. Madoff was not wealthy, but he was middle-class, and he socialized with people who were wealthy, and he saw as a boy nice country clubs and friends or cousins or acquaintances of family who did have wealth. And what happens with these guys is that little burr of jealousy is set at a young age. He saw the trappings of wealth and coveted that, and that's what sets them on this path to deceipt and schemes and self-delusion.
Healy cultivated intimate relationships with his investors, even asking his chief investor to serve as his daughter's godfather. Did this eat at him, or was it just part of the scam?
Investors ask "How could they live themselves? How could this guy get up every morning, look himself in the mirror, and continue to behave in this crazy way?" And the answer is, they don't. They don't look themselves in the mirror. They usually have been basically messed up, neurotic, whatever, forever. And for the perp, the inappropriate spending, the inappropriate behavior, the lies told cold-faced to longtime friends, they're not the individual egregious acts that you and I see them to be. To the perp, it's all part of the process, all part of the game. Sometimes "all business." But it's all part of the major façade they've been putting up for all of their adulthood. They've been justifying and rationalizing their bad actions for so long, they no longer see individual bad actions as bad. They see it as a cloud of behavior that they do.
In your book, you talk about "impostor syndrome" and how that helps Ponzi schemers rationalize their actions. Can you explain how that plays out?
It's this idea that you've always been a fraud. You've always been somewhere where you don't really fit in. That's why it's key that they saw wealth as a child: The worst thing you could do for a potential Ponzi perp is give them a background that was tight and there wasn't a lot of money but they had direct access to see wealth firsthand. That's what creates this exceptionialism: "I'm different, I'm the freak, I'm the oddball, I don't fit in." Not thinking, well, we all feel like that. Families who are wealthy at the country club, for their own reasons, feel like they don't belong. But it's the exceptionalism that lends itself to thinking, "Rules don't apply to me. I'm not from here. I understand them, but I'm not one of them. Their rules don't apply to me." These are justifications and rationalizations that we all think to some degree in our regular lives. It's just these guys cobble them all together and build a house out of them.
Theoretically, though, Healy loved his family. Friends and neighbors remember him as a family man, and a lot of the money he spent was on spoiling them. How could he have kept going with the scam when he knew it was going to explode on his family too?
Well, they usually tell themselves there's some exit strategy. He probably believed that he could put it together in a dramatic flourish somehow. Ponzi schemers are cynics, and they don't believe in really making money. The ideal of Warren Buffett, a guy who really sits in front of a computer grinding out analyses hours and hours and finds investments because of his sweat and makes money legitimately in that way -- they don't believe in that. They think all investment is scam anyway, and all they need is the big kill at the end, the big scalp, and they'll pay it all back. He probably was telling himself he could pull something out in the end. He was going to pick up a foreclosure. He was going to do something and make the money back. Was he going to do this? No. Is that what he told himself? Probably.
A lot of people say his wife must have known -- her name was on the bank statements -- but on the other hand, there's a lot of evidence that Healy really went through the daily motions of being a day trader. Do you think Shalese was complicit?
Most perps don't bring in partners, not because they want to save their wives from trouble but because they don't trust anyone. I suspect he probably didn't trust his wife with the scheme. He probably trusted her to the extent that he had to trust her, because she had to have her name on the bank statement, but it's not out of love for their family that they don't tell anyone what's going on. It's that they don't trust anybody.