Minnesota State Pension Victims Don't Want To Hear They've Been Scammed

All-too-often victims of financial fraud don't want to hear about it. Minnesota pension stakeholders are no exception.

In all things human, relationships often trump the facts. For scammers, the message is clear: Building and maintaining relationships with victims is the key to your success and defense.

The forensic investigation of Minnesota’s state pensions—the Minnesota State Board of Investment (SBI) and the Teacher Retirement Association (TRA)—commissioned by thousands of concerned teachers (members of the Minnesota Educators for Pension Reform Facebook Group) was completed in late September.

It seems everyone responsible for the pension mess detailed in the report agrees the best course is to simply ignore the blatant wrongdoing.

Even some participants who rely upon the state pension for their retirement security are angry about the damning expert findings, as opposed to the mismanagement by state officials and Wall Street.

Shoot the messenger, defend the perpetrators.

As I explained in 2021 in Chapter 16 of my book, How To Steal A Lot of Money—Legally, this is all-too-common.

Chapter 16: Most Victims of Fraud Don’t Sue

It’s often said we’re a nation of whiney consumers and that unlucky investors are all-too-quick to file lawsuits. Don’t believe it for a second.

In my professional experience, more often than not investors who have been defrauded:

1. Aren’t aware they’ve been fleeced;

2. Don’t want to believe they’ve been victimized by someone they trusted to handle their money;

3. Don’t want to get involved in an ugly investigation of potential wrongdoing; and

4. Feel powerless to bring a successful lawsuit and recover their monies, so why bother?

Even when the largest, supposedly most “sophisticated” investors get swindled out of millions or billions, ironically the level of sophistication required to grapple with the fraud is almost always lacking. It’s complex and messy to assign blame and victims fear they will discover they are at fault and be humiliated.

Investors often would rather go to the crook they have a relationship with for a reassuring explanation of where their money went than entertain they’ve been ripped off and seek out a second opinion that might sever the bond. The SEC admits as much on its website when discussing affinity fraud: Victims often fail to notify authorities or pursue their legal remedies and instead try to work things out within the group. Where the fraudsters have used respected community or religious leaders to convince others to join the investment, victims are inclined to accept reassurances from those leaders.

Victims often fail to notify authorities or pursue their legal remedies and instead try to work things out within the group. Where the fraudsters have used respected community or religious leaders to convince others to join the investment, victims are inclined to accept reassurances from those leaders- SEC Website.

In all things human, relationships often trump the facts. For scammers, the message is clear: Building and maintaining relationships with victims is the key to your success and defense.

I’ve seen strong personal relationships at the center of financial dealings withstand even outrageously bad—devastating—investment losses. It makes little sense but many investors would rather believe impersonal, unforeseeable market forces they can’t understand or control caused their losses, as opposed to someone standing immediately before them who they know and could easily hold accountable.

How crazy can it get? After I had investigated and reported to a client that his family lawyer had been stealing money, the client told me that since the lawyer (when confronted with the wrongdoing) had agreed to provide free legal services in the future, i.e., “work off the debt,” he wasn’t going to prosecute.

“Let me get this straight,” I said. “You’re gonna trust a known thief to handle your legal matters—little stuff like your will or the purchase of your home—because he’s going to do the work for free to repay the “debt” which is in fact a theft? Are you out of your mind! What’s the value of legal services provided by a lawyer who has admitted to felonious activity? Something less than zero in my book. That makes as much sense as hiring a doctor who’s lost his license to perform open-heart surgery because he’s offering a discount!”

“But, I’ve known this guy for years. We’re really close. I went to his son’s bar mitzvah,” said the client.

“In case you’ve forgotten, we’ve discovered he’s been ripping you off for years. He is not your friend,” I said.

Victims struggle to maintain personal relationships with perpetrators. Go figure. I’ve also found that people continue to respect financial firms well after those firms have lost their credibility. A Jesuit priest I sat next to on a long Greyhound bus ride to Boston when I was in law school once memorably told me, “There are some people who have educations, credentials, and reputations well beyond their capabilities.”

Truth be known, all longstanding Wall Street firms have reputations far beyond their capabilities. Each of these firms—household names—has a voluminous history of wrongdoing disclosed to the public on the industry’s FINRA BrokerCheck system and in SEC filings that would make a convicted serial killer blush. Trust none of them.

State and local pensions overseen by laymen (lacking any financial expertise), such as police, firefighters and teachers, are especially dangerous because they don’t know the truth about the investments they oversee—even if they were willing to tell you.