Ponzi Scheme Caught in Allentown, Pennsylvania

On Thursday, Craig H. Reinhard and Debra Bzik, 48, of Allentown, Pennsylvania, pleaded guilty in Federal Court to one count of mail fraud and one count of making false statements to the Securities and Exchange Commission in connection with a Ponzi scheme that they had run for over 10 years that bilked investors out of several million dollars.

The scheme went into effect by August of 1994 and lasted through March, 2006.

The Ponzi scheme is named after Italian immigrant to America Carlo Ponzi, who arrived at Ellis Island in 1903. By the 1920s, Ponzi set about convincing "investors" that he had a scheme for doubling their in very short periods of by buying Postal Reply Coupons from struggling economies. He would take these "investors'" money and give them certificates-but there was no investing and the certificates were fake.

Ponzi then used some of the money to finance his own lifestyle, which in time became quite lavish. The rest of the money he held on to for a certain period and then split among his previous "investors", creating the illusion that he had in fact gotten them extravagant returns on their money.

In order to keep what some call his "pyramid scheme" going, Ponzi was required to find ever more new "investors". He needed enough new investors at any given time so that he could finance his own lifestyle while at once being able to give enough money out to previous investors to maintain the illusion of returns on investment.

It is thought that Ponzi was caught when rumors began spreading among his many investors that he was getting 400% per year returns on the investments, which meant he was not giving them their fair returns. So investors older and newer all demanded their money at once, and Ponzi could not pay.

The Allentown pair were co-owners of IDPM Group, Inc., a supposed benefit counseling service and insurance agency. Renheid told potential investors, many of whom were elderly, that they were investing in CDs that were federally insured as all CDs are. But the CDs did not even exist.

The pair took the money from new "investors" but, instead of investing it they paid earlier investors and with the substantial amount left over, they financed their own business and personal expense and paid for their children's college education. for their children.

They could see 25 years in jail and $500,000 in fines for their crime.

The people that this journalist corresponds with concerning Ponzi schemes almost always bring up the U.S. Social Security system as an example of a yet-ongoing Ponzi scheme.

While there are a few who want it to be "saved" somehow by keeping the federal government's mitts off the account or by having the money actually invested in safe, low-yield accounts, most agree that in fact people should be investing the money that they would otherwise have to pay into the "scheme", which they anticipate would allow everyone who did so to retire comfortably instead of receiving the federal government's pittance.