Accepted for publication (PostPrint)
Journal of Business Ethics Education
This case describes a recent iteration of the Ponzi scheme originated in 1920 by Charles Ponzi: creating a plausible investment, attracting investors, using the money from more recent investors to pay off earlier investors, and earning a substantial profit, estimated to be $15 million (worth $220 million today).1 While not as big as Bernie Madoff’s Ponzi scheme, as a result of which he was sentenced to 150 years in prison and ordered to pay restitution of $170 billion to his victims,2 the Federal district court in Miami was asked to order Par Funding’s cofounders, Joseph W. LaForte and his wife, Lisa McElhone, to pay $337 million to Par Funding investors and to declare they engaged in a Ponzi scheme in defrauding those investors.3 Ultimately the Federal district court in Miami ordered Par cofounders to pay “$219 million in ‘ill-gotten gains,’ fines and interest so the funds can be used to help reimburse 1,200 investors who were duped into buying the risky, unregistered securities used to finance the high-fee loan company.”4 How LaForte and McElhone executed their scheme is an intriguing story which provides helpful insight into ethical and U.S. securities law principles
Edward J. Schoen, “Par Funding: A Fabulous Fraud Founded in Philly,” Journal of Business Ethics Education, Vol. 20 (2023) forthcoming.