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SCAMMER OF A CENTURY AGO PIONEERED TACTICS USED TODAY

June 17, 2021 - 9:00am
David Surdam
George Graham Rice

George Graham Rice? Never heard of him. Who is he? A century ago, though, he was a famous flamboyant scammer, a pied-piper of stock manipulation.

While incarcerated for the third or fourth time, he wrote a series of periodical articles that eventually coalesced into a book. As with other scammers, Rice was brazen, even boastful about his felonious escapades. He wryly entitled his book My Adventures with Your Money.

I enjoy reading about these con artists. Some of them were truly imaginative and many possessed shrewd understanding of investors’ psyche. These operators skillfully exploited people’s fears and excessive desire for quick riches (we have tens of millions of contemporaries seeking multi-million dollar jackpots in various state lotteries).

Of course, I am not condoning Rice’s behavior. His scams injured a lot of people, rich and poor. Then again, his victims bear part of the responsibility. They chose to believe in Rice’s claims to create 50% or 100% or even 1,000% annual rates of return on investment.

Rice repeatedly puffed up almost-worthless mining stocks, usually located in remote Nevada or Death Valley. Even after intermittent jail and prison stints, he was able to persuade legions of gullible investors to buy high and end up selling low (while he did the opposite).

Rice also pioneered the “suckers’ list,” as he compiled names of bilked people. He also studied the newspapers for death notices, figuring that widows and heirs of wealthy husbands and fathers might be lucrative targets. On occasion, he sold his list of suckers—reputedly over 100,000 names—to other fraudsters. Today, of course, if you answer the phone call from a telemarketer or scammer, you will likely end up on numerous scammers’ lists and be subject to a never-ending round of fraudulent offers.

As with recent scammer Bernard Madoff, Rice was able to dupe the wealthy and sophisticated. Rice bamboozled Charles M. Schwab, a prominent steel industrialist. The prospects of expanding his already vast fortune through investing in dubious mining stocks with almost unlimited “upsides” beclouded his judgment. Madoff targeted wealthy and educated co-religionists within the Jewish-American community. He was also subtler than Rice, as he merely offered a consistent 10 or 11% annual rate of return.

Rice realized that even ultra-wealthy people often yearned for more wealth…especially if they could attain such with scant effort and in a short period of time.

Rice, though, also understood the potential of a mass market. He often created penny stocks in mining companies. He reasoned that tens of thousands of people sending in $5 or $10 for hundreds of shares of worthless stocks added up to considerable amounts.

Scammers are protected by victims’ embarrassment. Few people are willing to admit to authorities that they were duped. On a handful of occasions, Rice got his comeuppance, when he enraged some of his clients by flippantly ridiculing them.

Rice might have retired in comfort, but he had a penchant for gambling at faro. Out in Nevada territory, saloons and gambling dens sprouted almost as soon as prospectors set up camp. Faro operators were known for unscrupulous behavior. Of course, in games of pure chance, the house “take” guarantees that all players will eventually lose their stakes. Rice understood this, but somehow he did not or could not resist the siren call of the Faro tables. He went bust as many times as he became a millionaire.

One might surmise that money quickly and dishonorably accumulated rarely stays with its possessor. Rice had plenty of business savvy, and he conceivably could have become wealthy honestly, but he would have had to invest time and effort into amassing a fortune.

Rice’s actions are unworthy of emulation, although they do provide instructive lessons and oftentimes amusing reading. Politicians exemplify his boast, “My Adventures with Your Money,” but they are scammers of a different stripe.

The views and opinions expressed are those of the author and do not imply endorsement by the University of Northern Iowa.

Author

David Surdam

David Surdam

David Surdam received his Ph.D. in Economics from the University of Chicago. His dissertation, "Northern Naval Superiority and the Economics of the American Civil War," was supervised by Nobel-Prize Winner, Robert Fogel. Professor Surdam has taught at the University of Chicago, Northwestern University, Loyola University of Chicago, and the University of Oregon.

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