Ponzi schemes abound in Canada

Several failed income trusts should be under serious consideration for Ponzi recognition. Some trusts were simply borrowing money or selling more units to new investors in order to pay cash distributions to old ones. And that's the basic nature of a Ponzi scheme. The unseemly part is when cash...

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Bibliographic Details
Published in:Canadian business (1977) 2009-03, Vol.82 (3), p.28
Main Author: Rosen, Al
Format: Magazinearticle
Language:English
Subjects:
Accounting
Accrual basis accounting
Income trusts
Murders & murder attempts
Pension plans
Pyramid operations
Securities fraud
Trusts
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Summary:Several failed income trusts should be under serious consideration for Ponzi recognition. Some trusts were simply borrowing money or selling more units to new investors in order to pay cash distributions to old ones. And that's the basic nature of a Ponzi scheme. The unseemly part is when cash distributions exceed the amount of income made by the company. As such, Ponzi schemes tend to be unsustainable over the longer term. Accrual accounting can produce Ponzi-like effects simply through inconsistent recognition of the time value of money. What with income trusts, pro forma financial metrics, pension plans and deficient accounting, almost everyone is a victim of one Ponzi scheme or another.
ISSN:0008-3100
2292-8421