In the first article in this series, we discussed the fact that the standard ways you make judgments about people cannot be used to spot con artists.  The good con man is a person that most people trust implicitly, and who can charm the pants off you.

Con games don't only exist in the financial industry, or in the sports service industry.  Con games are not used only to take your money under false pretenses.  You have to be vigilant in all areas of your life.  Politicians use con games to get elected.  Our leaders use con games to curry favor for some project or bill.  Con games can be used by anyone trying to misrepresent facts for any reason.  They may even be used by your neighbor to turn you against some other neighbor.  Wherever anyone in your life seeks to misrepresent facts, you will find one of the con game techniques we will be discussing in future articles.

To begin our discussion about recognizing con men, let's take a look at the well-publicized warning signs of the Madoff scam.  The following tells were used by those who refused to invest with Madoff, as well as those who tried to report him.   Many of them are the same type of tells that exist in any con game:

1.    The Free Service that Makes No Sense.  Bernie was giving away his hedge fund services for free.  Other hedge funds charge as much as 2% of assets and 20% of profits, but not good old Bernie.  Bernie wowed them and gained people's adoration by charging nothing while others charged hundreds of millions.  Very few people in this world are great altruists, willing to provide endless time and resources for no return.  How many of you out there work for free at whatever you do?  If you work for a charity, it is probably one more deserving than making rich people richer or helping strangers beat their bookmakers.  Giving something away for free under circumstances in which providing free services makes no sense, and the motivation cannot be seen, is often the sign of a con game.  It is similar to an offer that is too good to be true, and probably isn't.  In the Bernie Madoff con game, Bernie's failure to charge for his services made no sense. It was too good to be true, and hid a sinister motive. .

2.    Hiding in Plain Sight Combined with Gaps in Information.  Bernie supposedly made money by processing his hedge fund trades only through his own brokerage firm.  That sleight of hand made a large part of what was going on, or in Bernie's case not going on, invisible to anyone but Bernie. The records of every brokerage firm are audited every year by the FINRA (formerly the NASD).  They are the equivalent of being in plain sight.  People relax their vigilance when things are in plain sight.  They think that no con can take place because it will be noticed.  When things are in plain sight from the start, it is easier to con people because they are less likely to examine what they are seeing.  Hiding in plain sight makes the con easier, but it is not a sign of a con unless it is accompanied by the next tell on the list.  That is, Gaps in Information.  Gaps in information, or lack of detail, are an immediate danger sign.  Madoff sent out detailed account statements, but he never sent any lists of securities owned by the hedge fund, or lists of transactions actually made by the hedge fund.  These things would, he claimed, disclose his proprietary system that allowed him to make such great returns.  Watch for missing information or detail under circumstances where it should exist, even if that information seems to be in plain sight.  

3.    Secrecy.  Bernie would never reveal how, exactly, he was achieving the supposed gains he was paying to people.  Experts sat down and tried for years to duplicate it.  They couldn't.  I've called sports services that refuse to provide any information about their handicapping methodology.  About 15 years ago I started writing a book about sports services.  I never completed it because services were appearing and disappearing faster than I could write.  During my research on the book, I called sports services to find out their handicapping methodology. Some expounded on it for an hour.  Some, however, refused to tell me anything.  Their methods were supposedly secret.  They wouldn't even tell me general things, such as "we use trends," or "we have proprietary systems," or "we analyze team performance statistics."  I suspect their method was the "pin in the newspaper" approach, or the "off-the- top-my-head" opinion system.  Secrecy can be another danger sign.

4.    False auditors.  Bernie's hedge fund was one of the biggest.  Because Bernie was so nice, and so trusted, he had amassed an amazing $500 billion in money under management.  Despite the size if the fund, however, Bernie was using a one-man auditing firm in upstate New York.  It made no sense that a one-man accounting firm could possibly ever accurately audit an operation the size of Bernie's.

In these articles we will give examples of con games used for various purposes, but since this is a sports information forum, the main emphasis of our discussion of techniques and of our examples will be the misrepresentation of records by those who pick games, whether for free or paid.  Not all of the signs and tells in the Madoff case are applicable to sports advisory situations, and there are additional signs and tells that may be applicable to sports advisors that are not applicable to Madoff.

We'll discuss some of the main signs one-by-one.  Others we will point out as we explain the individual tricks themselves.  In the next article we'll discuss in detail the free lunch and hiding in plain sight.