3 min read


Two stories this past week shine a stark light on the role deception plays in markets, and in games.

The first is the story of how several financial institutions, including TD Bank and HSBC, have agreed to pay $1.6 billion to resolve and settle all litigation over the Stanford Financial Group’s Ponzi scheme. (WSJ Feb 27, 2023) The second story is about how the Legalized Games of Chance Control Commission (LGCC) detected fraud in a number of games on the South Jersey shore. The first was about settling claims, while denying liability, in a scheme that defrauded people for a total of $7 billion. The second is about on-going deception investigations conducted to ensure that people are not playing games designed to be unwinnable. The one is to redress, the other to prevent.

 The Stanford Financial Group scheme was a Ponzi-scheme structure: promising to invest in “low-risk, high-return investments”, Stanford used the monies collected from investors to pay back “returns” to earlier investors. The Stanford Interest Bank, based in Antigua, issued fraudulent certificates of deposits, while legitimate financial institutions provided loans to the Stanford Bank. This defrauded seemingly unsuspecting investors of enormous sums.

Yet there is a way to see Ponzi schemes as mutually beneficial - as long as they are not outed. The monies invested are used to pay earlier investors, creating a loop that could theoretically continue, but which falls apart when exposed as having no substantive investments. There is an argument to be made that maintaining the fiction could be financially beneficial to all players; and so one might ask, whose benefit is it to out the con? Of course, this is heretical: the con is a crime as it lures people into doing something that is from the outset entirely untrue. The schemers are selling something that is unreal and false.

 The games on the Jersey Shore that were outed for fraud included basketballs that were inflated so that they would bounce off the rim and not fit through the hoop, making successful shots impossible. Dan Barry (NYTimes Feb 21, 2023) explains that the reason for these investigations is to ensure that these “games of chance” are games of fair chance. According to Cari Fais, Acting Director of New Jersey’s Division of Consumer Affairs, it is important to ensure that these “games have not been modified to disadvantage the player” so that folks are not “scammed” out of their money; and this is important because rigged games “offend people’s sense of fair play”.

 We recognize that games, competitions, investments are risky - that playing means we may lose. Indeed, what attracts us to most “games” is that we will win – against the odds of losing. That is the risk-reward equation, and we all have different tolerances. But there is an important distinction between risk and fairness. When we know that there is a chance we may lose, but we trust the activity to be fair, we voluntarily participate. This is different from being deceived about the nature of the game.

 But what about activities and purchases where we expect not only fairness, but also quality. Food, for example. We tend to purchase food that tastes good; and we understand that it is our individual choice to select healthy from less-healthy food. But what if we discover that the unhealthy foods are designed to manipulate our neurological systems so that not only do we think they are super delicious, but we actually cannot stop eating them. In his essay in Salon Magazine, Matthew Rozsa, explains the “optimization” of Prego spaghetti sauce

Even though one may not think of spaghetti sauce as equivalent to candy, a single half-cup of Prego Traditional has more than two teaspoons of sugar — as much as at least two Oreo cookies. This is because industry research found that the sugar stimulated consumer tastebuds enough to make them crave more and more of the spaghetti sauce.

Is this an unfair game because we do not know about it? When we do know about it, is it still unfair?

 What about cars? We know that a car is a liability – things will go wrong, which is why cars come with warranties, and one of the reasons we purchase car insurance. But what if we discover that a car company has lied about the performance specifications so that we are not buying what we thought we were buying? That is precisely what happened when Volkswagen knowingly deceived authorities, and consumers, about emissions performance. More than just deception, VW installed software that detected how the car was driving so the cars would conform to emissions regulations. Does this disturb our sense of fair play?

We are confronted daily with stories of deception, fraud, dishonesty and cheating -of how the consumption game is not “fair”. Corporations misbehave while we constantly investigate and out the deceptions. Have we come to expect this reality, and accept that this is the fairness we are willing to live with? We hope not.

At Bovitz we see the power, and success that comes to the companies that treat people with fairness and respect; that operate not only legally, but fairly. We see this in how well regarded and loved they are, and how these qualities translate into enduring and growing purchase. When companies put People First, their employees, their customers, their communities, it is a mutual win-win-win. Fairness breeds respect, respect profitability. But this starts with putting people before deception.





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