Arlan Galbraith: the Pigeon King’s Ponzi scheme unravels

Ontario farmer turned livestock breeder, Arlan Galbraith's pigeon Ponzi scheme brought ruin to many in America's farming communities.

When the tide goes out, as Warren Buffett observed, "you discover who's been swimming naked". In 2008, the most obvious skinny dipper was Bernard Madoff, whose $65bn Ponzi scheme has gone down as the largest financial fraud in US history. But in Canada, a smaller but equally extraordinary Ponzi was unravelling, says The New York Times.

The perpetrator was failed Ontario farmer turned livestock breeder Arlan Galbraith. Instead of shares, he specialised in pigeons. Yet, for his many victims in farming communities across Canada and America, the 'Pigeon King' would prove just as ruinous as Madoff.

Galbraith's reign lasted from 2001 to June 2008. At his trial, he compared himself with Steve Jobs as a "risk taker and a visionary" all he'd ever wanted to do was put "joy on people's faces by providing them with a better life through pigeon farming". He touted his scheme as a way to "save" troubled family farms, says the local Wellington Advertiser.

His proposition was tempting. If punters paid C$500 for a pair of breeding pigeons, he would "buy back all their offspring for ten years for C$50 each". Many investors bought 200 pairs or more at a time, for upwards of C$100,000. Some, "impressed by an operation that appeared to be far more lucrative than traditional poultry sales", transformed their entire farms.

Galbraith, 67, always insisted he had a clear business plan, says The New York Times. Initially, he told farmers the birds were high-end racing pigeons whose offspring he would sell to rich overseas pigeon-fanciers. He claimed to have developed his own genetic line Strathclyde Genetics. But he later changed his story.

The birds were part of a "trailblazing plan to elevate pigeon meat, known as squab, from a fringe delicacy into the next ubiquitous chicken". In fact, says Better Farming, these were fantasies.

Galbraith never sold a single pigeon for sport or meat. He simply re-sold the birds he bought back from his investors to new ones. As that meant a continuous recruitment drive, he pushed into the American Midwest, often targeting Amish and Mennonite communities (see below).

The scheme began to unravel in 2007 when two men (a vigilante named David Thornton, who runs a website called CrimeBustersNow; and David Wagler, an influential Amish figure) separately accused Galbraith of running a Ponzi. It was later found he'd taken nearly C$42m from farmers and had walked away from obligations to buy back C$356m-worth of baby birds.

Tens of thousands of pigeons had to be culled. Eventually sentenced to seven years in December 2013, the Pigeon King still commands some loyalty. One investor, who lost C$125,000, said that if asked to have dinner with him, it would be a pleasure to accept.

Hapless businessman or skilled conman?

By 2001, when he began running advertisements in small farming magazines for Pigeon King International (PKI), he'd been breeding pigeons for about 50 years. "For decades he was active in Ontario's pigeon-racing and pigeon-fancying circles." One woman, who invested C$80,000, described Galbraith's "very nice-looking trusting face".

And in the seven years he ran the scheme, he never missed a payment. Many of his early investors made six-figure returns. "Pigeon King didn't look like a reasonable business. But it didn't make much sense as a scam either." Some years later Galbraith paid himself C$400,000, but he ploughed most of that back into PKI.

Close associates paint a different picture, says Dave Pink in Better Farming (which published a damning expose of PKIin December 2007). At least two staff testified they'd left the business after accusing Galbraith of running a Ponzi scheme. According to Mark Reusser of the Ontario Federation of Agriculture: "it was a pyramid scheme right from the start the man had no market".

Prosecutors argued that Galbraith deliberately targeted close-knit communities with biblical-sounding aphorisms. He signed an early flier: "He who does not trust is not to be trusted. My business is built on everlasting trust".

Key to his expansion plan was a monthly newsletter called The Pigeon Post, "a sort of small-town newspaper for the community he was building": crammed full of pigeon trivia and testimonials from happy investors, says Mooalem. It was this very cosiness that made him so convincing, says Morley Safer on CBS.com.

Galbraith promised "a pigeon in every pot, a balance in every bank account". The reality was very different. As one Ohio farmer who lost $250,000 later concluded, "I shoulda gone to Vegas and put it all on red".

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