Meyer Blinder was born in New York in 1921. He worked in his parents’ sweet shop and then as a travelling salesman, later serving in the US Army during World War II. After the war he started various companies, including a coffee vending firm that was eventually sold for enough money to enable him to retire. In 1970, however, he set up the brokerage firm Blinder, Robinson and Company in Westbury, New York before moving it to Denver, Colorado eight years later. At its peak it was the largest penny stock brokerage in the US, and the tenth-largest broker overall, employing 3,000 people in 80 offices in America and other countries.
What was the scam?
Blinder, Robinson and Company was known for its “three call” method, where brokers would build up the client’s trust by calling them multiple times before making a recommendation. It would use these sales tactics to sell shares in fraudulent shell companies, which Blinder and his associates had set up, at inflated prices. Meyer’s firm would further cheat its customers by charging them up to 140% commission on every trade, far more than the legally allowed 10%, without telling them. All this allowed Blinder to amass a $100m ($196m today) fortune.
What happened next?
Mounting investor complaints attracted the attention of the authorities, with the US Securities and Exchange Commission charging him with fraud in 1986. Meyer refused to back down, arguing that the investors were responsible for their own losses, and initially managed to delay the trial. However, the firm, which had become known as “Blind ‘em and Rob ‘em”, was hit by a class-action lawsuit set up by two former customers. By 1990 it was forced into bankruptcy, with debts of over $75m. By 1992 Meyer was himself convicted of racketeering and money laundering and would serve over three years in prison.
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Lessons for investors
Prosecutors believe investors may have lost as much as $500m ($978m) from the various scams that Meyer was involved in. It’s always good to check the small print of any fund, scheme or brokerage service to see how much money you are being charged, and avoid those with high charges, because there is little evidence that high-cost services do any better than cheaper ones. It’s also a good idea to stay away from brokers or advisers who cold-call you (which is now against the rules in most cases in the UK).
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