Willy Loman and a Ponzi Scheme

As a bankruptcy attorney, I have found that clients generally fall into  one of four categories:  Victim, Failure, Crook or Unlucky “VFCU.”  This is the latest in my series of blog posts regarding VCFU cases in which I've been involved during my career. 

In 1987 I received a call from a woman in Chicago who had invested $280k through her investment advisor, H.P. Smart.  Smart was selling notes allegedly secured by life insurance.  She told me that she had not received the last two interest payments and that the notes were supposed to pay 18%.  Given this high rate of interest, it was obvious to me (and would be to most people) that this was a Ponzi scheme.  She retained me and we sued.  I deposed Smart and he took the Fifth on every question.  At the time, he was under investigation by the SEC for selling unregistered securities. 

About a month later I received a call from Smart's attorney, who had found Smart dead of a self-inflicted gunshot wound to the head.  He had left a note saying, “To whom it may concern” and asking for forgiveness from God. While sympathetic, I remembered that Smart's newspaper ad soliciting investments had mentioned life insurance.  I immediately asked the attorney if Smart had insurance (it may have been in bad taste to ask so quickly), and he said he'd look into it.  Several days later the attorney told me there was a large policy.  It was a key man term policy that Smart had somehow gotten, even though he was the only employee of his company.  

Because it was a term policy, it had no cash value and was only worth something on Smart's death.  He had no family and was never married (a report said Smart's only relative was a brother on the West Coast).  I thought to myself that killing himself was the only good thing Smart had done.   

Through some maneuvers we were able to put Mr. Smart’s estate into a Chapter 11 proceeding (probably bending the law to get to a faster and more equitable way to divide the insurance proceeds without multiple individual court cases).  A trustee was appointed.  Even though it was the trustee/lawyer’s first such case, he managed to recover about fifty cents on the dollar, which is better than most victims generally receive. 

In Arthur Miller’s play Death of Salesman, Willy Loman has a family, is always under financial pressures and has  family disappointments.  In one of his lesser known quotes, when his refrigerator breaks down, he vocalizes his frustration by saying essentially that he wishes, for once, that he had paid for something in full before it broke.  Loman kills himself to let his family have the proceeds of his only valuable asset, his life insurance policy. 

I don’t pretend to fully understand Smart's motives, or to analyze a great American play, but I think that both endings, real and fictionalized, were an attempt to do something positive. My client was obviously a Victim.  Willy Loman was, at least in his own eyes, a Failure. Smart was clearly a Crook.