WHEN I WORKED FOR a personal finance magazine in the mid-1990s, I wrote a story about conmen who met their marks in internet chat rooms devoted to stock investing. One of the slickest tricksters went by the name of Josef von Habsburg. He told people he was descended from Austrian royalty.
In researching the story, I called the police in von Habsburg’s hometown of Birmingham, Michigan, a suburb of Detroit. The local police knew him as Josef Meyers and said he was about as royal as you or me. He was a gifted storyteller, however, who maintained an elaborate false identity for more than 20 years, including speaking English with a vaguely European accent.
In investment chat rooms, he’d identify himself as a foreign exchange trader and heir to an Austrian royal fortune. A 61-year-old Texan who met von Habsburg was among those taken in. He sent him $10,000 to invest in a hedge fund that von Habsburg claimed to run.
“Very early on I asked him if he was licensed as a broker,” the man told me. “He said, ‘Oh, you have to be.’ I took his word for it.” After the spell of Habsburg’s stories wore off, “I was terribly embarrassed,” the retired IBM executive said. “I knew I’d been screwed.”
The types of scams people pull have changed over the years. Cryptocurrency thefts and computer hacking now predominate. What hasn’t changed is human nature, including the desire by some to profit through deception.
I thought von Habsburg’s grift was finished once my story was published in February 1995. By then, he’d been charged with securities fraud by the Securities and Exchange Commission in the fake hedge fund case, and been publicly identified as a conman in a national magazine. I went on to other stories and never realized his career was only starting to blossom.
A gifted conman doesn’t stop spinning yarns just because he’s been charged. He just trains all his skills on the officials trying to put him behind bars. In this case, von Habsburg was able to maintain his false identity while he worked as a confidential informant for the FBI in New York for many years.
Von Habsburg would ingratiate himself with shadowy figures operating on the margins of Wall Street, and then introduce them to his handler, an undercover FBI agent named Michael Grimm. Over lavish lunches at places like the Waldorf Astoria, the mark, the conman and the FBI agent would discuss possible financial frauds, such as international money laundering—all while their conversations were secretly recorded.
When the net was sprung, the mark got arrested, charged and typically pled guilty. Von Habsburg was free to reel in another mark for law enforcement. He also ran cons of his own on the side, like allegedly forging a $100,000 check. If he got caught, his FBI handler would talk to the judge and prosecutor privately. The charges would get dismissed and von Habsburg would walk away a free man.
I only learned about the second half of von Habsburg’s career years later from a writer at The New Yorker. How had I found out about von Habsburg, the writer asked me? I told him I’d gone to the Securities and Exchange Commission and came across his name in the files of enforcement actions.
The writer, Evan Ratliff, said he’d looked through the SEC’s files, too, but found nothing under von Habsburg’s name. I told him I’d be happy to run my search again and call him back. I hopped online and went to the SEC’s Edgar database. I ran my search a dozen ways using several different names. Von Habsburg never came up. It was like a scene in a spy movie—the undercover agent’s identity had been scrubbed from the federal database.
Giving von Habsburg a “get out of jail free” card was like turning an arsonist loose in a match factory. He eventually became friendly with Barbara “Bobo” Rockefeller, the elderly ex-wife of Standard Oil heir Winthrop Rockefeller. After he talked his way into living in her Upper East Side mansion, her children noticed that a valuable French antique had disappeared. Von Habsburg said he’d removed it for safekeeping. It later reappeared—for sale at a Sotheby’s auction.
A Detroit News article identified him as both an FBI undercover witness and one of Michigan’s biggest deadbeat dads. Years before, he’d abandoned a wife and children in Michigan, who were owed a large sum in child support. When the FBI didn’t step in to protect him in the highly publicized case, he was sentenced to three-and-a-half years in prison.
What became of his FBI handler, Agent Michael Grimm? He parlayed his law-and-order experience into a seat in Congress, representing Staten Island. After losing re-election, he kept two sets of books at a Manhattan restaurant he’d opened. He was convicted of wage fraud and underreporting his income, and was sentenced to eight months in prison.
Is there a lesson to this story? I know HumbleDollar readers are too smart to buy securities based solely on internet discussions, especially when they’re portrayed as an inside tip or the score of a lifetime.
Still, one thing I learned from my reporting was that conmen target marks who live far away. It’s unlikely the police in Texas will fly to New York to investigate a white-collar crime if no victim was physically harmed. Today, grifters often pursue their con over the computer while living in foreign countries.
Back then, marks might be asked to invest by overnighting a check by FedEx. The conmen wanted to avoid U.S. mail or bank transfers, which trip off mail and wire fraud charges that are policed by national law enforcement agencies. Today, criminals manage money transfers online, and bounce the funds around through overseas accounts to make them impossible to track.
The good news: It’s a snap to see if someone’s a registered broker by looking them up on Finra’s BrokerCheck, which contains a wealth of information. As a favor to a friend, I once looked up her broker and found that he was facing Ponzi charges in Massachusetts. She said she was disappointed because he was so friendly and always seemed to call with such good investment suggestions.
It just goes to show that it pays to be skeptical—especially when someone seems like a real prince.
Greg Spears is HumbleDollar’s deputy editor. Earlier in his career, he worked as a reporter for the Knight Ridder Washington Bureau and Kiplinger’s Personal Finance magazine. After leaving journalism, Greg spent 23 years as a senior editor at Vanguard Group on the 401(k) side, where he implored people to save more for retirement. He currently teaches behavioral economics at St. Joseph’s University in Philadelphia as an adjunct professor. The subject helps shed light on why so many Americans save less than they might. Greg is also a Certified Financial Planner certificate holder. Check out his earlier articles.