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I still remember my first Ponzi scheme.

The company, First Pension Corp. of Irvine, Calif., defrauded more than 8,000 mostly elderly investors of their retirement funds in the mid-1990s. The long-running scheme enticed people to invest their individual retirement accounts into pools of mortgages -- except the loans didn't actually exist.

When I interviewed company founder William E. Cooper in prison after his sentencing, I expected him to make at least a show of remorse. Instead, all he wanted to talk about was "prosecutorial misconduct" -- the many, many ways he felt the district attorney had done him wrong.

That breathtaking encounter with the mind of a fraudster was unique only in that it was my first. I've written about several Ponzi schemes since that one, including the Bernie Madoff $50 billion debacle that dwarfed all previous scams.

Often the scam artists talk about the stress and anxiety of maintaining their frauds. Sometimes they even say they're sorry. But you have to wonder how much remorse they actually feel. How can someone steal so much from so many, yet still greet their victims day in and day out with a hearty handshake and a smile?

Such behavior carries hallmarks of the psychopath, including charm coupled with a lack of conscience. While the vast majority of financial advisers and money managers are conscientious, some researchers theorize the financial industry may have a greater-than-average number of psychopaths in its midst.

Liz Weston

Liz Weston

Robert D. Hare, professor emeritus at the University of British Columbia and co-author of "Snakes in Suits: When Psychopaths Go To Work," has been widely misquoted as saying that one in 10 people working on Wall Street could be a clinical psychopath.

In reality, Hare's study found that 4% of a sample of 203 corporate professionals met the definition, and Hare points out it wasn't even a representative sample that could be extrapolated to the general population of corporate executives.

The prevalence of psychopathy on Wall Street is unknown -- but Hare wouldn't be shocked if it were far above the rate in the general population, which is about 1%.

"It may be even higher than 10%, on the assumption that psychopathic entrepreneurs and risk-takers tend to gravitate toward financial watering-holes, particularly those that are enormously lucrative and poorly regulated," Hare wrote in a comment on his website. "But, until the research has been conducted, we are left with anecdotal evidence and widespread speculation."

Hare should know: He created the checklist commonly used to diagnose psychopathy including these traits:

  • Egocentricity
  • Grandiosity
  • Lying and deceptiveness
  • Manipulativeness
  • Shallow emotions
  • Lack of empathy
  • Lack of remorse
  • Willingness to violate social norms
  • Irresponsibility
  • Impulsivity

Hare points out that psychopathy is not an either/or diagnosis but a wide spectrum, with violent offenders at the extreme end.

A separate Swiss study found that some stockbrokers may be even more reckless, egoistic and destructive than psychopaths. Researchers at the University of St. Gallen found that 28 professional traders they studied were more willing to take chances and to harm their opponents than a group of psychopaths who took the same tests. Instead of aiming for the greatest gain in computer simulations, the traders tried hardest to thwart their competitors.

A group of American researchers has posited that successful investors might be considered "functional psychopaths." Fear of loss makes poor investors out of the rest of us, but those who are able to control their emotions -- or who don't feel them in the first place -- are able to make better investing decisions.

Still, you don't want to put your financial future in the hands of someone who feels no regret about lying to you, manipulating you or causing you irreparable harm. Remember, psychopaths are in it for themselves and couldn't care less about you.

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