This week TD Bank agreed to pay $1.2 billion to settle a case involving a $7 billion Ponzi scheme involving Allen Stanford. The Canadian bank denied any wrongdoing but said it chose to settle to “avoid the distraction and uncertainty of continuing a long legal proceeding.” Ponzi schemes are when the orchestrator pays out old investors with funds from new investors, and Straight Arrow News has some of the most notorious ones in history in this week’s Five For Friday.

#5: Charles Ponzi

Charles Ponzi was far from the first to be involved in a scam that robbed Peter to pay Paul, but his was so infamous they put his name on the fraud. In 1920, Ponzi lured investors by offering 50% interest in just 90 days — which he eventually sweetened to 45 days — by buying and selling international postal reply coupons. In the truest definition of a Ponzi scheme, he paid off early investors with money from new investors who wanted to get in on the fortune. Ponzi made $15 million in just eight months, worth roughly $232 million in 2023. His rags-to-riches story garnered media attention in Boston, which first brought him new clients and eventually scrutiny, which brought the scam to a halt. In the end, Ponzi went to prison, was paroled, committed more fraud, went back to prison and was eventually deported to his native Italy.

#4: Lou Pearlman

Lou Pearlman didn’t just launch massive boy bands like *NSYNC and The Backstreet Boys, swindling money from the superstars: Pearlman also ran a decades-long Ponzi scheme that started in the 1980s. He would get people to invest in businesses listed under his Trans Continental International company, but the businesses only existed on paper. Pearlman also used the success of his boy bands to sell investors on a fraudulent savings program. He created fake financial statements to make the whole operation seem legitimate. He made $300 million with the scam but was eventually caught and sentenced to 25 years in prison. Pearlman died in 2016, eight years after his sentencing.

#3: Scott Rothstein

Scott Rothstein used his expertise as an attorney for his scheme. He would sell structured settlement agreements to his clients, claiming the recipient couldn’t wait to collect the annuity over time. It’s similar to lottery winning payouts and is a legitimate business structure. Rothstein’s investors would pay a lump sum to the winner in these cases with the promise of earning their money back plus the difference in annuity payments over time. The problem was Rothstein’s cases never actually existed. The scheme fell apart after he ran out of money to pay his investors. Rothstein was eventually convicted and sentenced to 50 years in prison for running the $1.2 billion Ponzi scheme. TD Bank was also implicated in Rothstein’s fraud, paying $52.5 million due to alleged involvement.

#2: Allen Stanford

Allen Stanford’s $7 billion dollar scam involved certificates of deposit pitching fantastic, safe returns sold out of his bank in Antigua. They claimed the returns were better than anywhere else, which ended up being too good to be true. Stanford claimed the CDs were backed by actual assets but the SEC said it was a front to fund his lavish lifestyle, including funding high profile cricket tournaments. He’s now serving 110 years in prison while governments try to make his investors whole. That’s where TD Bank’s $1.2 billion settlement comes in.

#1: Bernie Madoff

Bernie Madoff’s $20 billion Ponzi scheme is one for the history books, along with documentaries, movies and TV series. Madoff took in $20 billion in principle from investors, promising huge returns. But he apparently just dumped the funds into an account to use as he pleased while forging documents to show clients $65 billion in returns. Madoff’s scheme fell apart when the stock market crashed in 2008 and he could no longer pay out his investors. He was sentenced to 150 years in prison after his sons turned him in. Madoff died in 2021.

President Joe Biden is flexing his veto power for the first time in his presidency. After the House and Senate voted to block a Biden administration rule on ESG investing, he vowed to veto the legislation.

But the veto might not end the fight, as Republican-led states are also challenging the rule in court.

The Labor Department rule in question would allow retirement fund managers to consider factors like climate change when picking investments, reversing a Trump-era rule that restricted firms to only consider how investments perform.

“Due to Biden’s reckless economic policies, too many Americans are worried about rising costs of living,” Rep. Virginia Foxx, R-N.C., said. “Diverting retirement savings to fund social justice causes will make this problem even worse.”

Conservatives have increasingly targeted so-called “woke” investing, known officially as environmental, social and corporate governance (ESG) investing.

“Republicans talk about their love for the free market, small government, let the private sector do its work. But their obsession with eliminating ESG would do the opposite, forcing their own views down the throats of every company and every investor,” Senate Majority Leader Chuck Schumer, D-N.Y., said.

Supporters of the rule argue it is voluntary whether fund managers want to look at ESG or not. But a bill blocking the rule not only passed the Republican-controlled House, but cleared the Democrat-controlled Senate as well. Two Democrats, Sens. Joe Manchin and Jon Tester, sided with Republican senators. Both hail from red states, West Virginia and Montana, and hold seats up for reelection in 2024.

“This is unacceptable to the president and that is why he will veto this bill if it comes to his desk,” White House Press Secretary Karine Jean-Pierre said Wednesday.

But even with the veto pen, the rule still faces a battle in court. A large coalition of 25 Republican-led states has asked a federal judge to block it, claiming the rule will jeopardize retirement savings. The government argues it won’t, saying the rule still requires retirement plans to prioritize financial gains over ESG.

Right now, both sides are fighting over where this will be hashed out. The federal government wants to move the case from the current Amarillo, Texas, federal court, where Trump-appointed judge Matthew Kacsmaryk is seen as a roadblock to Biden’s policies. He has so far halted federal action on issues from asylum-seekers to birth control.

The red states are rejecting a change in venue, adding a plaintiff this week from Amarillo to prove the case belongs there.

The Supreme Court is set to review whether an entire federal agency is unconstitutional. This week, it announced it would take up another challenge to the Consumer Financial Protection Bureau after the U.S. Court of Appeals for the Fifth Circuit determined its funding structure violated the constitution.

The Biden administration asked the Supreme Court to expedite the review but the court decided against fast-tracking it, so a decision won’t come for about another year.

What is the CFPB?

The CFPB was born out of the 2008 financial crisis. It is the brainchild of then-future Sen. Elizabeth Warren, D-Mass. In 2010, Congress and then-President Barack Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act, which created the bureau. It consolidated consumer financial protection authority from seven different agencies under one roof.

Some of the bureau’s wins include:

• Exposing the Wells Fargo fake accounts scheme and other violations, forcing the bank to pay billions in fines.
• Cracking down on risky mortgage lending, the catalyst of the financial crash.
• Recovering $16 billion for customers since its inception.

CFPB criticism

Critics of the bureau have long argued it is too powerful, unaccountable and burdensome, levying too many financial regulations. A particular point of attack is the way the bureau was structured from the beginning.

Democrats intended to protect the bureau from political pressure in two ways: one, the sole agency director could only be fired for cause; and two, the agency would be funded through the Federal Reserve, not congressional appropriations.

The first point was already challenged in a 2020 Supreme Court ruling. The court determined the director’s removal protections were unconstitutional, but instead of shuttering the bureau, they changed the rules so the bureau director now serves at the pleasure of the president and can be fired at will.

The second point is at the heart of the case the Supreme Court has just decided to review.

Community Financial Services Association of America v. CFPB

In October, a trio of Trump-appointed judges from the Fifth Circuit ruled in October that CFPB funding is unconstitutional because it bypasses Congress, violating separation of powers. The case stemmed from a lawsuit by the payday lending industry, which was challenging a CFPB rule that would have restricted their access to customer bank accounts.

The court ruled against the bureau not because of a lack of authority in making the rule, but because it financed its rulemaking via unconstitutional funding.

“Without its unconstitutional funding, the Bureau lacked any other means to promulgate the rule,” the decision read.

If the decision is upheld by the Supreme Court, it could throw into question every rule the agency has made in its 12-year history.

Starting March 1, millions of Americans will have less money to buy groceries. Across 32 states, D.C., and some territories, some emergency food stamp benefits are coming to an end.

For nearly three years, the Supplemental Nutrition Assistance Program (SNAP) has dished out congressionally-approved pandemic-era increases known as “emergency allotments.” With COVID-19 emergency aid now ending, households will get at least $95 less per month, according to the left-leaning think tank Center on Budget and Policy Priorities. They say some households will see reductions of $250 or more.

According to a report by the left-leaning Urban Institute, emergency allotments kept 4.2 million people out of poverty in the fourth quarter of 2021, reducing child poverty by 14% in states with the benefit. The cutoff of emergency aid comes as groceries are 11.3% higher than one year ago, according to the latest consumer price report. Anti-hunger advocates say poverty rates are now likely to rise.

Meanwhile, the cost of the SNAP program has surged under these COVID-19 emergency payments, from $60.4 billion in fiscal year 2019 to $113.7 billion in fiscal year 2021, the first full year of pandemic benefits. The Congressional Budget Office said the end of emergency measures will drop the SNAP cost by $21 billion from the previous year for fiscal year 2023.

Not all pandemic-related changes to food assistance are coming off the table. Families that qualify can still get a summer benefit for school-aged children called Summer EBT, which would act to replace the meals the schools would usually provide.

SNAP is a government benefit that adds more money to the economy than it costs to maintain. For every $1 spent on SNAP, it contributes around $1.50 to the country’s gross domestic product. Taking that into account, SNAP can have an effect of stimulating the economy. The reduction of emergency benefits could slightly depress economic growth and inflation, a Moody’s economist told Axios.

Pending home sales in January paint a positive and negative picture for the housing market. On one hand, the pending home sales figure is down 24.1% on the year, according to the National Association of Realtors. On the other hand, the pending home sales figure in January is up 8.1% from December, rising for the second consecutive month. That result blew away the forecast of 1% for the month.

The pending home sales data follows Friday’s release of new home sales, which was up 7.2% in January, according to the Census Bureau.

The NAR said buyers are responding to better affordability and falling mortgage rates in December and January. Those rates are already back on the rise, reaching 6.5% for a 30-year fixed rate mortgage, according to the latest data from Freddie Mac. A third factor could be boosting new home sales.

“We’ve seen demand creep back up a little bit but it’s still not at the levels we saw in 2020 and 2021,” Insider housing economy reporter Alcynna Lloyd told Straight Arrow News. “So what individual builders are doing right now, I’ve seen some builders offer more incentives.”

The main incentive is buying down mortgage rates. It’s always been a tool in the home builder’s belt but really wasn’t needed with rates so low for so long. Now, with the 30-year rate within the 6-7% range, homebuilders are luring in buyers by buying down mortgage rates one to two percentage points lower.

A recent John Burns Real Estate Consulting national survey revealed 75% of home builders surveyed confirmed they are buying down buyers’ mortgage rates to make payments more affordable. The surveys said 32% are buying down the full 30-year term, while 30% are reducing the rate the first two years. Buyers must still qualify to make monthly payments on the higher rate before it’s brought down.

This process can cost the home builder 2-6% of the sales price, but with a construction loan looming, it’s a powerful way to move inventory with lower demand. It’s also giving new home sellers a competitive advantage, with few resale sellers offering the same kind of deal, the consulting firm said.

The NAR still expects annual existing home sales to drop 11.1% in 2023 before jumping 17.7% in 2024. New homes have a much rosier picture, facing a projected 3.7% annual drop in 2023 and a 19.4% rise in 2024.

Entrepreneur Vivek Ramaswamy announced Tuesday he’s running for the Republican nomination for president in 2024. The “Woke, Inc.” author joins a field that already includes former President Donald Trump and former Gov. Nikki Haley, R-S.C. The 37-year-old Ohio-native has never been elected to office but has founded a lucrative biotech firm. Ramaswamy laid out an agenda of decoupling from China, dismantling the “new climate religion” and repealing affirmative action laws. He’s not the first to attempt an official transition from business to the nation’s highest office. Here are some others who tried to move from the C-suite to a suite in the White House in this week’s Five for Friday.

#5: Andrew Yang

Andrew Yang received a surprising amount of attention during the 2020 Democratic Primary after appearing on high-profile shows and podcasts including the Joe Rogan Experience and the Breakfast Club. His campaign was energized through the use of memes and social media mobilizing his supporters, known as the “Yang Gang.” A key pillar of the Yang campaign was a universal basic income (UBI) of $1,000 per month. He said UBI would help as jobs were lost due to an increase in automation. All of the hype didn’t result in many voters though and he dropped out after two primaries. Yang went on to endorse Joe Biden.

#4: Carly Fiorina

Former Hewlett-Packard CEO Carly Fiorina gained some momentum in early 2016 Republican debates. The field was large, featuring governors, senators and another person from the business world that went on to become president. Fiorina had hoped her business acumen would make her standout from the field, despite being forced to resign her position at HP in 2005. But the early momentum stalled and she dropped out after poor showings in Iowa and New Hampshire. Fiorina also has the distinction of shortest vice presidential candidate in modern history after joining Sen. Ted Cruz’s campaign a week before he called it quits.

#3: Tom Steyer

It may be easy to forget about Tom Steyer’s 2020 bid for the Democratic nomination for president. The hedge fund manager turned climate activist was never able to gain traction despite sparring with Joe Biden and Bernie Sanders on the debate stage. Steyer technically survived four primaries but received no delegates before suspending his campaign. He spent around $250 million of his own money to fund the campaign, but at a current net worth of $1.5 billion, it was just a drop in the bucket.

#2: Ross Perot

The 1990s were a unique decade, and billionaire businessman Ross Perot was indicative of the quirky time period. In 1992 Perot launched an independent bid for president, facing off with Bill Clinton and George H. W. Bush. Perot ran on balancing the budget and an opposition to the North American Free Trade Agreement (NAFTA). He didn’t win any electoral votes in the election but is widely seen as one of the most successful third-party candidates of all time after receiving 19% of the popular vote nationwide. Perot’s persona also spawned arguably one of the best Saturday Night Live impressions of all time. He made another run for the White House in 1994, but couldn’t recreate the magic.

#1: Donald Trump

From the moment real estate mogul Donald Trump descended on a golden escalator to announce his candidacy for the Republican presidential nomination in 2016, he changed the landscape of the race. On packed debate stages, he pressed established politicians like Jeb Bush and Marco Rubio. He ended up running away with his party’s nomination and defeated Hillary Clinton in the general election. He was impeached twice during his time in office but not removed. He lost his reelection bid to Joe Biden in 2020 and is running for a third time in 2024.

With $39 billion in manufacturing grants up for grabs, the race is on to get a piece of the CHIPS and Science Act. During a speech Thursday, Commerce Secretary Gina Raimondo said the department will be launching the first applications for the funding starting Tuesday.

“Folks, the stakes couldn’t be higher, could not be higher, which is why we have to win,” she said, likening the semiconductor investment and innovation she hopes it spurs to President John F. Kennedy’s space race. “This is so much more than incentivizing the creation of a few new semiconductor fabs around the country.”

But practically, her plan this decade is to get two new clusters of chip manufacturing built in the U.S. It seems likely one of those clusters will be in Arizona, where companies like Intel and Taiwan’s TSMC have pledged tens of billions in new projects.

The sophisticated semiconductor industry is largely dominated by Taiwan, and China is heavily investing in new industry growth. Semiconductors are used in all types of technology, from powering cars to hospital technologies.

When the COVID-19 pandemic shut down the world, industries from tech to automobiles severely struggled with the inability to secure enough chips for products and demand. The U.S. has eyed bolstering U.S. production ever since.

Raimondo acknowledged in her speech Thursday that there’s keen interest in finding out how the government plans to divvy up the taxpayer funds secured through the CHIPS Act, but didn’t go into more detail about which companies will benefit.

While the semiconductor industry pulled together to push the historic taxpayer investment, it’s now starting to splinter as the Biden administration prepares to dish out grants. According to a New York Times article, a public relations firm accused Intel “of angling to win subsidies under the CHIPS and Science Act for new factories in Ohio and Arizona that would sit empty.” The firm would not divulge its client.

Meanwhile, Intel, which has hosted President Joe Biden at its Ohio site, has publicly questioned how much taxpayer money should go to companies like TSMC with offshore headquarters over American companies like Intel, which is headquartered in California.

“I expect there will be many disappointed companies who feel that they should have a certain amount of money. The reality is the return on our investment here is the achievement of our national security goal,” Raimondo told reporters on Wednesday.

She said her goal is that the more than $50 billion in total federal semiconductor investment will translate to an additional $500 billion or more in private sector investment. But critics point out that with so much taxpayer money on the line, the pressure is on to make sure the funds are properly used.

In a time when policing is highly scrutinized, the Toronto Police Service says it’s giving the community a “behind-the-scenes view” of its activities with a podcast. The series “24 Shades of Blue” is controversial because the department spent more than 300,000 Canadian dollars ($200,000) to produce it with a third party, according to a CBC Toronto investigation.

This year, the police service received a budget bump of 48.3 million dollars to improve response times and hire more community safety officers. Some people online have expressed concern over funding the podcast project, calling it “copaganda.”

In the first episode from 2020, a host says he intends to show more of the job that’s not represented in traditional media.

“Systemic racism exists,” former Chief of Police James Ramer said. “It exists in every institution. It exists in policing. And the first step in changing is understanding that and recognizing it. And we do and we’re sort of working towards that. But at the same time we also have a whole group of people — an entire organization — the vast majority of which have a genuine and sincere commitment to the profession and they are doing good work.”

Tension between police officers and the communities they patrol have been especially high since George Floyd’s death — not only in the U.S., but in Canada as well.

While an Ipsos poll showed 51% of the Canadian population supported defunding the police in 2020, not one city police department there has done so, according to Concordia University professor Ted Rutland. He says their budgets have only gone up.

The Securities and Exchange Commission has fined the Church of Jesus Christ of Latter-Day Saints, known more colloquially as the Mormon church, for allegedly hiding how much money it has. The church agreed to pay a $1 million fine while its investment portfolio manager, Ensign Peak Advisors, agreed to pay $4 million.

The SEC said that with the LDS Church’s approval, Ensign Peak Advisors created 13 shell corporations to hide the church’s billions so those funds wouldn’t be tied back to the institution. The SEC claimed the church was concerned about the public finding out its investment portfolio had grown to $37.8 billion by 2020. That’s nearly the size of Harvard University’s endowment the same year.

In a 2020 report, the head of Ensign Peak, Roger Clarke, told the Wall Street Journal he believed church leaders were concerned knowledge of the large fund would discourage tithing.

According to the LDS Church’s official website, members must give 10% of their income to the church, where a council at headquarters then decides how to use the “sacred funds.”

“Tithing funds are always used for the Lord’s purposes–to build and maintain temples and meetinghouses, to sustain missionary work, to educate Church members, and to carry on the work of the Lord throughout the world,” the website reads.

“We allege that the LDS Church’s investment manager, with the Church’s knowledge, went to great lengths to avoid disclosing the Church’s investments, depriving the Commission and the investing public of accurate market information,” said Gurbir Grewal, director of SEC’s enforcement division.

The LDS Church said in a statement that it relied upon legal counsel when signing off on the shell corporations.

“We affirm our commitment to comply with the law, regret mistakes made, and now consider this matter closed,” the church said Tuesday.

The LDS Church told its members the settlement fines will be paid using investment returns. It said the church invests in stocks, bonds, commercial and residential real estate, and agricultural properties.

This week, the U.S. Supreme Court is looking at whether to narrow Section 230, a foundational internet shield law that passed in 1996. But even some of the justices are grappling with that role.

“I mean, we’re a court, we don’t really know about these things. These are not, like, the nine greatest experts on the internet,” Justice Elena Kagan said Tuesday, eliciting laughter in the courtroom.

But technology experts have said what the Supreme Court decides could dramatically disrupt the internet.

“Section 230 has been a cornerstone rule for the internet,” said Matthew Schruers, president of Computers & Communications Industry Association.

“If Section 230 were to disappear overnight, I think there are very real questions about whether a company, even the size of Google or Facebook, would be viable, without really radical changes to how their user interface works,” said Michael Karanicolas, executive director of UCLA’s Institute for Technology Law and Policy.

Karanicolas called Section 230, “The most important law in tech, the law that created the modern internet.” He told Straight Arrow News he was very concerned when he saw that this issue was coming before the Supreme Court and would prefer any reform be dealt with as a legislative matter, which he said will open it up to more public debate.

The two cases this week against Google and Twitter are brought by families of victims killed in separate terror attacks. The plaintiffs have challenged the tech companies’ legal immunity under Section 230, the law that says companies are not liable for what other post on their sites, while also allowing platforms to moderate content without fear of liability.

“So much of the digital economy turns on the ability of services to moderate their ecosystems without the risk of legal peril for whichever needle they miss in the haystack,” Schruers said.

But the families in these cases argue the platforms should be held liable for allowing terrorist content that may have helped radicalize the attackers. In Google’s case, the plaintiffs’ lawyers argued YouTube is acting as a publisher by recommending more terrorist-related videos, claiming a publisher would be legally liable.

If the Supreme Court agrees to narrow or gut Section 230, Schruers said there are two ways internet companies could respond to legal liability.

“You’ll have two different experiences, either the kindergarten, Sesame Street experience, or the chaotic Bourbon Street experience,” Schruers said. “Either over-moderated or under-moderated. And neither experience is what internet users or advertisers want.”

“Meaningful, individualized review is simply not possible at that kind of scale, even for a company with the resources of Google or Facebook,” Karanicolas said.

Which is why tech lawyers in front of the Supreme Court argued it is more likely the internet would go the other direction and avoid moderation to avoid claims of being a publisher.

“The worst case scenario would be a legal ruling that disincentivizes companies — or encourages companies — not to police content online, and that in turn leaves users at greater risk of dangerous content,” Schruers said.

With the future of the internet hanging in the balance, several justices suggested this quandary might be a better case for Congress.

For more in-depth coverage of Section 230 and the details of these two cases, click here.