Why are so many white-collar criminals drawn to Los Angeles? To paraphrase bank robber/philosopher Willie Sutton: Because that’s where the money is.
Los Angeles is home to about one-eighth of the nation’s millionaires, boasting some 73,700 households with more than $1 million in liquid, investable assets, according to PSI Global, a Tampa, Fla.-based consulting firm that collects data on wealthy consumers and investors. In fact, the L.A. area is second only to the New York metropolitan region which has about 93,000 households with more than $1 million on hand as the nation’s capital of extreme wealth.
But that’s just the top of the economic ladder.
A couple of rungs down, the ranks of what might be called the “merely wealthy” also have been expanding providing a potentially fertile field for the legion of fraud artists plying their trade in Los Angeles.
The number of L.A. County residents in households with taxable annual incomes of more than $100,000 jumped 30 percent between 1994 and 1996, rising from 431,036 to 561,716, according to the Assembly Select Committee on the California Middle Class. The number of L.A. County residents in households with annual incomes of more than $1 million grew even faster, swelling by 52 percent, from 8,529 to 13,008, over the same period.
While the sheer number of wealthy folks here is attractive to swindlers, even more enticing is the relative newness of their money. John J. DeMarco, an executive with PSI Global, pointed out that one large group of Angelenos fits the description of the perfect mark for swindlers.
In particular, PSI was gathering statistics on wealthy individuals in California about a decade ago when researchers discovered something unusual. “It was a group of people we had never seen before,” DeMarco recalled. “They had a lot of wealth, but not very high incomes, and they were not highly educated.”
It turned out they were rich divorcees, primarily ex-wives of wealthy individuals, who had reaped the benefits of California’s status as a community-property state.
Of course, most of the personal wealth in the United States has been earned rather than inherited or won through divorce proceedings. And that is particularly true in Los Angeles a young city that from its infancy has attracted a striving class of immigrants seeking to strike it rich.
“People here have made an enormous amount of money through their entrepreneurship,” said James P. Smith, senior economist at Rand Corp. in Santa Monica. “These people made their money; they didn’t inherit it.”
But that also provides scammers with opportunity: There are plenty of people willing to take a risk if the payoff seems high enough.
According to PSI Global, most of the new wealth generated in recent years has come from successful entrepreneurial ventures and stock market gains that is, from risk-taking. And the hunger for riches displayed by so many Angelenos may render them especially likely to simply roll the dice, and get involved in a shady get-rich-quick scheme that may be too good to be true.
