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One of the greatest forms of financial fraud is the Ponzi scheme. You collect money from an initial group of investors, claiming to be investing it in something. Then you collect more money from a larger secondary group of investors. You use that second tranche of funds to pay off the first group, creating the illusion of great returns. Those great returns help you score money from an even larger third wave of investors, which you use to pay off group two.
Lather, rinse, repeat.
This is generally illegal, but as is often the case with criminal frauds, an enterprising individual can often come up with legal ways to mimic the operation of a crude fraud. One such method is the multilevel marketing scheme, in which you are compensated not only for selling a company's products but for recruiting new sellers. The success earlier sellers had in making money by recruiting new sellers serves as a tool to recruit new sellers. Until, that is, you run out of new sellers to recruit, and it all collapses.
The New York Times's Eric Lipton and Jennifer Steinhauer conducted a brilliant investigation into what amounts to a political version of this — the endless parade of front groups urging conservatives to dump John Boehner or Mitch McConnell or oppose Kevin McCarthy or Paul Ryan.
What they found is that most of these groups aren't really raising money in order to support conservative candidates for office or to lobby on behalf of conservative causes — they're raising millions of dollars and then spending 80 to 90 percent of that money on fees to consulting firms that are run by the people who started the groups. In effect, you have direct mail and email campaigns whose sole purpose is to raise funds to pay direct mail and email operatives.
Even Ben Carson's presidential campaign has something of this air about it. Carson is currently in second place in national polls and leading in Iowa. His campaign is raising tons of money from small donors and is spending most of that money on fundraising. People are giving Carson money so that he'll have the money to ask more people for money. It's a form of pyramid scheme. There's no real field operation, policy staff, or any other manifestation of the kind of campaign apparatus that could plausibly result in victory.
But in both cases there is the appearance of a growing movement, as manifested in an ever-increasing din of fundraising solicitations, though there's little in the way of actual movement building or policy progress. Yet it's all perfectly legal, and when the groups of the day end up collapsing, the consulting operations behind them can always find new ones.
