On Attack
Barry Seid
Two weeks ago, news broke that a secretive billionaire who made his money selling power strips had given the proceeds of his company’s sale to our old friend Leonard Leo:
An elderly, ultra-secretive Chicago businessman has given the largest known donation to a political advocacy group in U.S. history — worth $1.6 billion — and the recipient is one of the prime architects of conservatives’ efforts to reshape the American judicial system, including the Supreme Court.
We often talk about the rich people who believe the country should be remade according to their personal beliefs. The size of Seid’s ‘donation’ and the way he was able to orchestrate it without paying $400 million in taxes drew desperately needed media attention to the many ways wealth influences politics.
ProPublica went deeper into Seid’s past, and it turns out he’s been on a decades-long crusade against a laundry list of conservative grievances:
Seid has funded climate denialism as well as a national network of state-level think tanks that promote business deregulation and fight Medicaid expansion. He’s also supported efforts to remake the higher education system in a conservative mold, including to turn one of the nation’s most politically influential law schools into a training ground for future generations of right-wing judges and justices.
Many ultra-wealthy Americans believe it’s their right to influence society, and often that wealth has warped their worldview so severely they develop a chronic case of FYGM. Look at the causes Seid chose to champion:
Seid also became convinced that leading practitioners of climate science are wrong when they blame global warming on the carbon emissions of human beings.
[…]
Seid has also funded the State Policy Network, a group of influential state-level think tanks that push for deregulation and tax cuts, according to an email written by a friend of Seid’s.
[…]
Seid has funded Hillsdale College, a small Christian liberal arts school in Michigan, according to Susan Lang, the widow of Seid’s friend and Tripp Lite executive.
[…]
Activists have long suspected that Seid was the anonymous donor who gave $20 million in 2016 to rename GMU’s law school after the late Justice Antonin Scalia.
Now, with his $1.6 billion dollar somehow-legal donation to Leo, which will undoubtedly be used to fill state and federal jurisdictions with judges and lawmakers committed to ultra-conservative ideals, Seid has his piece de resistance. One bitter old man has donated his massive fortune to remake America in his regressive, warped image, and thanks to lack of regulation and porous tax codes, he’s been able to do it largely in secret.
Stealerships
We’ve talked a little about bad behavior at car dealerships, and the ways they’ve codified their monopolies in many US states. The supply chain crisis and America’s new obsession with electric vehicles has opened the door for car dealers to engage in even worse behavior.
It’s largely accepted by American consumers that the price they pay at a dealership is fungible - they can negotiate, browbeat, or find creative ways to drive off the lot with a deal. But is it really a deal? Probably not:
Shopping for cars is not like shopping for most other products. Unlike, say, computers or refrigerators, cars are typically not sold for one standard price. Ten people could go into a dealership and each pay a wildly different amount to buy the same exact vehicle.
Economists call this sort of pricing strategy "price discrimination." That's when, instead of charging everyone the same price, sellers charge people different prices based on their willingness to pay. In simpler terms, it means that the seller milks as much money as they can out of you.
The car dealer lobby has spent decades pushing states to grant a stranglehold on car sales - shutting out direct-to-consumer upstarts - because study after study shows their pricing tactics are predatory and discriminatory:
For example, a number of studies find that dealerships tend to charge people of color more than white folks. Another study finds that older people tend to be charged higher prices than younger people, and that older women tend to be charged the highest price of all.
One study found that dealerships tend to treat a buyer's decision to trade in their used car like a neon sign on their foreheads, flashing, "Charge me more!" That's because trading in your used car, while easier than selling it directly, also fetches less money. Dealerships apparently see this as an indicator that you're either unsavvy or willing to burn cash — so they jack up the price of the car they sell to you. The type of car you trade in also offers a wealth of information on how much they can charge.
When you’re forced to buy a car through a dealership, it makes sense they’d charge as much as they can get away with. And so we read stories about dealers charging way over MSRP for cars, simply because they can:
"This is the first time in my career — and it's a long career — that I've seen most dealerships charging at list price or over," [Michelle Krebs] says. "And it's simply because there's high demand, low inventory, and they can do it."
Some automakers are pushing back against dealership gouging:
Earlier this year, Hyundai Motor Company sent a letter to its dealerships urging them to end deceptive practices, such as advertising a low price online and then charging a much higher price when customers go into the store.
[…]
Likewise, Ford Motor Company urged its dealers to cut down on markups and threatened to cut back on sending them Ford's most coveted vehicles if they didn't.
Franchise agreements and state laws limit automakers’ power. Buick recently made headlines by offering to buy out dealers who refused to make the switch to EVs, but those dealers would still be able to sell the rest of the GM lineup. The symbiotic relationship between brands and dealers remains tilted in favor of the latter.
The FTC is considering passing rules against extreme price gouging:
The new rules the FTC proposes include a ban on deceptive advertising in which dealerships market cars as way cheaper than they actually intend to sell them for; a ban on "junk fees for fraudulent add-on products and services that provide no benefit to the consumer"; and a requirement that dealerships disclose upfront all costs and conditions for buying their vehicles.
But, again, these are proposals, and dealers have deep pockets and an organized lobbying apparatus that’s spent years cementing monopolies around the country. It’s unlikely Congress will do anything about the cost of cars - they’re focused on the cost of gas, a key worry for their voters - so we’re stuck with stealerships for the foreseeable future.
Juul
Back in 2018, Juul called itself the ‘anti-Big Tobacco’ company, aiming to disrupt nicotine consumption with its trendy vape pens. It was so successful tobacco giant Altria invested $12.8 billion in cash in Juul, valuing the company at $38 billion dollars. The Marlboro manufacturer was forced to sweeten the deal with $2 billion in bonuses to be paid out to employees who didn’t like the idea of working for the enemy:
The e-cigarette company plans to share it with its 1,500 workers, averaging about $1.3 million each, people familiar with the matter said.
Hopefully those employees spent their millions on something nice, because the last couple years have been rough, to say the least. Back in 2020, the FDA and various states enacted bans on flavored vapes, but vape companies held onto hope they’d still be able to sell standard e-cigarettes with government signoff.
Facing a potential ban on its products, Juul fought to get FDA approval, but was initially unsuccessful:
Today, the U.S. Food and Drug Administration issued marketing denial orders (MDOs) to JUUL Labs Inc. for all of their products currently marketed in the United States. As a result, the company must stop selling and distributing these products. In addition, those currently on the U.S. market must be removed, or risk enforcement action.
Except! The FDA recently reopened its review of the applications after a federal judge blocked the ban from immediately taking effect. So, pending the outcome of that lawsuit, Juul is still on the market. For the moment.
Now Juul has been ordered to pay a $438 million dollar settlement over deceptive marketing practices:
Marketing efforts included free samples, social media campaigns, launch parties, and the use of young-looking models in its advertising campaigns, according to the office of Texas Attorney General Ken Paxton. The packaging was easy to hide and the flavors such as mango, fruit and mint were popular among underage users.
It includes this provision, darkly funny given Juul’s ongoing legal troubles:
The current settlement will limit Juul's sales and marketing abilities, including restrictions on marketing to people under age 35, limits on in-store displays, online and retail sales limits, and a retail compliance check protocol.
Bummer! Before the news of the settlement, Altria announced it had written down its investment by 95%:
Altria slashed the value of its Juul investment by more than $1.1 billion Thursday, pegging its new value at $450 million as it reported second-quarter earnings. The Marlboro maker had recently valued its stake in the company at a vastly reduced $1.6 billion.
Despite the losses, Altria said it would maintain its investment deal with Juul, including an agreement not to sell competing vaping products.
It’s a sad story - one of the companies responsible for killing half a million Americans a year paid billions for a company that was marketing nicotine to kids, and has seen most of that money go up in…smoke.
MJ Capital Funding
Here is a story about a Ponzi scheme in Florida that netted an impressive $196 million dollars in a little over a year:
Garcia's company promised to use the money to make MCA loans to businesses it carefully vetted. To prospective investors, it portrayed the process as "purchasing future receivables" — guaranteeing them a share of the recipient businesses' income for months to come.
In reality, MJ Capital used new investors' funds to make millions of dollars in payments to satisfy existing investors and fuel a Ponzi scheme, according to the SEC. In addition, the agency says, the company's insiders spent millions of dollars on items such as travel, luxury goods and clothing.
The scheme was led by Johanna Garcia, who promised monthly returns of 10% to investors, which, as we’ve discussed at length, is a huge red flag! The merchant cash advance (MCA) loans they claimed to offer are something we’ve also discussed here before, fronting a company for future receivables. Perhaps if Garcia had rebranded as a B2B BNPL fintech she’d be swimming in VC cash, and not facing criminal charges.
The scheme began to unravel when someone registered a website claiming MJ Capital was a fraud:
MJ Capital then took the extraordinary step of suing the site's creator in federal court, demanding a jury trial on defamation claims.
If you are doing a Ponzi, it is probably not a good idea to file documents in court, under oath, saying you are not doing a Ponzi. This may attract attention. And it did!
Two months later, an undercover FBI agent visited MJ Capital's office in Pompano Beach, Fla., posing as a potential investor. The agent gave the company $10,000, which they were told would generate a guaranteed 10% return for the next 12 months.
The scheme involves two things we talk a lot about here - an attractive, charismatic founder, and guaranteed investment returns. Both are strong indicators of unsavory behavior! I am not saying all start-up founders and hedge fund managers should be ugly and unpleasant, but it might invite more scrutiny on their business models.
Nutty
On that note, here is a story about a YouTuber who swindled $55 million from her followers:
Known as Nutty to her followers, Natthamon Khongchak attracted more than 847,000 subscribers to a YouTube channel where she posted dance videos. She also advertised private courses for aspiring forex traders on her Instagram account, posting images of what she said were her profits.
I mean, sure. Why wouldn’t we take trading advice from a dance video influencer?
Followers were lured with promises of returns of as much as 35% on their investments, the report said.
Of course! Forex trading made George Soros rich! It can’t be that difficult.
When it all began to unravel, Nutty trotted out a familiar excuse for why she couldn’t return funds:
In her last Instagram post, in May, Natthamon said she owed 1 billion baht ($27.5 million) to investors. In the video, she claimed her broker had blocked her trading account and funds since March, but said she would try to repay the money.
Classic. She hasn’t been on social media in months, and people are speculating she’s fled Thailand, but the real lesson here is if you’re going to use your life savings to do risky forex trading, maybe use a broker and not someone named Nutty.
UPDATE: Holy Crap
The Bucks County sewer system was set to be privatized to the tune of $1.1 billion dollars, but after local reporting exposed the deal, the public outcry was so loud the county has now backtracked, and the politicians in charge insist they will not approve the deal. So, that’s nice?
All three Bucks County commissioners on Tuesday came out publicly to oppose the sale ahead of a planned rally by opponents on Wednesday at the Board of Commissioners’ meeting. The chairman of the Bucks County Water and Sewer Authority (BCWSA), an independent entity that has the power to sell the system, said he does not support moving forward with Aqua’s proposed offer.
Now the county will be tasked with figuring out how to finance needed upgrades and yes, the same residents opposed to the privatization deal will see their bills go up to pay for it, but at least their critical waste systems will be overseen by elected officials instead of for-profit corporations.
Short Cons
CNN - “A Republican county official in Georgia escorted two operatives working with an attorney for former President Donald Trump into the county's election offices on the same day a voting system there was breached, newly obtained video shows.”
ProPublica - “One recent study by the Brown University School of Public Health and others estimated that 1,464 Montana COVID-19 deaths — about 1 in 3 — could have been prevented if every eligible adult had been vaccinated.”
Motherboard - “28 promises to provide “personalized streaming workouts, nutrition profiles, and science-based ‘horoscope-like’ insights for women, designed around the four phases of the natural cycle,” by which they mean the menstrual cycle.”
AL.com - “Several pregnant women and new moms accused of exposing their fetuses to drugs have been held for weeks or months inside the Etowah County Detention Center under special bond conditions that require rehab and $10,000 cash.”
Tips, thoughts, or forex trading advice to scammerdarkly@gmail.com