Now that the Wall Street Journal has made their article on the Hsu swindle of Source Financing Investors available for free, we can see the scope of the grifter’s con of Joel Rosenman is absolutely incredible. I may have been right when I speculated that Mr. Hsu’s entire life was one big Ponzi scheme.
Mr. Rosenman’s partner, Ms. Cheng, met Mr. Hsu while working for an Internet company in 2000. She began investing in one of his businesses and made a profit, according to someone familiar with the matter. In 2002, she joined JR Capital and introduced Mr. Rosenman to Mr. Hsu. That year, Mr. Rosenman invested and also made a profit. He began telling friends and relatives about the investment opportunity.Mr. Rosenman described the deal in a pitch letter he provided to prospective investors for Source Financing Investors, which he launched in 2005. The investment pool would “lend to U.S. private label designers that needed interim financing to fill orders for a select group of well-known, high-end U.S. apparel retailers.” Since 2001, he writes, “the return of these short-term (typically 4½ months) loans has been no less than 40%.”
That last bit about a 40% return on the investment was pure hooey. It was Hsu up to his old tricks of paying off early investors by victimizing later ones. The idea was to appeal to simple human greed – a get rich quick scheme that seemed to work. The early investor’s excitement would lead him to tell a lot of friends about the “opportunity” and, in Rosenman’s case, even set up an investment company to unwittingly assist Hsu with the scam:
Mr. Rosenman described the deal in a pitch letter he provided to prospective investors for Source Financing Investors, which he launched in 2005. The investment pool would “lend to U.S. private label designers that needed interim financing to fill orders for a select group of well-known, high-end U.S. apparel retailers.” Since 2001, he writes, “the return of these short-term (typically 4½ months) loans has been no less than 40%.”In a “step-by-step” outline of a typical transaction prepared for investors, Source Financing describes the way a deal worked with Mr. Hsu. Source Financing would agree to provide bridge loans for seasonal high-ticket, high-quality retail goods made in China for exclusive brand names, according to investors. Mr. Hsu told the company that he would obtain from Chinese manufacturers a price quote for apparel production. He would then add a mark-up and give the quote to a high-end buyer in the U.S.
If the U.S. buyer accepted, according to the outline, Source Financing would transfer by wire what Mr. Hsu said was 80% of the necessary loan, with Mr. Hsu saying he would provide the other 20% himself. Mr. Hsu told the investors he would then receive a letter of credit from a Chinese bank and that the manufacturer would ship the apparel to the U.S., where Mr. Hsu would deliver it to the merchant.
That Hsu must be a fast talker. I’m no investment expert but does anyone else see where an investor could get screwed 6 ways from Sunday? The deal is dependent on a rickety house of cards indeed. And how much do you want to bet that some if not all of those “US buyers” who accepted those quotes were shell companies set up by Hsu in order to fool investors everything was on track!
But this to me, would have been the biggest “tell” that something was amiss:
Mr. Hsu would give the investment firm a check, post-dated for 135 days beyond the wire transfer, for the amount of the loan plus profit. When the check matured, Source Financing would deposit it and allocate the money to investors. The company that would carry out these transactions, Mr. Hsu told investors, was Components Ltd., set up in 1997.Some investors in Source Financing said they got involved through friends who knew Mr. Rosenman. Some did not know who Mr. Hsu was until news about him broke in late August.
Again we see the power of greed at work here. What possible guarantee is a post dated check? It is a worthless piece of paper until the date it can be made good. If Hsu was going to skip out – as he evidently was doing – what possible good would a post dated check be? It still came down to Rosenman placing his full faith and trust in Norman Hsu – his biggest and most tragic mistake.
I may be off base with this and if someone can give me a rational explanation why any sane businessman would think that accepting a post dated check in a deal like this would protect him somehow, I’m open to hearing it.
It is doubtful that Hsu fulfilled any of the promises he made about the deal – the exact same thing he did for 1/40 the amount of money in 1991 in the latex glove scam. No clothing manufacturers were contacted. No letter of credit from a Chinese bank. No product at all. Hsu was able to succeed in his con the way that all grifters make a living; feeding off the avarice of their marks.
As I said in the post below, Hsu is a first team all American crook. I look forward to more revelations about his swindles so that before long, he may be inducted into the Con Man Hall of Fame.
11:34 am
(1) Rosenman knew that transfer would show up in any investigation and probably had already.
(2) His explanation makes no sense.Gucci and Prada produce nothing in China—it would dilute the brand.
(3) If they decided to do so, why would they forego the greater profit margin to someone else? They would not. They’d do it themselves.
(4) Like any businessman working in China will tell you, you do not do this without visiting the factories involved to check on product performance and human rights violations, etc. Rosenman did not.
(5) I do not believe this story for one minute.
Capt Ed has more thoughts on this, too.
12:41 pm
I do not believe Rosenman’s story.
No legitimate investor would hand over $40 million to a company that had no address or any track record.
Of course, if the investor was a big supporter of Hillary (as Rosenman is) then he might be inclined to look the other way as he funneled $40 million to Hsu.
I would not give Hsu credit for being a sophisticated con man.
12:47 pm
One of the first reports said there were two big checks to Hsu—one from NY and one from Calif. Waiting for the Cal shoe to drop, Rick.
And someone might want to check out Rosenman’s partner, Yau Cheng , who like all the officials in his company gave a check for the max to Hillary on 3/28.
1:32 pm
Go to hot air comments about Burkle and Susie Buell’s contacts with China and Hsu—Interesting possibilities.
1:37 pm
I have a feeling the Con Man Hall of Fame is going to be located in the south wing of the Clinton Library.
2:16 pm
Under the Uniform Commercial Code, most states did away with post-dated checks about a decade ago. Now, a check can be presented to a bank at any time after it is issued, regardless of the date. Because of this, I would be even more suspicious of any plan involving post-dated checks – it would be a sure tip off to me that something was fishy.
7:24 pm
Rick said:
“I may be off base with this and if someone can give me a rational explanation why any sane businessman would think that accepting a post dated check in a deal like this would protect him somehow, I’m open to hearing it.”
I think you answered you’re own question with the sane part. But as saying goes “Theres a sucker born every minute”. One other thing, I’m totally convinced these days alot of folks just dont have plain old fashioned common sense.
10:16 pm
Rick, don’t buy this crap.
I was in the manufacture, wholesale and retail garment business for 15 years (having my own label). Any investor Hsu might have convinced would have wanted the names of the “high end” designers that Hsu would be funishing them with. High end labels do not seek third hand investors. They have banks with letters of credit that back them. They seek their own investors and there are federal laws that mandate how those investments are to be handled.
There are so many holes in this story from Rosenman I don’t know where to start.
Suffice to say it is all bull.
6:54 am
Hillary’s first act will be to pardon Hsu.
9:33 am
Rosenman is NOT a VICTIM…neither is Hillary….they are Co-CONSPIRATORS with HSU, CHENG, and OTHER Communist Chinese!!
IF the Feds or any smart investigative reporters unravel this scheme, it will blow the Clintons out of the political water for good.
8:31 pm
This Rosenman guy has to know that his story is going to be looked at by the Feds. How will he explain loaning other peoples money to Hsu with no due diligence?
Hsu had no office, placed no orders for goods, had no contracts with Prada or Gucci, and made payments with post dated checks.
Wasn’t the fact that he was claiming to return a 40% profit enough to raise any suspicion?
No one does business like this. How can this cover story provide anything but more questions?