Living too large is often what brings criminals down.
Topping the news right now is the indictment of two Trump campaign officials as part of the government’s investigation into Russia’s meddling in the 2016 election.
The indictment alleges that former Trump campaign manager Paul Manafort and his associate Rick Gates earned millions working as agents of the Ukraine government. They are accused of hiding much of this money, which they allegedly used to pay for their luxurious lifestyles.
The indictment says, “In order to hide Ukraine payments from United States authorities, from approximately 2006 through at least 2016, Manafort and Gates laundered the money through scores of United States and foreign corporations, partnerships, and bank accounts.”
In such cases, it always comes down to “follow the money.”
Manafort is accused of laundering more than $18 million. Gates allegedly transferred more than $3 million from offshore accounts.
I’m programmed to look for financial lessons in most things. So I was particularly interested in the details coming out about what Manafort and Gates did with their supposed ill-gotten gains. Here’s what the indictment says:
• “Manafort used his hidden overseas wealth to enjoy a lavish lifestyle in the United States, without paying taxes on that income. Manafort, without reporting the income to his tax preparer or the United States, spent millions of dollars on luxury goods and services for himself and his extended family through payments wired from offshore nominee accounts to United States vendors.”
• Manafort allegedly withdrew money from offshore accounts to purchase multimillion-dollar properties. Some of his spending also allegedly included the purchase of four Range Rovers that cost a total of $210,705, and a Mercedes-Benz for $62,750; landscaping at a Hamptons property; and improvements to a house in Palm Beach, Florida. Manafort allegedly also spent $934,350 on antique rugs at a store in Alexandria, Virginia; close to $850,000 on clothing at one men’s store in New York between 2008 and 2014; and another half-million dollars at a clothing store in Beverly Hills.
• Gates allegedly used money from offshore accounts to “pay for his personal expenses, including his mortgage, children’s tuition, and interior decorating of his Virginia residence.”
At this point in the investigation, what’s the money lesson for those of us watching all of this unfold? How can we relate this to our everyday lives?
How about this: Why do so many people have a need to show their wealth?
One Princeton University economic researcher examined the need for people to flaunt their financial status. In a 2004 paper, Ori Heffetz wrote, “In the signaling game we call life, when deciding upon a course of action, we consider not only the direct effects of our choice on our welfare, but also the indirect (or social) effects resulting from society observing our choice.”
I’ve often heard people say that they look forward to the day they can buy a certain luxury-brand car. But practically speaking, the goal of a vehicle is to get you from point A to point B. So why does it matter so much about the make of the car if everything else is equal in terms of reliability and safety?
It matters to many because it signals they’ve arrived at some destination point of social standing. It’s a sign of success. People like to tell themselves that their BMW, Mercedes or Range Rover is far superior to other vehicles. But on Consumer Reports’ 2017 list of the 10 most reliable cars, half are priced under $30,000.
Often the motivation behind a purchase is the desire to draw attention to the appearance of affluence. If a Timex watch tells the same time as a Rolex, why then are we impressed with the higher-priced timepiece?
In his 1899 book “The Theory of the Leisure Class,” American economist Thorstein Veblen coined the term “conspicuous consumption” to describe wealthy people who broadcast their bountiful life and attempt to boost their reputation by purchasing expensive things.
“Conspicuous consumption of valuable goods is a means of reputability to the gentleman of leisure,” Veblen wrote.
But conspicuous consumption is now not limited to the rich. People who can least afford to show their wealth are doing so nonetheless. And they are doing so at the expense of a secure retirement or having savings for a financial emergency.
In Proverbs, there’s a scripture that can keep your conspicuous consumption in check. It says, “One person pretends to be rich, yet has nothing; another pretends to be poor, yet has great wealth.”
I wonder, if they are convicted, if Manafort and Gates will regret living so large despite the cost.
© 2017, Washington Post Writers Group
