Introduction
The "rag" is a type of confidence game that was practiced very successfully in the mid 20th century and is a type of scam that can be adapted to modern uses today with a bit of tweaking. The Nigeran scam, for example, is a slightly less evolved version of the rag, and is probably closer to the "wire" or "pay-off". The charm about these schemes is that a grifter, with a bit of charm and cunning, largely makes his money through the gullibility and greed of the "mark" (victim), leading a bystander to ponder whether or not the mark deserved it.
The grift, unlike the wire, requires that the grifter has a certain ready supply of cash up front; the money, combined with the mark's money, is used to win more money in "gambles" (typically stock market scams) with huge payoffs. The rag is quite elaborate, needing the use of many players (at least more than 10) and a certain level of skill. However, the payoff is huge, much bigger than that scammed from the wire (and if done successfully, can be done over and over again).
(Please note that to make it easy to follow, the names introduced are alphabetical: A, B, C.)
Chance Meeting
Let us introduce Mr. Marc Alberts, the future victim to this sad and pitiable story. Getting it by through the years, he's a boisterous kind of person, a little florid through years of drinking a bit too much; he is a bit heavyset, solid but not too fat. He's a king of small businesses; he's made his money through the buying, selling, and renting of a few real estate houses and apartments in New York (though he's originally from Texas); he prides himself of having climbed his way to the top through sweat and hard work.
Since he's a friendly man, and the nature of his business depend on his conversational skills and the ability to drive a hard bargain, he considers himself to be a bit of shrewd businessman. He's built quite a solid business, but lately, the thrill and charm has begun to pall, and it's not without a bit of envy that he notices his other wealthy friends seem to make money effortlessly through the stock market.
His interest piqued, he dabbled a bit with stocks, but the whole system seems to be a daunting prospect; too many things to keep track of, and far too much risk. Mr. Alberts has been trying to reassure himself that it's not that all different from the real estate market, but it doesn't encourage him to spend more than few thousand dollars, and every loss hurts. So he merely contents himself with his good fortune, and tries not to feel too envious of his friends who seem to reap prodigal profits simply by doing nothing.
For one reason or another, he happens to take a flight to Texas, and he meets a man by the name of Michael Beveridge on the flight. Mr. Beveridge, as he is delighted to find out, is also a Texan; his soft drawl and easy-going manner clearly make him out as such. Mr. Beveridge is also equally delighted to see another Texan in New York City, and they chat it up throughout the whole of the five hour flight. Alberts, as we find out, is from Dallas, and Beveridge is from Fort Worth; they don't even live that far from each other, it seems!
The talk turns to their occupations, and Alberts finds himself telling all about the business to Beveridge, who is listening attentively. Beveridge, Alberts finds out, has retired; he owned a small chain of restaurants and made enough to live comfortably on, and is flying back to Texas because he was "getting a bit homesick," as he ruefully puts it. Beveridge has no wife (divorced), but has three children (two sons and a daughter), all grown up. Now, since Beveridge doesn't live in Texas anymore and hasn't visited in quite a while, things must've changed in the last twenty or so years, and would Alberts know of a fine hotel to stay in Dallas, seeing how he's from there...?
Alberts likes Beveridge; he seems to be a honest guy, and isn't all that much different from him. Didn't they both start their own business from scratch? Were they both not Texans? Mr. Alberts suggests the hotel that he's staying in, and by the time the plane touches a runway in the Dallas Love Field Airport, they are fast becoming good friends.
The Wealthy Crook
Later that night, they dine in the restaurant at the expensive hotel they are both booked in for the night, a restaurant that was rated very well in the Zagat. Though they both think that the restaurant review book is a "load of rubbish", they both can't help but agree that the food is quite delicious.
By strange coincidence, Beveridge spots a man he recognizes in a quiet corner. The stranger is smoking a cigar and reading a newspaper, his food untouched. Beveridge waves a hand to catch Alberts' attention, and gestures toward the man. "You see him?" Beveridge asks.
Mr. Alberts twists in his chair and looks: the stranger is on the slender side, wearing a neat pinstripe suit, seemingly untouched by the sweltering Texas heat that has left both Beveridge and Alberts battered and a little bedraggled. He is well into middle age, going gray, but nothing about him suggest senility; quite the opposite, in fact. "Yes, what about him?"
"He's a friend of a friend," Beveridge explains. "I only know him by his rep. His name's Roger Campbell. That name ring a bell?"
Alberts shakes his head. "Not at all," he says.
"Well, not too many know of him," Beveridge says, shrugging. "But he's a millionaire, god knows how many times over. That's not such a big deal, but it's how he does it!"
Alberts looks at Beveridge with interest. "What does he do?"
"He's part of some group made up of the big Wall Street brokers. From what I hear, he's the biggest cheat of them all, but he's good at what he does, so they don't care. You know the stock market's really a big scam, right? Just a big chummy inbred family, really. If you don't have the money, you ain't anything. Anyway, Campbell plays the stock markets because he's got connections - he knows when to buy and when to sell because of it. It's a game he never loses. There ain't any other way to make money on the stock market if you're an honest broker; it's no better than a lottery."
Alberts has to marvel. So that's how it's done, he's thinking. But his thoughts are interrupted by Beveridge, who stands up. "Where are you going?" Alberts asked.
"To talk to him, of course. Let's go." Both Beveridge and Alberts make their way to the table where Campbell sits. Campbell looks up from reading his paper, clearly irritated at being disrupted.
"Yes?" he says, and Beveridge hastens to apologize.
"Hi, I'm Michael Beveridge, a friend of Salvatore Jacobs, I think you're good friends with him...?"
Campbell's irritation completely disappears; the change in the man is remarkable. He puts down his cigar and paper and stands up, reaching out to shake Mr. Beveridge's hand. "A friend of Jacobs, is it? Mr. Beveridge, you said? A pleasure to meet you. Any friend of Salvatore is a friend of mine." He gestures to the table. "Sit down, sit down. And this gentleman over here is...?"
Marc Alberts introduces himself, and Campbell greets him warmly. They sit down at the table, and Campbell calls a waitress to the table to order wine. They talk affably together, for an hour, swapping stories and exploits. Alberts has the opinion that Campbell is a sharp card; very little seems to escape his notice.
Towards the end of the night, Mr. Beveridge leans over on the table, and says, "Mr. Campbell, I've heard that you've got unbeatable tips in the stock market. Salvatore always spoke about you being their "magic eight ball", and I must say, I'm real curious."
Campbell hesitates, but seems to come to a decision. "Well, since you're a friend of Salvatore, it seems to be all right. Yes, it's true, I dabble a bit in the stock market. What do you want to know?"
Beveridge laughs and waves his hands. "Oh, no, I wasn't asking for information! Ain't my thing, really. I just want to see the famous Roger Campbell in action. Think you feel up to it?"
"Sure," Campbell says, leaning back. "You want a play? Let's play for..." He hesitates, and thinks. "How about a grand? Sound good?" He nods to Alberts. "You, too?"
Alberts is about to turn it down, but is interrupted by Beveridge. "Nah, don't worry about Alberts here. We're good pals now. I'll throw in his share for now." Alberts starts to protest, but Beveridge waves him silent. "Don't worry, don't worry, my friend Salvatore says this guy's the best." He pulls out his wallet and pulls out two grand in cash without hesitation, handing it over to Campbell, who carelessly takes the money to put into his wallet.
"Damn straight," Campbell says, and stands up. "Then I'll bid you good night, gentleman. Let's see... a week from today, here again, same time, sound good?" Both Alberts and Beveridge agree, and Campbell leaves the restaurant.
A week later, after spending doing their own thing, the three of them meet again. After dinner, Mr. Campbell, the esteemed rogue, pulls out two envelopes out of his suit. "Here's an envelope for you, gentlemen," he says, handing both Mr. Alberts and Mr. Beveridge an envelope. "Two thousand each."
Since our friend Alberts here did not contribute any money, he feels somehow obliged to turn it down out of good manners, but it sends his mind churning. Two thousand dollars out of one thousand in a week? What if he had put in more money? Ten thousand could be twenty... a hundred thousand could be two hundred... a million to two million. The idea completely astounds him. If only...!
Mr. Campbell notices Alberts' astonishment, and laughs self-deprecatingly. "A parlour trick," he says. "Nothing more. Here, don't worry about the money. Two thousand is nothing; just enough to pay the hotel, really. How about this: let me keep the money for another play. Sound good?"
Both Beveridge and Alberts agree eagerly, and Campbell takes the two envelopes back.
The Scheme
True to his word, Campbell comes back, but instead of the four thousand Alberts and Beveridge are expecting, it's six thousand. At this point in time, Beveridge and Alberts want Campbell to work for them with their money, but Campbell refuses.
"Look," Campbell says, "you've been nice fellows and all, but I don't have the kind of time to do this for you. How about this: let me show you a bit about how it's done and you can do it yourself. That okay?" They agree.
"Well, first things first," he says, rubbing his hands briskly. "We'll need money to buy the stock, of course. One of you will have to write a check for, say, for about, let's see.... three hundred thousand." Beveridge looks at him, aghast, but Mr. Campbell waves him off irritably. "Don't worry about not having the money. This'll be quick, and you'll be about a million richer for it, and that will more than cover your bank funds." Alberts, who is keenly interested in the proceedings but a bit relieved that Campbell does not single him out to write that kind of check, persuades the reluctant Beveridge to go along with the plan. Beveridge, with much hemming and hawing, eventually writes out a check for that amount and hands it over to Mr. Campbell.
Mr. Campbell examines the check and says, "Good! Now, hand over the money I made for you this week, the six thousand from you... and the six thousand from you. Together, that should be, hmm, three hundred and twelve thousand." In the space of an hour, he takes them to a brokerage, where business is teeming: men buying and selling, stock tickers flying, cash being traded. The place is a mess, and there is a heady smell of coffee, cigarettes, and booze. Alberts, who has never actually been inside, looks around with interest. Campbell navigates through the mess with an air of familiarity; weaving between desks, he makes his way to the back, where a clerk is busy taking orders. The clerk immediately recognizes him, and greets him with a certain amount of deference. "Why, Mr. Campbell, how good it is to see you."
"You, too," Campbell says. "Anyway, you see these two fine gentlemen here? They're here to do a little stock trading, and I'll give you my word that their checks are good."
The clerk nods. "As you wish, sir."
Mr. Campbell leans over to the pair, and says, in a low voice, "I want you to buy $300,000 worth of Talisman Quest, when it's at 1 3/8, and wait it out. When you see it hit 5 1/8, sell. You got that?" Both Alberts and Beveridge nod, and Campbell gives them a quick smile. "Good. This might take a while, so why don't you fellows stay put. I have a few errands to run, but you know how to reach me. This should keep you more than happy for a while."
He leaves, and both Alberts and Beveridge settle down to wait. It does not take long for the stock Mr. Campbell specifies to drop to 1 3/8, and they buy thousands of shares, up to the amount worth three hundred thousand dollars. The clerk accepts their check, and hands them a receipt. Now the waiting begins.
The time drags on as both Alberts and Beveridge watch the tickers anxiously. True to Campbell's promise, the stock ticks upward: 2 5/8... 4... 4 3/8... and then the moment appears. 5 1/8, just a few minutes short of the exchange closing. They both leap from their seats to sell and cash out, rejoicing; in the space of one day, they have made something around the range of a million.
Just as they're about to cash it out, the manager of the brokerage steps in. "Excuse me," he says, apologetically, "but I got a call from the bank saying that there are no funds to bank the three hundred thousand check. I'm sorry, but this will not do." He turns to clerk. "Why in the world did you accept their check?"
The clerk looks surprised. "But Mr. Campbell vouched for these two. Said their money was good."
"Ah, yes, Mr. Campbell." He turns to look at the two. "It's true, I'd trust Mr. Campbell's judgment, but three hundred thousand - it's just a little bit too much risk."
"Sir," Mr. Beveridge says, "excuse me for interrupting, but I fully intend to honor the check, and it was made in good faith."
The manager thinks about it, and says, "Okay, I normally don't do this, but how about this. We'll hold onto the three hundred thousand check, and your profits from the sale. The moment the check clears, we'll give you the money. Sound good?"
They both nod.
The manager shakes his head. "Remember that I'm doing you guys a favor," he says, emphasizing his words. "If you weren't Mr. Campbell's pals, I'd have thrown you to jail for your little stunt. I'm going to deposit the check today or tomorrow. You've got three business days to get the funds. Got it? Good." He starts to walk away, but Mr. Alberts stops him.
"Wait," he says, "what about the cash? We put in twelve thousand in cash, too. You're going to hold onto that?"
The manager doesn't bat an eye. "Yes," he says. "You made a huge purchase with all the funds together, so it's got to stay that way. If you don't like it, then you shouldn't even have bothered." He walks away.
Mr. Beveridge looks at Mr. Alberts. "What should we do?" he asks. "I don't have that kind of money. I've got, what, maybe fifty, sixty thousand in my account right now."
"I'll help," Mr. Alberts offers. "After all, he's got my money, too. But three hundred thousand!"
The Crash
The next few days are a flurry of activity on the parts of both men. Alberts raises a hundred and twenty thousand from his own funds, and another thirty thousand borrowed from his brother; Beveridge has the original sixty and gets another ten thousand from a family member. Mr. Campbell turns out to be the biggest surprise; after hearing their plight, he offers to cover the rest, eighty thousand, to bring the grand total up to three hundred thousand. Campbell is apologetic. "Sorry for getting you into such a mess," he says. "Consider it a token of my apology; pay me back when you get a chance, see?"
The three hundred thousand goal met, the three of them make their way to the brokerage again to cash out. The manager, after calling and finding all the funds are there, agrees to hand over the profits, and the clerk counts out the cash, in stacks of hundred dollar bills riffled alarmingly quickly through the bill counter. The stacks pile up: three hundred thousand, half a million, seven hundred thousand...
Campbell, who has been talking on his cell phone, suddenly hangs up. "Alberts, Beveridge," he says. "It's a rush. There's a stock - BetaLabs - that we're going to short sell. It'll be a sure game, you'll double your money in minutes. Got it?" They both nod, and Beveridge goes over to the counter to initiate the short sell.
Campbell turns to Alberts. "Isn't the stock market great?" he says. "When BetaLabs drops to four, we'll make a killing..." His words trail off when he spots Beveridge, a receipt in hand. "You sold the shares?" he demands.
Beveridge looks surprised, then confused. "Sold? I thought you wanted to buy up all the stock of BetaLabs to sell later...!"
Campbell turns white. "Buy?" he shouts, causing some of the clerks to look at him. "I said we were short selling! It's at fucking, what, fifteen points now? Fuck! We were supposed to sell now! That stock's going to go down!"
Beveridge blanches. "Good god, I already bought the stock with all the money we've got!" He starts swearing.
The trio quickly make their way to the clerk to try to reverse the transaction, but the clerk shakes his head. "Sorry, sirs, the purchase has been made and already finalized in New York City."
True to Campbell's word, the stock drops, crashing violently to two points when the news of the patent denial are released. The three of them, miserable, sell as quickly as possible to minimize losses, but the damage is done. Mr. Alberts, however, is in a daze. A few hours ago, he would have been approximately three hundred thousand richer; and now... now... how much did he lose? He can barely do the math. About fifty thousand. No, it had to be more, there were all sorts of fees and whatnot... possibly he lost sixty, maybe seventy thousand from this deal. No, it was more, now that he thinks about it; he borrowed quite the sum from his brother, and that still had to be paid...
And it's all because of Beveridge, who he now no longer sees as a swell guy. Look at him now, sniveling at Campbell about his losses. His losses! Alberts was the one who put up the most money. Alberts, his appetite gone and rather dejected, goes back to the hotel and tries to forget about it.
The next day, Beveridge calls him up, saying that Campbell agreed to help them out again, that there won't be a mistake next time, but Alberts refuses. He's exhausted, tired of talking to Beveridge and Campbell, and just about all he wants to do is go home to New York City. And so he flies home, thinking all the while about the money he could have won had the mistake not been made.
Now, let's go behind the scenes.
The Results
What our poor friend Mr. Marc Alberts did not know were these things:
He was a victim of the rag; and
Every single person he met during the course of his transactions was in on it. "Mr. Beveridge", "Mr. Campbell", the brokerage clerk, the manager, the brokerage - every single person he spoke to, or glanced at (in the case of the brokerage), was an actor of consummate ability, each playing their role to the utmost extent. The stocks dropping? Falsely reported. The ticker? Manipulated. Nothing in Mr. Alberts' world is real, not for the little while he is being scammed.
This surreal reality sound familiar? Every actor playing their part did it for only one person: our friend Mr. Marc Alberts. This farce, this elaborate pantomime, was all done with one goal in mind: to relieve Mr. Marc Alberts of his money.
Do they succeed? Of course they do, and though the profits are split several different ways after such a scheme, each man walks away with quite a hefty amount of money. The charm of this particular grifter scheme (much like the Nigerian scam), is that if the scheme is executed with enough skill, the mark will feel as if the whole thing happened merely due to some unfortunate bad luck. Indeed, there are some who go back to their jobs, earning the money they lost, and then seek to play all over again.
The other additional charm to this particular scheme is that it offers an unrivaled adaptibility to changing times.
Drawbacks
This particular scheme has the potential to earn a huge (and in some cases, perhaps unlimited) amount of money for everyone involved. However, there are quite a few external drawbacks involved with this particular scheme:
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The set-up required is enormous: the man that Alberts meets on the plane; the stranger at the dinner; the brokerage. Each part must be played perfectly, or else Alberts will simply spook out and leave;
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The costs of this, because of above point, are also rather high: rental of an office; dinners; rides to and fro from cities to pick up easy marks.
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It is by no means a quick and easy buck;
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There is always the chance that Alberts is greedy enough to start the plan, but when it comes to raising money, he will back out of it; and
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Alberts might be a completely honest man, and find these shady dealings to be repugnant.
Out of all of these drawbacks, grifters usually found it easy to never worry about #5; true honesty is really quite a very rare trait. More worrisome was #4, which is usually an indication that the grifter is not doing his job properly; more time and skill must be applied for the mark to come 'round to get the money.
Internal problems also crop up, especially when it comes to dividing the loot. Even in grifting, indeed, there is a level of trust that is required; trust between the major partners (in this case, Beveridge and Campbell), and between the partners and the the brokerage group (usually an operation that operates locally around the clock for several grifters in the area). It is not a place you can anger or cheat out of if you wanted to continue to grift profitably.
Conclusion
People are gullible and greedy. What else did you expect?
Maurer, David W. The Big Con: The Story of the Confidence Man, Anchor Books, 1999 (original printed in 1940): By far the seminal work on the confidence man, introducing the basics of the "wire", "pay-off", and "rag", along with a detailed analysis of the life of a grifter, who the famous grifters were, and what lingo was commonly used. Definitely worth a read. I have adapted the "rag" to my own prose and tried to modernize it a bit, since all these schemes in Maurer's book are based on slightly outdated technology (telegrams and such).
If you think I'm poking fun at Texans, you'd be wrong; it just happens to be the only other place I'm familiar with in America. If you feel scorned, pretend this happened in Chicago or Montreal or something.