Peter Son: Shame and Ponzi Schemes in California’s Korean Community
by Vivienne Chen, June 2013.
“You've got to kill that bastard!”
The shout echoed in Korean, bouncing off the dark brown wooden walls as 38-year-old Peter Son was escorted into the Oakland courtroom. According to San Francisco Chronicle reporter Henry K. Lee, the cry came from the gallery of Son’s Korean American victims, whom Son had defrauded in an $85 million Ponzi scheme that lasted five years. In 2010, Son was charged with two counts of wire fraud, sentenced to 15 years in federal prison, and ordered to pay $62 million in restitution.
The wrath of Bay Area Korean Americans at Son for betraying their trust remains potent. But save for that single outburst on the sentencing day one year after Son turned himself in, few have been eager to speak of the situation since.
“You’re not going to find anyone who’s going to want to talk about it,” said the pastor at one of the local Contra Costa Korean Protestant churches near Son’s home, who was reluctant to go on the record.
“There’s a lot of shame, obviously,” said Melody Lee, a 21-year-old Korean American who was not connected to the crime, but grew up in San Jose’s Korean community. “I find it kind of difficult to articulate why someone wouldn’t talk about it, other than that they shouldn’t.”
Shouldn’t speak of it— The cultural silence around victimhood is not unique to Korean Americans. But especially in the tight-knit immigrant community of the Bay Area, where Son and Chung advertised their business through word-of-mouth and ads in Korean language newspapers, the silence is almost inescapable. Many attribute it to the notion of “loss of face,” which exists in many Asian countries: an acute reluctance to admit anything that incurs shame or reveals weakness. It permeates, even in Son himself.
As CEO of a purported foreign currency trading investment company called SNC Investments, Son and his Chief Financial Officer Jin Chung, 46, began soliciting investors in 2003 from among their fellow Korean Americans around the San Francisco Bay Area, offering large returns of 24% to 36% a year.
Like many classic Ponzi schemes, the success of their business was based on secretly paying off investors with the money collected from new investors, while diverting funds to their own personal expenses. According to Assistant U.S. Attorney Stephen Corrigan, the company did hardly any actual foreign exchange trading, and the little trading it did was unprofitable. And like many of these schemes, from Charles Ponzi to Bernie Madoff, the ruse was never built to last. In 2008, Son and Chung failed to show up for work, fleeing with investors’ money. Chung became a fugitive in South Korea, while Son remained in hiding for nine months before surrendering to authorities in June 2009.
The details of Son company’s founding, rise, and unraveling are well documented—the who, what, when, and where—but the why remains fuzzy, and the black-haired, broad jawed Son is tight-lipped.
“He always seemed very private,” said Kim Chew, who lived next door to the Son family in Danville. “He had this worried look on his face and was a bit unfriendly.”
Born in Seoul, Korea and raised in California since he was a teenager, Son claimed to be a Harvard Business School alumnus. However, records show he actually only attended the school’s certificate program, the Owner/President Management Program, which, as Jenna Saunders of Jezebel wrote, “is a little like enrolling in a night-time pottery extension class and saying you are ‘going to art school.’”
His wife, Ann Lee Son, lived in the $1.26 million home Son bought in 2005 on the corner of Vanessa Way in Danville. Chew recalled they had two young boys, and Ann may have been pregnant with a third child during the time of the Ponzi scheme. The FBI, in their press release, characterized Son as a resident of Blackhawk, the wealthy gated community near Danville whose residents have reportedly included rapper E-40 and football coach John Madden. While Son did spend investors’ money on dues for the Blackhawk country club, there is no evidence Son actually lived behind the gates of the upscale neighborhood.
The Sons’ house on the corner of the suburban Vanessa Way is certainly more modest than a Blackhawk mansion, but by no means plebeian. A white, two-story, five-bedroom house with a round arch framing the garage, the Son house is one of five different cookie-cutter house designs in the Danville neighborhood known as Wendt Ranch. Chew said that Wendt Ranch was coveted when it first opened for sale, and said Son and other families practically camped outside to get their leases. Chew befriended Son’s wife when the family lived there, but Chew never really knew what was going on, nor did she ever invest with Son.
“They were always having these parties,” Chew said. “It was strange. I remember they used to own these really nice cars. A Porsche. BMW. Mercedes.”
Melody Lee, whose estranged father defrauded his fellow Koreans in the Bay Area, said this behavior seemed familiar.
“My dad made a lot of money in the mid-to-late 90s through schemes similar to [Son’s],” she said. “He met most of his dupes through my mom or through church, and there was a lot of fairly boozy wining and dining going on behind the scenes.” Upon learning the eerie similarities between her family and Son’s, Lee remarked, “I wonder how common these types of schemes actually are, because no one likes to talk about it.”
The old web archive of Son’s company website, sncfx.com, shows the site was written in English, despite the ethnicity of his company’s target investors. SNC presented a veneer of fluency and business savvy that could have impressed many an English-learning Korean family. But now the hollow irony of Son’s words rings out in all languages.
“We, at SNC Investments, Inc., believe that trust and high ethical standards are the foundation of a healthy relationship with our clients,” said Son in his CEO statement. SNC was registered with the National Futures Association, the self-regulatory analog of the Securities and Exchange Commission, giving it the air of legitimacy it needed. For five years, investments flowed in from friends and community members.
But by 2008, the pressure was building against the company. In the last year of the company, Son and Chung “solicited aggressively,” according to a CFTC injunction, gathering around $22 million in investments and raising suspicion. In May 2008, the NFA’s Business Conduct Committee issued a complaint against Son and Chung for “failure to maintain the minimum adjusted net capital, misleading solicitations material, and general conduct violations.” Based on CTFC records, from August through September, Son transferred $1.59 million of investor money to his personal bank account. On October 15, the NFA fined the partners $60,000, which they paid. And by late October, they were gone.
One week before the Sons went into hiding, Chew recalled a dinner with Ann and a small group of four friends. The CFTC eventually called for Ann to help return the money Son had stolen.
“She looked sad,” Chew said. “She mumbled that they might have to leave. That they were moving because Peter didn’t like the area.” Chew never learned how long Ann knew about her husband’s business. Even when Son was paying her an allowance of $3000 a month from his ill-gotten gains, there was no evidence to suggest that Ann was participating in Son’s dealings. For 9 months, from October to June, neighbors wondered where the Sons went. Some say they fled to Canada.
For the Korean American community that Son left behind, shame and loss of face echo in the silence.
“There’s a lot of upset, I suppose, at the idea of other people knowing [that you were scammed],” said Lee. “I think it reflects poorly on your parents, as though they weren’t good enough to raise you to be smarter than that.”
“I don’t understand why he did it,” said Chew.
According to Son himself, “It was based on very accidental circumstances, [which] have had enormous consequences.”
Son currently sits in the Federal Correction institute of Lompoc, CA, an hour north of Santa Barbara’s beaches. The low-security facility is located off a single two-lane road, flanked by flat, yellowing plains and sparse eucalyptus trees, the rolling Californian hills in the distance. Curling concertina razor wire gives Lompoc a more forbidding look. When I wrote to him asking why he started the scheme, he declined to explain via letters, phone, or email, what he meant by “accidental.”
“I hope you understand prison life,” he wrote in his tight black print on a sheet of binder paper. “I don’t want the guards or staff to know anything about me.” With all mail and correspondence monitored, there is little room for secrets. Son will only share his in person, but the bureaucracy of federal prison erects a greater barrier than their cellblock walls.
It’s easy to speculate about the motivations behind a Ponzi scheme: greed, fast cash, the high life. It’s a little harder to know why, after running away, Son would turn himself in. Perhaps the strain of living as a fugitive was too much for Ann and their children. Perhaps it was the guilt, the shame, and the remorse of turning into an outlaw.
In the courtroom, Son pled guilty. His words to his victims, family, and friends were: “They trusted me and I let them down.”