July 7, 2010; Source: Philadelphia Inquirer | When someone steals something and then gives it to you, the general rule is that you can’t keep it because it wasn’t the other person’s to give away. On the other hand, when you are the victim of the scam, shouldn’t you be entitled to some sort of compensation if you suffer damages as a result?
That, more or less, is at the heart of a dispute involving a school outside of Philadelphia that received $900,000 from a former trustee, Joseph F. Forte, who is now serving a 15-year prison term for swindling investors out of millions of dollars. According to the Philadelphia Inquirer, the receiver seeking to recover some of the $35 million stolen in a Ponzi scheme wants Malvern Prepatory School to return the money it received from Forte. However, because the school says it was a victim of the scam, it filed a counterclaim for $630,000. That’s how much Malvern Prep, an independent Catholic school for boys in grades 6 through 12, says it is due because of debt incurred to build a new strength-and-conditioning center that Forte said he would contribute $1 million to help construct.
The receiver’s argument that the money should be returned is based on a legal theory that when stolen money is given away to provide the donor status and access to powerful and wealthy people and nothing of real value is received in return, the gift must be paid back. However, what’s complicating this case is that the school believed Forte was good for the full amount he pledged, and thus spent what he gave them up until then and took out a loan for the rest. In the end, the school found itself on the hook for the full amount they borrowed and with no more money from Forte. Even a case like this might be beyond the wisdom of Solomon.—Bruce Trachtenberg