Free Rider

By J. L. Reynolds

It’s not always easy to have sympathy for the victims of fraud. In hindsight, most con men seem pretty obvious, leading us to exaggerate the greed and gullibility of their dupes.

This leaves J. L. Reynolds with a hard task. In Free Rider, Reynolds tells the story of the sudden rise and fall of Michael Holoday, a young Bay Street broker who managed to swindle investors ranging from a retired schoolteacher to one of the richest men in Canada with his claims to have perfected a “specialized controlled-risk trading strategy.” Despite clear and repeated evidence to the contrary – the regular statements from the brokerage houses that showed their accounts being depleted to nothing – Holoday’s clients continued to trust the Whiz Kid with their savings. All Holoday had to do was prepare handwritten account statements for them showing that everything was “tickety-boo.”

This was ignorance verging on willful blindness, but Reynolds is eloquent in defence of Holoday’s victims. “Neither stupid nor greedy, they were perhaps guilty only of excessive trust, and not merely of Holoday.” This is too generous a conclusion – Holoday’s victims were clearly lacking in awareness – but it does indicate where Reynolds, correctly, lays a great share of the blame: the financial institutions that made trust their coin and then did nothing to earn it.

The big-name brokerage houses that Holoday worked for, and whose titles and letterheads he was able to so effectively exploit, did little to protect the investors he was cheating. When evidence of wrongdoing was forced into the open their only reaction was to cover it up. Complaints were typically referred back to Holoday, for him to deal with as he saw fit. And when the bubble burst, any responsibility for their representative’s actions was denied.

Of course Michael Holoday was never a Whiz Kid. He was only playing a confidence game, maintained in its latter stages by a simple cheque-kiting scam. His character appears to have been a total void. Like the cuckoo Paul in John Guare’s Six Degrees of Separation, his identity was only a series of roles he wanted to play, and the more expensive the better. If that meant other people had to foot the bill, fine. For Holoday, other people were simply extras with bank accounts.

Free Rider will have some readers shaking their heads. The catalogue of Holoday’s success in the early going is particularly appalling. But the collapse of his schemes has a spectacular train-wreck quality that makes the inevitable dramatic. Reynolds has given us a cautionary tale for investors, a book that both frightens and instructs.

Review first published January 5, 2002.