Hailee Washburn

223003578
April 7, 2015
American Greed Essay

In the episode of American Greed, “Charity Begins at Home,” it follows the

actions of EY entrepreneur of the year, Claudio Osorio. In 1999, Osorio was the then

confident CEO of CHS Electronics, a computer distributer company that sells products

internationally with its headquarters in Miami. Soon after his success in 1997, Osorio

moved to the extravagant Star Island neighborhood in Miami. In doing so, Osorio gained

close relationships with high-class celebrities and engaged in their lifestyle. At the end of

1997, the computer industry began to sharply decline, and everyone was suffering, except

for CHS Electronics. In fact, CHS Electronics reported record earnings and were growing

in both profit and volume. Osorio credited this success to the local managers knowing

how to run a business in their home countries. However, the local managers were actually

reporting losses every quarter to Miami. Osorio was in fact cooking the books to make

the financials appear more profitable. In 1999, Osorio announced that the 1998 financials

profits were overstated by 50% and pointed the blame at the Vice President of European

operations who resigned quickly thereafter. CHS Electronics was convicted of providing

materially false financials and was required to pay out $11 million in settlement. Now

finding himself starting from square one, Osorio discovered his next opportunity to make

money in 2004 with the start of his next company, Innovida. Innovida provided

construction of homes at little cost and within five days. This fast construction and low

cost was made possible by the light weight, durable materials used that also required no

machinery in order to build the home. Osorio began to target investors selling the idea

that it would be a great chance to make money and provide homes to many third world

countries, ultimately making the world a better place. He attracted a strong Board of
Directors including Jeb Bush, former Governor of Florida. This strong Board of Directors

that Osorio built created confidence in Innovida and attracted other big time investors

such as NBA players and other strong sources of income. With these investors, Osorio

also was able to present an astounding resume, which drew in another investor Chris

Corge. Corge even hired a private investigator to ensure that his investment was going

towards someone with integrity and credibility. Osorio won Corge over by setting up a

meeting with then Presidential Candidate Barak Obama and Hillary Clinton along with

many other credible sources. Corge invested over $300,000 including the purchase of

over one million shares. At this time, however, it was unknown to Corge that Osorio’s

company was facing litigation in Sweden based on the accusation of creating false

financials in order to receive loans from Swiss banks along with checks that were

bouncing in other countries. Also, what Corge did not realize is that when Osorio

presented him with the financial statements, they were unaudited. In 2010, Osorio seized

the opportunity to provide homes to people of Haiti who suffered from an earthquake.

Osorio’s mission was to donate 1,000 homes in order to help this cause. Osorio received

a $10 million loan from the United States government to aid his mission. Meanwhile,

Corge was in deep trouble because of the real estate market suffering and found himself

in serious debt. Osorio ensured Corge that once a deal in the Middle East was closed that

Osorio would help him by matching him Corge’s investment in the company. However,

months past and Corge began to hear from Osorio less and less until he was virtually

unreachable. Corge soon filed a lawsuit against Osorio and started digging deeper into the

company’s proceedings. Also, the U.S. government soon discovered that the houses

Osorio promised to build in Haiti were not being constructed. In fact, there was no

construction at all happening in Haiti. Funds were then frozen and Innovida was taken
over and it was discovered that the company was in fact, completely broke. Osorio had

simply been using the company as a personal piggy bank and had even used the money

from the U.S. government to pay off investors. None of the money had in fact gone to

Haiti. Soon, Osorio was sentenced to twelve and a half years for twenty-three counts of

fraud and money laundering in 2012.

In this case, the who and what are Claudio Osorio and the fraud and money

laundering he committed. Osorio committed these crimes over a period of time in two

instances, first in the late 1990s and then throughout the late 2000s. The crimes were

committed in two companies- first CHS Electronics and then Innovida. Osorio was able

to commit these crimes because of the people he surrounded himself with. These

surrounding gave Osorio a profile that was assumed to be reliable and a man that

everyone could trust despite his past fraudulent actions. The trust was the key factor in

providing Osorio with many investors along with a very respectable Board of Directors

overseeing Innovida. The combination of trust and a strong Board of Directors gave

Osorio the opportunity to bring in as much investment money as possible with no

questions. However, during interrogation Osorio never revealed why he committed these

actions.

Beginning with opportunity in the fraud triangle, Osorio was provided with the

opportunity to commit and conceal fraud by being the CEO of Innovida and surrounding

himself with a crowd of prestigious people that gave him a trusting reputation. I believe

that Osorio rationalized his actions by presenting to people that he was working to better

third-world countries through Innovida. I believe Osorio was facing a pressure to keep up

his family’s current lifestyle, his successful past, and with the people he surrounded

himself with.