The Ponzi schemes allegedly perpetrated by Bernard Madoff, Allen Stanford and others shouldn't surprise anyone.

They're certainly not a shock to those of us who perform factual due diligence to ensure that investments are protected against fraud. Such deception is constant and a risk that many companies don't want to address or even acknowledge, because the mere mention of fraud erodes trust in the financial markets.

But there are ways to protect your investments going forward, because fraud isn't going away.

Lack of true due diligence is usually at the heart of the issue, despite claims to the contrary. Savvy executives know it takes time and effort to analyze whether an individual or a company can pass the tests and are trustworthy.

		Top investor mistakes that lead to fraud 1. Failure to understand the basics of investment strategies, including whether the funds recipient is licensed, has a verifiable track record, sound investment strategies, a legitimate office and requisite number of employees needed to perform services. 2. Reliance on attorneys and auditors to uncover potential fraud. Law and audit firms are good at what they do, but typically they're not experts in fraud detection and prevention. 3. Lack of due diligence to verify assets pledged by recipients. Are you certain those monies are really owned by the person with whom you're entering into a deal? It is common to pledge other people's assets. 4. Failure to conduct background checks on employees. We know from experience that the most dangerous people work from the inside. 5. Confusing security initiatives with due diligence and fraud prevention. Security professionals are good at protecting buildings and conducting theft investigations, but lack the skills and resources to conduct true due diligence.

Smart investors are willing to commit time and money to the process. But they are in the minority. As a percentage of operating expenses, too many funds and banks spend little in the way of due diligence. For investors, it is easier later to assume a business has failed than to admit the existence of fraud.

How often do these cons surface? Our firm has performed more than 100 due diligence, fraud and asset recovery investigations over the past seven years for some of the world's largest multinational corporations, private and public banks and private equity and hedge funds. We found fraud or misconduct 30 percent or more of the time.

Despite the many iterations of corporate fraud, including Ponzi schemes, cooking the books, concealing information through offshore assets and activities, lying about business strategies, and utilizing complex kickback schemes, the typical scam is similar to the Madoff scenario: Make yourself look respectable. Lease nice offices, wear expensive suits, claim a long track record of success and set up multiple companies with great sounding names.

Why is fraud missed so often? There is a systemic failure to understand basics of investment strategies, and due diligence efforts are often weak. Investigations of people and businesses typically are limited to studying public records such as criminal and civil court filings, SEC filings and the like.

Accountants analyze the purported books and records of the business, and more often than not, do not uncover any problems. Lawyers tell investors about the legalities of the transaction and seldom find fraud. In the end, the deal gets done and bonuses are paid.

A primary reason for failure in the due diligence process occurs when investors neglect to speak with people familiar with the key principal, especially former employees and others less likely to paint a rosy picture. Talking to satisfied customers is not the path to success. Talking to the dissatisfied is usually more helpful.

Limiting due diligence by relying only on public records is not recommended, either. Few white collar fraud cases end up in the courts at any given time. The Madoff scam may never have been uncovered if Madoff himself hadn't panicked and admitted the fraud to his sons.

In point of fact, white collar crime victims often are embarrassed that they were duped, so it's not reported and there is no trail to follow when the next investor decides to get into bed with an imposter. U.S. banks must report fraud to the FBI, but that requires an assessment as to whether a fraud has been committed and that doesn't always happen.

One common mistake made by banks and funds is to limit investigations to those jurisdictions where a target has lived or where the project or operations will take place.

In one case our firm recently undertook, it was believed that the subject of our investigation had always lived in the United States, Israel and Brazil. We sought information in those countries and found nothing to scuttle the deal. Then we looked in Africa after finding that he had a business there for a short time, and discovered that he did not repay $60 million to a bank. There were allegations of misconduct, and we recommended against a $500 million project.

The financiers, accountants and attorneys who claim astonishment at the Madoff and Stanford cases are only surprised because they believe that the last big fraud case is in fact that: the last big fraud case.

After Enron, WorldCom, Parmalat, or Societe Generale, the French bank that recently may have been victimized, or perhaps now after Madoff or Stanford, the thinking goes, we have seen the end of it. Our controls are good, our due diligence first-class, our lawyers and accountants highly competent, and therefore it can't happen to us. But it can, and it does.

Protect yourself. Fraud is here to stay.

What must be done to restore the American dream? The White House, Congress, the media -- all are consumed by the need to solve the problem. Neglected in the ferment is an issue underlying all others: the need to reform the American dream itself.

The dream acts as an unwritten constitution of the United States, governing our conduct. Our written one has checks and balances; it evolves through debated amendments and reasoned court interpretations. Our unwritten one soars beyond check or balance; it is updated continuously by whatever glitters beyond the edge of our means.

Today's scary headlines reflect the force of this unwritten constitution. It mandates a steely ambition, a heroic greed braving all consequences. Result? Our economic catastrophe. So many executives made so many wrong decisions not because they lacked competence but because they couldn't resist the common pressure -- higher, bigger, more -- driving them to their folly. Many of them knew better; none could resist the boundless compulsion of the American dream.

Now, it may be argued that our passion for the out-of-reach is the very dynamic that (to use a long-familiar phrase) "has made this country great." But has it made us happy? And how much of our happiness is the bright mask of stress? The picture of a helicopter-accoutered yacht glowing from a glossy page inflames (to use a newly familiar phrase) "the audacity of hope." Of course, Barack Obama's book has nothing to do with luxury craft. It's title, though, plays on a basic Yankee emotion. The audacity invoked transcends hope. It is fueled by the fiercest expectation: "Impossible is American"; that's our martinet motto.

In other words, a dweller in the land content with the possible falls short of America's spirit; he fails his country's stern, norm-shattering exceptionally. The map of your truly American life charts a freeway leading from a log cabin, literal or figurative, to the White House, literal or figurative (that is, to the movie icon's aerie or the billionaire's topiary garden). No intermediate destination is recorded on this map; no speed limit, no rest stop, no side roads, not even a space for getting out to enjoy the scenery.

If only there weren't just one Bill Gates, one Elvis Presley, one Barack Obama able to even approximate such a journey. With the rest of us, audacity tends to curdle into personal thwarting, social malaise and, sooner or later, general economic disaster.

Sooner or later has arrived. Now we look back to the 1930s, the last time we visited upon ourselves a similar suffering.

In those days, we managed to ease the pain by agreeing to temper the dream. With the New Deal, we toned down the adamant commitment to absolute individual fulfillment. We woke up our dormant response to the comfort and warmth of the communal. We discovered we could savor realistic contentment; we didn't need to keep panting after triumph. Many of us in the bleachers learned to enjoy the game as fully as those few behind home plate. By reordering our inner attitudes, we produced the outward political will to remake the nation.

Can we do it again? The contrast between presidents now and then may complicate the process. Franklin Roosevelt was a beneficiary of privilege gained by unbridled private ambition. Hence his moderating of such ambition made him a persuasive role model. Obama's project has parallels to the New Deal, yet his biography is almost the opposite of the New Deal architect's. It suggests the invincible self, predestined for barrier-smashing. His legend sees him marching from the back of the bus straight into the Oval Office. Without intending to, he has made the trajectory of the superstar even more prescriptive. He can't help stoking over-the-top American optimism, whose very excess is seductive and addictive.

From that addiction we are not easily weaned. Quite a number of us may have voted for Obama not just to prove ourselves post-racist but by way of denying the debacle of the unmitigated American dream. We voted to reinstate the impossible as a national idea, a legitimate obsession, a must for you and me.

Therefore, I put the question to you and me: Do we have the courage to free ourselves from the fixation on the exceptional? Shall we try to dream a dream less extreme? Can we give up the mania that must crash into depression?