ANALYSIS/OPINION:

The ghosts and goblins of Halloween have retired to their ghoulish places for another year, but there’s still Terry McAuliffe and his friends. Mr. McAuliffe, the Democratic nominee for governor of Virginia, is a piece of work. The latest McAuliffe fright to emerge from the shadows is how he came to join an investment group to profit from the helpless and the hopeless waiting to die of AIDS, cancer and other fearsome diseases. The design of the clever scheme was the work of one Joseph Caramadre, a Rhode Island estate planner and generous contributor to the McAuliffe campaign.

Caramadre pleaded guilty last year for his part and went to prison. The scheme involves “death put bonds,” and it worked like this: Caramadre posted an advertisement in a Catholic newspaper offering $2,000 in cash to the terminally ill, which many understandably took as an offer of Christian charity. Caramadre and his associates met with them to run a slick and smooth spiel, obtaining enough personal information to open dozens of joint brokerage accounts in the victims’ names, either duping them into signing the paperwork or forging their signatures.

The beauty part for the crooks is that through a quirk of the law, the “co-owner” of certain types of bonds are allowed to cash them at full value before the maturity date if the other “co-owner” dies. Caramadre and his associates poured money into the bonds. At the death of their clients, they cashed the bonds, which returned more than $10 million to them. Mr. McAuliffe was one of those making a handsome return on his investment. Mr. McAuliffe further received campaign donations of $26,599 from Caramadre.

Mr. McAuliffe has not been accused of breaking the law, but when court documents revealed his investment in the Caramadre scheme, duty and conscience (if not fear) compelled him to contribute several thousand dollars to charity. Despite his talent and skill in raising millions for Bill and Hillary Clinton and other Democratic candidates, he insists he was duped by Caramadre. He knew nothing about how the scheme actually worked, like the man caught in a raid on the bordello who insists he knew nothing of what was going on upstairs — he was only there to hear the piano player.

Mr. McAuliffe knows about big money, and how it can be used to guarantee big returns on the right investments. He has spent millions of dollars on television commercials designed to cultivate the reputation of an ethical and successful businessman. But successful businessmen of good reputation do not associate with scam artists. Why should the voters of Virginia trust a friend and associate of scam artists to invest the state’s money?

The Caramadre scheme exploited first the anguish of the dying and then certain loopholes in the law designed to show compassion for bondholding widows and widowers. He guaranteed that his investors could not lose, regardless of market conditions. This alone should have raised a red flag for investors who know about the importance of due diligence. A reputable businessman would have asked questions, and would have quickly learned that the profit in the scheme came about by bilking insurance companies and bondholders, and bamboozling the ill and the infirm.

Mr. McAuliffe is not accused of breaking the law, and his investment was one of the smaller sums in the scheme, but his participation raises serious questions about his judgment, if not his integrity. Either he was not competent enough to know what he was doing, or he didn’t have the conscience to care. Either failing is sufficient to disqualify him from holding an office of public trust. Virginia voters should keep this in mind when they elect a new governor on Tuesday.

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