According to Fortune, Young allegedly used millions of that money to buy himself huge homes in Chester County, Pa., ($4 million); Palm Beach, Fla., ($2.1 million), and Northeast Harbor, Maine ($1.3 million). How did he do it? Using a script that has been followed by Ponzi schemers through the ages -- most dramatically by Bernie Madoff: Take investors' money and create fake account statements to convince them that everything is fine.

To be fair, Young differed from Madoff in one crucial respect. While Madoff used a hole-in-the-wall accounting firm, Young hired prestigious accounting and law firms -- Master, Sidlow and Associates and Dechert, respectively, which evidently failed to detect Young's fraud. (I think it would be worth investigating what these firms did to "earn" the fees Young paid them).

The SEC alleges that Young routinely sent false information to the accounting firm; created fake performance and account statements to investors; and regularly gave fake 13Fs -- reports on Acorn's holdings -- and other documents to the SEC, according to Fortune.

Like Madoff's con game, Young's little scheme fell apart when investors got nervous and demanded their money back -- $11.5 million that Young didn't have readily available. But Young was able to scrounge up the money from other investors' accounts. Eventually, another investor had a question about a transaction in a tax statement he had received from Young, and asked Master, Sidlow to explain.

The accounting firm noticed a discrepancy between the client's tax statement and the one that Young had sent to it.

As long as the SEC permits schemers like Madoff and Young to generate their own financial statements, we are sure to see more investment scams. Sure, they eventually got caught, but not before causing lots of pain for everyone involved.

Wouldn't it be better to close the loophole that lets these scams get off the ground? All we'd have to do is create a totally independent organization to produce money managers' financial statements. But that might put a crimp in the business of audit firms -- the same firms that failed to stop Madoff and Young. We wouldn't want that, would we?

Peter Cohan is a management consultant, Babson professor and author of nine books, including Capital Rising (due in June 2010). Follow him on Twitter.