His life changed forever when he began looking into a company called Baldwin United. Baldwin, which had been formed from the merger of a piano maker and an insurance company that sold annuities, was one of the hottest stocks of that era. After months of dogged research, Chanos realized that the high-flying Baldwin was, in essence, a giant Ponzi scheme that raised money secretly through subsidiaries, turned the money over to the parent to support its enormous capital consumption, and used aggressive mark-to-market assumptions on its portfolio of annuities to create fabulous earnings growth.
