An International Affair

There is a path through the dangerous investing landscape, but only the vigilant find it.

Investment fraud is an international affair. In January 2011, the U.S. Securities and Exchange Commission filed an enforcement action against Costa Rica-based Provident Capital Indemnity, Ltd. alleging that the company, its president, and its auditor were engaged in a Ponzi scheme. We wrote about the case at the time. Last week, 5,600 miles away from Provident’s headquarters, Dutch Police arrested four men accused of selling more than $200 million in Provident investments to citizens of the Netherlands and Belgium. According to an article in Bloomberg BusinessWeek: (more…)

The Plan v. The Execution

Executing a good plan brings the world of ideas in contact with the world of payroll, rent, and other operating costs.

Your neighbor has a $1 million life insurance policy. He is terminally ill, unlikely to survive for another year. Due to the illness he hasn’t worked in the past 12 months, and he is suffering through extreme financial hardship. He needs money now. If you could buy the policy for $250,000, would that be an investment worth making? That’s the pitch that so-called life settlement companies make to investors. What could go wrong? Several things. To mention only one, what if the person whose life is insured  lives longer than expected and the people through whom you made the investment don’t make the annual premium payments? One missed payment and the person’s life is no longer insured.

Over the past decade, regulators have shut down hundreds of companies that claim to earn profits for investors through investments in life insurance policies. Last week the SEC filed an emergency enforcement action to shut down yet another alleged life settlement scam. According to the SEC’s press release: (more…)

Three Men Charged with $100 Million Fraud Involving Life Insurance Investments

Vigilant investors insist on a professional due diligence investigation of any unregistered investment. But this is especially important with life settlement investments.

Federal prosecutors have indicted three men in an alleged scheme that has become common.  The scheme involves life insurance settlements in which the owners of life insurance policies receive a cash payout and transfer ownership of the policy to investors who continue making premium payments and receive the death benefit when the insured dies.  While there are, no doubt, people who seek to capitalize on this model legitimately, the field is infested with innumerable con men and bunglers who have, and will, cost investors hundreds of millions in losses.  According to Bloomberg: (more…)

Where You’d Least Expect It

The scam artists offer these trusted advisers an attractive commission on each sale. With dollar signs in their eyes, these trusted advisers cannot possibly objectively evaluate the investments they have agreed to sell.

Where does the greatest threat to your life savings come from?  You might think it’s from a professional scam artist.  Because you (mistakenly) believe that characters like that are few and far between and because you (mistakenly) believe that your instincts would lead you away from anything offered by such a character, you believe that your nest egg is safe.  With all due respect, you could not be more wrong.  Oftentimes, the biggest threat is so close to you that you do not perceive it.  A case out of Wyoming helps make the point. (more…)

SEC Halts Alleged Life Settlement Scam

Instead of reserving investor funds to pay future Policy premiums, Defendants commingled the funds and used them to pay Defendants’ business and personal expenses and to support lavish lifestyles, including payments for jewelry, casinos and other travel and entertainment. The complaint alleges that Defendants enriched themselves with approximately $2.3 million of investor funds.

Some people sell investments in life insurance policies on the lives of those facing imminent death. Those who sell those interests are supposed to use the investor’s money to pay the premiums on the policy.  If they don’t pay the premiums, the policy lapses and the investment becomes worthless. Often, these scamsters just take investor money and live the high life, praying that the insured dies before the policy lapses.   The U.S. Securities and Exchange Commission (“SEC”) believes it has caught people doing just that.   (more…)