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“Investments Sold Through Free Lunch Seminar Turned Out to be a Ponzi Scheme”

“The men allegedly conducted estate planning seminars, aimed primarily at retirees …, and sold promissory notes for investments in Turkish bonds to “individuals with substantial savings….”

“As through this world you wander you’ll see lots of funny men, some will rob you with a six gun and some with a fountain pen” (Woody Guthrie, Pretty Boy Floyd, 1939).

“Free lunch” seminars are a favorite tactic used by today’s fountain pen robbers who target mostly elderly retirees with substantial assets.  They know that audience members are unlikely to be vigilant investors looking for fraud or they would not be there in the first place.  Unfortunately, many audience members come there looking for someone to trust.  That is often their first and fatal mistake.  One recent example of this can be found in an article entitled “Men Charged in $28 Million Investment Scheme.” (more…)

Former Raymond James Broker Indicted

The reality of the securities industry is nothing like the portrait firms paint in commercials that air during golf tournaments.

You can slice and dice the characters who commit investment crimes any number of ways; by modus operandi, by personality traits, by size of their cons. In The Vigilant Investor we divided them into five categories: the Professional Criminal, the  Golden Boy, the Fibber, the Bungler, and the Thief. Prosecutors in Indiana have indicted a man who, if the allegations against him are true (he is presumed innocent), would fit solidly into the Thief category. According to journalgazette.net: (more…)

Trial Set for Accused Montana Madoff

I don’t care if your 90-year-old grandmother is the salesperson.

Polson, Montana sits at the southern end of Flathead Lake in northwestern Montana. The town is known for cherry orchards and the lake, which is the largest natural freshwater lake in the western U.S..  If federal prosecutors have their way, it’ll soon be known as home to the biggest Ponzi scheme in Montana history. According to the Lake County Leader: (more…)

Staten Island Case Highlights Risk to Seniors

The financial legacy that they intended to leave to the next generation will instead buy a Porsche and a nice house for a “financial adviser.”

Last month, I got to meet Hollywood legend Mickey Rooney.  He came to a conference at which I was speaking to talk about his experience with elder abuse. His story involved a member of his family keeping him a virtual prisoner in his own home and looting his savings. He has testified before Congress about the problem. He’s just the tip of an iceberg. There is a wave of investor abuse on the way that threatens to make us forget Bernie Madoff. A story out of Staten Island, New York highlights the danger that faces all senior investors. According to silive.com: (more…)

Tennessee Authorities Arrest County Commissioner Following Ponzi Charges

People who have access to your money are so placed that their mistakes can cost you a lifetime of savings.

The Tennessean is reporting that former Robertson County Commissioner Shannon Polen has been arrested and charged with theft. This follows the filing of a lawsuit by people who invested in business deals that Polen promised would be very profitable. According to the plaintiffs, Polen robbed Peter to pay Paul in classic Ponzi fashion. According to the story from The Tennessean: (more…)

Palm Beach Ponzi

We’ll see more of these because the recent downturn in house prices has convinced many that there is money to be made by buying at the current low prices, making improvements, and selling for a profit in a recovering real estate market.

Boca Raton is a beautiful city in Palm Beach County, Florida, on the Atlantic Coast.  Three of the ten most exclusive gated communities in the U.S. are in Boca Raton.  If you have to ask the price in Boca, you can’t afford it.  But, not everyone comes by their money honestly.  According to prosecutors in Palm Beach County, Boca Raton businessman Lawrence Hamel fleeced more than 30 investors, many of them senior citizens, in Boca Raton and elsewhere out of $2 million in a Ponzi scheme that lasted for more than a decade.  According to The Palm Beach Post: (more…)

Solzhenitsyn Was Right

Russian dissident Alexander Solzhenitsyn had it right when he wrote . . .

Think of the person you trust most.  If you learned that he or she had a gift for choosing profitable investments, would you entrust your money to him or her?  People often do, and regret it soon thereafter.  I can’t count the number of cases I’ve seen of people losing money to family and friends; folks they would have judged as “incapable” of fraud.  The U.S. Securities and Exchange Commission (SEC)  has filed an enforcement action in yet another of these cases.  Specifically, the SEC has charged Joseph A. Dawson (president of Dawson Trading LLC) of Fox Lake, Illinois with taking $3.8 million from family and friends and misappropriating much of it for his personal use.  According to the SEC’s press release: (more…)

Former Smith Barney Broker Pleads Guilty to $3 Million Fraud

The old “computer error” ruse is as old as computers, and crooked stockbrokers have used it to great effect.

Sanjeev Jayant Kumar Shah was a financial adviser for Smith Barney in New York.  His clients were big investors, including banks.  In March 2009, he engineered a fraud to rob one of those banks of more than $3 million.  Having recommended that his foreign bank client buy more than $3 million in bonds, Shah fabricated documents authorizing Smith Barney to wire the money to an offshore bank account that Shah controlled.  When his client called to ask about the transfer, Shah explained that the money had to be wired to pay for the bonds.  When the client asked why the bonds had not appeared in its account, Shah blamed a technical error by Smith Barney.  Shah pled guilty this week to one count of securities fraud and three counts of wire fraud.   He is awaiting sentencing. (more…)

Investment Adviser Allegedly Uses Elderly Clients’ Nest Eggs to Support Three Exotic Dancers

Elderly investors are vulnerable; roughly twice as likely as younger investors to be the victim of investment fraud.

Federal prosecutors in Detroit allege that Farmington Hills, Michigan, investment adviser Keith Epstein defrauded 17 elderly clients out of $17 million, then used that money to “financially support three exotic dancers, pay for his gambling habit, travel and art expenditures, and pay interest to other investors.”  According to a story in the Detroit Free Press: (more…)

“You’re the Bernie Madoff of . . .”

Sometimes investors who have reason to suspect a scam do not report it out of an understandable, but selfish, desire to have the scam continue long enough for them to get their money back.

Last week, a state court judge in Panama City, Florida spoke words often repeated in the past two years:  ”You’re the Bernie Madoff of . . ..”  This time the sentence ended with “Bay County.”  Judge Michael Overstreet spoke those words to Harrison Jones in the course of sentencing Jones to more than 12 years in prison in connection with a Ponzi scheme that robbed 92 elderly people of more than $6 million.  According to WJHG.com: (more…)

Princeton Grad’s Ponzi Reminds Us Not to Rely on Pedigree

Here’s the thing. You think you are a good judge of character, but those determined to take your life savings can read you better than you can read them.

How many of Makara Nkhereanye’s victims saw his Ivy League credentials (Princeton class of 1993) and slept more soundly at the thought, surely someone who has worked so hard to earn such impressive credentials would never risk them by doing something illegal. My service as an Enforcement Branch Chief at the SEC cured me of the human tendency to think such thoughts.  Twenty years of protecting investors both inside the SEC and outside, as the CEO of Investor’s Watchdog, has taught me that, whatever their pedigree, humans will be human and that humans make mistakes.  Sometimes those mistakes cost innocent people their entire life savings, as they did in the case of  identical twins Makara and Tsele Nkhereanye.  Reporting on the sentencing of the Nkhereanyes’ sentencing, The New York Daily News reports: (more…)

FBI Arrests Alleged Southern California Mini-Madoff

Even unanimous recommendations from Billy Graham, the Dali Lama, Nelson Mandela, and Warren Buffet are useless to you.

The FBI arrested Morris Gussin in Las Vegas last week.  California prosecutors had been looking for him in connection with an alleged Ponzi scheme that preyed upon the elderly and the disabled.  He is now charged with 20 counts of grand theft and securities fraud.  A story in The San Gabriel Valley Tribune includes the story as told by some of Gussin’s alleged victims:   (more…)

SEC Charges Internationally-Syndicated Talk Radio Host With Fraud

This is not the first time that a popular radio talk show host has been accused of fraud.

Barbara Alexander is the host of internationally-syndicated talk radio show MoneyDots, which boasts more than six million listeners. This week, the U.S. Securities and Exchange Commission (SEC) charged her and two executives at her Monterey, California-based company with fraud.  Specifically, the SEC claims that the defendants stole $2.5 million of the $7 million they raised through “fraudulent sales of interests in two real estate investment funds.”  The SEC’s press release further states: (more…)

Scam by Former Police Officer Reminds Us to Question Our Assumptions

Those who prefer to rely on their gut instincts often find out the hard way that human instincts more often lead to disaster in the investment context.

The 2008 Rand report commissioned by the U.S. Securities and Exchange Commission (SEC) found that trust is the most important factor to investors in choosing a financial adviser.  Those of us who, as youngsters, wanted to be police officers and admire the very dangerous and difficult job that they do are inclined to trust them.  That was no doubt the case with investors who entrusted their money to Mentor, Ohio financial adviser — and former police officer — Raymond Thomas, who was sentenced last week to six years in prison for defrauding 25 people out of approximately $889,000.  Tracey Read of the News-Herald of Northern Ohio reports:   (more…)

Chicago-Area Investment Program Could Be a $50 Million Promissory Note Scam

Scam artists are smart enough to stick with a strategy until it stops working. As long as our the economy remains shaky, promissory notes scams will work.

The Chicago-Sun Times is reporting on an alleged Ponzi scheme run by a Chicago-area investment adviser.  According to the Sun-Times the Illinois Securities Department has alleged that suburban Chicago investment broker Algird Norkus has been running a Ponzi scheme structured around supposedly profitable promissory notes.  The alleged scheme has even snared legendary prep basketball coach Gene Pingatore, who coached Isaiah Thomas and other eventual NBA stars at St. Joseph’s High School.  According to the Sun-Times: (more…)

Repentant James Bond Draws Five Years Probation

In fact, Eisner and MacCaull simply pocketed investors’ money, sending phony account statements to convince their victims that Razor FX was legitimate and profitable.

James Bond drove an Aston Martin and spent a lot of time in casinos.  He has that in common with Bradley D. Eisner, the mastermind behind a Ponzi scheme that, between 2001 and 2008, took in more than $110 million from 272 investors.  Eisner and his partner in crime, Michael R. MacCaull, told investors that their company, Razor FX, made money by trading currency options.  In fact, Eisner and MacCaull simply pocketed investors’ money, sending phony account statements to convince their victims that Razor FX was legitimate and profitable.  In addition to his Aston Martin and his casino jaunts, Eisner used investor money to buy a $3 million home on Long Island and artworks by Picasso and Willem De Kooning. (more…)

Registered Investment Adviser Steals from Elderly Clients

But Schwab proved no match for Salutric; he simply forged client signatures and took money out of their Schwab accounts.

Registered investment adviser Steven W. Salutric appeared wealthy, philanthropic, and entrepreneurial. He donated more than $300,000 to the church at which he was treasurer.  He paid $600,000 to co-produce a motion picture.  And he invested more than $250,000 in two restaurants near his home.  This week an administrative law judge for the U.S. Securities and Exchange Commission (SEC) found that Salutric acquired that apparent wealth by stealing from clients of his registered investment advisory firm, Results One Financial LLC.  One of Salutric’s victims was a 96-year-old nursing home resident who suffered from dementia. (more…)

Friendly Neighborhood Insurance Agent Pleads Guilty to Running a Ponzi Scheme

As Glenn Frey wrote in Smuggler’s Blues, the lure of easy money has a “very strong appeal.” Often, we are just too close to see the red flags that would stand out to an objective observer.

We like to think that we can see a scam coming a mile away.  Too often, though, we find that it was standing right next to us as we scanned the horizon for it.  According to an article by John Diedrich of the Milwaukee Journal Sentinal: (more…)

Stockbroker Thief Sentenced for Stealing from Elderly Clients

This case also reminds us that our elderly relatives are especially at risk from stockbrokers.

It’s a lot easier than you think for a stockbroker to steal from you.  It’s even easier for him or her to steal from an elderly client.  The FBI caught PrimeVest Financial Services broker Brian Anderson of Oradell, New Jersey doing just that.  Anderson pled guilty to stealing $1.1 million from elderly customers by depositing their supposed investment checks into a bank account that he controlled.  The court sentenced him to 68 months in federal prison.

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Charities At Double Risk From Investment Fraud

How can a charity protect itself against this back-door damage? It can be on the lookout for large donations from newly wealthy contributors, and investigate them before putting their money to work.

A recent article in the Chronicle of Philanthropy highlights how charities are at double risk from investment fraud.  Professional scamsters love to target charities.  The modern resurgence of the prime bank scam began in the early 1990s when an organized crime figure defrauded the Salvation Army out of more than $4 million.  But, beyond being a direct victim of investment fraud, charities can find themselves victimized by contributors who give stolen money. (more…)