Small Story Teaches Big Lessons

You can learn how to protect yourself and those you love.

Part of my challenge in writing this blog is paring down long, detailed stories to a size that won’t deter you from launching into the story. That means that I sometimes have to leave out details — including good writing by the reporters who write these stories — that a different medium would allow. But the story for today is short. Even so, it is full of lessons that can mean the difference between a secure, well-funded retirement and penury. According to Eyewitness News 4, in Albuquerque: (more…)

Another Insurance-Based Ponzi?

Ponzi schemes germinate from insurance agencies every day.

We all lead busy lives. Career and family demands are relentless. Who, in the little bit of downtime that they have, wants to spend time studying the intricacies of the financial services industry? But for those of us whose jobs give us intimate knowledge of those intricacies, widespread misconceptions are troubling enough to cost us some sleep now and then. People do not know the legal distinctions between stockbrokers and investment advisers, or between stockbrokers and insurance agents. Most people only know that you can buy investments through any of them. And, whoever said it first deserves credit: “A little bit of knowledge is a dangerous thing.” A case out of New Mexico makes the point. According to Las Cruces Sun News: (more…)

Seniors Moved Into the Fox’s Lair

Investigate the owners/operators of the place as you would investigate a stockbroker or investment adviser.

“While people 60 and above make up 15 percent of the population, they account for 30 percent of fraud victims.” — The Vigilant Investor, p. 228

What job would put you in the perfect position to swindle elderly people? I can’t think of one better than “retirement home operator.” Police in New Mexico believe that they have caught a swindler using that very position to steal from the elderly residents. According to (more…)

Here’s What Your Parents Are Facing

Let’s hope that the person who sits in the White House is never interested in rolling back investor protection.

Elder financial abuse is rampant. Cases of brokers and investment promoters taking advantage of elderly investors used to make up about 10 percent of my caseload.  Now, it’s more like 25 percent. We knew that this was coming, and it’s only going to get worse. Just as a combination of meteorological factors can make the “perfect storm” out at sea, a combination of economic and demographic factors make a perfect storm of investment fraud. I’ve listed those factors elsewhere and don’t have the space to recount them here. So I will mention just a few. (more…)

Teacher’s Union Case Shows Why Institutional Investors Need a New Model of Due Diligence

Investment professionals have experience evaluating the profitability of investments, but almost no experience recognizing a fraud.

According to a lawsuit filed by the National Education Association of New Mexico, New Mexico’s main teachers union, registered investment adviser Austin Capital Management, failed to do adequate due diligence before investing $186 million of its clients’ money with Bernard Madoff. According to the Sante Fe New Mexican: (more…)

New Mexico Pension Fund Case Shows Need for a Different Approach

Institutional investors, like pension funds, charities, and endowments, need to insist on this new level of transparency.

The New Mexico Independent is reporting that the New Mexico Educational Retirement Board (ERB) has sued its former investment adviser, Aldus Equity, alleging that Dallas-based Aldus is guilty of racketeering, fraud, breach of contract and professional negligence.  In 2009, the U.S. Securities and Exchange Commission filed an enforcement case against Aldus and others, alleging participation in a kickback scheme designed to line the pockets of politicians with influence over which investment advisers handled lucrative state pension fund business.  The SEC’s press release reads, in part: (more…)

Alleged ‘Convertible Bond’ Scam Raises $10 Million

Investment seminars have proven to be a reliable tool for selling phony investments. You can imagine why.

Think about a financial scam from the perspective of the scam artist.  You know that you are not going to generate any profits.  You know that you are going to spend the victims’ money on houses, cars, vacations, and a luxury box at your local major league stadium.  You might also have to spend some of the money to maintain the illusion that your scam is legitimate.  You will send some to investors, some to the landlord of the space you rent and equip to look like an operating office, some for design of a first-class website, and some for impressive stationary, business cards, and antique furniture for the office. (more…)

More Evidence that the Mob Loves Investment Scams

If the allegations against Mr. Guarino are true, he is only the tip of the mob-run investment fraud iceberg.

If you were a young mobster on the make, how would you show your bosses that you deserved a higher place in the organization?  By making them a lot of money.  You could do that by things like robbery, loan sharking, extorting “protection money,” or any of the many other kinds of crimes that rely upon intimidation.  While all of those crimes might bring in cash, they are soooo last century; they involve a high risk of incarceration because they require occasional violence.  If you bet your advancement on them you would watch many enterprising young mobsters leapfrog you in the organization. (more…)

SEC Halts Alleged $80 Million Ponzi Scheme in New Mexico

The U.S. Securities and Exchange Commission (“SEC”) has charged Douglas F. Vaughan and his company — The Vaughan Company Realtors — with fraudulently raising $80 million by selling promissory notes through promises of high fixed returns.

The U.S. Securities and Exchange Commission (“SEC”) has charged Douglas F. Vaughan and his company — The Vaughan Company Realtors — with fraudulently raising $80 million by selling promissory notes through promises of high fixed returns. According to the SEC, Vaughan paid later investors with money from new investors, in classic Ponzi fashion. (more…)

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