Veterans are Being Victimized by “Pension Strategy” Schemes

The U.S. Government Accountability Office (GAO) has issued a report warning about insurance agents, financial planners and attorneys who are taking advantage of elderly and low-income veterans by selling them deferred annuities and trusts on the pretext of helping them stay below the income threshold needed to qualify for pension benefits from the Department of [...]

The U.S. Government Accountability Office (GAO) has issued a report warning about insurance agents, financial planners and attorneys who are taking advantage of elderly and low-income veterans by selling them deferred annuities and trusts on the pretext of helping them stay below the income threshold needed to qualify for pension benefits from the Department of Veterans Affairs. (more…)


The Lord’s Name in Vain

Whatever you have to do, stay away from even the most subtle hint of religion in your investments.

Yesterday’s post was about an alleged $200 million scam run by an Orthodox Jew against other Orthodox Jews. It’s the type of con that we typically call an affinity fraud, a fraud that preys upon members of an identifiable group. The story we relay below involves an affinity fraud that preyed upon Christians. For reasons we’ll discuss below, Christians are targeted by affinity fraud more often than any other group.  According to the Albany Times-Union: (more…)

SEC Charges Brokerage Firm with Defrauding School Districts

Here’s hoping that the SEC’s action in this case makes a statement to those who seek to line their pockets with fat commissions by putting their clients’ assets at unsuitable risk.

Institutional investors are at as much risk from securities fraud as individual investors. In the speeches I give to institutional and individual investors and financial professionals, I often run a scrolling list of public pension funds that have been victimized by Ponzi and other scams. The list is just a small sample of funds defrauded in the past five years.  It takes more than two minutes to scroll through. A full list would take more than an hour to scroll through. This week, the SEC charged brokerage firm Stifel, Nicoluas & Co., Inc. with adding six more institutional investors to that list. According to the SEC’s press release: (more…)

Alleged Pump and Dump Sting Exposes Risk to Pension Funds

Pension fund risk managers must adopt policies and procedures that require an independent due diligence investigation before any investment in penny stocks is allowed.

The U.S. Securities and Exchange Commission (SEC) has filed an enforcement action in a case that highlights the need for a different kind of risk management at pension funds.  The SEC charged penny stock promoters Joshua Konigsberg and Louis Fischler for their roles in alleged “illicit schemes to manipulate the volume and price of four microcap stocks and illegally generate stock sales. The SEC also charged microcap company MediSys Corp., of which defendant Konigsberg is the president and chief executive officer, in connection with one of those schemes.”  The SEC’s press release reads, in part: (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…)

SEC Nabs Former “CHiPs” Star in Micro-Cap Fraud

Scamsters can afford to share the profits of their enterprise with those they hope to recruit to the effort.

The U.S. Securities and Exchange Commission (SEC) and the FBI have charged several individuals and businesses with operating a stock fraud scheme that targeted pension funds and other institutional investors.  Among those charged was former star of “CHiPs” Larry Wilcox, who played Officer Jonathan Baker on the 1970’s hit show.  Baker has agreed to plead guilty.  According to the SEC’s press release: (more…)

Union Pension Fund Among Victims of Alleged Financial Scam

Whether you are responsible for the retirement savings of thousands of people or only for your own, the best time to investigate is before you have reason to suspect that anything is wrong.

This week, the U.S. Securities and Exchange Commission (SEC) filed an emergency enforcement case to halt what it alleges to be an ongoing fraud run by investment adviser Carlo G. Chiaese of Springfield, New Jersey, and his company, C.G.C. Advisors, LLC.  According to the SEC’s press release: (more…)

Pension Funds Taking Big Risks with Alternative Investments

The list of institutional investors who have fallen victim to financial scams is too long to include here, but it includes Lehman Brothers, the City of Detroit, Carnegie Mellon University, and the New York Mets.

According to the latest issue of Pension & Investments magazine, public pension funds have doubled the percentage of their funds’ assets invested in alternative investments such as hedge funds and limited partnerships.  Between 2005 and 2009 the allocation doubled from 10 percent to 20 percent.  Is there any doubt as to the reason for that increase? (more…)

Why You Should Care About the SEC’s Case Against New Jersey

As a rule, pension funds do inadequate due diligence aimed at preventing fraud, recklessness, and incompetence.

Last week, the U.S. Securities and Exchange Commission settled a case against the State of New Jersey, which, the SEC alleged, had fraudulently omitted material information in connection with the sale of municipal bonds.  Specifically, the SEC alleged that New Jersey failed to tell investors in its bonds that it had not made required contributions to the state’s public employee pension plan because it was just too broke to do so.  A reasonable investor in the state’s bonds would have found that information significant.   (more…)

Why Pension Funds and Endowments Invest in Ponzi Schemes

Pension funds and endowments must begin separating the task of recommending what investments they should buy from the task of ensuring that they do not fall into a fraud.

In the wake of the Madoff scandal and the flood of Ponzi schemes that followed, we learned that several of the public pension funds and college endowments that lost money to those schemes had been advised to buy them by consultants employed specifically to help select safe investments.  Believing that they had taken sufficient precautions to protect the billions of dollars under their care, these pension funds and endowments followed the recommendations of their consultants only to find that they had been led into frauds. (more…)

UK Case Highlights Pension Funds at Risk

No target is more attractive to scam artists than a pension fund. It takes no more effort to defraud a fund than it does to defraud an individual, after all. And the potential take is so much larger.

According to the U.K.’s Serious Fraud Office, Graham Pitcher and Gary Cordell were the trustees for nine separate pension funds, when they decided to help themselves to 52 million British pounds of the money in those funds.  This case is a bit unusual in that the defendants worked for the pension fund trustee and are accused of taking the money directly from accounts belonging to the nine pension funds.   (more…)

Detroit-area Pension Funds Lose Out to Alleged Private Equity Fraud

If they are going to protect the money entrusted to them and avoid liability for losing that money, those responsible for pension funds and endowments must get in-depth due diligence investigations on unregistered investments as well as on any adviser(s) who will be making decisions about how to invest that money. Failing to do so will likely cost them their jobs and do irreparable damage to the institutions they serve.

The U.S. Securities and Exchange Commission (“SEC”) has charged Onyx Capital Advisors, LLC and its founder Roy Dixon, Jr., with participating in a fraudulent scheme through which they stole more than $3 million invested by three Detroit-area public pension funds.  According to the SEC: (more…)

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