If It Sounds Too Good To Be True, You Are Talking To An Amateur

For every one buffoon who promises ridiculous returns, there are several competent scamsters who know better than to do so.

For the last several decades — at least the last five during which I have been around — we’ve been fed well-meaning but dangerously incomplete information about how to avoid the financial ruin that comes with investing in a scam. The old axiom: “If it sounds too good to be true, it probably is,” makes its way onto every list of how to keep your nest egg safe. What makes the axiom so dangerous is that it is almost true, as far as it goes. Because, of course, if an investment sounds too good to be true, it is (not “probably  is”) too good to be true. Take a look at the story of a recent case in which the axiom would have protected people who heeded it. Then we’ll talk about why the axiom, by itself, will never be enough. According to Courthouse News Service: (more…)

Consider It A Dealbreaker

Please add this hard and fast rule to your investment toolbox.

Somewhere along the investing road, almost every investor comes across one piece of advice that is easy to remember and apply. I’m not talking about the nearly worthless axiom “If it sounds too good to be true, it probably is,” which has led more people to lose their nest eggs than all Bernie Madoff’s victims combined. I’m talking about good, solid pieces of sound advice, like, “Never write a check directly to your financial adviser.” From Connecticut comes a story that should provide another bullet in the savvy investor’s arsenal. According to ctpost.com: (more…)

Advice from Someone Who Knows

Taking the proper mental approach to an investigation will not come to you naturally.

Kent Burleson of Maryville, Tennessee, was a lineman and a splicer for AT&T. For thirty years he built up a nest egg sufficient to provide him with a comfortable retirement. When he retired, he entrusted that nest egg to Benchmark Capital, Inc. Reporter J.J. Kindred of The Daily Times has written a compelling account of what happened next. The entire story is well worth your time. For our purposes, we’ve copied excerpts below: (more…)

Call It a Loan

A thoroughly legal attempt to earn a profit for investors has nothing to fear from regulators.

Massachusetts Secretary of State William Galvin has filed Ponzi charges against a Belmont, Massachusetts man, alleging that his sale of promissory notes violated the anti-fraud provisions of the Massachusetts Securities Act. The defendant, John W. Cranney, is defending (he is innocent until proven guilty) by saying that the promissory notes were ordinary loans and not securities. According to boston.com: (more…)

No Excuses

It isn’t the substance of an excuse that matters, it is the fact of the excuse

Just when we thought we’d seen the last of the Madoff era Ponzi schemes, comes a criminal indictment in a case that alleges a scam operating from 1995 to 2011. According to LoanSafe.org: (more…)

A Family Fraud Affair?

Your nest egg is within the reach of every scam artist on the planet.

I listened to a podcast last week about Kate “Ma” Barker, a grandmotherly woman who allegedly led a criminal gang with her children, robbing banks and performing kidnappings for ransom in the 1930s. Ma Barker and one of her sons were killed in a shootout with FBI agents in Florida, leaving the world to wonder whether she was the mastermind of the gang or merely a mother who traveled with and cared for her sons while remaining deliberately ignorant of their crimes. You don’t hear much about family gangs these days, outside of stories about the Mob, but the SEC believes that it has found one. According to the SEC’s press release: (more…)

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…)

Double Identity

You’d be surprised how many use another name.

What name would you choose if you had to go by an alias? Famed Ponzi scamster Lou Pearlman chose A. Incognito Johnson. I think I’d go with something like Elvis Powers or Bono Von Victor. Most folks don’t reach quite that far. But, you’d be surprised how many use another name. Authorities in Texas have nabbed one. According to mySA: (more…)

Texas Oil and Gas Attorney Indicted

Powerful cognitive biases common to all healthy humans make you want to use professional degrees and apparent affluence as substitutes for a meaningful investigation.

A recent case out of Texas gives us a chance to revisit a basic due diligence tool that can help you keep the nest egg that you worked so hard to accumulate. According to Dallas Observer: (more…)

The First Church of the Broken Nest Egg

They could have performed a due diligence investigation that would have uncovered the fraud.

There will be scores of these this year; church congregations torn apart by the pastor’s involvement with a fraudulent investment scheme. Sometimes the pastor will be an innocent dupe. Other times the pastor will have good reason to suspect the fraud from the beginning. In both cases, though, the pastor will plead afterwards that he could not have known that the thing was a fraud. He or she will be wrong about that. Last week, a story from South Carolina took its place in this long, never-ending line of sad stories involving clergymen. According to The Post and Courier: (more…)

SEC Stops Alleged Ongoing Fraud in Boston

It is comforting to see a federal agency hitting a home run in its area of responsibility.

For all the misunderstandings about the SEC — the limits of its authority, the scope of its mission, etc. — cases like the one the Commission filed in Boston this month underscore how vital the SEC is to investor protection. According to the SEC’s press release: (more…)

Atlanta Prime Bank Fraud

The best you can do to protect yourself against a prime bank fraud it to know more about how they operate.

Like stand-up comedians, prime bank scamsters change their material to appeal to those who may have seen the act before. — The Vigilant Investor, p. 61

It’s the scam that will not die. Someone could get a PhD in social psychology by studying just why this particular brand of investment fraud is so resilient. It’s called the prime bank scam, and it has been around since the 1950s, although its modern resurgence dates to the early 1990s. The SEC believes that it has found yet another prime bank scam right in Investor’s Watchdog’s backyard. According to the SEC’s press release: (more…)

SEC Tags Investment Seminar Salespeople

Don’t believe the rumor of a shortcut

“I can teach you how to be a millionaire by following my five simple rules of stock market investing.” Pitchmen galore make a version of that promise hundreds of times every day, in television and radio ads, in print advertising, and on signs placed on street corners. Ask yourself this question: if they are good enough at whatever it is they promise to teach you how to do, and that something makes money, why don’t they just get on with it and make their millions instead of taking a couple hundred dollars from you? There is no satisfactory answer to that question. Yet, such investment seminars continue to make millions, a few hundred dollars at a time. The SEC recently concluded enforcement actions against two such characters. According to the SEC’s press release: (more…)

Louisiana Authorities Ring Up Allegedly Crooked Baseball Coach

Selling investments is what they know, and they keep right on doing it, without a license.

I coached baseball for ten years. It was the best decade of my life up to that point. The memory of teaching life lessons through the best game in the world is among my most cherished. Baseball helped turn my sons and their teammates into productive young men, and it introduced my family to the people we still consider our closest friends years after our kids moved on to college. That’s why the story that I write about today caught my eye. According to NOLA.com: (more…)

A Fib on the Resume Speaks Volumes to a Vigilant Investor

They are afraid that you won’t be impressed with the truth.

Yahoo CEO Scott Thompson has put resume inflation in the news again. Whether he will survive the scandal is anyone’s guess. But I’m grateful that he has given me a chance to address a subject that all vigilant investors must understand. (more…)

Ponzi in Potato Country and a Lesson from Mother Theresa

We cannot and should not look to them to prevent investment fraud before it starts.

I keep track of the states in which the investment scams I write about are based. (After four years of writing every weekday, Vermont finally joined the list last week). Today’s post takes us to one of the states we rarely get to write about — Idaho. According to KPVI News 6: (more…)

Affinity Fraud Targeting Christians Teaches Essential Lesson

We haven’t yet learned to recognize those cognitive biases in our own thinking and account for them in our financial decision-making.

When you read about the promises made in this scam, which the SEC shut down this week, pay attention to your initial reaction. After you’ve read about the case, we’ll talk about those reactions. According to the SEC’s press release: (more…)

Canadian Police Shutter Alleged Ponzi Scheme

A very powerful cognitive bias leads us to believe that we somehow pop out of the womb fully able to recognize a competent scam, when we have to learn how to do everything else.

Through more than two decades of swimming in an ocean of sociopaths, career criminals, bunglers, and reckless stockbrokers, I’ve learned a few things about investment fraud. For purposes of today’s post, I’ll share three of those observations (as Jimmy Durante used to say, “I’ve got a million of ‘em”).  First, fraud is global. It happens as much in Japan, Russia, and South Africa, per capita, as it does in the United States. Second, fraud never slumps, but adapts to the current economic environment.  Third, fraud is ever evolving and always becoming harder to spot.  A recent case out of Canada validates all three of those observations. According to thespec.com: (more…)

“Believe Me, I’m As Upset As You Are”

Friendship is a lousy reason, by itself, to entrust your money to anyone.

“Believe me; I’m as upset as you are.” I pray that you never hear those words. Because, if you do, they’ll likely be spoken by someone to whom you have entrusted your life savings. They’ll be describing how all the money is gone; lost, if you believe them, to an unscrupulous character to whom they entrusted it. A recent case out of Vermont is familiar to those of us in the investor protection business. According to WCAX.com: (more…)

National Guard Ponzi

While age often brings wisdom to the discerning, it isn’t a cure for a larcenous inclinations.

We owe a debt to our men and women in uniform. But, even in that group, there are bad apples. A recent case from California tells the story of one of them. According to the Los Alamitos-Seal Beach Patch: (more…)

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