Category Archives: Illegal Schemes & Scams

Bad advice damages investors, but it is not illegal. That is why it is so common. Then there are illegal scams, the most prominent being Ponzi schemes. These scams may be sold by unlicensed people who have nothing to do with the financial services industry. It pays to make sure you are talking to a licensed professional who has a clean compliance record.

How to Avoid the Next Investment Scam!

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How to Avoid the Next Investment Scam!Over lunch a friend tells you about an investment he’s bought that’s making great returns. Over the past month it’s returned over 30%! He tells you of some other friends you have in common that are experiencing similar results. “What’s the catch?” you ask. “There isn’t one,” he explains. The investment is guaranteed not to lose money. “How does it make money?” you ask. You’re friend says he’s not exactly sure, but it involves something high tech. He can direct you to a web site (or a sales rep) with all the answers. Just be sure to mention his name because he gets a bonus for bringing in new investors. The scenario above happens every day in our country and around the world. Given the facts above, our first thought is that this is a scam. During our time in this industry, we have personally helped people avoid at least three such scams before they were publically exposed. How did we do it? Well, it wasn’t from trying to debunk the particulars of each scam. Instead, we followed a few simple common sense principles. The following are some basic questions to ask when considering getting involved in any investment deal. Continue reading →

Do Psychopaths Really Run Wall Street?

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According to Al Lewis (Al’s Emporium; Wall Street Journal) psychos run Wall Street. How else do you explain the continuing string of Wall Street scandals and fraudulent activities that rip-off investors. For example, why would a prestigious firm like Goldman Sachs package and sell a $1 billion CDO and then bet against the performance of the product. Investors lost more than $700 million and GS was fined $250 million.

Sherree DeCovny in CFA Magazine that said 10% of Wall Street professionals have psychopathic tendencies based Lewis’ article on an article. That would explain a lot if this analysis were correct.

Psychopaths have anti-social tendencies: Lack of empathy, no regard for consequences, and unlimited risk-taking. Lack of empathy explains how Wall Street executives could damage millions of people and still get a good night’s sleep in their mansions. Lewis also said many of these psychos were charming, narcissistic, glib, had great senses of humor, and could spin the truth like a roulette wheel.

Unless the 10% dominate the Wall Street’s executive suites, I believe the number is much higher. I also think the psychopathic behavior is driven by a massive sales culture that puts huge importance on company profit and very little value on ethical standards that protect investors.

I also believe politicians are paid millions of dollars to allow this culture to flourish. You may have noticed Goldman Sachs paid a fine, but did not have to admit guilt, when its executives made decisions to rip-off investors. This means the psycho executives have huge upside (multi-million dollar bonuses) and no downside (prison). Based on the events of the past few years, fines have become a cost of doing business for companies. Psychopaths in Washington D.C. and Wall Street flourish in a mutually beneficial environment.

Goldman Sachs on Most Hated List

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According to 24/7 Wall St.’s research, Goldman Sachs has made it onto its 10 Most Hated companies list.

I am not surprised. The greed of GS executives has become legendary and their actions severely damaged investors and the U.S. economy. Exposure started in 2010 when the company was sued for fraud and settled for $550 million – a small percentage of annual profits. Fraud accusations against GS actually accelerated after the settlement and fines became a cost of doing business. GS is facing a number of suits for toxic mortgages it sold to individual and institutional investors.

Being on a Most Hated list must rankle GS executives, but they have made hundreds of millions of dollars in compensation and they know Americans have short memories. Eventually this will be old news and it will be business as usual.

What is truly amazing is that GS defrauded investors and caused major damage to the U.S. economy and not one company executive went to jail. Why not? These executives have purchased Get Out of Jail Free cards from politicians who care more about re-election than protecting Americans from greedy executives.

This cycle will repeat itself over and over again until the executives who made the decisions to rip-off the public begin joining Bernie Madoff in jail.

Occupy Wall Street’s Focus is Wrong

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There is no question Occupy Wall Street has gotten a lot of publicity – most of it bad.

One of its goals is to increase the awareness of the American public about the greed and corruption that permeates Wall Street. It has not accomplished this goal. Its message has been obscured by tents-in-the-park.

Unfortunately, it does not stand for a clear-cut cause that people can rally around. Its message is rapidly becoming old news – even if it has a float in the Rose Parade.

If Occupiers are fed up with Wall Street they should have shined their spotlight on company executives who made millions when they decided to rip-off the American public. They should use public data to publish a Top Ten List. The spotlight should focus on the executives’ decisions, compensation, and the damage they did to their own clients and the American public.

Occupiers should also shine their spotlight on the politicians who pass regulations that protect these executives from prosecution for their crimes. Wall Street executives can commit crimes and their companies pay fines without admitting any guilt.

According to the SEC it does not have the legal resources to prosecute the executives of large companies. Its solution is to levy fines that become a cost of doing business for the executives’ companies. Consequently, there is no downside for corrupt executives.

Occupiers should be focused on making executives and politicians accountable for decisions that damage the American public. This is a cause worth fighting for.

Wall Street greed and corruption will not go away until the incentives to cheat investors have to be removed and executives who commit criminal acts are sent to jail.

Church Members are Easy Prey for Ponzi Schemes

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The SEC has accused a father and son of bilking LDS church members out of $220 million. The money that was supposed to be used to buy apartment buildings and renovate them was used to fund the lifestyles and businesses of the perpetrators.

Churches are easy prey for Ponzi schemes. The bad guys sell the scam to church elders then they make sure the elders have a very positive experience or the elders are lead to believe they are having a very positive experience.

Elders may be inclined to share their good fortune with other church members. Or, the scam operators convince the elders to act as references for their scam. Either way, church members tend to trust other church members. They do not question the validity of the experiences of other church members, in particular church leaders.

One trust is established, they let their guards down and they are easy prey for the criminals who operate scams.

Investors should not trust the comments of references when they invest their assets. No advisor will provide a bad reference. Most references are selected because they are willing to make positive comments. Most references are coached to make particular statements. And, you do not know the nature of the relationship that exists between the reference and the person selling the investment.

Be very cautious, even when the reference is a member of your church.

How Can Your Retire?

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Americans spend their working years accumulating retirement assets that they turn over to Wall Street for investment. They need asset growth so they can retire when they want to and live comfortably and securely during their golden years.

Americans are in big trouble and they don’t seem to know it or they don’t care.

They have put their trust in a Wall Street system that has proven it cannot be trusted to put investor interests first.

Investors want competent, ethical advice they can trust. Wall Street wants investor assets to maximize company profits, share values, and executive bonuses.

There is only one winner for these conflicting goals.

Investors don’t stand a chance unless they develop a powerful voice that cannot be ignored in Washington and on Wall Street. Investors are voters. They can create change if they care enough. Maybe the damage to their retirement hopes and dreams will be the catalyst.

Thank You Wall Street!

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You can’t blame Wall Street for the low retirement savings rates of most Americans.

You can blame Wall Street for the bubbles, scams, and fraudulent activities that have reduced the value of the savings accounts of most Americans. Or, how about the pressure Wall Street analysts exert on American companies to earn more money. Thousands of companies have converted their defined benefit pension plans to 401k plans to transfer investment performance risk to their employees.

Now in a recent article, MSN’s Today Money reported 25% of Americans expect to work to age 80. And, 75% expect to work during their retirement years. These Americans are acknowledging it is more important to save a specific amount of money than it is to retire at a specific age. But, the consequences are horrific, especially if there are health problems.

The two primary ways to accumulate assets are savings and performance. Once you achieve a critical amount of assets, performance is more important than savings.

Where do you go to get performance? That’s right, Wall Street.

Wall Street’s robber barons are the executives who make millions ripping off Americans who have to defer retirements, take part time jobs, and reduce their standards of living.

Robber barons belong in jail. Politicians belong in adjacent cells. Then Americans can expect on ethical advice and services that help them accumulate more assets for retirement.

Affinity Ponzi Schemes-Are You a Possible Target?

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One way that ponzi scheme operators (aka slimeballs) operate is to prey on people they have close affiliations with. Some of the most commonly targeted groups include religious or community-based groups and the elderly. The con-artist will gain the trust of respected leaders within the affinity group (e.g., religious leaders) to help spread the message to others about the investment scam. Unfortunately, the unsuspecting leaders who help spread the word have no idea that the investments are fraudulent and themselves become unwitting victims of the con-artist’s grand plan.

Don’t fall victim to one of these types of scams. Never entrust your money to someone simply because you like them. Get documented information about who you’re working with and make sure they are legitimate. Here are some red flags that you should be aware of before you take a leap of faith with your money.

Illinois Man Cheats Investors Out of Millions

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The U.S. Securities and Exchange Commission alleges from 2007 through 2009, 51-year-old Steve W. Salutric a co-founder of investment advisery firm, Results One Financial in Elmhurst, IL, misappropriated several million dollars from his clients, one of which included a 96-year-old suffering from dementia.

According to the complaint, in addition to other crimes, Salutric embezzled over $400,000 from the elderly woman’s account at Charles Schwab draining it to a balance of less than $10,000. Salutric directed: approximately $259,000 to two local restaurants (one of which he partially owned); approximately $610,000 to a film distribution company; and almost $321,000 to his church, where he served as treasurer and had authority over the church’s bank account. Most the other misappropriated funds were used in a Ponzi-like fashion to pay different clients.

According to the allegations, Salutric cheated his clients by making unauthorized withdrawals from their accounts. To perpetrate his scheme, Salutric forged client signatures on written withdrawal request forms and submitted the signed requests to the account custodian.

The report states that Results One Financial had more than 1,000 clients with more than $160 million in assets under management.