By: Jack WaymirecloseAuthor: Jack Waymire Name: Jack Waymire
Email: jack@paladinregistry.com
Site: http://paladinregistry.com
About: Jack writes for the InvestorWatchdog website and Worth magazine. He worked in the financial services industry from 1976 to 2004. For twenty of those years he was the president of a Registered Investment Advisory firm and a Broker/Dealer. Jack is the author of Who's Watching Your Money? The 17 Paladin Principles for Selecting a Financial Advisor and is a co-founder of PaladinRegistry.com.See Authors Posts (87) | July 16, 2009 | Ponzi Schemes

Mike Kauffman, a Maryland investor, was recently vicitimized by two scams. Chris Coulther, an advisor with Ameriprise Financial in Florida, allegedly sold him tourism real estate investments in Costa Rica. He was told he would receive a 100% return on his investment. He was also sold CDs from Depository Pacific Bank in Costa Rico that were supposed to yield 12% risk free. It now appears both of these investments were created by the advisor and his Costa Rican cohorts. It is possible there were no actual investments. In fact, the investments may be part of an elaborate Ponzi scheme that took 98 investors for $12 million.

Where did this investor make his biggest mistakes? First, he trusted the advisor because he had produced good results in the past - he wasn’t as cautious as he otherwise might have been. Second, the advisor worked for Ameriprise Financial a brand name firm that used to be owned by American Express - he did not verify that the investments were approved by Ameriprise. Third, he did not know the AmSouth Bank manager, another brand name, had a potential conflict of interest in regard to this particular investment product. And fourth, he assumed the advisor was supervised by Ameriprise and that the company and the advisor had fiduciary responsibilities so there was no risk of wrongdoing. 

Of course, Ameriprise fired the advisor in a matter of months because he was selling products that were not approved by the company.  Now the soap opera begins. The investors want their money back. The international aspect makes the case even messier. It turns out Costa Rico has issued an arrest warrant for Matteo Quintavalle, the Costa Rican connection, and an Interpol arrest warrant for Coulther.  It will take years for this case to roll through the courts.

Meanwhile what about the investors who trusted the wrong advisor because he worked for a brand name firm? In all likelihood, their assets are long gone and they are facing significant legal expenses. A little less blind trust and more due diligence might have helped them avoid these losses.

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