Backers Of Viatical Scam Busted In Idaho

A Boise judge has entered judgments against five companies and individuals charged with running a bogus investment scheme.

Marilyn Scanlan, chief of the Securities Bureau in the Idaho Department of Finance, said the defendants allegedly sold securities in the form of loans to underwrite the purchase of life insurance benefits from terminally ill individuals.

The investors were told these “viatical settlements” would produce returns of as much as 25 percent a year.

In fact, according to the complaint filed in Fourth District Court, the funds were diverted to Personal Choice Opportunities of Palm Springs, Calif., and its president, David Laing of Carson City, Nev.

The other defendants are Los Angeles-based Next Century, Inc., and its president, Reparata Mazzolo, and M.D. Smith & Co. of Englewood, Colo. The three allegedly sold the securities.

Laing and Michael Smith were arrested by federal authorities in April on charges of conspiracy to commit mail and wire fraud.

Also in April, a receiver was appointed in Los Angeles to handle issues linked to the scheme, which may have separated more than 1,100 investors from as much as $100 million.

Scanlan said Idaho officials estimate only about 40 were in that state, most around Twin Falls and Idaho Falls. The state is pursuing a case against salesmen in those communities, she said.

The department urges anyone who might have been an investor in the PCO program to call 1-208-332-8004.

Balance best way to beat bears

The bear will return, but there are ways to be ready.

A bear market is a price decline of 20 percent or more over at least two months. Bear markets occur, on average, once every four to five years. We haven’t had one in seven years.

The worst bear market lasted from September 1929 through July 1932, when stocks plunged about 90 percent. Wild speculation, low margin requirements and sheer panic triggered the free fall that set off the Great Depression.

The market didn’t recover its losses until 1954.

The worst postwar bear market struck in 1973-1974, a Dow Jones plunge of 45 percent. The market didn’t recover for eight years. From this week’s level, a 45 percent decline would drop the Dow about 3,300 points.

Since bear markets strike unexpectedly, how do we prepare for them?

The Vanguard Group’s “Bear Markets: A Historical Perspective” advises holding a balanced portfolio of stocks, bonds and reserves, adding, “A balanced list cushioned the shock in the 1973-1974 bear market. A $10,000 investor with 60 percent in stocks lost $2,600, vs. the person who had 100 percent in stocks and dropped $4,500.”

Other bear market protections:

Don’t dump your stocks at the first sign of trouble.

If you make periodic investments in a 401(k), continue doing so. This strategy, known as “dollar-cost averaging,” lowers the average cost of your shares.

Finally, remember that stocks on average have yielded 10.5 percent annually over 75 years - bear markets included.

Capital spending a buy signal

In its latest issue, Dow Theory Forecasts spotlights firms that successfully invest in capital equipment to boost productivity, getting more sales and profits from workers. Such firms tend to have lasting earnings power.

Here are the newsletter’s favorites: Air Products & Chemicals, Andrew Corp., Avnet, Caterpillar, Equifax, Dover Corp., Deere, Frontier, Hewlett-Packard, Honeywell, Johnson & Johnson, Merck, Morton International, Philip Morris Cos., PPG Industries, Rollins Truck Leasing, Sara Lee Corp., SBC Communications and Schering-Plough.

, DataTimes