When it comes to investment fraud, the perpetrators chase the news.
After 9/11, it was phony anti-terrorism technology. During the housing boom, it was real estate scams. A year ago, it was “green technology” swindles.
Today, amid a financially stressed economy, it’s “prime bank” and other high-yield, quick-money quackery.
“They always seem to mirror economic times. They exploit whatever’s current,” said Kevin Baker, head of the FBI’s white-collar crime squad in Sacramento, Calif.
And while none approaches the heft of the current Bernard Madoff scandal that has wiped out billions from trusting investors around the world, Baker says Ponzi schemes and other investing scams are running so rampant that his 25 or so agents can’t keep up.
Baker’s agents go after only the most egregious cases, typically those that have cost victims at least $1 million in total losses.
The FBI says scammers use the same methods, regardless of whether they’re peddling real estate, gold bars or new technology. These include:
•Slick promotional brochures touting great returns.
•Official-looking prospectuses, financial filings and pending patents.
•Aggressive salespeople known as “promoters” who are paid up to 40 percent in commission, making them highly motivated.
To avoid becoming a victim, here are some tips from law enforcement, public officials and investing watchdogs: Be skeptical; do your research on the individual and the companies; get second opinions.
“A crooked adviser can turn your nest egg into a goose egg overnight and leave you destitute,” said Don Blandin, CEO and president of Investor Protection Trust, a Washington, D.C.-based nonprofit that promotes investor education.
The FBI’s Baker said victims of investment fraud cross all income, education and age ranges. “We’ve got doctors who are victims; we’ve got plumbers who are victims.”
The common denominator, he said, is that they drop their guard, become too trusting or are too reluctant to appear ignorant and don’t ask the probing questions.
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