Investment fraud Becomes target

December 5, 2008
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LANSING — In October, three Lansing-area men were indicted on federal securities fraud-related charges for allegedly promising victims low-risk, high-return investments in oil and gas.

In reality, their retirement funds were turned into cash for a company’s various get-rich-quick schemes and wired to accounts in the Bahamas and the United Kingdom, according to the U.S. Attorney’s Office in Grand Rapids.

Earlier this year, a Bloomfield Hills man received 54 months in prison for initiating more than $100 million in bogus investments from businesses in Florida, Maryland and Australia, federal prosecutors in Detroit say.

Now, in an effort to crack down on fraudulent investment scams, the Office of Financial and Insurance Regulation will hold training and education sessions for law enforcement officers. The program, “Securities 101,” will focus on common types of securities fraud, how to spot a questionable investment deal, and how the OFIR can work with local law enforcement agencies to stop illegal investment practices.

It’s important for police to be aware of the latest trends in investment fraud, especially in a period of rapid economic and technological change, said Jason Moon, the agency’s public information officer.

“Fraud and scam artists evolve with the times,” Moon said. “It’s important for us to share our expertise so we can spot new and emerging scams. We need to talk about our experiences with fraud so officers will know how to spot it and bring the perpetrators to justice.”

Effective consumer protection requires agencies to work with local agencies to build strong cases against securities fraud, said OFIR Commissioner Ken Ross. The seminars will provide officers with the “nuts and bolts” necessary to convict the creators of bogus investments, he said.

While it’s important for law enforcement officers to learn about fraud, individuals should still do everything they can to educate themselves, said Ron Tatro, project director of the Consumer Fraud Prevention Office at Elder Law of Michigan, a Lansing-based group that provides information, advocacy and legal advice for senior citizens.

“We’re asking all our public safety officials to do more and more to prevent consumer fraud,” Tatro said. “Everyone needs to know the warning signs, from educators to doctors to caregivers.”

According to AARP Michigan, warning signs include phrases like “I’ll get you the paperwork later,” “profit guaranteed” and “offer only available today.” If anything sounds too good to be true, people should investigate further and call OFIR or other agencies to help verify the investment, AARP said.

Tatro’s organization has educated more than 150,000 people, but the number of fraud cases continues to climb. He echoed Moon’s statements, tying the increase to growing technology and the state’s economic slump.

“As the economy continues to incur difficulties, people get more and more creative to bypass legitimate sources of income,” Tatro said.

Fraud begins over the Internet in 60 to 70 percent of cases, Tatro said.

“I tell people that the e-mail in your computer or the caller on your phone might say they are from Grand Rapids, but they could be in Russia or the Caribbean or some other part of the world.”

What qualifies as investment fraud? Moon said it’s “basically any time you’re writing a check and it’s not going anywhere.” Instead of putting the money in shares of a company or product, criminals simply pocket it for themselves.

Besides e-mail scams, the most common scams Moon sees are with unregistered investment products or individuals, false investments in oil or gasoline, and “affinity fraud,” where the perpetrator is the victim’s friend or relative.

Another problem is fraudulent disaster relief funds, Tatro said. In the wake of natural disasters like fires, earthquakes or hurricanes, predators set up phony charities only a day after the disaster and encourage people to donate money online. Americans lose $10 billion a year to fake charities, he said.

“Frauds and the people who perpetrate them respond to changes far quicker than traditional society or government agencies.”

Moon said OFIR is collaborating with AARP Michigan to start the “Free Lunch Seminar” program to encourage the public to report questionable investment practices in their communities. The agency also plans to start a program to educate Michigan prosecutors.

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