Investment fraud reaches working class and wealthy
Even con men are struggling in this economy. Law enforcement officials are finding that victims of fraud are being persuaded to take money from reverse mortgages and individual retirement accounts -- a new source of funding for criminals that were accustomed to tapping into unsuspecting investors' excess income during the boom years.
In a seminar on investment fraud at the University of Connecticut's Stamford campus on Monday, representatives from the U.S. Department of Justice, Securities and Exchange Commission, Commodity Futures Trading Commission and related regulators educated about 120 participants on new trends in fraudulent activity post-recession -- and also in this global and digital age.
"In 2011 and 2012, our prosecutors have handled more than 500 cases involving more than 800 defendants who committed frauds resulting in the loss of more than $20 billion to over 100,000 victims," said David B. Fein, U.S. Attorney for the District of Connecticut, who opened the event.
The goal of the half-day seminar was to gain perspective on how fraud is prosecuted and to educate investors on how to spot and prevent it. Several panel discussions were held, including one in which experts discussed recent schemes and trends.
"What concerns me (is that) defendants are getting access to so much money through reverse mortgages and self-directed IRAs," said Assistant U.S. Attorney John Nowak, deputy chief of business and securities fraud section for the Eastern District of New York.
It's a sign of how investment fraud is reaching a broader spectrum of nest eggs.
Loretta Lynch, U.S. Attorney for the Eastern District of New York, said you used to think the victims of investment fraud were wealthy people, but now everyone is in the stock market -- or looking to be.
More InformationSigns of potential investment fraud: 1. Guaranteed returns 2. Clients are almost exclusively from a particular ethnicity, religion or other demographic 3. Reported returns are not mathematically possible (Ex. 20 years of 12 percent or better returns.) 4. Has trouble providing access to your money 5. No proof of investments 6. You make personal checks out to him or her Source: Northeast Region Investor Fraud Conference
The results have been tragic for American families who have lost homes and life savings.
Barbara Grebin, of Brooklyn, N.Y., who was a victim of a $40 million Ponzi scheme by Philip Barry, told the crowd on Monday that she has had to cancel her cellphone, she shops at the Salvation Army and can't afford to get her computer replaced after getting wrapped up in the scheme. The income she was hoping to gain from her investments over 30 years with Barry are gone and now she's on a fixed income of $1,400 a month.
"I can't take my granddaughter to the theater like I used to," she said.
Barry ran his Ponzi scheme for decades in Brooklyn, relying on investors like Grebin, who were mostly working-class people. He promised them a 12.55 percent return each year on their investments, and said he was buying stocks, according to court documents. The government said he used the money to fund a side business and invest in real estate. Barry was sentenced to 20 years in prison in 2011.
While Barry's scheme lasted decades, the experts at the conference said technology and a more global economy allow criminals to be more sophisticated and get access to funds more quickly than in the past.
The popular scams these days are for commodities, like gold or oil in foreign countries. And technology enables con artists to create professional-looking websites that can reach millions of potential victims in short periods of time. High-quality printers and software programs also allow con artists to create false documents that appear authentic.