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Robert Powell
Nov. 19, 2009, 12:01 a.m. EST · Recommend (4) · Post:
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By Robert Powell, MarketWatch
BOSTON (MarketWatch) -- Glancing through the headlines, it might seem like an epidemic. No, we're not talking swine flu; we're talking investment scams. Consider just a few recent headlines:
Denver duo bilks seniors in green scheme
Former life insurance agent denies scamming $2 million from seniors
Ex-Morgan Stanley rep barred for defrauding 97-year-old's charity
These cases serve as a reminder to make sure that you don't become a fool, separated needlessly from your hard-earned money. So what can you do? Consumer advocacy groups and regulators there's much you can do.
A promoter promising high returns with little or no risk? That's the biggest red-flag warning for possible investment fraud, said Andres Castillo, who heads AARP's free-lunch monitor program. (At free-lunch seminars, attendees are promised a free lunch in return for listening to what is generally a product sales pitch.)
Few investors know what they're paying in administrative and other fees for their 401(k), but there are ways to find out, says Ryan Alfred, president of BrightScope, a retirement-plan ratings and research firm. MarketWatch's Andrea Coombes reports.
For instance, in the most recent case of its kind, the SEC charged four individuals and two companies involved in perpetrating a $30 million Ponzi scheme in which they persuaded more than 300 investors nationwide to participate in purported "green" investment opportunities.
The SEC alleged that "Wayde and Donna McKelvy, who were previously married and living in the Denver area, particularly targeted elderly investors or those approaching retirement age to finance such 'green' initiatives of Pennsylvania-based Mantria Corp. as a supposed 'carbon negative' housing community in rural Tennessee and a 'biochar' charcoal substitute made from organic waste."
According to the SEC, with the help of two other promoters (Mantria executives, we might note) the McKelvys convinced investors attending seminars or participating in Internet Webinars to liquidate their traditional investments such as retirement plans and home equity to instead invest in Mantria.
The alleged scam artists promised returns ranging from 17% to "hundreds of percent" annually. The actual returns were, sadly, closer to zero. Yes, Speed of Wealth, the firm headed by the McKelvys, was promoting an investment that had no revenue whatsoever. And more sadly still, it was easy to be taken by this deal. The Speed of Wealth seminars were heavily advertised on TV, and even featured former Bronco John Elway, according to published reports. Read the SEC's release about Speed of Wealth at this Web site.
To be sure, not all free-lunch seminars -- such as those offered by Speed of Wealth -- are bad. But regulators and advocacy groups say you should never attend a free-lunch seminar without making sure you know exactly what you're getting into. The results of one recent study make it clear why.
Almost 6 million Americans age 55 and older have attended a free lunch or dinner seminar in the past three years, according to "Protecting Older Investors: 2009 Free Lunch Seminar Report," a survey just released by AARP and the North American Securities Administrators Association (NASAA).
And many seminars were nothing but venues to acquire clients, slaughterhouses for lambs if you will. To wit: 39% of those responding to the AARP/NASAA survey said they were solicited to buy financial products, 50% said they were asked to provide information about their finances, and 46% said the seminar presenter tried to make a follow-up appointment at their home.
Most troubling, however, is this: Six in 10 of these seminars reflect weak supervisory practices by firms and nearly one in four (23%) of the advisers holding these seminars recommended investments that didn't appear suitable for the client. You can read that full report at this Web site.
- OldYeller | 12:14 a.m. Today12:14 a.m. Nov. 19, 2009
It's going to be hard enough to get an economic recovery going without more problems at the Federal Aviation Administration.
12:56 p.m. Today12:56 p.m. Nov. 19, 2009 | Comments: 1
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