Unethical or Duped Financial Planners / Insurance Agents / Accountants / Lawyers
A Position of Trust
Today, a variety of institutions, from banks to brokerage firms to financial planners, offer a wide range of financial products. With such a confusing mix to choose from, it is no wonder that many people turn to financial advisers for guidance.
While the vast majority of persons in the financial services industry serve the investing public conscientiously and ethically, there are inevitably those who seek to exploit the trust which others have labored so hard to earn. Unscrupulous promoters of investment fraud rely on the fact that investing is complicated, and many people don't research the investment process.
Many individuals who hold positions of trust and esteem-accountants, attorneys, bona fide investment brokers and even doctors -have sacrificed their ethics for the fast buck of running an investment scam.
They concoct investment schemes that have zero possibility of making money for anyone other than themselves. Such persons promise investment rewards they cannot possibly deliver and have no intention of delivering.
Misconceptions
The first rule of protecting yourself from an investment swindle is to rid yourself of any notions you might have as to what an investment swindler looks or sounds like. They may be glib or fast-talking or so seemingly shy and soft-spoken that you feel almost compelled to force your money on them.
In some cases, investment programs that began with legitimate intentions have faltered, leading the promoter to mishandle or abscond with the investors' capital. But whether an investment is planned as a scam or simply becomes one, the result is the same.
They can create the illusion of authenticity and success by incorporating, renting office space and issuing authentic looking promotional materials along with fabricated debt instruments or stock certificates using a personal computer and desktop publishing software.
Contrary to popular belief, most fraud perpetrators are not slinky, shady characters who perpetrate their crimes under the cover of night. They can vary as much as the victims they target and come from every educational, geographical, racial, religious, gender, and socio-economic background.
They are often highly trained professionals who are good at what they do -stealing money and assets from people. They work very hard to come across as smooth, professional and successful. Fraud criminals often do their homework by
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Joining professional organizations, |
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Participating in community events (to legitimize their schemes and develop trust with potential victims), |
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Keeping abreast of current events (to appear knowledgeable about cutting-edge technologies, legitimate financial investments, and business practices), and |
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Assuming an "affinity" with their victims (emphasizing their common age, culture, education, race, or financial or social status). |
Scammers will actively troll for victims by visiting churches, country clubs and seniors centres. They will both impress and obligate you by buying you drinks or dinners while alluding to the secrets they possess.
Civic Involvement
A local swindler may join civic groups, contribute to charities, and generally play the role of solid citizen while quickly getting to know a lot of people. Then by using this common bond to spread the word about their questionable investments, they use their social credibility and respectability to swindle family members, friends, business colleagues, and other members of the community with whom they have formed a relationship.
Through their good works ( with your money ) they will often dupe local politicians and community leaders into endorsing them, complete with media coverage.
Attire
They are bound to present the aura of wealth and prosperity by the clothes they wear and the cars they drive, though if they are phoning you they could easily be sitting unshaven in their underwear extolling the virtues of the wealth-building opportunity you just can't miss out on.
Offices
Some swindlers work out of impressive looking offices when they expect walk-in trade. They will rent plush offices, hire an interior decorator and a professional-sounding receptionist then open what has the "appearance" of your perception of a reputable investment firm. You'll have to phone for an appointment, and once there you'll likely be kept waiting, as in all professional offices.
Notoriety
A former professional football player from Texas traded on his notoriety to establish an extensive network of contacts which helped him solicit investors in a ponzi scheme purporting to invest in foreign currency markets.
Over a two year period he raised in excess of $50 million from over 800 clients which he cycled back as illusionary profits and spent on a fancy office, luxury cars, entertainment and travel before declaring bankruptcy.
Assume Control / Power of Attorney
Many times they will start out by providing offers of unrelated advice and assistance that are merely efforts to develop a sense of friendship and eventual dependency. They may even perform a legitimate service like tax preparation to win your confidence. People who are lonely and in need of companionship often make the mistake of seeking it from someone whose only real interest is to get their hands on your money.
Con artists stand ready to assume full responsibility for your investment decisions. When you sign a power of attorney, you might just as well have willed them your money and jumped off a bridge.
Never give someone control over your purse strings just because you think you are too old, young or financially inexperienced. If you really need help, only deal with financial advisers, broker-dealers or financial institutions with a lengthy proven track record.
 
Signs of Trouble
Your first indication of trouble may be when various documents or accounting statements you were promised don't arrive. Or information you do receive is vague or different than what you had been led to expect. Or money that was supposed to have been paid to you isn't received, and instead of checks you get excuses. If you cannot get specific answers to your questions following your investment, this may signal danger.
You may remain unaware that you've bought something of little or no value until the promised profits do not materialize and your money is as long gone as the adviser.
No Risk to Him
One Arizona accountant participated in an investment scheme in which investors were supposed to receive a guaranteed profit per month, at no or little risk to their investment, supposedly through the trading of safe and secure United States treasury securities.
Under the terms of written and verbal representations provided to the investors:
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investor funds would be used only to purchase and trade Treasury securities; |
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the trustee was obligated to provide a return of one percent per month on funds invested; |
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if such a profit was not obtained, the trustee was responsible for refunding the investors' investments through the liquidation of the trust's investments; |
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and only after the one percent monthly return was paid to investors were the trusts permitted to use additional trading profits to make payments to the trustee or anyone else. |
The safety of their investments were supposedly guaranteed, as safe as investing in bank certificates of deposit, and investor money was to be used exclusively for investment purposes.
In total, of the approximate $10 million provided by investors, $3.5 million was lost in stock trades conducted by a brokerage firm which received about $500,000 in trading commissions.
About $900,000 was paid to investors as monthly interest payments, another $900,000 was paid out as "finders fees" for bringing in other investors, and about $3.4 million was transferred to an entity in the Bahamas controlled by two individuals. As a result all investor funds were depleted.
Tune in Next Week
A Maryland-based investment adviser, known widely due to his Saturday-morning radio show, induced his clients to turn over more than $4 million by touting phony performance figures for a bogus mutual fund called the GTC Fund, which stood for "Good 'Til Canceled". It promised "maximum capital growth consistent with the preservation of capital."
He instead used the money to run a typical Ponzi scheme in which early investors were paid with later victims' money. The money also supported a lavish lifestyle that included his own horse racing business and gambling junkets. Arrested in Cincinnati, he was ultimately sentenced to eight years in jail.
4ME2SPEND
A registered investment adviser, the owner of College Planning Services, advertised his expertise in repositioning assets for families seeking financial aid for their college-bound children.
Offering fraudulent securities and trust agreements, he obtained $293,000 from fourteen investors then used the money to pay for personal and business expenses including a luxury Mercedes with the license plate IPLAN4U.
One of his victims was a 19-year-old man who lost the $15,000 he had received after his father had died from cancer. The adviser was convicted on one count of mail fraud, sentenced to 24 months in prison plus three years of probation, and ordered to make restitution.
Finally Tackled
A former pro football player turned self-proclaimed investment adviser had a history of being disciplined for securities violations by the New York Stock Exchange, the National Association of Securities Dealers, as well as two state regulators.
He was eventually arrested after a joint investigation by the Vermont Securities Division and the FBI for running a Ponzi scheme in which early investors were paid fake returns with money provided by later ones, then encouraged to invest ever larger sums.
Residents of Vermont, New Hampshire, Massachusetts, and Florida may have been bilked out of as much as $30 million. He owned several luxury homes and an airplane, was an avid golfer, and recruited many of his victims from the local country club.
A Write-off
The Colorado Division of Securities reports that one lady swindled $1.8 million from eighty individuals that she dealt with at her income tax preparation service.
In league with her husband and son, she convinced her carefully selected clients that they would receive returns, higher than certificates of deposit, from nine limited partnerships in residential mortgage loans that she offered.
After pleading guilty, she was convicted of securities fraud and money laundering and sentenced to 57 months in federal prison. Her former clients lost everything they invested.
Giant Service Fee
A former partner left a law firm to devote his time to running American Mortgage Funding, an investment business which "offered" particularly safe investment opportunities, including a "Government Securities Fund" ("GSF") which received over $800,000 in deposits.
However, after ten years, when he declared bankruptcy, he admitted that while he was soliciting funds he had not purchased any Government securities at all, and instead used investor money to pay personal expenses and interest to previous investors in a Ponzi-type scheme.
His victims, many of whom were former friends and neighbors, outlined for the court his continual unkept promises to repay them.
Legal Developments
Another attorney defrauded two elderly clients after discovering they had a $100,000 profit from a real estate transaction which he had processed.
Telling them that he owned 300 acres which he was developing as a retirement community he suggested that they should invest their $100,000 in this project and he would pay them 9% interest per year. At the end of the first year they could either recoup their investment, plus interest, or they could keep their money invested and he would continue to pay them the same interest.
The couple invested the $100,000 with the understanding that the money would be used to develop the property but as soon as they gave him their cheque he deposited it into his personal checking account and began issuing personal checks for such things as to pay his taxes and his mortgage.
At the end of the first year, to conceal his fraudulent activity and to make the real estate investment seem genuine, he mailed two checks to the clients totaling $9,000. As a result, the couple decided to keep their $100,000 invested with him.
Later in the year when the couple called and asked him to send the interest that had accrued, he said he was having difficulty obtaining funds, but mailed a partial interest payment to the couple.
He later mailed two more partial payments but eventually, when the couple insisted on the payment of the interest and return of their principal the sad truth emerged.
A Steady Hand
The former operator of an insurance agency was sentenced to 21 months in prison for defrauding customers out of $500,000.
During a five year period he contacted four major life insurance companies to get fraudulent withdrawals and loans from his customers' life insurance, annuity and mutual funds by forging clients' signatures on withdrawal requests.
Three of the companies forwarded checks directly to him upon "written authorization" from the "customer". When one company insisted on mailing the checks directly to the investor, he got the client to give him the unopened envelopes under some pretext. He received at least 117 checks worth about $500,000 on which he would forge the endorsement and then deposit them into his account for personal use.
Nordic Trick
An agent who sold insurance for the Sons of Norway to its members fabricated a letter purporting to be from the Sons of Norway to its staff.
The letter offered staff members, but not their clients, an opportunity to partake in a tax-advantaged, high-yield, secure investment. He then showed this fake letter to his insurance clients, told them it did not seem fair to deprive them of this opportunity, and offered to help them get into it.
His scheme was that his clients would borrow against their insurance and give him their money in exchange for his "personal" high-interest promissory note. He would supposedly invest the money in the staff opportunity and pass the "returns" back to his clients. What he was really doing was taking his clients' money, and paying off the earlier investors with the later investors' money.
Because the fake letter made it look as though the Sons of Norway sought to limit the non-existent investment to staff, he advised his clients to keep his pass-through scheme and their participation secret.
He managed to steal about $8.8 million this way, and paid back about $2.3 million to the more fortunate "investors." He used the profits to pay off his gambling debts and to build a $1.6 million, 6700 square foot house with full gymnasium, swimming pool and tennis court.
The Price of Diligence
Even reputable insurance agents, financial planners and anyone else who might be in a position to promote prime bank mega deals are offered the moon, if they can reach it, as an inducement to quickly start selling the scammer's "investment" to their clients without any due diligence.
One salesman signed a Fee of Success Agreement ("FSA") with Castlerock Investment Group, under the terms of which he agreed to introduce investors to Castlerock in exchange for a one time commission of $500,000 for each $100,000,000 invested.
He did manage to introduce six investors for the purpose of making an investment in Castlerock/IFR, an offshore trust whose offering material stated that investors would receive a $1,000,000 return for each $5,000 invested, over the course of a 55 month period.
Investors' funds were to be pooled and then traded by agents of Castlerock. The offering material also stated that the investment was guaranteed by an 8% note, issued, but unsecured, by Castlerock.
He then signed a second FSA with Castlerock under the terms of which he would get a payment of 25% of the "paid out" amount for each individual investor, or a "potential" $250,000 on each $5,000 . Later on he signed a Lead Broker Referral Agreement where he agreed to introduce investors in exchange for 5% of Castlerock's net profits.
Set Your Own Price
The cons from the "made up" Alliance Trust mailed literature concerning an investment opportunity directly to current and former insurance agents. The literature solicited these agents to become "Agents" of Alliance Trust which was in the business of buying and selling "financial and institutional debentures and properties."
It promised both high yields and a guarantee of principal for minimum investments of $10,000. An investment of $10,000 to $500,000 would yield a 25% annual return, investments of $501,000 to $1,000,000 would yield a 30% annual return, and rates of return on investments above $1,000,001 would be determined by special quotes.
All investments were to be guaranteed by Alliance Trust, which claimed $450,000 in assets.
They also said that U.S. Guarantee Corp, with assets over $6 billion, has by letter, represented that although U.S. Guarantee Corp does not have a "formalized and continuous agreement" with Alliance Trust, they will "corporately guarantee transactions whereby U.S. Guarantee is fully indemnified by Alliance Trust." This financial and legal gibberish meant nothing.
The Agents themselves had the discretion to determine what percentage of the return would be paid to the investor, and how much to keep themselves. Recruits were required to pay an up-front fee of $99 to obtain a "sales manual" which contained the information needed to become an agent. No license was required. Both agents and investors were also required to pay annual membership fees of $99.
I'm Still Looking
A former Sudbury, Ontario financial adviser wanted for allegedly fleeing Canada in 1999 with $5.7 million of his clients' investments was arrested in London (10/01) and was returned to Canada to face 151 counts of both fraud and theft over $5,000.
Pierre Montpellier, 40, was arrested at his residence in a very modest part of England after leaving the country "in pursuit of those parties who really stole his clients money."
Recently working in the London area as a recruitment consultant, his former position was as an agent with the established Regal Capital Planners and as one of two officers of the Montpellier Foreign Capital Corp., a private company.
Police began an investigation when his clients came forward complaining that they were not receiving the promised returns from their investments in Foreign Capital.
There was no prospectus registered with the Ontario Securities Commission but investors in Foreign Capital were told to expect a return of 20 per cent a year and were promised at least seven per cent, police said.
Sudbury police also said they have a list of 108 people, many of them seniors, who lost their entire life savings, none of which has been recovered. Admonished for not properly supervising one of their reps, Regal was obligated by the Commission to set aside a pre-crash, stock-based $5 million reserve fund to cover unrecoverable investor losses.
Betraying the Trust of Widows, Orphans and Cripples
10/18001 - An eight count indictment, which included charges for conspiracy to commit mail and wire fraud, mail fraud, wire fraud, and conspiracy to commit money laundering, was issued in Illinois against JAMES R. GIBSON, JACQUELYNE M. LITTLE (Gibson's daughter), and MARJORIE G. GIBSON, A/K/A MARNIE GIBSON (Gibson's wife).
They owned and operated SBU, a structured settlement services company which invested money for personal injury victims who had been awarded lawsuit settlements. Their clients were, for the most part, individuals who were seriously injured in accidents, as well as widows and orphans of individuals killed in accidents.
They were supposed to set up trusts with the settlements, which were to be invested in U.S. government bonds, in order to provide a regular monthly income for the victims but used the moneys instead for unauthorized business transactions, high risk investments, and the purchase of real estate and personal luxury items. They also bought a chain of grocery stores which ultimately, under their management, went bankrupt.
All totaled, they diverted and misappropriated in excess of approximately $50,000,000.00 in victims' settlement moneys and bonds.
It's Hard to Read a Sociopath
ED QUIOCO - © St. Petersburg Times - 06/08/03
PALM HARBOR - Even beginning investors are taught to avoid an offer that sounds too good to be true, such as one promising limited risk and monthly returns of 2 to 4 percent from exotic investments in foreign currencies.
Yet money manager T of Palm Harbor, who boasts a Harvard MBA and years of investment experience, poured $40-million of his clients' money into just such a venture. Now most of that money may be gone.
T fell for the promises of high returns made by a California company run by a father and son, Moshe and Zvi Leichner. They are in jail in Los Angeles on federal charges of using a Ponzi scheme to swindle more than $77-million from investors nationwide, including T.
It's a nightmare for clients of T's wealth management company. He has about 70 clients, but he won't say much about who they are. "CEO types," he says, some in Florida, most outside the state.
It's also a nightmare for T, who has not been accused of any wrongdoing but struggles to explain how he took such a wrong turn in judgment.
Picking his words with painful deliberation in a recent interview, T said he's always had a gift for knowing when other people were telling him the truth.
"And yet it's clear to me that despite that gift, I was not able to detect the untrustworthiness of that organization."
"They don't care where the money comes from'
T used brains and hard work to build a career that had elements of a classic American success story.
In his youth T won a scholarship to an exclusive boarding school in New Jersey. He graduated from Princeton University, worked on Wall Street and got his MBA.
In 1999, after five years in high-ranking jobs, including director of domestic institutional equity sales, he left to open his own wealth management firm.
T managed $137-million for 67 clients, according to forms he filed two years ago with the Securities and Exchange Commission as a registered investment adviser. He indicated in the filing that all his clients gave him discretion to buy and sell investments without their specific approval.
T's mistakes began when he invested $40-million of his clients' money in a North Florida company that, in turn, invested in the company run by Moshe and Zvi Leichner.
T's company plays a central role in the federal case against the Leichners, who face two counts of wire fraud. Both charges involve transactions with T, but officials say the number of victims is growing.
"Some people invested their life savings, and it's completely gone," said Stephen Kramer, special assistant U.S. attorney in the major frauds section for the central district of California. "The Leichners, they just take this money and they don't care where the money comes from."
The Leichners' attorneys declined to comment.
Since learning of the alleged scam, T has spent hundreds of thousands of dollars trying to track down the Leichners' assets. He said he notified his clients of the problem at the end of last year and regularly gives them updates on his efforts.
T and another investor, Donald Richetti, also have sued the Leichners and their company, Midland Euro Exchange. T invested his clients' money through Richetti's investment company, Standing Stones LLC of Ponte Vedra Beach. That company, in turn, invested in Midland Euro.
T met Richetti through a mutual friend in September 2001. Richetti had experience in foreign currency markets, a field that interested T.
At one time, banks and large institutions made up the bulk of the trading in the foreign currency markets. But in 2000, a new federal law opened the market to the public.
That change has attracted con artists and led to problems, said Larry Dyekman, director of communications and education for the National Futures Association in Chicago. Regulating the foreign currency exchange market used to be a small part of the association's job.
"It's the most visible (part) now," he said, adding, "All these scammers are out there taking advantage of investors."
Explaining away a suspension
Investors with Midland Euro were told their money would earn guaranteed monthly profits of 2 to 4 percent. Not only that, from 40 to 85 percent of their initial investment supposedly was guaranteed against loss, according to the FBI.
Investigators say less than 20 percent of clients' money was invested in the foreign currency market. The FBI says the Leichners spent the rest on planes, cars, houses and other personal items.
By the time T came along, Richetti had contracts with the Leichners worth millions. And Richetti spoke highly of Midland Euro.
T said he depended on Richetti to research the Leichners and Midland Euro. Richetti said that at the time he did his research, Midland Euro was "reputed to be one of the best dealer-brokers in the country."
"I did as much due diligence as I knew how to do at the time," Richetti said. "I didn't do anything wrong. didn't do anything wrong. The other investors didn't do anything wrong. We were wronged."
Now, he concedes, "I can see cracks where I should have been more or could have been more aware."
In October 2001, T's company wired $2-million to an overseas account at Lloyds Bank of London to invest in Midland Euro.
Of Richetti's four portfolios, "We elected the most conservative one with the most consistent record and the record with the least volatility," T said.
In November 2001, T met the Leichners in Sherman Oaks, Calif., where they had their offices. They told T that their company was properly registered and assured him he could get his money back five to seven days after sending in a written request.
"If you deal with us, you will be a happy man because we do things right here," Moshe Leichner told T.
But just before that, the National Futures Association had suspended the Leichners and fined them $150,000 for providing the agency with false information and failing to maintain current books and records. Notice of the suspension was posted on the association's Web site.
Richetti, who had already started dealing with Midland Euro, said the mistake was explained to him as an "administrative error." Considering Midland Euro's good reputation, he accepted that.
"You felt good about them," Richetti said. "You felt like you were in the right place. This is the last thing that I thought they would ever do."
Figuring out where the money went
For a while, things went well. Richetti made withdrawals on the accounts with no problems and received his commissions on time.
But that's how Ponzi schemes usually work, said Kramer, the federal prosecutor.
"The early investors are making some money," Kramer said. They, in turn, bring in more investors.
At first, T received weekly e-mailed account statements showing a profit of 2 to 3 percent a month, according to court documents.
The statements were bogus.
A confidential informant told the FBI how Moshe Leichner prepared those statements using a list of clients on a legal pad: "Moshe Leichner would go down the list of names and make comments such as, "We need to get more money from this guy. Let's show a 5 percent gain.' "This guy wants his money back. Let's show a 6 percent loss.' "
Court pleadings quote Moshe Leichner saying, "The object is to take the money and not show the client where it goes."
Between January and November 2002, T sent another $38-million through 23 separate wire transfers to Midland Euro's account in London. But he began to sense something was wrong. He asked repeatedly for an audit to confirm where the money went.
Instead, he got a vague and unsubstantiated letter from an accountant who, it turned out, wasn't registered as a CPA in the United States. When T sent his own auditor to Midland Euro's offices, the computer server suddenly went down. The company promised the documents he wanted would be sent overnight.
They weren't.
"It became clear that we would not be able to get what we needed, which was a full audit," T said. "So we asked for our money back."
In January, Zvi Leichner came to Tampa to meet with Richetti and T. They set up a conference call to his father, who supposedly was in Vienna. But Moshe Leichner was evasive, and later T checked with the conference call center. Instead of Vienna, the call went to Los Angeles.
Confronted with that information, the Leichners promised T and Richetti they would get their money back. They offered reassuring letters. One was on the letterhead of a company that had gone out of business. Another was from a banker who later told the FBI he never heard of the Leichners.
A magistrate court judge has ruled that the Leichners are a flight risk and has denied them bail. The government has until June 12 to turn the charges against them into a formal indictment or get a guilty plea. T said he keeps in close contact with prosecutors in California. He said the case is close to being resolved, with the Leichners helping the government find their assets to help pay off investors.
"The frightening thing is we don't know if it's 30 cents or 90 cents on the dollar," T said. "But I think it's promising."
That, however, doesn't mean the Leichners have made T's life any easier. About a month ago, a private investigator working for the Leichners' attorney dropped by T's office on U.S. 19. Holding out a business card, he told T, "I'm in town to learn more about you."
T said the gall of it made him sick. He sent the guy away.
Note: Victim's name removed upon request.
More info on Midland-Leichner from the bankruptcy trustee.
Bank Pays Out for Foreign Currency Ponzi Scheme Investment Fraud
08/07 - (London) - Lloyds TSB is to pay out $12.5m (£6.25m) for its alleged part in a $100m-plus foreign currency scam in the United States.
Though not admitting liability, the British bank has agreed a settlement to compensate victims of the fraud in a US class action suit in the name of Ralph Gonzales, a private investor. Man Financial, the futures and derivatives trader spun out of Man group in July and now called MF Global, has agreed to pay $4.1m in the same case - again without admitting guilt.
The class action alleged that Lloyds TSB, Man Financial and the Californian accountancy firm Kaplan, Swicker & Simha aided and abetted a breach of fiduciary duty and fraud and contravened sections of RICO - the Racketeer Influenced and Corrupt Organisations Act.
Mr Gonzales was one of more than 300 investors who bought into a currency scheme sold between July 1998 and February 2003 by Moshe Leichner and his son Zvi. In messages on internet bulletin boards, the two promised investors they would gain 2-4% a month by foreign currency dealing through their companies - most prominently Midland Euro Exchange. They took in an estimated $130m, including $40m from clients of one Florida investment adviser.
But the Leichners were operating a Ponzi scheme, where high returns are possible only if more and more new investors can be found to put in cash to pay out to scheme members who want to quit.
According to Debra Wong Yang, a Californian federal prosecutor, less than 20% of the money was actually invested. The rest was spent by the Leichners on themselves. They bought boats, houses and luxury cars as well as hiding away millions in secret offshore accounts.
Even though the US regulator, the National Futures Association, had barred Midland Euro from business in October 2001, and Zvi Leichner had been personally suspended in March 2000, the pair continued to enjoy banking and other financial facilities.
In 2003, the Leichners were arrested by the FBI. They pleaded guilty to wire fraud, money laundering and operating an illegal Ponzi scheme. Moshe was sentenced to 20 years, his son to 11 years.
Investors sued organisations they claimed had aided and abetted the Leichners - albeit unwittingly. After the Lloyds TSB and Man settlements, they expect to see about 30% of their money returned.
"The bank admits no liability," Lloyds TSB said. "The settlement has been reached to put an end to the distraction and expense of litigation."
(Guardian Unlimited)
www.UnjustIS.co.uk where victims of constructive or other fraud involving dishonest or grossly negligent solicitors and their clients will be invited to have their say. The UK term 'solicitor' applies to legal practitioners admitted to the Law Society, their regulating body in England & Wales.
None the Wiser
ST. CLOUD, Minn. -- startribune.com 01/15/04 - An Albany man accused of bilking more than $386,000 from investors has been charged with 26 felonies.
Thomas Raymond Terres, 46, admitted taking the money and has paid back more than $110,000, authorities said. He was charged with eight counts of theft and 18 counts of unlawful offer of securities.
A 17-page complaint details the investment scams dating back to August 1999 that Terres used to take thousands from clients. Many of the 27 victims are in their 50s or older, and some lost their retirement accounts.
Terres, who has never been licensed as an investment broker or adviser, is accused of falsely claiming to be a certified public accountant and a former Internal Revenue Service employee, the complaint said.
Terres had been preparing income tax returns for many of the victims and suggested investments that would lessen their tax burdens, according to the complaint. He then offered to invest for them.
Terres took the money and claimed to be investing it in a variety of ways - mutual funds, medical savings accounts, IRS investment accounts and Social Security escrow accounts. Many of the investment opportunities never existed, and in some cases Terres never invested the money, the complaint said.
The scams came to the attention of investigators when an Albany man received notice from the IRS that he owed money. That man had given Terres $5,000 to prepay his taxes. Terres never sent the money to the IRS, the complaint said.
An IRS investigator then obtained Terres' bank records and started contacting people who had financial dealings with him. Prior to that investigation, nobody had called sheriff's officials or the IRS with complaints about Terres, said Assistant Stearns County Attorney William MacPhail.
"The position of trust (Terres had) is what makes this most egregious," MacPhail said. "And the fact that a lot of these people are at an age that they're never going to be able to recover from this."
Terres was previously convicted of swindling a St. Cloud man out of more than $30,000 in 1998.
Two Strikes and You're Out!
03/28/04 - (AP) BEAVERTON, Ore. -- An elderly couple, swindled out of more than $80,000 by their accountant, were forced out of their $1 million Beaverton home by Washington County Sheriff's deputies.
One week ago, six armed deputies, said Ken and Trudy Reusser, broke down the door to their home, searched the house and asked the couple to pack their belongings and leave within the hour. Two of the deputies drew guns, said Trudy Reusser.
The officials removed the couple because the pair was unable to pay for the home, which sits on land once owned by Ken Reusser's grandfather.
"We thought we could retire there and have the kids come visit," said Trudy Reusser from her neighbor's home, where she and her husband have been staying. "Now we're strapped like a young couple starting out in life."
The couple said they owed about $800,000 on the house to Washington Mutual.
Trudy, 65, and Ken, 84, a retired Marine Corps pilot who was awarded the Purple Heart five times and the Navy Cross twice, said they trusted Robert E. Thomas, their accountant, to care for their finances. Instead, he took checks from their checkbook, wrote them to himself and deposited them in his accounts.
Thomas was sentenced in May 2003 to a year in jail. He pleaded guilty to four counts of first-degree aggravated theft and one count of first-degree forgery exceeding $10,000.
The couple filed a civil lawsuit against Thomas and Washington Mutual, which the couple said made it easy for Thomas to forge the checks.
The Reussers have tried to recover their money from the bank, but because they missed a 30-day deadline to file the complaint, Washington Mutual could not help.
The Reussers said they tried to sell the home, but Washington Mutual told them if they did not drop the lawsuit against the bank, it would block the sale.
Olivia Riley, a spokeswoman for Washington Mutual, released a statement saying, "While Mr. Reusser's situation is unfortunate, it is not of our company's making."
Three years ago, the Reussers said they lost $262,500 in a high-yield investment they learned about from friends. That, along with the $83,383 they lost to Thomas, forced them to file for bankruptcy in August.
The sheriff's office said it was not aware of the earlier investment loss.
There Will Be a Slight Deduction
05/06 (AP) An accountant accused of defrauding clients out of more than $7.2 million in a phony investment scheme was sentenced to more than seven years in federal prison Friday.
Barry Korcan, 50, of Chippewa Township, Beaver County, pleaded guilty in January to one count each of mail fraud and tax evasion in a scheme that prosecutors said involved dozens of clients from 1994 to 2004.
Prosecutors said Korcan promised clients returns of 7 percent to 8 percent if they put their money in something he called Guardian Investments, a company authorities said did not exist.
Instead, prosecutors said, Korcan laundered the money through real estate deals and used it to fund a lavish lifestyle -- and failed to pay federal taxes on the ill-gotten income.
In addition to serving 87 months in prison, U.S. District Judge Gary L. Lancaster ordered Korcan to repay 28 investors who lost millions in the scheme, said Margaret Philbin, spokeswoman for U.S. Attorney Mary Buchanan. Korcan took $11.3 million from a total of 39 clients, but previously paid back about $4 million, prosecutors said.
Authorities seized Korcan's assets, including a vacation home in Ohio, boats, furniture and bank accounts, but Buchanan said investors likely will not be repaid in full from the proceeds.
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