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Color of Money

Investor Beware: The Con Is On

By Michelle Singletary
Sunday, April 24, 2005; Page F01

It's the season to scam.

I think I've used the phrase "low-life bum" more than I care to as I've read story after story this past year of investors being ripped off in new and old scams.

Most recently, the Securities and Exchange Commission filed civil charges against two Maryland businessmen, accusing them of bilking investors of $8.2 million with promises of risk-free returns of between 1 and 5 percent per month.

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_____Column Archive_____
Brush Up on Your Tax Facts to Save More Next Year (The Washington Post, Apr 21, 2005)
Managing Retirement, Automatically (The Washington Post, Apr 17, 2005)
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_____Interactive Primer_____
Understanding Regulatory Policy
_____Related SEC Articles_____
BearingPoint Raises $200 Million in Debt Offering (The Washington Post, Apr 23, 2005)
SEC Faulted in Fund Abuses (The Washington Post, Apr 22, 2005)
BearingPoint Stock Falls by More Than 30 Percent (The Washington Post, Apr 22, 2005)
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In its complaint, the SEC said people were told their money would be pooled with other investors' in $1 million lots to buy "debt obligations of the top 50 banks in the world." Investors were promised their money would be safe and secure.

But the SEC thinks this was a classic "prime bank" scheme. It alleges that the money collected from investors was in fact used to engage in highly speculative and expensive trading in the precious metals markets.

The SEC says that, in similar cases, investors are told their funds will be used to buy and trade "prime bank" financial instruments and are led to believe the investment, while low risk, will net high returns. But no such prime bank instruments exist.

With the ups and downs of the stock market (mostly down these days), investors, especially retirees, are becoming more vulnerable to fraud or, at the very least, open to putting their hard-earned money in inappropriate investments.

Con artists are diligent in gaining the trust of unsuspecting investors, in some cases even getting on their knees and praying with their victims to win them over.

In February, a federal jury convicted a Georgia man -- a preacher, no less -- of stealing nearly $9 million from 1,600 small, black churches and other nonprofit organizations by promising them big returns on small investments.

Prosecutors in the case said the minister told the faithful (who then told their friends and relatives) that he was developing Christian resorts around the country and that for a fee of a few thousand dollars, their churches could be "members" of his company. In return, he promised that in time, the churches would get a grant or a forgivable loan of up to $500,000.


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