Beware of Hurricane Irene Scams

Beware of Hurricane Irene Scams

The FBI and other state and federal agencies have issued warnings about con artists seeking to profit from the tragedies caused by hurricane Irene. Beware of bogus charities and contractors, phony links and emails which try to trick you into giving personal information and/or contain viruses. For more information visit the FBI guidance on charity scams.

Warning Against Financial Investment Scams

Today I want to address those of us that have chosen the advisory profession as well as those who seek professional advise. The current environment has created the perfect scenario for scammers to attack a fragile niche; the retirement market. With 10,000 baby boomers turning 65 every day it is an attractive niche for them to target. According to a recent study by Metlife, elder fraud is a problem of approximately $3 billion per year. These scam artists prepare their sleek marketing materials and spoon feed these information to the untrained financial advisors, who then presents this information to their clients causing not only damages to thousands of families, it also destroys professional careers.

Due to the decline in asset values that many of the baby boomers have suffered in their retirement accounts in the past few years, they have an urgent need to catch up in their financial plans. This is understandable and provides the opportunity for predators. Also, poorly trained financial advisors feeling the need to bring new products/alternatives to their client fall victims of these well trained predators.

The problem we are encountering is that many of these non-traditional investments are unregistered products. They come in different shapes and forms, however the main goal is to create the illusion of legitimacy. Some examples of these unregistered products are:

1. unregistered limited partnerships
2. hedge funds
3. oil & gas deals
4. real estate products

Some times above products are legitimate and well founded. However, the investment decisions should always be made on a sound analysis of the investment potential. As financial advisors, extensive due diligence must be performed to ensure that the products being presented meet the risk assessment and financial plan of the clients. Financial advisors must not think that they are "too smart to fall for anything like that". Financial advisors must exercise a healthy level of skepticism. If the financial advisor starts from the premise that these guys are legitimate, it takes almost no effort for them to confirm the "legitimacy" of the products being presented. Financial advisors must start from what I call a healthy level of skepticism; start from the basis that this could be a scam, then perform due diligence and leave no rock unturned and if after looking under all the rocks the financial advisor cannot find evidence of fraud, then and only then we can feel that the deal is OK and could be presented to the appropriate clients. Furthermore, it is important that you as the client of the financial advisor be comfortable with the understanding of the products by your financial advisors. Is He/She well prepared on the subject matter? Does the company that they represent have a solid background? Has your financial advisor performed sufficient due diligence on the opportunity/product before being presented to you? Is your financial advisor keeping up with the required training? With clients still wincing from the declines of 2008, faith and trust is running low. While there are benefits to alternative investment programs, they should only be implemented after performing diligence to ensure the trust of our clients bestowed in us continues to be well deserved.

The Explosion of the Mexican Bonds

They go by different names; White doves, blue doves, red doves, you name the doves ... "vintage gold-backed bearer bonds" issued by the Mexican government. What has caused the sensation on the trade in historical debt instruments seems to come from rumors that the "allegedly authentic" certificates are more than mere collectibles because they "supposedly can somehow still be used as securities in sophisticated trading programs". These rumors have been created by a global network of buyers and sellers, brokers and scammers, legitimate collectors and investors, and convicted fraudsters selling nothing more than hope.

The truth is that Historical Gold Bonds are collectors' items. These historic bonds that were issued to fund building projects of different sort, even private corporate enterprises, such as railroads. From the collectors point of view, some are rare and therefore command a relatively high price among them.

Please remember that a bond is a Promissory Note (i.e. Debt), issued by a corporation or government toward the completion of a project. A Bond is a means for that corporation or government to borrow money from the general public in small individual increments. In return for the use of the Bond owner's money, interest is paid on a pre-determined schedule. All bonds have a maturity date. On that maturity date, the Bond owner can cash in the Bond for his original investment amount and any interest due. The bottom-line is that all bonds, regardless of where are they issued they close after a reasonable amount of time. In other words, if you do not cash them in a timely manner they are no longer redeemable.

The only Bonds backed by the United States Government are issued by the U.S. Treasury Department. See the U.S. Treasury Department's Bureau of Public Debt web site for more information relating to Bonds and U.S. Treasuries.

Be alert for scams. Historical Gold Bonds are a "popular commodity" in the UNDERGROUND NETWORK. The most frequently offered are Pre-World War II German Gold Bonds. After that come Railroad Bonds. All are stated as being redeemable, frequently in gold. Specially now with the prices of gold and the uncertainty of many of the currencies people are looking for ways to hedge against currency devaluation. These individuals purchase these bonds as an investment instrument, which they are not any longer.

In the process of the acquisition of these bonds, you are made to jump through an infinite variety of hoops involving bank-to-bank transfers and private meetings. You are offered so-called authentication documents attached to impressive appraisals, often supposedly drafted by attorneys, accountants, bank officers, and dealers. Many times these scams there seldom any Bonds of any kind. If by chance the fraudster does have an old Bonds in his/her possession that actually belong to them, they are only worth the collector's value. If you are collector, you may be interested in them as such as a collectible item. The same way that some people collect baseball and basketball cards. They do have a historical collectors' value and that is all. However, they cannot be redeemed for gold nor expect the issuer government to pay you some "past due interest". They cannot be leased or used for collateral to enter into another scam - the HIGH-YIELD INVESTMENT PROGRAM - and they cannot be used as collateral to purchase a LETTER OF CREDIT or TREASURIES, all of which you may be told by these fraudsters or a middleman. They are no longer a valid financial instrument.

Remember: If it's too good to be true....

How To Avoid "Get Rich Quick" Schemes

It is amazing that today we still have people falling victims of business and other Internet scams. Just in March of 2011 a con artist man who ran a defunct get-rich scheme agreed to settle a court order by paying the Federal Trade Commission $900,000 and surrendering the proceeds from the sale of his house and most of his personal property. Mr. John Stefanchik was found guilty of blatantly false claims that his "wealth building (know as the "Stefanchik Program") program" would teach consumers how to quickly make serious money by buying and selling mortgages. This thief sold consumers the idea that they could earn huge amounts of money in their spare time, upwards of $10,000 every 30 days, if they purchased the Stefanchik program; instead most customers failed to earn a dime. Victims typically paid $5,000 to $8,000 for the worthless program, but only Stefanchik and his cronies got rich.

It is truly incredible that in today's environment this type of scams still happens. The sponsors of these schemes usually profit from selling the opportunity than from the opportunity itself. A get-rich-quick scheme is any project or method that promises a high amount of return for a relatively small investment. These get-rich-quick schemes also promise that these high returns will come with a minimum amount of risk or work. Something that most people seem to forget is that return is a function of risk which would make all the get-rich-quick schemes too good to be true. That should be the first alarm when one of this scams are presented to us. Another point to remember is that these scams have a low percentage of success stories relative to the number of participants. They will blast their websites with testimonials, showing their big checks they have made. However, what is their percentage of success when calculated over the total of participants in the program.

Due to the public scrutiny, most of the illegal programs have to chose underground methods to promote their programs, such as cold calling and spam emails. The reason is that the public scrutiny placed upon the traditional media channels, makes it difficult for illegitimate enterprises to prosper for long periods without being exposed. The illegitimate enterprises tend to use emotional triggers and confidence building to motivate participation. They often place emphasis on the exclusivity of the opportunity to make it more attractive.

Here are a couple of tips you can use to prevent falling victim of scams:

1. Surround yourself with good, wise people who can advice you well and then listen to them.
2. Become aware of your strong desires and their influence over your thinking.
3. Write down your decision and the reasons for it, then put it away for 24 hours and come back to it and check it.
4. Do not give in to impulsiveness.
5. Wait for a decision until your spirit is calm and your mind is clear.
6. Never violate your conscience.
7. Never do something if financial gain is the only reason that you are doing it.
8. When in doubt - don't. Trust your instincts when they tell you to pause and think it over.
9. Avoid manipulative people and high pressure situations.
10. Check the numbers and the fine prints before signing anything.
11. Stay in control, do not let others control your decision making.
12. Know the difference between character and personality and have a healthy distrust of "Charming People".
13. Know the difference between opinions, facts and projections.
14. Carefully look at all aspects of the opportunities - Strengths, Weaknesses, Opportunities, and Threats (SWOT)
15. Do not let pride and ego fashion your decision.
16. If it seems rash and risky it probably is. Ask Who gains and how?
17. Do not make major decisions without a moment of meditation.
18. Never make a decision when you feel harassed or stressed, tired or hungry.
19. If you have to rationalize the decision and manufacture excuses why you have to do it, then you are probably trying to do something that your better self knows that is dubious or wrong and it is trying to warn you.

I have provided to you 19 tips that will help you prevent potential mistakes in your business decision making. This list is not all inclusive and there are other steps you can take to prevent being a victim of a scam artist. The best thing to do is to take a moment and analyze the opportunity before rushing into a decision. One of the best tools that a scam artist has is to pressure into an immediate decision because they know if they let you go to think the chances are that you will discover their scheme.