Secy. Of State Speaks At Ivy Tech
July 28, 2016 at 4:25 p.m.
By Tim [email protected]
Tuesday afternoon at the Ivy Tech Warsaw campus, Indiana Secretary of State Todd Rokita, along with Investor Education Coordinator Melanie Woods, Securities Division, spoke to several dozen people about securities fraud.[[In-content Ad]]In his opening remarks, Rokita said if you see the economy as the ocean as you stand on the beach at high tide, the high tide is the economy. All may look well during good times, but you don't see what's underneath. One reason Bernard Madoff was able to get away with his more than $50 billion Ponzi scheme, Rokita said, was because the economy was so good. Now that the tide is low, the economy is down, you can see the jagged rocks beneath. The sinking economy helped expose Madoff.
Rokita said a lot of people are calling his office now because their portfolios are down 10 percent or more. His own portfolio is down about 30 percent, he said. That doesn't mean anyone did anything wrong, but part of investing is taking on some risk.
Others, however, have been legitimately scammed, and that's where his office comes into play, Rokita said. He and Woods were in Warsaw Tuesday to help teach people a little about preventing and avoiding scams.
Woods said a security is a way to make money without a lot of work on your own. Securities also carry a level of risks with them. In Indiana, all securities and investments are regulated by the state. Investments also are regulated federally.
"The reality is, we see all types of victims come into our office," Woods said.
Victims include doctors, lawyers, teachers, college students, business people and the retired and elderly. No one is immune to fraud, and anyone can become a victim. "There really is no profile of a victim," Woods said.
She said there are various ways a person can become a victim. They may have a lack of understanding of the basic concepts of investing. Early in life, they might have planned poorly for retiring so when they get older, they might be more easily enticed. Victims could be unhappy with low rates of return on their CDs or savings accounts. It could sound like easy money and the victims could be too trusting or make rash decisions.
Fraudsters also play on people's fears. They tell their victims they have an alternative way of making money, Woods said.
"We have this stereotypical idea of a fraudster. But if someone looked like that, would we give them our money? Probably not," Woods said. A fraudster is going to play the part of a professional, she said. If they looked shady, you'd probably just walk away.
Five ways to spot a con artist, she advised, are that the con artist likes to blend in, dress for success, push products that are not well-known, bring out the worst in you and are fair-weather friends.
The two common types of fraud are pyramid schemes and ponzi schemes. In a pyramid scheme, Woods said, a fraudster recruits a level of investors. Those investors then recruit the next level, and so on. In a ponzi scheme, the fraudster just moves the money around to pay people as needed.
"For all the good the Internet has brought us, it's paved the way for whole new scams," Woods said.
Most people have learned about the Nigerian "419" e-mail scams, but the new twist to those is that the fraudsters pose as American soldiers returning from war. They say they've gotten a hold of some money from terrorists and want you to help them get it home. Woods said people shouldn't even read those e-mails.
Phishing scams online ask for personal information to update or verify your account. Woods said people should not give anyone any information unless you know and trust them 100 percent. Even then, don't do it online - call instead and ask if the information really is needed.
Woods said there is a pending case through the Secretary of State's office where a woman used Craig's List to solicit investors. "Not a single person thought to meet her in person," Woods said.
If you're dealing with someone online, Woods said, try to meet them in person.
Woods then reviewed the various common types of fraud.
Affinity fraud occurs when a member of a group, organization or community abuses trust to take advantage of other members. Affinity fraud preys on likeness and trust. Faith communities, ethnic and minority groups are common targets of affinity fraud, Woods said.
People age 60 and older make up 15 percent of the population, she said, but account for 30 percent of fraud victims. Senior citizens often are targeted for fraud because they have money saved.
Risky ventures aimed at older Americans also include variable annuities and viatical settlements.
In an annuity, a person pays a specific amount of money for a specific amount of time and can not get their investment and interest back until the time period is up. For a senior citizen, they may not be able to wait seven years to get that money, Woods said.
A viatical settlement is when a person purchases someone else's life insurance policy so that when they die, the purchaser gets the insurance money. But there's no guarantee of when a person may die, Woods said.
Outrageous promises are signs of fraud. They can include "double your money in 90 days," "this is a risk-free guarantee," "high reward with low risk" or "you are lucky to be getting in on the ground floor."
Fraudsters also may tell you that an "investment is guaranteed/insured," "no written information is available" or "no securities license or registration is necessary to sell this."
Red flags that an investment may be a fraud include "it's only good today or for a limited time," "credit card and checking account number required," "only available to a select group," "I get nothing out of this deal," "do not tell anyone," "I will come to you, you don't have to come to me" or "this is insider information."
Insider information is illegal, Woods said. If an investment is legitimate, why would they keep it a secret? And if a person doesn't have a place for you to meet them, then it's not real, she said.
The Secretary of State's office also looks at mortgage brokers. "Mortgage fraud is a crime that is on the rise," Woods said. In 2008, the FBI investigated 1,800 mortgage fraud cases, up from 1,210 in 2007.
Mortgage fraud red flags, Woods said, include an unlicensed mortgage broker, upfront frees from loan brokers, falsifying income, over-appraised real estate, or post-closing request for more money.
A person can call the Secretary of State's office to check the license of a loan broker, or visit online at www.aarp.org/money/personal/reversemortgages for more information. The National Reverse Mortgage Lenders Association is online at www.nrmla.org
Tips for avoiding fraud include hanging up the phone if you get an unsolicited call. Sign up for the telephone privacy list at www.telephoneprivacy.net or call 888-834-9969.
Check licensing and registration at www.indianainvestmentWatch.com or call 800-223-8791.
Other investor resources include the Securities and Exchange Commission at www.sec.gov and the North American Securities Administrator's Association at www.nasaa.org
Asked what the reality was of a victim of investment fraud ever getting their money back, Woods said, "I'm sorry to be depressing, but it's very slim."
Tuesday afternoon at the Ivy Tech Warsaw campus, Indiana Secretary of State Todd Rokita, along with Investor Education Coordinator Melanie Woods, Securities Division, spoke to several dozen people about securities fraud.[[In-content Ad]]In his opening remarks, Rokita said if you see the economy as the ocean as you stand on the beach at high tide, the high tide is the economy. All may look well during good times, but you don't see what's underneath. One reason Bernard Madoff was able to get away with his more than $50 billion Ponzi scheme, Rokita said, was because the economy was so good. Now that the tide is low, the economy is down, you can see the jagged rocks beneath. The sinking economy helped expose Madoff.
Rokita said a lot of people are calling his office now because their portfolios are down 10 percent or more. His own portfolio is down about 30 percent, he said. That doesn't mean anyone did anything wrong, but part of investing is taking on some risk.
Others, however, have been legitimately scammed, and that's where his office comes into play, Rokita said. He and Woods were in Warsaw Tuesday to help teach people a little about preventing and avoiding scams.
Woods said a security is a way to make money without a lot of work on your own. Securities also carry a level of risks with them. In Indiana, all securities and investments are regulated by the state. Investments also are regulated federally.
"The reality is, we see all types of victims come into our office," Woods said.
Victims include doctors, lawyers, teachers, college students, business people and the retired and elderly. No one is immune to fraud, and anyone can become a victim. "There really is no profile of a victim," Woods said.
She said there are various ways a person can become a victim. They may have a lack of understanding of the basic concepts of investing. Early in life, they might have planned poorly for retiring so when they get older, they might be more easily enticed. Victims could be unhappy with low rates of return on their CDs or savings accounts. It could sound like easy money and the victims could be too trusting or make rash decisions.
Fraudsters also play on people's fears. They tell their victims they have an alternative way of making money, Woods said.
"We have this stereotypical idea of a fraudster. But if someone looked like that, would we give them our money? Probably not," Woods said. A fraudster is going to play the part of a professional, she said. If they looked shady, you'd probably just walk away.
Five ways to spot a con artist, she advised, are that the con artist likes to blend in, dress for success, push products that are not well-known, bring out the worst in you and are fair-weather friends.
The two common types of fraud are pyramid schemes and ponzi schemes. In a pyramid scheme, Woods said, a fraudster recruits a level of investors. Those investors then recruit the next level, and so on. In a ponzi scheme, the fraudster just moves the money around to pay people as needed.
"For all the good the Internet has brought us, it's paved the way for whole new scams," Woods said.
Most people have learned about the Nigerian "419" e-mail scams, but the new twist to those is that the fraudsters pose as American soldiers returning from war. They say they've gotten a hold of some money from terrorists and want you to help them get it home. Woods said people shouldn't even read those e-mails.
Phishing scams online ask for personal information to update or verify your account. Woods said people should not give anyone any information unless you know and trust them 100 percent. Even then, don't do it online - call instead and ask if the information really is needed.
Woods said there is a pending case through the Secretary of State's office where a woman used Craig's List to solicit investors. "Not a single person thought to meet her in person," Woods said.
If you're dealing with someone online, Woods said, try to meet them in person.
Woods then reviewed the various common types of fraud.
Affinity fraud occurs when a member of a group, organization or community abuses trust to take advantage of other members. Affinity fraud preys on likeness and trust. Faith communities, ethnic and minority groups are common targets of affinity fraud, Woods said.
People age 60 and older make up 15 percent of the population, she said, but account for 30 percent of fraud victims. Senior citizens often are targeted for fraud because they have money saved.
Risky ventures aimed at older Americans also include variable annuities and viatical settlements.
In an annuity, a person pays a specific amount of money for a specific amount of time and can not get their investment and interest back until the time period is up. For a senior citizen, they may not be able to wait seven years to get that money, Woods said.
A viatical settlement is when a person purchases someone else's life insurance policy so that when they die, the purchaser gets the insurance money. But there's no guarantee of when a person may die, Woods said.
Outrageous promises are signs of fraud. They can include "double your money in 90 days," "this is a risk-free guarantee," "high reward with low risk" or "you are lucky to be getting in on the ground floor."
Fraudsters also may tell you that an "investment is guaranteed/insured," "no written information is available" or "no securities license or registration is necessary to sell this."
Red flags that an investment may be a fraud include "it's only good today or for a limited time," "credit card and checking account number required," "only available to a select group," "I get nothing out of this deal," "do not tell anyone," "I will come to you, you don't have to come to me" or "this is insider information."
Insider information is illegal, Woods said. If an investment is legitimate, why would they keep it a secret? And if a person doesn't have a place for you to meet them, then it's not real, she said.
The Secretary of State's office also looks at mortgage brokers. "Mortgage fraud is a crime that is on the rise," Woods said. In 2008, the FBI investigated 1,800 mortgage fraud cases, up from 1,210 in 2007.
Mortgage fraud red flags, Woods said, include an unlicensed mortgage broker, upfront frees from loan brokers, falsifying income, over-appraised real estate, or post-closing request for more money.
A person can call the Secretary of State's office to check the license of a loan broker, or visit online at www.aarp.org/money/personal/reversemortgages for more information. The National Reverse Mortgage Lenders Association is online at www.nrmla.org
Tips for avoiding fraud include hanging up the phone if you get an unsolicited call. Sign up for the telephone privacy list at www.telephoneprivacy.net or call 888-834-9969.
Check licensing and registration at www.indianainvestmentWatch.com or call 800-223-8791.
Other investor resources include the Securities and Exchange Commission at www.sec.gov and the North American Securities Administrator's Association at www.nasaa.org
Asked what the reality was of a victim of investment fraud ever getting their money back, Woods said, "I'm sorry to be depressing, but it's very slim."
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