to put money into a trust account backed by a guarantee (often fake) from a "prime bank," "top-100 world bank," or "top-25 European bank." You're told that your money will be leveraged to buy prime bank instruments, which can generate enormous returns. In fact, your money goes offshore, never to return. Another pitch: You pay the promoter a fee in return for a promise that you will be "leased" a much larger sum of money to invest in prime bank instruments at great interest rates.
In the Omega trust, investors were told their capital would be invested in foreign bank debentures. Money was invested from all over the country, as well as from Australia and China. The mastermind of the scheme laundered the money by handing out interest-free loans to local residents and by starting businesses.
There is no such thing as bank debentures. No secret banking system exists, at least not on this planet.
One of the giveaways in Mattoon was when residents began buying new trucks and cars and opening businesses, even though some of them had jobs that paid minimum wage. In the fall of 2000, law enforcement authorities charged a group of Mattoon residents and others with perpetrating an investment scheme that duped more than ten thousand people throughout the world of more than $12.5 million.
RED FLAGS
Obviously, you just can't be too careful with your money. Before you part with it, look at all investments on the SEC database to be sure they're registered. All American companies with more than five hundred investors and $10 million in assets must be registered with the SEC. Smaller companies have to file information with the SEC, or with the state securities regulators where they're based. To check if a broker is licensed, go to the website of the National Association of Securities Dealers Regulation. One thing the Internet has done is made it easier to do research on a company, so go to reliable sites and check analyst reports. There's no need to rush into something.
I would never invest in anything described as "risk-free" or "guaranteed," particularly offshore investments. It's an automatic red flag if the promoters say the state Attorney General has approved it. Check with the Attorney General's office and find out for yourself. Take note of how you're asked to pay. If a broker wants your bank account number to speed things along, forget it. If you're told to send money to a P.O. Box or someplace offshore, forget that, too.
The bigger the promised return on an investment, the higher the likelihood that it's a scam. But just because a return is reasonable, don't assume the investment is real. One of the biggest scams in recent years is fraudulent promissory notes sold to the elderly. Promissory notes are a short-term debt companies use to borrow cash. Con artists exploit a loophole in securities laws that exempt some nine-month promissory notes from regulatory scrutiny. The con artist starts a marketing firm and recruits unwitting insurance agents to sell the notes. Unlike so many investment schemes with their 100-percent-plus returns, these typically promise 9 to 12 percent interest, enough to attract a conservative investor without arousing suspicion. They're touted as risk free and bonded by foreign insurance companies, which usually are fake. The local agents are often known and trusted by the investors, and are fooled as well by the con artists. Eventually, investors get notices that the company behind the notes has gone bankrupt and that's the end of their investment.
A good rule of thumb is, the more exclusive something is positioned to be, the more likely it's trouble. Once-in-a-lifetime opportunities are usually once-in-a-lifetime chances to lose all your savings. If something is billed as getting "imminent" regulatory approval, that means it will never get regulatory approval. When I see ads on television promoting some new elixir or wonderful product, the words that always tell me it's a scam are "not sold in stores." Think about it, if someone has a great product, why wouldn't he sell it in stores? The reason is because there's something fishy about it.
It's the same with investments. When I hear about an investment opportunity and am told it's not available through brokerage houses, then that's criminal-speak for "only available through con artists." If you really could make 100 percent on your money in a week, you wouldn't need to find out about it in an e-mail from a total stranger. You can bet Merrill Lynch and Paine Webber would be selling it, too.
Chapter 11
[STEALING