Common schemes still pervade
BY PHIL MULKINS World Action Line Editor
Wednesday, May 16, 2012
5/16/12 at 3:02 AM
We think that because Bernie Madoff is in jail the world is safe for investors. Retirees think so and are looking for ways to produce income from savings. Scammers know this and think up ways even Madoff hadn't, according to the FBI's website.
Investment schemes all have one thing in common: they promise large returns on investments with very little risk. Such offers usually arrive unsolicited, and their potential targets are contacted by email, phone or even by U.S. mail; but the "prime caveat" still applies: "If it sounds too good to be true, it probably is."
The FBI's "Common Fraud Schemes" webpage, accessible at tulsaworld.com/FBICommonFrauds, provides tips on how to protect yourself and your family from fraud.
"Senior citizens especially should be aware of fraud schemes for the following reasons, the FBI says.
Senior citizens are most likely to have nest eggs, own their homes, and have excellent credit - all of which makes them attractive to con artists. People who grew up in the 1930s, 1940s, and 1950s were raised to be polite and trusting - good traits that bad people exploit. Con artists know it's difficult or impossible for seniors to say "no" or to just hang up.
Older Americans are less likely to report fraud because they don't know who to report it to, are too ashamed at having been scammed or don't know they have been scammed. Elderly victims might not report crimes because they are concerned relatives will think they no longer have the mental capacity to take care of their own financial affairs.
Letter of credit fraud: Legitimate "letters of credit" are never sold or offered as investments but are issued by banks to ensure payment for goods shipped in internationally. Payment on a letter of credit generally requires paying banks that receive documentation certifying that goods ordered have been shipped and are en route. Letters of credit frauds are attempted against banks by providing false documentation showing goods were shipped when, in fact, no goods or inferior goods were shipped. Never invest in anything you don't understand, because con artists rely on complex transactions.
Prime bank note fraud: International fraud artists invented an investment scheme that supposedly offers extremely high yields in a relatively short period of time. They claim to have access to "bank guarantees" they can buy at a discount and sell at a premium. By reselling the "bank guarantees" several times, they claim to be able to produce exceptional returns on investment.
Don't invest in "roll program" schemes offering unusually high yields by buying and selling anything issued by "prime banks."
Ponzi scheme: Yes, they're still around. This is an investment fraud in which the operator promises high financial returns or dividends not available through traditional investments. Instead of investing victims' funds, the operator pays "dividends" to initial investors using the principle amounts "invested" by subsequent investors - robbing Peter to pay Paul.
The scheme is named after Charles Ponzi, a Boston man who in the early 1900s operated an extremely attractive investment scheme guaranteeing investors 50 percent returns on "postal coupon" speculation. He gladly took their money but never invested in coupons and was able to pay his initial investors with subsequent investors' money. The scheme dissolved when he was unable to pay investors who entered the scheme later.
The scheme generally falls apart when the operator flees with the proceeds, or when sufficient new investors cannot be found to continue paying dividends.
Reverse mortgages also prone to scamming
The FBI and the U.S. Department of Housing and Urban Development Office of Inspector General urge senior citizens to be wary when seeking reverse mortgages.
Reverse mortgages - also known as home equity conversion mortgages (HECM) - have increased 1,300 percent from 1999 through 2008, creating significant fraud prospects, the FBI website says.
Reverse mortgage scams are engineered by unscrupulous professionals in real estate, financial services and related companies to steal equity from the property of unsuspecting senior citizens or use seniors to unwittingly help scammers steal equity from flipped properties.
In many reported scams, victim seniors are offered free homes, investment opportunities, and foreclosure or refinance assistance. They are also used as straw buyers in property-flipping scams. Seniors are frequently targeted through local churches and investment seminars, as well as television, radio, billboard, and mailer advertisements.
A legitimate HECM loan product is insured by the Federal Housing Authority tulsaworld.com/FHAHECM It enables eligible homeowners to access the equity in their homes without having to come up with funds and without incurring a monthly payment. Eligible borrowers must be 62 years or older, occupy their properties as their primary residences and own their properties or have small mortgage balances.
See the "FBI/HUD Intelligence Bulletin" tulsaworld.com/FBIHUDRevMore for specific details on HECMs and other foreclosure rescue and investment schemes.
Some tips on avoiding reverse mortgage scams are: Do not respond to unsolicited advertisements. Be suspicious of anyone claiming you can own a home with no down payment. Do not sign anything you don't fully understand or accept payment from individuals for a home you did not purchase. Find your own reverse mortgage counselor.
Tulsa World consumer writer Phil Mulkins wants to know which topics interest you. Call 918-699-8888, email your suggestion to phil.mulkins@tulsaworld.com or mail it to Tulsa World Consumer, PO Box 1770, Tulsa, OK 74102-1770.
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JASON POWERS / Tulsa World
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