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Financial Serial Killers: Inside the World of Wall Street Money Hustlers, Swindlers, and Con Men PDF

228 Pages·2010·1.13 MB·English
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Financial Serial Killers: Inside the World of Wall Street Money Hustlers, Swindlers, and Con Men Tom Ajamie Bruce Kelly Copyright © 2010 by Tom Ajamie and Bruce Kelly All Rights Reserved. No part of this book may be reproduced in any manner without the express written consent of the publisher, except in the case of brief excerpts in critical reviews or articles. All inquiries should be addressed to Skyhorse Publishing, 555 Eighth Avenue, Suite 903, New York, NY 10018. Skyhorse Publishing books may be purchased in bulk at special discounts for sales promotion, corporate gifts, fund-raising, or educational purposes. Special editions can also be created to specifications. For details, contact the Special Sales Department, Skyhorse Publishing, 555 Eighth Avenue, Suite 903, New York, NY 10018 or [email protected]. www.skyhorsepublishing.com 10 9 8 7 6 5 4 3 2 1 Library of Congress Cataloging-in-Publication Data Ajamie, Tom. Financial serial killers : inside the world of wall street money hustlers, swindlers, and con men / Tom Ajamie & Bruce Kelly. p. cm. 9781616080310 1. Fraud--United States. 2. Swindlers and swindling--United States. 3. Investments--United States. I. Kelly, Bruce. II. Title. HV6695.A35 2010 362.88--dc22 2010000144 Printed in the United States of America “Radix malorum est cupiditas.” Greed is the root of all evil. —“The Pardoner’s Tale,” Chaucer “Rule number one: Never lose money. Rule number two: Never forget rule number one.” —Warren Buffett Table of Contents Title Page Copyright Page Epigraph CHAPTER ONE - Financial Serial Killers CHAPTER TWO - The Little Old Lady Who Invested with Buffett and Was Fleeced by Insurance Agents CHAPTER THREE - The Financial Serial Killer: Charles Ponzi and the Criminal Pathology of White-Collar Thieves CHAPTER FOUR - Bre-X Minerals: How to Make, and Detect, Fool’s Gold INTERLUDE A - The Investment Industry Speaks CHAPTER FIVE - Stockbrokers, Greed, and Laziness CHAPTER SIX - More Stockbrokers, Greed, and Laziness CHAPTER SEVEN - Hedge Funds and Private Placements: Cachet and Exclusivity Can Cost You CHAPTER EIGHT - Securities Regulators and Their Shortcomings: Are the Regulators Protecting You? INTERLUDE B - The Investment Industry Speaks CHAPTER NINE - What Is an Investment Adviser and Why Are So Many Running Ponzi Schemes? CHAPTER TEN - Mortgage Fraud: How the Mortgage Industry and Mortgage Brokers Can Rip You Off and How Promises of Investment Riches Undermine the Safety of Your Home CHAPTER ELEVEN - Affinity Fraud, or Holy Rolling, Religious Zeal, and the Art of the Steal INTERLUDE C - The Investment Industry Speaks CHAPTER TWELVE - Wall Street: It’s a Game for Insiders—and Outsiders, Like You, Should Get Advice CHAPTER THIRTEEN - The Consequence of White-Collar Crime and How It Can Destroy Lives and Rip Families Apart CHAPTER FOURTEEN - Web Tools and Databases to Spot Trouble Before It Starts CHAPTER FIFTEEN - Four Outlandish Tales of the Securities Business CHAPTER SIXTEEN - Elder Abuse and Fraud INTERLUDE D - The Investment Industry Speaks CHAPTER SEVENTEEN - Tilting at Windmills: How One Investor Refused to Give Up His Fight to Track Down His Financial Serial Killer CHAPTER EIGHTEEN - The Psychology Behind Why We Fall for Scams Epilogue A Laundry List of the Classic Warning Signs for Investors Notes Acknowledgments CHAPTER ONE Financial Serial Killers Sadly, Bernie Madoff is no different than hundreds, if not thousands, of common thieves that today blight the American landscape and put you and your life savings in danger. Yes, he stole and shifted around billions of dollars, perpetuating most likely the greatest fraud in American history. However, if one looks at his manner and methods, at how he actually did it, the conclusion is clear. Simply put, fraudsters like Bernie Madoff—we call them financial serial killers—won’t be found only on Wall Street. In fact, they operate in towns large and small across the United States. The seduction techniques used by Bernie Madoff to attract investors are the same well-worn tricks used over and over by financial schemers across the country. The financial con man always paints a picture of himself as someone who has a great deal of financial knowledge (certainly more than his victim) and a “proven” track record of having made a lot of money for others. He’ll likely show some piece of paper acknowledging his outsized investment gains. He’ll tell a tale of having spun riches for others. He’ll convince you of how he alone has, through his hard work, devised a “can’t fail” means of making money: be it some type of overlooked investment product, some type of hedging technique, or inside knowledge possessed by only him or his investment team. Personal relations are imperative to the success of the financial con man. He is a master at building them. He will bond with his victim, emphasizing their common interests. Did you both attend the same high school or college? Do you share the same religion or ethnic background? Did you, perhaps, belong to the same club or have kids at the same school? Or, by coincidence, did you both grow up in the same neighborhood? Maybe, if the con man is particularly lucky, you even know some of the same people. That is particularly wonderful, because people seem to believe that, if you and I know the same people then, well, we must share the same values and we can now trust one another. So what the financial serial killer eventually achieves is to cause you, the victim, to believe in him. To trust. To feel comfortable. To let down your guard. All this is done with such skill that even the smartest among us fails to do the most basic research into the man we will entrust to hold our life savings, our children’s college money, and the money we will use to buy our food and our medicine when we near the end of our life and are too old to work. It would be ridiculous for us to make blanket statements about a firm or an industry. This book is not saying that all stockbrokers lack ethics or are somehow evil. Our goal is to help investors separate the wheat from the chaff to help identify a broker or adviser who does have questionable business practices so you can find a good one. In fact, there are hundreds—and perhaps even thousands—of such financial serial killers lurking in the financial landscape right now. One group of securities regulators—FINRA—recently estimated there are fifteen thousand ex- stockbrokers barred from the industry. Until late 2009, information about brokers, even those who have been banned from selling securities because of criminal and outrageous behavior, was removed from public viewing after they had been out of the securities business for two years. This was the norm even though FINRA encouraged investors to use public Web sites to check out brokers. The federal government had the good sense to address the issue, and the records of such bad brokers are now permanently public. However, many brokers banned from the securities business have surfaced in the spate of recent frauds and Ponzi schemes that have cost investors billions of dollars. The FBI and Congress have finally taken notice. The 2008 stock market collapse exposed so many schemes that the FBI in 2009 began a new investment fraud investigation for every day of the year. “High yield investment fraud schemes have many variations, all of which are characterized by offers of low risk investments, guaranteeing an unusually high rate of return,” testified Kevin Perkins, assistant director of the FBI, before the Senate Judiciary Committee in December 2009. He explained that the crimes weren’t complicated. “Victims are enticed by the prospect of easy money and a fast turnaround.” The financial serial killer’s ability to make investors hand over their money is a key to fueling such frauds, Perkins noted: “The most common form of these frauds is the Ponzi scheme, which is named after early twentieth-century criminal Charles Ponzi. These schemes use money collected from new victims, rather than profits from an underlying business venture, to pay the high rates of return promised to earlier investors. This arrangement gives investors the impression there is a legitimate, money-making enterprise behind the fraudster’s story; but in reality, unwitting investors are the only source of funding.” “As the financial crisis expanded, drying up investment funds and causing investors to begin seeking returns of their principal, investment fraud schemes began to unravel.” The number of investment frauds was staggering, Perkins told Congress. In the fiscal year 2009, the FBI saw a 105 percent increase in new high-yield investment fraud investigations when compared to 2008 (314 versus 154, and many had losses exceeding $100 million). “Many of the Ponzi scheme investigations have an international nexus and have affected thousands of victims,” Perkins said. Yes, 2009 was indeed a rough year for Ponzi schemers. The recession unraveled nearly four times as many of the investment scams as fell apart in 2008, with “Ponzi” becoming a buzzword again thanks to the collapse of Madoff’s $50 billion plot. Tens of thousands of investors, some of them losing their life savings, watched more than $16.5 billion disappear like smoke in 2009, according to an Associated Press analysis of scams in all fifty states. While the dollar figure was lower than in 2008, that’s only because Madoff— who pleaded guilty in 2009 and is serving a 150-year prison sentence—was arrested in December 2008 and didn’t count toward 2009’s total. While enforcement efforts have ramped up in large part because of the discovery of Madoff’s fraud, the main reason so many Ponzi schemes have come to light is clear. “The financial meltdown has resulted in the exposure of numerous fraudulent schemes that otherwise might have gone undetected for a longer period of time,”

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How to make sure you don’t fall victim to the next Bernie Madoff.By using true tales of thieves, swindlers, and fraudsters at work, Financial Serial Killers illustrates how these perpetrators get their hooks into investors' wallets, savings accounts, and portfolios—and never let go. The worst fi
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Most books are stored in the elastic cloud where traffic is expensive. For this reason, we have a limit on daily download.