Investment Fraud: Wealth, Education, and Experience Don't Equate Invulnerability
Bernie Madoff’s massive Ponzi scheme brought the financial world to a standstill in 2008, there was hardly
a household in the
country that didn’t know something about investment fraud. In the
years since, a vast majority of the nation’s headlines have either
exposed new fraud schemes or offered tips on how to avoid becoming a victim.
Now, as we begin 2013, most investors believe they know the key facts
about investment fraud: Fraudsters often use their group memberships to
garner trust. They promise
high returns at little to no risk. And, they most frequently target investors over
the age of 65.
Though these investment fraud facts are all true, they aren’t the
Coupled with the persisting myths of investment fraud (i.e. that the less
educated, less experienced investors are most likely to fall prey to a
con artist) – they can obscure the real truths behind who is and
who isn’t at risk of losing their money in a scam.
Investors who believe experience, wealth, or education makes them immune
to investment fraud may find themselves counting their losses at some
point in the near future.
The truth is that countless numbers of people fall victim to
affinity fraud schemes, Ponzi schemes, and other types of investment scams every year.
Victims of these schemes include those who are considered wealthy and those
on fixed incomes; seniors over 65 as well as those under 40; highly experienced
investors and first-time investors; Ph.D.s and high school grads; and
everything in between. Even celebrities have
lost money to an investment fraud scheme in recent years.
The truth is fraudsters don’t really care who you are, how experienced
you may be, or how much money you have; they only care about whether they
can convince you to part with that money.
Separating you from your money may actually be easier if you are a wealthy,
sophisticated investor who believes your experience enables you to spot
fraud easily and to choose the “right” investments. If you
have placed a great deal of trust in your financial advisor, broker, or
accountant, it becomes even easier.
Fraudster Philip Horn, for example, used his long-time experience in finance,
his Wells Fargo brokerage firm affiliation, and his country club membership
to swindle wealthy investors out of millions of dollars for over two years.
According to the New York Times, Horn – a financial advisor with
Wells Fargo – met his victims on the golf course, handed them his
business card, and slowly convinced them to invest millions of dollars
with him by becoming their friend and dropping hints about winning trades.
Once he had gained their trust and their business, he systematically stole
their funds by executing and cancelling trades in their portfolios and
pocketing the profits.
Philip Horn’s wealthy investment scam victims believed their funds
were safe because they trusted him both as a friend and as a professional.
They also trusted Wells Fargo to oversee him.
Unfortunately for them, Horn managed to keep his scheme going and to avoid
detection by the bank by limiting his paper trail and burying the fraudulent
activity amidst hundreds of legitimate transactions. Because he was a
trusted acquaintance and friend,
few of Philip Horn’s investors took the time to carefully study the
extensive trading documentation that he handed out on a regular basis.
If Horn’s clients had been more vigilant on the front end, they may
have recognized something was amiss with their investments long before
the bank finally brought the thefts to their attention. After all, Horn
didn’t want to meet at the office, and he often kept his clients’
trading documents in his trunk. Such actions should have raised at least a few
investment red flags. Yet, many of Horn’s clients let his gregarious nature, friendly
overtures, and smooth manners override their misgivings.
“Phil would present his investments as if he was giving you something
that would protect you,” one investor told the NY Times, adding
“he was also just a guy you wanted to drink with.” (“Madoff Aside, Financial Fraud Defies Policing,” Jan. 6, 2013)
And, Horn’s not alone.
Other brokers and advisors across the nation continue to slyly steal from
sophisticated and unsophisticated investors alike by utilizing charm,
connections, extensive knowledge of the financial markets, and deceit
to gain their clients’ trust and avoid detection. My law firm gets
calls from individuals every week who have fallen prey to investment fraud.
Despite the plethora of
new regulations enacted after Madoff, preventing fraud before it is too late is still a problem for regulators.
The best thing investors can do to avoid losing money in an investment
fraud scheme is to protect themselves. This means carefully researching
every financial professional and every investment opportunity before parting
with any money, and continually monitoring and reviewing each and every
investment account. It also means remembering that anyone can fall victim
to an investment scheme – even wealthy investors with years of investing
About our law firm:
Meyer Wilson represents individuals across the country who have been harmed
by investment fraud. All of our cases are handled on a contingency fee
basis and we never request a retainer of any kind. Contact us for more
information or complete the online form on the top of this page and we
will respond promptly.