Scams are Back

Scammers are talented at taking advantage of people by tapping into their fears and desires to get ahead financially. Periods of high stress and abysmal returns often bring out promoters who promise miracle money strategies. Since the last two years have been particularly trying for investors, scammers know this is a great time to strike.

You do not have to be financially unsophisticated to be taken in. Many of the schemes are packaged to appeal to the very educated by appearing to be very complex and available only to wealthy investors. This was Bernie Madoff’s strategy, and his $50 billion dollar Ponzi scheme proved he was quite good at it. But you can find other examples right here in Cincinnati.

According to the June 1997 SEC litigation filing, Mark Gatch and Henry Schmidt solicited investors from February 1992 to March 1995 with the promise of 4-5% per month profits using a secret trading strategy marketed through Ben Mar Investments, an unregistered investment company. They found their clients at country clubs, within the Reds and Bengal rosters, and through relationships with other high net worth Cincinnati residents with an invitation only entrance requirement. By the time the scheme came to light, investors had lost approximately $12.2 million, including $4 million that Gatch and Schmidt took for themselves.

After suffering losses in 2008, many people are probably wishing for guarantees. From 1995 to 2002 George Fiorini's 10 Percent Plus Income Plan was advertised on TV, radio, newspapers and even bus benches across the Tristate. “There aren't many things in life that are guaranteed, but the Fiorini Agency's 10 Percent Income Plus Plan guarantees you an income for life — without any risks,” Mr. Fiorini promised on the radio. The late television celebrity Bob Braun, a face familiar to generations of Cincinnatians, backed him up. The problem was, there was nothing paying an annual tax-free interest rate of 10%, and any investment (like stocks) that could provide a high return was NOT guaranteed. In August, 2004 Fiorini finally plead guilty to mail fraud, income tax evasion and interstate transport of stolen money which ended more than four years of law-enforcement efforts against the one-time insurance agent.

The FBI is reporting a surge in investment fraud cases including high yield investment frauds, Ponzi schemes, pyramid schemes, foreign currency fraud and other plans. It sounds obvious, but if you are solicited by a friend or stranger with an investment idea that sounds too good to be true, no matter how credible it sounds – walk away!

By Jeannette Jones, CFP®
Jjones@taaginc.com