State can help seniors guard against fraud

Sham investments are just one kind of scheme that targets older people

By Paris Achen, Columbian courts reporter

Published:

 

Online resources to protect against fraud

• File complaints:

Washington Attorney General’s Office.

State Department of Financial Institutions.

Federal Trade Commission.

Securities Exchange Commission.

Commodity Futures Trading Commission.

• Research businesses at the Better Business Bureau.

Research a broker or investment adviser.

Research a commodities dealer.

• Order “Tricks of the Trade: Outsmarting Investment Fraud,” a free DVD of a documentary about investment fraud.

• More tips on avoiding financial fraud from the state Department of Financial Institutions.

Seniors are more vulnerable to fraud than younger people. There are a myriad of reasons, but there's also an arsenal of precautions seniors can take to help protect themselves, said William McGinty, an enforcement attorney at the state Department of Financial Institutions' Securities Division.

McGinty gave a presentation on investment fraud Friday at a Senior Services Network meeting at PeaceHealth Southwest Memorial Health Center near downtown Vancouver.

"There are lots and lots of ways to defraud seniors, and (investment fraud) is just one slice of that," McGinty cautioned.

About 20 percent of Americans 65 and older report they have either been a victim of fraud or "have been taken advantage of financially," according to a survey by Infogroup ORC, a data-collection and marketing company.

Put simply, seniors are more likely to have money, so they're attractive to would-be fraudsters, according to the Pew Research Center.

Seniors also have a disproportionate loss of cognitive function in the part of the brain that processes doubt, which makes them more gullible, according to a 2012 study by the University of Iowa College of Medicine.

Investment fraud typically involves securities, such as stocks and bonds; commodities, such as investment in gold; business opportunities in which one might pay to work from home to earn income; lotteries not sponsored by the state; Ponzi schemes and multi-level marketing.

A general rule of thumb is, if it seems too good to be true, it probably is, McGinty said. Another warning sign is guarantees.

"Nothing is certain except death and taxes," said McGinty, quoting the common adage. "If someone claims it's certain, that is a sign it could be fraudulent."

Watch out for promises of large returns. YourBank.biz, a venture now under investigation, promised a 165 percent return on investment in three days.

Be wary of free-lunch seminars that pitch investments or business opportunities. Free lunches are a common tactic to find victims.

For any investment, it's wise to do a search on Google to see if there is any reason for concern.

One way to guard against fraudulent deals is to check whether the security or commodity is registered and if there are any complaints against it, McGinty said. Most, but not all, securities and commodities are required to be registered with state and/or federal regulatory agencies. (Fraudsters will commonly claim they are among the few who are exempt, he said.)

Check securities at the Securities Exchange Commission or the state Department of Financial Institutions and check whether securities salespeople are registered with the Financial Industry Regulatory Authority.

Commodities can be checked through the Department of Financial Institutions, the Commodity Futures Trading Commission and the Federal Trade Commission. Commodities salespeople usually are required to be registered with the National Futures Association.

Washington residents have an extra protection against fraudulent business opportunities because some, though not all, business opportunities are required to register with the Department of Financial Institutions. That's not the case in Oregon.

McGinty recommended that consumers check the registration before paying anyone for a business opportunity, including common work-from-home schemes advertised online and through email.

Also, those offering business opportunities are required by the FTC to furnish a disclosure document to consumers, he said. Ask for that document before handing over any money, he said.

Others tactics to beware are:

• Ponzi schemes use new investors' money to pay old investors until the Ponzi collapses. The schemes are outlawed under the securities law, McGinty said.

• Multi-level marketing is a cross between a Ponzi and a business opportunity, and some are legitimate, McGinty said. If the income comes from recruitment of participants, it's likely a pyramid scheme, he said. If income comes from sales, then the business is likely legitimate. Check with the Better Business Bureau and the Washington Attorney General before participating.

Paris Achen: 360-735-4551; http://twitter.com/Col_Trends;http://facebook.com/ColTrends;paris.achen@columbian.com.