Articles

ONE OUT OF FIVE AMERICANS OVER THE AGE OF 65 HAS BEEN THE VICTIM OF AN INVESTMENT SCAM
August 17, 2010 by Jeffrey Wittenberg, Esq.

According to the Washington-based Investor Protection Trust, a nonprofit that promotes shareholder education, one out of five Americans over the age of 65 has been the victim of an investment scam. There are well over 35 million Americans over the age of 65, which equates to more than 7 million seniors who have been abused by an investment promoter either through unsuitable investments, high fees, or fraud.

Investment scams and fraud have been undertaken by unscrupulous investment promoters since the inception of money and investments. Senator Herb Kohl (D-Wis.), who heads the Senate’s Special Committee on Aging, has been quoted as saying that, “We need better regulation of this industry so seniors can tell the difference between professionals who offer clear and unbiased financial advice and bad actors…who steer them toward inappropriate financial products.”

Senator Kohl certainly means well. But government regulation has never, and will never, help anyone determine whether a charming, intelligent, smooth-talking investment promoter is an ethical investment professional or a con artist. If legislation could do that, Bernard Madoff could not have operated his colossal Ponzi scheme. The recent Wall Street and Consumer Protection Act won’t fair any better at preventing investment scams than the Securities Act of 1933, Securities Exchange Act of 1934, Investment Company Act of 140, Investment Advisers Act of 1940, or the many other pieces of legislation designed to prevent investment scams and fraud.

There is only one way to prevent becoming a victim of an investment scam, and it does not matter whether you are a teenager or a senior. That one way is to protect yourself. So how do you protect yourself and still invest your savings in a manner that provides income and/or capital appreciation so that you can keep pace with inflation and support yourself through retirement?

A system of checks and balances, just like the U.S. Constitution, is the smartest approach to managing any system that relies on the decision-making of other people. In the investment world, that means every investor should obtain an independent, conflict-free, sophisticated investment evaluation prior to making an investment with an investment promoter or broker. If you avoid the investment scams, you have a chance to create a sensible financial plan that can produce income and the capital appreciation you seek even though the income obtainable in the securities markets likely will be less than that promised to you by a con-artist operating an investment scam.

Initially, the system was set up so that the only person explaining any investment opportunity to an investor was the investment promoter or broker, or perhaps several investment promoters or brokers. The inherent problem with this structure is that each investment promoter or broker had his or her own interests at heart, notwithstanding affirmative representations from each of them that the investor’s interests are paramount. In other words, an inherent conflict of interest always encumbered the relationship between investment promoter and investor.

Then, government agencies and non-profits showed up on the scene to combat the pervasive investment scams and fraud. Their weapon was and remains investor education, a noble cause. There can be no doubt that these investor education programs have saved many from becoming victims of investment scams, but the sad reality is that these efforts are simply not enough. A quick look at any news publication these days will likely reveal that the government authorities have shut down yet another investment scam in which hundreds of victims lost their life savings. Have not doubt that for every one investment scam that the authorities shut down, there are several others the continue to operate and that start up anew.

The system of checks and balances only works if investors have access to an affordable, independent, conflict-free, sophisticated investment professional. In the past, no such option existed. But, today that has changed. In plain language this means that investors can obtain advice from a highly sophisticated investment professional who has no interest in managing their money. That’s what it means to be conflict-free.

Jeffrey Wittenberg, Esq., founder of Wittenberg Law, has established the affordable Investment Scam Prevention Program^TM in order to help safeguard the savings and futures of individual investors. Typically, the investment scams can be spotted by an experienced, well-trained, investment professional. Many, if not all, of the victims that come to Wittenberg Law for legal counsel after losing their savings in an investment scam could have avoided the tragedy if they had the opportunity to seek affordable counsel before investing their life savings.

Lawyers can make a fortune pursuing litigation on behalf of defrauded investors, and investors can retrieve some of their money at times. But that takes years of litigation, and major emotional suffering. Ben Franklin said it best when he said, “an ounce of prevention is worth a pound of cure.”

Now that every investor, even an investor considering a $10,000 investment, has access to Wittenberg Law’s affordable Investment Scam Prevention Program^TM, investors can employ the optimum investment approach of checks and balances before signing-over their savings to any investment promoter or broker. Wittenberg Law has no interest in managing investors’ money, hence it is conflict-free.

An added bonus is that Wittenberg Law brings a totally objective perspective to the investment opportunity. An objective viewpoint is essential in light of the affinity scams that are so prevalent, wherein the investor is subjectively motivated to hire an investment professional because he or she is from the same background, color, religion, nationality, etc. Worse yet, many victims were referred to an investment professional by a close family member or friend who had early success in the investment scam. Investors must take the emotion out of their investment decisions, and the only real way to do that is by bringing an completely objective person to point out any red flags.

VICTIMS OF INVESTMENT FRAUD ARE MORE LIKELY TO RELY ON THEIR OWN EXPERIENCE AND KNOWLEDGE WHEN MAKING INVESTMENT DECISIONS

August 12, 2010 by Jeffrey Wittenberg, Esq.

This morning, like virtually every morning for the last year, I woke up to a news report that the federal government has shut down a Ponzi scheme.  Like many before it, this Ponzi scheme was a so-called “affinity” scam, meaning that the investment promoter was of the same race, religion, nationality, etc., of the victims of the fraud.

As always, the government regulators reacted to the fraud, in contrast to preventing it.  Don’t get me wrong, I am not bashing the government regulators at all.  They are doing the best they can and often deserve substantial praise for their tremendous efforts.  I am simply stating the fact that the government will not, and cannot, prevent you from becoming a victim of an investment scam.  Only you can do that – either by yourself, or with the help of an investment professional, but not just any investment professional.  Only an independent, conflict-free, experienced professional will suffice.  That means someone who is not interested in managing your money.

Before you allow your ego to tell you that it could never happen to you, consider a study conducted by the NASD Investor Education Foundation, in cooperation with WISE Senior Services and AARP Foundation, which was released in 2006.  This study contains a few surprising facts about victims of investment fraud.  The findings below are enough to make anyone think twice about making an investment without a second opinion from an independent, conflict-free, investment professional.

• Investment fraud victims are more financially literate than non-victims.
• Investment fraud criminals use a wide array of different influence tactics—from friendship to fear and intimidation tactics—to defraud the victim.
• Fraud pitches are tailored to match the psychological needs of the victim.
• Investment fraud victims are more likely to listen to sales pitches.
• Investment fraud victims are more likely to rely on their own experience and knowledge when making investment decisions.
• Fraud victims experience more difficulties from negative life events than non-victims.
• Investment fraud victims are more optimistic about the future.
• Investment fraud and lottery victims dramatically under-report fraud.

In addition to the government regulators, many government agencies and non-profit organizations are in the trenches every day fighting to protect investors from losing their life savings by providing free investor education services.   Investor education is simply not enough.  In order to prevent becoming a victim of investment fraud, you must seek out an objective, sophisticated opinion to evaluate the investment opportunity.

The problem is that, until now, there was no affordable service available to the average investor.  Fortunately, Wittenberg Law created the Investment Scam Prevention Program^TM to fill the void.  The Investment Scam Prevention Program^TM is affordable to anyone considering an investment of $10,000 or more, and will identify red flags that give rise for concern with any investment opportunity.

My mission, and my deep passion, is to protect the savings and futures of innocent investors. That is exactly why I have used my resources to develop an affordable program for all investors. Investment scam prevention must not be just accessible to the super wealthy. It must be available to everyone.