ROTHSTEIN’S RECENT WRONGS
Scott Rothstein is a recent case of Ponzi scheme perpetration. Rothstein is accused of covertly running a scam out of his law office where he embezzled from investor trust accounts. As a lawyer at Rothstein Rosenfeldt Adler, he forged documents and funded his philanthropy, political contributions and law firm salaries through a $1.2 billion Ponzi scheme. Rothstein’s scam involved him fabricating pre-settlement structures, which were sold in legal cases for large sums of money. Investors offered Rothstein up-front cash payments that would go towards paying individuals owed money from court cases so they may buy the right to collect the full amount of the settlements later. Under this scenario, investors in Rothstein’s scheme would be guaranteed to receive a minimum of 20% investment returns in as short as three months. When the jig was up, Rothstein fled to Casablanca, Morocco, hoping to avoid extradition. Rothstein had a change of heart and returned to Ft. Lauderdale, FL, in a private chartered jet.
Showing posts with label accounting. Show all posts
Showing posts with label accounting. Show all posts
Monday, October 18, 2010
Tuesday, September 21, 2010
PONZI SCHEMES: INFAMOUS PERPETRATORS - Part 3
HAITIAN HOTBED
The residents of Haiti became victims of Ponzi schemers in 2001 when outfits referred to as “cooperatives” were offering rates up to 15%. The cooperatives gave the impression that they were government backed. They were quick to become rampant amongst inhabitants. Individuals also felt comfortable since the coops were actively promoted through radio and TV advertisements. Even Haitian pop stars were spokespeople! Unfortunately, it is estimated that residents lost more than $240 million in these scams, which is comparable to 50% of Haiti’s Gross Domestic Product.
The residents of Haiti became victims of Ponzi schemers in 2001 when outfits referred to as “cooperatives” were offering rates up to 15%. The cooperatives gave the impression that they were government backed. They were quick to become rampant amongst inhabitants. Individuals also felt comfortable since the coops were actively promoted through radio and TV advertisements. Even Haitian pop stars were spokespeople! Unfortunately, it is estimated that residents lost more than $240 million in these scams, which is comparable to 50% of Haiti’s Gross Domestic Product.
Tuesday, August 17, 2010
PONZI SCHEMES: HOW TO DETECT AND AVOID THEM - Part 4
PARTICIPATION
If you have already given a salesperson your money for an investment, do not provide additional funds or reinvest without seeing an initial return on your investments. Promoters easily keep their scams continuously going by convincing their investors to simply roll-over their preliminary profits with the promise of an even greater return. While it does make sense to follow through with the investment for a certain period of time, be suspicious of salespeople that are reluctant to let you cash out after the first sign of success.
A product that offers an overly consistent return is a cause for concern. Also, an investment with a rising return or that gives remarkably steady returns, regardless of the current market conditions, should be a cause for concern. Especially during these economic times, it is common for even the most solid investments to experience fluctuation from time to time. Be aware even if you receive funds back, they may be from other investors.
If you have already given a salesperson your money for an investment, do not provide additional funds or reinvest without seeing an initial return on your investments. Promoters easily keep their scams continuously going by convincing their investors to simply roll-over their preliminary profits with the promise of an even greater return. While it does make sense to follow through with the investment for a certain period of time, be suspicious of salespeople that are reluctant to let you cash out after the first sign of success.
A product that offers an overly consistent return is a cause for concern. Also, an investment with a rising return or that gives remarkably steady returns, regardless of the current market conditions, should be a cause for concern. Especially during these economic times, it is common for even the most solid investments to experience fluctuation from time to time. Be aware even if you receive funds back, they may be from other investors.
Wednesday, July 14, 2010
THE MORTGAGE FRAUD TRIANGLE: Pressure, Opportunity and Rationalization - Part 1
Fraud has become a rampant occurrence in the mortgage industry. It has become such a common practice that many people are getting away with it. There are numerous reasons why an individual would commit this illegal act. By utilizing the mortgage fraud triangle, we can explore the pressure, opportunity and rationalization.
COMITTING FRAUD
Unfortunately, many mortgage companies create a corporate culture that allows for corruption to occur. Techniques to commit fraud were taught to their new employees as part of instructing them in mortgage processing. Lenders have also created programs on how to detect fraud, which were then used by dishonest brokers as ways to actually conduct it. Through the combination of financial pressures, employer pressures and a lack of ethics there was too great a temptation created and brokers have begun to take the risk and commit fraud.
COMITTING FRAUD
Unfortunately, many mortgage companies create a corporate culture that allows for corruption to occur. Techniques to commit fraud were taught to their new employees as part of instructing them in mortgage processing. Lenders have also created programs on how to detect fraud, which were then used by dishonest brokers as ways to actually conduct it. Through the combination of financial pressures, employer pressures and a lack of ethics there was too great a temptation created and brokers have begun to take the risk and commit fraud.
Monday, July 12, 2010
PONZI SCHEMES: AN OVERVIEW - Part 3
BIG BUCKS
Ponzi schemes can generate billions of dollars. In fact, in 2008, Bernard L. Madoff of Investment Securities LLC committed arguably the largest Ponzi scheme in history. His scheme had all the typical Ponzi ingredients with a great deal of creditability due to the fact he had been in the investment banking business since 1960. Due to Madoff’s scheme, investors are estimated to have lost anywhere from $34 and $50 billion U.S. dollars. His scheme did collapse though, as they always do.
CONCLUSION
With the economy in turmoil, more and more Ponzi schemes are being established. By having a greater knowledge of their inner workings, there will be less of a chance to fall into their traps. Keep your eyes open so you don’t stumble into a Ponzi pitfall.
Gary Opper, CPA is the Managing Member of Levie-Opper, LLC, Weston, Florida. He is a member of the American Institute of CPAs and the Florida Institute of CPAs. He has written over 500 published articles in over 20 magazines. Mr. Opper has been the National Association of Mortgage Broker’s “Writer of the Year” and “Featured Writer of the Year.” He has spoken to many groups including the Florida Bar Association, the Florida Institute of CPAs, the Mortgage Bankers Association and Northern Trust Bank. He has lectured at four colleges including University of Florida and Florida International University. Opper has an Accounting degree from UF and a Master of Science in Taxation from FIU. Opper is Past President of the Florida Association of Mortgage Professionals - Miami Chapter and the FICPA - Gold Coast Chapter. Levie-Opper, LLC focuses on forensic accounting and fraud auditing. They handle state and federal cases including civil, commercial and criminal. Mr. Opper is available to speak to your group. He may be reached at (954) 384-4557, fax: (954) 384-5483, or e mail: Gary@Levie-Opper.com.
Ponzi schemes can generate billions of dollars. In fact, in 2008, Bernard L. Madoff of Investment Securities LLC committed arguably the largest Ponzi scheme in history. His scheme had all the typical Ponzi ingredients with a great deal of creditability due to the fact he had been in the investment banking business since 1960. Due to Madoff’s scheme, investors are estimated to have lost anywhere from $34 and $50 billion U.S. dollars. His scheme did collapse though, as they always do.
CONCLUSION
With the economy in turmoil, more and more Ponzi schemes are being established. By having a greater knowledge of their inner workings, there will be less of a chance to fall into their traps. Keep your eyes open so you don’t stumble into a Ponzi pitfall.
Gary Opper, CPA is the Managing Member of Levie-Opper, LLC, Weston, Florida. He is a member of the American Institute of CPAs and the Florida Institute of CPAs. He has written over 500 published articles in over 20 magazines. Mr. Opper has been the National Association of Mortgage Broker’s “Writer of the Year” and “Featured Writer of the Year.” He has spoken to many groups including the Florida Bar Association, the Florida Institute of CPAs, the Mortgage Bankers Association and Northern Trust Bank. He has lectured at four colleges including University of Florida and Florida International University. Opper has an Accounting degree from UF and a Master of Science in Taxation from FIU. Opper is Past President of the Florida Association of Mortgage Professionals - Miami Chapter and the FICPA - Gold Coast Chapter. Levie-Opper, LLC focuses on forensic accounting and fraud auditing. They handle state and federal cases including civil, commercial and criminal. Mr. Opper is available to speak to your group. He may be reached at (954) 384-4557, fax: (954) 384-5483, or e mail: Gary@Levie-Opper.com.
Monday, June 14, 2010
PONZI SCHEMES: AN OVERVIEW - Part 1
The words “Ponzi scheme” can be found quite easily throughout the world of media these days. What exactly is a Ponzi scheme though? It’s something to be forewarned about so that you don’t fall into its deadly trap.
DEFINITION
First things first, according to the American Bar Association, a Ponzi scheme is:
“…a type of securities fraud where the promoter makes some sort of false or misleading statement about an investment (often including a guaranteed high rate of return) and pays off older investors with newer investor’s monies. Eventually, when the promoter can’t find any new investors, the scheme collapses.”
The difference between a Ponzi scheme and a pyramid scheme is that a Ponzi scheme the promoter handles the new recruits and the new money. Within a pyramid scheme, people within the scam recruit new participants. In both of these traps, the early investors receive an income from the subsequent individuals taking part in the scam; however, only in a Ponzi scheme does the organizer handle all of the recruitment.
COINING THE TERM
Charles Ponzi came to the United States at the turn of the century from Italy. He was an Italian swindler that went by many different aliases to con his prey and had been jailed many times. In 1918, he began offering his investors a choice between receiving a fifty percent return on a simple forty-five day investment and receiving one hundred percent return on a ninety day investment. Ponzi promoted that this was a possibility due to a special circumstance with the international postal reply coupon system. Back then, due to an international agreement, postal reply coupons were accepted by all countries despite the fact there were varying cost from country to country (depending on their economy).
As legal as Ponzi’s idea was (the cost for an IPRC in the US could have been a dime while a nickel in Germany), he full well knew that his idea would not be a success. It was impossible due to importation restrictions. The idea was too tempting though and Ponzi pushed it well.
Unfortunately for Ponzi, suspicions grew when investors would not receive the interest on their investments. The scheme had no underlying business so it couldn’t possibly generate any revenue! In 1920, Ponzi’s brilliant idea came crashing around when investors began requesting their money be returned during a growing governmental inquest into his company.
DEFINITION
First things first, according to the American Bar Association, a Ponzi scheme is:
“…a type of securities fraud where the promoter makes some sort of false or misleading statement about an investment (often including a guaranteed high rate of return) and pays off older investors with newer investor’s monies. Eventually, when the promoter can’t find any new investors, the scheme collapses.”
The difference between a Ponzi scheme and a pyramid scheme is that a Ponzi scheme the promoter handles the new recruits and the new money. Within a pyramid scheme, people within the scam recruit new participants. In both of these traps, the early investors receive an income from the subsequent individuals taking part in the scam; however, only in a Ponzi scheme does the organizer handle all of the recruitment.
COINING THE TERM
Charles Ponzi came to the United States at the turn of the century from Italy. He was an Italian swindler that went by many different aliases to con his prey and had been jailed many times. In 1918, he began offering his investors a choice between receiving a fifty percent return on a simple forty-five day investment and receiving one hundred percent return on a ninety day investment. Ponzi promoted that this was a possibility due to a special circumstance with the international postal reply coupon system. Back then, due to an international agreement, postal reply coupons were accepted by all countries despite the fact there were varying cost from country to country (depending on their economy).
As legal as Ponzi’s idea was (the cost for an IPRC in the US could have been a dime while a nickel in Germany), he full well knew that his idea would not be a success. It was impossible due to importation restrictions. The idea was too tempting though and Ponzi pushed it well.
Unfortunately for Ponzi, suspicions grew when investors would not receive the interest on their investments. The scheme had no underlying business so it couldn’t possibly generate any revenue! In 1920, Ponzi’s brilliant idea came crashing around when investors began requesting their money be returned during a growing governmental inquest into his company.
Wednesday, June 9, 2010
MORTGAGE FRAUD UNFORTUNATE GROWTH INDUSTRY –Statistics, FERA, Adding Mortgage Fraud to Your Practice and Mortgage Fraud Types - Part 4
ADDING MORTGAGE FRAUD CASES TO YOUR PRACTICE
Now is the right time to add mortgage fraud to your law practice. It has become the “hot topic.” It is usually the lead article of magazines and newspapers. With the growing cases of fraud, the government is seriously and aggressively pursuing guilty parties. A vast amount of money is being provided to the FBI, the Attorney General, the Department of Justice and other governmental agencies are working towards tracking down fraud and punishing the guilty parties. Because of the rampant outbreaks of mortgage fraud, it is a productive, worthwhile and rewarding area of exploration.
According to noted criminal defense attorney Brian H. Bieber, “The mortgage fraud industry has exploded to depths no one could fathom. On the state and federal levels, prosecutors are scrambling to find sufficient resources to arrest indict and convict individuals. The targets are not just mortgagees, but are mortgage companies, low, mid and high level executives. Many cases; however, are defensible. Experienced criminal defense lawyers know which questions to ask, which documents to look at and they can assist in pinpointing where the fraud began and who is responsible under the law.” Forensic mortgage fraud accounting can assist lawyers to determine the proper questions and documents.
Fraud cases can be both criminal and civil. Civil cases can involve lenders suing mortgage un-professionals, appraisers, title companies and private mortgage insurance companies.
Now is the right time to add mortgage fraud to your law practice. It has become the “hot topic.” It is usually the lead article of magazines and newspapers. With the growing cases of fraud, the government is seriously and aggressively pursuing guilty parties. A vast amount of money is being provided to the FBI, the Attorney General, the Department of Justice and other governmental agencies are working towards tracking down fraud and punishing the guilty parties. Because of the rampant outbreaks of mortgage fraud, it is a productive, worthwhile and rewarding area of exploration.
According to noted criminal defense attorney Brian H. Bieber, “The mortgage fraud industry has exploded to depths no one could fathom. On the state and federal levels, prosecutors are scrambling to find sufficient resources to arrest indict and convict individuals. The targets are not just mortgagees, but are mortgage companies, low, mid and high level executives. Many cases; however, are defensible. Experienced criminal defense lawyers know which questions to ask, which documents to look at and they can assist in pinpointing where the fraud began and who is responsible under the law.” Forensic mortgage fraud accounting can assist lawyers to determine the proper questions and documents.
Fraud cases can be both criminal and civil. Civil cases can involve lenders suing mortgage un-professionals, appraisers, title companies and private mortgage insurance companies.
Thursday, June 3, 2010
MORTGAGE FRAUD UNFORTUNATE GROWTH INDUSTRY –Statistics, FERA, Adding Mortgage Fraud to Your Practice and Mortgage Fraud Types - Part 2
According to acting U.S. Attorney Nora D. Dannehy, most mortgage fraud cases involve false representations on mortgage loan applications and inflated property appraisals. In fact, appraisal and mortgage fraud cause an estimated 83% of all mortgages to be legally problematic.
Bank America, Wells Fargo & Co., JP Morgan Chase & Co. and Citigroup Inc – some of the biggest players in the servicing industry – are all facing litigation.
In mid-July, the Federal Trade Commission and the California Attorney General’s Office – in conjunction with the state Real Estate Department and other agencies – jointly announced lawsuits, injunctions and fines against 189 companies across the nation, claiming they deceived troubled homeowners through mortgage modification and foreclosure schemes.
While Taylor, Bean & Whitaker Mortgage Corp. (TB&W), headquartered in Ocala, Florida was attempting to give a capital infusion to Colonial Bank of $300 million, federal and state officials raided both entities. TB&W’s website states they are “… a top 10 national wholesale mortgage lender.” The Wall Street Journal says they are the third-largest underwriter of FHA loans. Colonial Bank is the sixth largest bank in Florida. There relationship was incestuous. TB&W was trying to give Colonial Bank a $300 million capital infusion at the same time that Colonial Bank was a major funder of TB&W.
Los Angeles County Department of Consumer Affairs director Pastor Herrera, Jr. noted that fraudulent foreclosure prevention services were so bad and rampant that the category could top the list of consumer complaints for 2009.
Governor Pat Quinn of Illinois recently signed a mortgage scam defense bill that offers better consumer protection to those who are in search of home loans.
According to the Mortgage Asset Research Institute, the states with the most significant mortgage fraud problems in 2008 were Rhode Island, Florida, Illinois, Georgia, Maryland, New York, Michigan, California, Missouri and Colorado (in that order). Florida is the mortgage fraud’s epicenter and hypocenter. According to my conversations with anonymous sources at the U. S. Attorney’s office, Rhode Island’s position as first is an anomaly. Unfortunately, Florida is dubiously first.
Mortgage fraud may be pandemic and not just epidemic. It is pervasive in our society. As previously stated, Congress has devoted $522 million to prosecute mortgage fraud. The city, state and federal governments have devoted tremendous resources to fight mortgage fraud. It has brought down top companies and banks in America. It has changed the way that people act and think for the next generation.
Bank America, Wells Fargo & Co., JP Morgan Chase & Co. and Citigroup Inc – some of the biggest players in the servicing industry – are all facing litigation.
In mid-July, the Federal Trade Commission and the California Attorney General’s Office – in conjunction with the state Real Estate Department and other agencies – jointly announced lawsuits, injunctions and fines against 189 companies across the nation, claiming they deceived troubled homeowners through mortgage modification and foreclosure schemes.
While Taylor, Bean & Whitaker Mortgage Corp. (TB&W), headquartered in Ocala, Florida was attempting to give a capital infusion to Colonial Bank of $300 million, federal and state officials raided both entities. TB&W’s website states they are “… a top 10 national wholesale mortgage lender.” The Wall Street Journal says they are the third-largest underwriter of FHA loans. Colonial Bank is the sixth largest bank in Florida. There relationship was incestuous. TB&W was trying to give Colonial Bank a $300 million capital infusion at the same time that Colonial Bank was a major funder of TB&W.
Los Angeles County Department of Consumer Affairs director Pastor Herrera, Jr. noted that fraudulent foreclosure prevention services were so bad and rampant that the category could top the list of consumer complaints for 2009.
Governor Pat Quinn of Illinois recently signed a mortgage scam defense bill that offers better consumer protection to those who are in search of home loans.
According to the Mortgage Asset Research Institute, the states with the most significant mortgage fraud problems in 2008 were Rhode Island, Florida, Illinois, Georgia, Maryland, New York, Michigan, California, Missouri and Colorado (in that order). Florida is the mortgage fraud’s epicenter and hypocenter. According to my conversations with anonymous sources at the U. S. Attorney’s office, Rhode Island’s position as first is an anomaly. Unfortunately, Florida is dubiously first.
Mortgage fraud may be pandemic and not just epidemic. It is pervasive in our society. As previously stated, Congress has devoted $522 million to prosecute mortgage fraud. The city, state and federal governments have devoted tremendous resources to fight mortgage fraud. It has brought down top companies and banks in America. It has changed the way that people act and think for the next generation.
Thursday, May 27, 2010
MORTGAGE FRAUD UNFORTUNATE GROWTH INDUSTRY –Statistics, FERA, Adding Mortgage Fraud to Your Practice and Mortgage Fraud Types - Part 1
MORTGAGE FRAUD STATISTICS
Acting U. S. Attorney Jeff Sloman indicted forty-one “un-professionals” on mortgage fraud on July 28, 2009. These un-professionals face a variety of mortgage fraud charges involving $40 million in loans. The six separate cases epitomize the insidious nature of mortgage fraud from purchasers to mortgage brokers to real estate agents to lawyers, said Sloman.
Congress has appropriated $522 million in order to work towards higher mortgage standards. The money is to be spent in fiscal year 2010 and 2011 that is from October 1, 2009 to September 30, 2011. The majority of the money is for investigating and prosecuting mortgage fraud.
There are 2,440 pending FBI mortgage fraud investigations, as of April 2009. This is more than double from the past three years.
In total, mortgage fraud suspicious activity reports in 2008 were at 63,173. They indicated more than $1.5 billion in losses. So far, up to May 2009, there are 40,901 suspicious activity reports.
Mortgage fraud cases opened in 2009 equaled 965, as compared to 136 opened in 2004.
During the fiscal year of 2008, the FBI had 574 indictments and 354 convictions on mortgage fraud.
President Obama notes that last year, the Treasury Department received 62,000 reports of mortgage fraud, which is more than 5,000 each month.
The FBI has created sixty-five mortgage fraud task forces/working groups.
There are over 500 new internet pages a month regarding mortgage fraud.
Acting U. S. Attorney Jeff Sloman indicted forty-one “un-professionals” on mortgage fraud on July 28, 2009. These un-professionals face a variety of mortgage fraud charges involving $40 million in loans. The six separate cases epitomize the insidious nature of mortgage fraud from purchasers to mortgage brokers to real estate agents to lawyers, said Sloman.
Congress has appropriated $522 million in order to work towards higher mortgage standards. The money is to be spent in fiscal year 2010 and 2011 that is from October 1, 2009 to September 30, 2011. The majority of the money is for investigating and prosecuting mortgage fraud.
There are 2,440 pending FBI mortgage fraud investigations, as of April 2009. This is more than double from the past three years.
In total, mortgage fraud suspicious activity reports in 2008 were at 63,173. They indicated more than $1.5 billion in losses. So far, up to May 2009, there are 40,901 suspicious activity reports.
Mortgage fraud cases opened in 2009 equaled 965, as compared to 136 opened in 2004.
During the fiscal year of 2008, the FBI had 574 indictments and 354 convictions on mortgage fraud.
President Obama notes that last year, the Treasury Department received 62,000 reports of mortgage fraud, which is more than 5,000 each month.
The FBI has created sixty-five mortgage fraud task forces/working groups.
There are over 500 new internet pages a month regarding mortgage fraud.
Thursday, May 20, 2010
AVOIDING PONZI SCHEMES: Four Tips (Part 2)
DO YOUR HOMEWORK
To save yourself from falling into the clutches of a Ponzi Scheme, it is important to do your homework and review an investment with a comfortable level of skepticism. Request a copy of the promoter’s license in order to confirm you will be entrusting your hard earned funds to someone legitimate. Check their credentials to see if they have ever had their license suspended or revoked. Speak with your state, county or city securities regulator to confirm the answer. The number for your state securities regulator can be found in the government section of your local phone book or by speaking with the North American Securities Administrators Association at (202) 737-0900. A legitimate salesperson will be registered with the Financial Industry Regulatory Authority (“FINRA”), The Securities and Exchange Commission (“SEC”) or a state securities regulator. To verify a broker’s license and registration, including whether or not they have ever had a complaint filed against them, contact BrokerCheck at (800) 289-9999. Investment advisors can be verified by the SEC’s Investment Advisor Public Disclosure website at http://www.adviserinfo.sec.gov/IAPD/Content/Search/iapd_OrgSearch.aspx. Additionally, to check on an insurance agent, you can speak with your state’s insurance department, which can be located through the National Association of Insurance Commissioners (“NAIC”) at http://www.NAIC.org. Individuals that are sellers should be investigated through your state securities regulator.
DIVERSIFY
A diversified investment portfolio will keep you protected from completely emptying your pockets should you somehow invest funds in a Ponzi Scheme. No one enjoys losing money, but through proper diversification you suffer a much smaller blow. By spreading out your investments, it will be a softer pain to lose 5% of your funds than your life savings. No matter how good an investment may appear to be doing, the safest security measure is not to put all of your money in one place.
CONCLUSION
Ponzi Schemes have become a pandemic cause for concern due to the state of our current economy. Hopefully, this article has provided you with several elements that you will put to use to guard your finances. It is easy to fall victim to venom without knowing proper keys for detection and avoidance. Secure your savings with dynamic diversification, a sense of skepticism, heeding your homework and avoiding overpromised payouts.
To save yourself from falling into the clutches of a Ponzi Scheme, it is important to do your homework and review an investment with a comfortable level of skepticism. Request a copy of the promoter’s license in order to confirm you will be entrusting your hard earned funds to someone legitimate. Check their credentials to see if they have ever had their license suspended or revoked. Speak with your state, county or city securities regulator to confirm the answer. The number for your state securities regulator can be found in the government section of your local phone book or by speaking with the North American Securities Administrators Association at (202) 737-0900. A legitimate salesperson will be registered with the Financial Industry Regulatory Authority (“FINRA”), The Securities and Exchange Commission (“SEC”) or a state securities regulator. To verify a broker’s license and registration, including whether or not they have ever had a complaint filed against them, contact BrokerCheck at (800) 289-9999. Investment advisors can be verified by the SEC’s Investment Advisor Public Disclosure website at http://www.adviserinfo.sec.gov/IAPD/Content/Search/iapd_OrgSearch.aspx. Additionally, to check on an insurance agent, you can speak with your state’s insurance department, which can be located through the National Association of Insurance Commissioners (“NAIC”) at http://www.NAIC.org. Individuals that are sellers should be investigated through your state securities regulator.
DIVERSIFY
A diversified investment portfolio will keep you protected from completely emptying your pockets should you somehow invest funds in a Ponzi Scheme. No one enjoys losing money, but through proper diversification you suffer a much smaller blow. By spreading out your investments, it will be a softer pain to lose 5% of your funds than your life savings. No matter how good an investment may appear to be doing, the safest security measure is not to put all of your money in one place.
CONCLUSION
Ponzi Schemes have become a pandemic cause for concern due to the state of our current economy. Hopefully, this article has provided you with several elements that you will put to use to guard your finances. It is easy to fall victim to venom without knowing proper keys for detection and avoidance. Secure your savings with dynamic diversification, a sense of skepticism, heeding your homework and avoiding overpromised payouts.
Tuesday, May 18, 2010
AVOIDING PONZI SCHEMES: Four Tips (Part 1)
By Gary Opper, Managing Member, Levie-Opper, LLC
There are many tricks to avoid falling into the traps of Ponzi Schemes. With more and more scams occurring in our economy, it is wise to be aware of how to stay clear of their snares. This article will explore four of the most significant ways to detect and evade Ponzi Scheme pitfalls.
THE FRAUDSTER
An easy way to detect a Ponzi Scheme is taking notice when an investment opportunity sounds too good to be true. A fraudster will make lofty promises for a guaranteed return; however, with any legitimate business investment there is risk involved. Therefore, it would be impossible to be assured of receiving a specific profit and/or rate of return. Affluent businessman Donald Trump has stated, “Some of my best investments were ones I didn’t make.” Follow “The Donald’s” lead and skip investing in an offer that seems too good to be true.
FOLLOW YOUR INSTINCTS
A product that appears to be unique or exotic is a cause for concern. It is not wise to invest your money on an investment that seems too risky or is unfamiliar. Investments that offer a rising return or that claim to provide remarkably steady returns, regardless of the current market conditions, should give pause. Due to the current state of the economy, even the most solid investments will note fluctuation from time to time. Furthermore, any funds you receive back should be given consideration, as they may be funds that originate with other investors.
There are many tricks to avoid falling into the traps of Ponzi Schemes. With more and more scams occurring in our economy, it is wise to be aware of how to stay clear of their snares. This article will explore four of the most significant ways to detect and evade Ponzi Scheme pitfalls.
THE FRAUDSTER
An easy way to detect a Ponzi Scheme is taking notice when an investment opportunity sounds too good to be true. A fraudster will make lofty promises for a guaranteed return; however, with any legitimate business investment there is risk involved. Therefore, it would be impossible to be assured of receiving a specific profit and/or rate of return. Affluent businessman Donald Trump has stated, “Some of my best investments were ones I didn’t make.” Follow “The Donald’s” lead and skip investing in an offer that seems too good to be true.
FOLLOW YOUR INSTINCTS
A product that appears to be unique or exotic is a cause for concern. It is not wise to invest your money on an investment that seems too risky or is unfamiliar. Investments that offer a rising return or that claim to provide remarkably steady returns, regardless of the current market conditions, should give pause. Due to the current state of the economy, even the most solid investments will note fluctuation from time to time. Furthermore, any funds you receive back should be given consideration, as they may be funds that originate with other investors.
Friday, May 14, 2010
MORTGAGE FRAUD: UNFORTUNATE GROWTH INDUSTRY –Defending the Mortgage Fraud Defendant and Minimizing Sentencing Time - Part 2
MINIMIZING SENTENCING TIME
Once mortgage fraud liability has been concluded, the economic damages as a result of the fraud must be calculated. This is critical since the fine for mortgage fraud in criminal matters is based on guidelines. So, the amount of the loss will be a factor in determining the sentence. The economic loss or damage must be determined through the culmination of the loan transaction. Therefore, tracing is required from the inception of the loan through the ultimate sale of the property. The net assets need to be computed in the calculation of damages. Net assets (as referred to in federal sentencing guidelines) are the “assets remaining after payment of all legitimate claims against assets by known innocent bona fide creditors.”
In order to reduce sentencing time, the expert needs to be able to minimize the economic loss, as the two are directly related. I will share an actual case in which the computation of damages was key in the judge’s determination of the sentence:
The defendant was convicted of mortgage fraud in the origination of approximately 50 loans. These loans were fully documented so that there were credit reports, appraisals, loan applications and tax returns in the loan files. The loans were purportedly suitable to be purchased by Fannie Mae. In fact, Fannie Mae did purchase them from the lender. The fraud occurred in the quality of the documents, which were altered so that they would qualify to meet Fannie Mae standards.
Upon conviction, the defendant was offered a plea bargain of a sentence of 5 years, which was turned down. The criminal defense attorney did not accept the alleged loss by the prosecution. Instead, he chose to have an expert compute the actual loss, which is critical in a mortgage fraud case. The value of the homes that have been foreclosed must be evaluated extensively to determine whether the bank/lender/investor is actually damaged by the amount they alleged. Remember the bank/lender/investor is using the government to go after what it believes is the criminal that tricked them into the loan application process. A federal criminal defense attorney will have the ability to hire experts, accountants and investigators to get the monetary loss down to a minimum. The lower the monetary loss the lower the exposure to prison time under United States Sentencing Guidelines.
In advance of the sentencing hearing, I was hired by the defendant’s attorney to compute the loss and to testify at the sentencing hearing. I attempted to compute the actual loss on each loan and used an Excel spreadsheet to summarize the findings. Factors used in the computation were the principal amount of the loans, interest rates promised to the investor, time period from the purchase of the loan to the date of foreclosure, appraised values at time of loan and appraised values of each property after the foreclosure or what the properties ultimately realized. In some cases, there were actual gains to the investor in the foreclosures as property values had increased which more than offset any loss in interest or principal. The loan losses were summarized on a net basis to arrive at a total economic loss, which was testified to and presented, to the Court. While the prosecution had its own expert to compute the loss, the final ruling was a much lower loss than alleged. Whereas the prosecution was seeking a sentence of 12 years, the judge ultimately ruled for a sentence of 3 years. The criminal defense attorney and the client were pleased since the sentence was less than that which was offered in a plea bargain.
CONCLUSION
This scenario will play out more and more as the indictments continue in mortgage fraud cases. Trials will naturally follow. As the federal government has earmarked millions of dollars in the prosecution of mortgage fraud, the defense of those charged is creating an unfortunate growth industry.
Once mortgage fraud liability has been concluded, the economic damages as a result of the fraud must be calculated. This is critical since the fine for mortgage fraud in criminal matters is based on guidelines. So, the amount of the loss will be a factor in determining the sentence. The economic loss or damage must be determined through the culmination of the loan transaction. Therefore, tracing is required from the inception of the loan through the ultimate sale of the property. The net assets need to be computed in the calculation of damages. Net assets (as referred to in federal sentencing guidelines) are the “assets remaining after payment of all legitimate claims against assets by known innocent bona fide creditors.”
In order to reduce sentencing time, the expert needs to be able to minimize the economic loss, as the two are directly related. I will share an actual case in which the computation of damages was key in the judge’s determination of the sentence:
The defendant was convicted of mortgage fraud in the origination of approximately 50 loans. These loans were fully documented so that there were credit reports, appraisals, loan applications and tax returns in the loan files. The loans were purportedly suitable to be purchased by Fannie Mae. In fact, Fannie Mae did purchase them from the lender. The fraud occurred in the quality of the documents, which were altered so that they would qualify to meet Fannie Mae standards.
Upon conviction, the defendant was offered a plea bargain of a sentence of 5 years, which was turned down. The criminal defense attorney did not accept the alleged loss by the prosecution. Instead, he chose to have an expert compute the actual loss, which is critical in a mortgage fraud case. The value of the homes that have been foreclosed must be evaluated extensively to determine whether the bank/lender/investor is actually damaged by the amount they alleged. Remember the bank/lender/investor is using the government to go after what it believes is the criminal that tricked them into the loan application process. A federal criminal defense attorney will have the ability to hire experts, accountants and investigators to get the monetary loss down to a minimum. The lower the monetary loss the lower the exposure to prison time under United States Sentencing Guidelines.
In advance of the sentencing hearing, I was hired by the defendant’s attorney to compute the loss and to testify at the sentencing hearing. I attempted to compute the actual loss on each loan and used an Excel spreadsheet to summarize the findings. Factors used in the computation were the principal amount of the loans, interest rates promised to the investor, time period from the purchase of the loan to the date of foreclosure, appraised values at time of loan and appraised values of each property after the foreclosure or what the properties ultimately realized. In some cases, there were actual gains to the investor in the foreclosures as property values had increased which more than offset any loss in interest or principal. The loan losses were summarized on a net basis to arrive at a total economic loss, which was testified to and presented, to the Court. While the prosecution had its own expert to compute the loss, the final ruling was a much lower loss than alleged. Whereas the prosecution was seeking a sentence of 12 years, the judge ultimately ruled for a sentence of 3 years. The criminal defense attorney and the client were pleased since the sentence was less than that which was offered in a plea bargain.
CONCLUSION
This scenario will play out more and more as the indictments continue in mortgage fraud cases. Trials will naturally follow. As the federal government has earmarked millions of dollars in the prosecution of mortgage fraud, the defense of those charged is creating an unfortunate growth industry.
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