MARKET SCAMS

[thepennyking]

The Latest in Investment Frauds

By Jacquelyn Lumb, Guest Columnist
The Federal Trade Commission and the North American Securities Administrators Association have undertaken a campaign to combat telemarketing investment fraud and pyramid schemes, in a project named "Field of Schemes." The campaign announced that it has so far taken 61 legal actions against alleged scam artists.

An estimated $40 billion is lost each year to telemarketing fraud, including telemarketing investment frauds. The Field of Schemes project, which is aimed at both stopping the fraud and educating consumers, is comprised of securities regulators from 21 states and two Canadian provinces.

Among the securities-related scams uncovered was a film production company claiming to have generated 500 percent returns for investors on earlier films. The named producer was an actual movie producer, but none of his films had won the awards claimed by the defendants, nor had they generated the substantial profits that were claimed. The defendants also oversold the partnership units, thereby diluting the investors' stakes.

In another case, a company promoted a basketball training machine used by athletes to improve their game. One woman who had seen the product being demonstrated invested $6,000 after being promised an 8 percent return and 600 shares. She has yet to receive any payment or securities three years after her investment.

Another firm projected earnings of up to 600 percent per year on investments in a partnership that featured a virtual shopping mall on the Internet. Shoppers could select products live and online in a format similar to television shopping channels. The defendants, however, left only 15 percent of the investment funds in a shell corporation, having kept the rest for themselves. The shell corporation still has no operational Internet shopping mall.

Additional scams have included the sale of promissory notes to finance international projects, investments in gold mines, new technology for ATM machines, and a jewelry pyramid scheme. Teresa Schwartz, deputy director of the FTC's Bureau of Consumer Protection, noted that fraudulent investment promoters often follow the headlines to find ventures that will appeal to consumers. New technologies, especially the Internet, are fertile ground for fraud, she said.

Other frequent tactics include the projection of enormous profits with little risk, false claims about track records, slick promotional packaging and high-pressure sales pitches. Schwartz urged consumers to always get a second opinion before investing and to refuse to be pressured. Research the company and the offering, she advised, and always be skeptical of unsolicited calls about investments.

http://www.toolkit.cch.com/columns/wealth/fraud.asp