Your Economy (No Politics)

[Bullwinkle]

More gold fraud likely as economy swoons-US agents
By Grant McCool
03.05.09, 04:33 PM EST


FRAUD-GOLD/PROBES:More gold fraud likely as economy swoons-US agents

NEW YORK, March 5 (Reuters) - Investigators expect to uncover more fraud involving gold in a recession that has already exposed several Ponzi schemes and other crimes, law enforcement officials with the U.S. Postal Inspection Service said on Thursday.

Agents with the federal agency have been working with the FBI, U.S. prosecutors and other investigators on a series of scams from Ponzi schemes in financial investments and oil futures to gold coins all over the United States.

"It's the same scam but they are just selling different products," Ronald Verrochio, Postal Inspector in Charge of the New York division of the U.S. Postal Inspection Service (USPIS), said in an interview.

He spoke to Reuters at a seminar marking national consumer protection week to warn the public about being bilked by seemingly attractive investments.

"A lot of these scammers develop their scams following current economic trends and we're bracing to see gold being used as a carrot," USPIS spokesman Al Weissmann told the seminar, which was attended by government agents, prosecutors, attorneys and victims of fraud.

The price of gold hit an 11-month high above $1,000 an ounce on Feb. 20, just below a record of $1,030.80 reached a year ago as investors sought a safe haven from financial market turmoil. Spot gold was trading at $927.90 on Thursday.

New York division agents have helped uncover various scams involving selling unwitting investors gold coins, which turn out to be a fraction of their purported worth.

Postal inspectors investigate mail fraud, enforcing more than 200 U.S. federal laws that pertain to the mail. They investigate corporate and securities fraud cases when mail is suspected of being used to commit a crime.

"It's a very old adage but if it sounds too good to be true, it probably is," said Verrochio, whose agency has been known as the "silent service" for its relatively low profile.

In 1920, its agents played a role in catching Charles Ponzi, the swindler who gives the name to the scheme in which early investors are paid with the money of new clients. Ponzi pleaded guilty to mail fraud after his arrest.

Verrochio's agents were lead investigators in a purported $370 million Ponzi fraud and arrest in January of investment firm head Nicholas Cosmo on New York's Long Island. He declined to discuss the 12 or so current investigations in his region.

The agency has played only a peripheral role in the case of once-respected Wall Street trader Bernard Madoff, who authorities say confessed to a $50 billion global Ponzi scheme over many years, but Verrochio said the Madoff case ignited people's suspicions about other investments they had.

"Some of the suspicions they might have had but didn't act on them, then we started to get some additional phone calls," he said.

http://www.forbes.com/feeds/reuters/2009/03/05/2009-03-05T213327Z_01_N05333215_RTRIDST_0_FRAUD-GOLD-PROBES.html