WASHINGTON – Take it from one who knows: Senior citizens increasingly are being bilked in investment scams and they need to be vigilant, reformed con man Barry Minkow told senators Wednesday.
“There’s this environment for fraud … the perfect fraud storm” engulfing seniors concerned by weak returns in the stock market or shortfalls in their retirement income, Minkow said. He served 71/2 years in prison for defrauding investors in his ZZZZ Best carpet-cleaning company in the 1980s.
People 60 and older make up 15 percent of the country’s population but account for an estimated 30 percent of fraud victims. With baby boomers swelling the ranks of retirees, regulators expect an increase in financial scams preying on them.
The Securities and Exchange Commission has put together a new national strategy for protecting older investors, and is working with regulators in the securities industry and in Florida to crack down on misleading sales seminars for seniors.
“If seniors take away one message … I hope they remember this: It took you a lifetime to save your retirement money. Take five more minutes to make the (phone) call that could protect it,” said Sen. Herb Kohl of Wisconsin, the senior Democrat on the Special Committee on Aging, who chaired the hearing.
The call Kohl mentioned should be made to state securities regulators to check out the credentials of those offering investment deals and to ensure they are licensed to sell securities.
As a teenager, Minkow started ZZZZ Best in the garage of his family’s San Fernando Valley home in California. At 21, he made headlines as the youngest person in American history to take a company public.
But he made headlines of a different sort when he was convicted of 57 counts of securities, credit card and mail fraud in a scheme that prosecutors said cost victims more than $100 million. ZZZZ Best claimed to be making a fortune restoring water- and fire-damaged buildings. Investors were given badges and hard hats and taken on tours of alleged restoration projects in abandoned buildings with which the company had no connection.
Minkow’s prison term was one of the stiffest ever given to a white-collar criminal.
Now a pastor at Community Bible Church in San Diego, Minkow also works undercover to help executives detect corporate crime as an executive of the Fraud Discovery Institute in San Diego, which he co-founded. Federal investigators credit him with helping to break up several alleged scams, including what they call one of the biggest Ponzi schemes in U.S. history: Orange County, Calif.-based Financial Advisory Consultants’ alleged $814 million swindle of investors.
Ponzi schemes rely on attracting new investors to pay returns to current ones.
“People will stop at nothing … to defraud,” Minkow said. His advice for seniors: “Don’t invest out of fear or greed.”
Appearing with him was Ruth Mitchell of Columbiana, Ohio, who said she and her husband, Len, lost $100,000 in an alleged investment scam operated by accountant Barry Korcan in Pennsylvania.
Korcan pleaded guilty in federal court in January to mail fraud and tax evasion charges. Prosecutors say he took $11.3 million from clients, using his personal relationships and the clients’ trust in him. He told them he was investing in something called Guardian Investments, which in reality was just a bank account that he controlled.
“Barry Korcan started Evergreen Hills Development in 1990 and we bought our lot from him in 1996,” Ruth Mitchell recounted at the hearing. “It is now apparent that he was stealing from us for two years when we paid him another $30,000 for our lot. He sat at our dinner table and socialized with the entire neighborhood.”
Mitchell’s advice: “Investigate before you invest.”
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