GALLAGHER: BEWARE OF FINANCIAL SCAMS TARGETING RELIGIOUS AND COMMUNITY GROUPS
Florida’s Chief Financial Officer Tom Gallagher today cautioned Floridians to be on the lookout for con artists who claim to be members of the same religious or community-based group and use that affiliation to defraud group members. Gallagher said “affinity” fraud includes a variety of Ponzi schemes in which affiliation is used to gain trust.
About 400 Floridians allegedly invested about $15 million in fictitious “prime bank notes” in this scheme that has now been placed in receivership. According to the U.S. Securities and Exchange Commission, Learn Waterhouse Inc. operated a Ponzi scheme that defrauded 1,900 investors in 39 states out of $56.5 million in 2003 and 2004. Learn Waterhouse Inc. allegedly depended on investments from new recruits to pay off earlier investors and diverted millions of dollars to the personal use of its officers and directors.
“It’s unconscionable that con artists would exploit the faith, trust and friendship among members of a church,” Gallagher said. “Floridians should be wary of people who ask them to invest money and use their shared background as their primary marketing tool. Always thoroughly research an investment and its salesperson.”
The civil suit against Learn Waterhouse Inc. claims that its operators, one of whom used the fact that his father was a pastor, lured members of Florida churches into the scheme. They allegedly also quoted the Bible to make sales.
“It’s not just investment scams that can hit religious and community groups hard. Some fraudulent charities may also target groups they know have a history of giving back to the community,” Gallagher said, offering the following tips on how to avoid affinity fraud:
- Beware of anyone who drops names or uses testimonials from other group members.
- Obtain a prospectus detailing the risks in the investment and procedures to get your money out.
- Ask for professional advice from a neutral outside expert not in your group—an accountant, attorney or financial planner—to evaluate the investment.
Before investing any money, call the Department of Financial Services to find out if they are registered to do business in your state. Ask if the investment is allowed to be sold. If one or the other is not registered, inquire further or walk away.
So far this year, the Office of Financial Regulation, housed within the Department of Financial Services, has received 111 complaints or referrals regarding unregistered securities.
If you suspect that you may be the victim of fraud, call the Florida Department of Financial Services Helpline at 1-800-342-2762.
The Department of Financial Services also has a Verify Before You Buy web page at www.MyFloridaCFO.com to provide consumers with information they can use to verify they are dealing with a licensed entity and salesperson. Gallagher said Floridians should invest with Florida-licensed investment brokers and companies.