What you need to know about investing your money safely, avoiding fraud
There’s no free lunch, Iowa’s fraud watchdog says, but he’s offering just that to warn investors to stay away from financial schemes.
“Double-check before you invest,” said Nick Gerhart.
As Iowa’s insurance commissioner, he oversees the state’s securities industry as well as its insurance companies. That means his staff hears from people who have written checks for thousands, hundreds of thousands or even a million dollars to white-collar crooks.
Gerhart praised people who have the courage to report being defrauded so the crooks can be stopped.
For example, he said, Martha-Jo Ennis, a retired school teacher from Marion, Iowa, has made her case public in the hope that others will check with state authorities before investing.
Ennis lost her retirement savings and money from the sale of her family farm to an unscrupulous financial adviser. The adviser pleaded guilty to theft and securities fraud after bilking the retiree and other Iowans out of more than $350,000.
Gerhart said the bad actor used charm and a professed Christian faith to gain retirees’ confidence.
Another rogue financier sold promissory notes that guaranteed returns of more than 20 percent a year. Gerhart ordered him to pay more nearly $615,000, plus interest, to the 24 people he hornswoggled. Gerhart said it’s not certain whether the man will pay. In many cases, the money has been spent before frauds are uncovered.
Such losses can often be prevented by calling authorities before putting money into proposed investment plans. He urged people to call the Iowa Insurance Division at 877-955-1212, or the Nebraska Department of Banking and Finance at 877-471-3445.
To check investments and investment advisers online, visit doublecheck.iowa.gov, the Financial Industry Regulatory Authority at brokercheck.finra.org or the U.S. Securities & Exchange Commission at investor.gov.
Gerhart’s free-lunch warning is part of the state’s Fraud Fighters campaign, which presents programs around the state. The programs are paid from fraudsters’ fines and fees from securities companies that do business in the state.
The 12th and latest anti-fraud event will be Thursday at the Mid-America Center in Council Bluffs. Besides Gerhart, officials from the Iowa Attorney General’s Office, the Iowa Department on Aging and the Senior Health Insurance Information Program will talk. Nebraskans can attend, but some of the topics discussed and resources given will pertain specifically to Iowans.
Listening to the officials’ pitches is the “price” of the lunch at the forum. Up to 200 people can attend.
Gerhart said crooks may target people from Iowa and Nebraska, especially those 60 and older, because they live in a region that’s known for openness and honesty. “It’s not necessary to be ‘Iowa nice.’ It’s not necessary to hand your money to these people,” he said.
Even people who have heard fraud warnings need to be careful, Gerhart said. Today’s perpetrators update their schemes so they appear legitimate and make reasonable-sounding pitches.
During the period of high prices for oil, for example, they convinced victims to put up money to finance phony drilling rigs.
Today, fraudsters may play on people’s worries about low interest rates on bank deposits and promise higher returns for promissory notes or other “investments” that aren’t registered with state authorities. Some crooks develop Medicare or Affordable Care Act scams.
Gerhard said certain red flags should trigger a phone call to authorities. He said to look for terms and situations such as:
»“No-risk” or “low-risk.”
» “Guaranteed” return on investment.
» Pressure to make a decision quickly before the “opportunity” ends.
» A friendly person who seems interested in your financial position.
» Slick but vague and confusing promotional materials.
» Predictions of future riches.
» Written-in promises on investment documents.
The elderly shouldn’t fear reporting losses or asking their relatives about investment proposals, he said.
Gerhart said legitimate financial managers don’t resent being checked out by state and federal regulators and are open about their credentials. They are required to offer investments that are appropriate for their clients’ experience and financial sophistication and make sure people understand what they are doing.
People should get written information about an investment and take their time checking out the details, he said.
Yet even well-informed people have fallen victim to reasonable-sounding proposals that could have been unmasked by checking with authorities, he said.
Gerhart said people can learn a simple lesson from Omaha investor Warren Buffett. If you don’t understand it, don’t invest in it.