In Focus

ank securities fraud is everywhere! It comes in all shapes and sizes, from the largest brokerage firms (remember Frank Gruttadauria at Lehman Brothers) to basement operators. Investors must beware.

And they should read "Confessions of a Scam Artist", which appeared in the August 9th Wall Street Journal. The confessions are by Eric Stein, a Ponzi Scheme operator who bilked 1,800 investors out of $34 million and who now is serving an 8-year criminal sentence. Among other gems, Stein says that, "Dentists love to be loved by people." Stein warns that those over 50 years old, whether or not they are/were dentists, must be especially on guard. Among other things, he cautions investors not to rely upon others to vouch for the legitimacy of an "investment". After all, he observes that these "references" will be either legitimate victims of the fraud (having received other people's money as part of the Ponzi Scheme), or fraudsters pretending to be investors, but actually on the take.

Many scams, like Stein's scam, leave trails of victims who have lost their savings. But consider this. Lucky for investors, this month SEC regulators were successful at shuttering a "first time" affair: a con job that sought to impersonate an entire mutual fund complex! Operated on the Internet, this hoax played on the legitimacy of Pax World Funds, even using parts of its mutual fund prospectuses. Only a few investors were duped, losing a scant $400.

Thanks, securities regulators!

— James J. Eccleston
FinancialCounsel.com