Thursday, December 18, 2008

Consumers Can Detect and Fight “Madoff-Style” Ponzi Schemes:

(BUSINESS WIRE)--Thousands of large and small investors will suffer from Ponzi schemes such as those perpetrated by Bernard Madoff and Lou Perlman – but few investors will know how to avoid them in the future or how to recover any of their losses, says Lunelle Siegel, executive director of the Association for Fraud Recovery and Prevention (AFRP) (

“Ponzi schemes are insidious and can go on for years, and affect both the wealthy and not-so-wealthy,” says Siegel. “For most investors, the chance of a direct recovery is very slight. However, there are special tax code provisions that will allow them to recover up to 30 percent of their losses. AFRP can help them understand their options.”

AFRP is a consumer advocacy association formed to investigate fraudulent schemes, inform members of scams, provide information on how to evaluate opportunities before investing, help individuals recover a portion of their losses and advocate for stricter penalties for those convicted of investment fraud.

Following are some tips AFRP offers for individuals considering an investment:

* Is the annual return the same in up and down markets? Many fraudsters promise a number and don’t change it despite the volatility of the market and how investments react to it.
* Is the investment salesman registered in your state or with the Securities & Exchange Commission (SEC)? Ask to see their license. Individual states and the SEC govern the sale of investments in their jurisdictions. If the salesman isn’t registered, he or she is likely a scam artist.
* Is the accounting firm that is providing financial statements for the investment registered with the state in which they are located? Legitimate sounding frauds often include audited financials from a fictitious CPA firm.

“The old saying that if something seems too good to be true, it probably isn’t, is often right,” says Siegel. “Sadly, some investors will fall prey to investment scams more than once – a situation that can be devastating for older individuals living on a fixed income. And in today’s difficult economic times, there’s less and less leeway for loss in anyone’s portfolio.”

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