Print

Finance >> Browse Articles >> Debt

Finance >> Browse Articles >> Government Finance

Finance >> Browse Articles >> Retirement

Rate

As Economic Suffering Spreads, So Do Financial Scams

As Economic Suffering Spreads, So Do Financial Scams

By Tony Pugh | McClatchy Newspapers

Gas and oil schemes flourished during last year’s oil price spike, Joseph said. This year, he’s seeing gold mine investment scams trying to take advantage of the lure of higher gold prices.

While profit-starved investors are vulnerable to these scams in the current economic downturn, there is a bright spot: Ponzi and pyramid schemes are also more likely to unravel in bad economic times as more investors try to pull their money out and find there’s none there.

That’s what happened to James M. Nicholson, whose investment firm in Pearl River, N.Y., allegedly defrauded hundreds of investors out of millions of dollars by misrepresenting the value and profits of numerous hedge funds he managed.

The Securities Exchange Commission claimed Nicholson even created a phony accounting firm to provide bogus statements about the funds’ financial health.

Last week, the SEC moved to freeze the assets of Nicholson and his company, Westgate Capital Management. Calls to Westgate weren’t answered and messages couldn’t be left.

With consumer desperation creating more opportunity for fraud, the Financial Industry Regulatory Authority issued an “Investor Alert” last week on how to avoid investment scams. The information outlines a variety of tactics commonly used in securities fraud. It also provides links to sites that help people conduct background checks on investment professionals, learn more about the investments they’re considering and how to file a complaint if necessary.

“Using these tools can help investors shut the door on any con artists who might come knocking,” said John Gannon, the regulatory authority’s senior vice president for investor education.

At the Senate hearing on consumer protections, Rockefeller, the committee chairman, cited concern over a number of growing abuses in the area of personal finance. These include foreclosure rescue scams that collect hefty fees, but don’t keep families in their homes; and debt collectors who use deceptive practices, such as threatening consumers with imprisonment, to compel payment.

Travis Plunkett, the legislative director for the Consumer Federation of America, testified that some debt-settlement firms that collect fees often fail to negotiate reductions on credit-card debt. While Pamela Jones Harbour, a commissioner with the Federal Trade Commission, said that some credit repair companies promise to remove negative information, such as delinquencies, from credit reports, even though they can’t do so if the information is accurate.

“Unfortunately, experience teaches that some bad actors will seek to take advantage of consumers when they are down,” Jones Harbour said.

And people are indeed down.

In the third quarter, the percentage of borrowers who are at least 60 days late on their mortgage loans increased for the 7th straight quarter, Harbour told senators last week. And in January, late payments on credit cards hit record levels.

To better protect consumers, Harbour said that new laws are needed. Specifically, she recommended giving the FTC rulemaking authority to declare certain financial practices unfair or deceptive; allowing the FTC to obtain civil penalties for dishonest acts and to sue in federal court to obtain those penalties.

©2009 Yellowbrix, Inc.


Rate
Govcentral School Finder

Save time in your search for a degree program. Use GovCentral's School Finder to locate schools online and in your area.

Get Info

* In the event that we cannot find a program from one of our partner schools that matches your specific area of interest, we may show schools with similar or unrelated programs.