It is no surprise that retirees are often the targets of investment scams. But it is a surprise that the scammers are often empathy-challenged senior citizens themselves, and that is surprising. Attorneys and advocates for the elderly are reporting an increase in the number of elder scams perpetrated people their age, according to an article in Bloomberg BusinessWeek, “Senior Swindlers: A Sucker Retires Every Minute.”
Indeed, 20 per cent of Americans over the age of 65, 7.3 million of them, are financial scam victims, according to nonprofit Investor Protection Trust, which promotes shareholder education. MetLife Insurance Company says that financial scams cost the elderly over $2.6 billion a year. Why? Those targeted often have diminished capacity, are isolated, and have money.
In addition, elderly con artists seek out their own age group partly because senior citizens put more confidence in someone their age, says Denise Voigt Crawford, president of the North American Securities Administrators Assn. “It’s astounding that you can’t even trust older people anymore,” Crawford was quoted saying.
The article relates how one 84 year old a financial adviser was sentenced to five years in prison for stealing more than $100,000 from senior citizens and other clients who invested in promissory notes issued by his company. Another 74 year old was sentenced to 60 years for persuading retirees to invest more than $2.6 million into nonexistent bank-related investments. Still another 68 year old financial adviser pleaded guilty to fraud for selling elderly members of his church bogus promissory notes.
Others that offer to help former soldiers sign up for a $2,000-a-month benefit from the Veterans Affairs Dept. in Washington, have falsely told seniors they can only qualify if they liquidate their assets and purchase an annuity, a high sales commission product.
Still others have made the unsuitable recommendation to finance annuity purchases with a reverse mortgage, despite a prohibition on cross-selling them with other financial products. Other unsuitable investments being pushed on seniors include pools of life insurance policies. You need to be an actuary to tell whether such an investment is a good deal or not, and some of the life insurance pools contain policies that are fraudulent, having been previously sold to someone else.
Structured products, including principal-protected notes and five-year certificates of deposit linked to financial assets are also being pushed on the elderly. Seniors are told falsely that the notes risk-free, and that they can get their money out of 5-year CDs at any time. Investors in such notes issued by Lehman Brothers and sold by firms like UBS lost all or most of their principal when Lehman went bankrupt. Both the notes and the 5-year CDs are not worth what investors pay for them, a fact that is sometimes (but not always) reflected on their monthly statements.
It is often difficult to tell the difference between professionals who offer clear and unbiased financial advice and “confidence men” who sell unsuitable and fraudulent investments. The most dangerous scammers, when selling, inspire confidence and seem to be on the level. Unless you are truly an experienced and knowledgeable investor who has done due diligence and understands all the risks of a proposed investment, before investing, it may be a good idea to run it by a competent financial advisor who is totally unconnected with the seller and does not stand to benefit from the proposed transaction.
Page Perry is an Atlanta-based law firm with over 125 years collective experience representing investors in securities-related litigation and arbitration. While past results are not indicative of future success, Page Perry’s attorneys have recovered over $1,000,000 for clients on more than 35 occasions, and have aided clients who have been the victims of financial adviser abuse and scams. Page Perry’s attorneys are actively involved in representing elderly investors that have been victimized by financial frauds. For further information, please contact us.