MADISON, Wis. - The lure of get-rich-quick offers can be tempting, but with the majority of these promises delivering nothing more than rip-offs and fraud, state regulators are warning consumers to be on the alert. State regulators report that administrative orders and fraud prosecutions have increased in the last few years. There is no shortage in the types of scams perpetrated Ponzi schemes, nine-month promissory note programs, Internet fraud, and even in today's high-tech world, the telephone boiler room scam operations. Wisconsin DFI Secretary John F. Kundert warned that, "Today's get rich quick schemes may be a short-cut to financial failure and not fortune. Today, there are more scams than ever and unwitting investors lose billions of dollars annually to investment fraud." One of the latest scams in the state involves nine-month promissory notes and has, according to DFI's Division of Securities, cost 150 Wisconsin investors more than $4 million in the last two years. Every year, the North American Securities Administrators Association issues its list of top investment scams consumers should be on the alert for. In 1999, the top 1- scam, ranked in order or seriousness or prevalence were: * Internet fraud: about half of state have programs to monitor the Internet for fraud and they regularly team up with other regulators for Internet "surf days." Regulators warn consumers to never invest based on a "tip" on the Internet without doing independent research first; * Investment seminars: investors should be wary of expensive seminars where so-called experts promise to make them rich quick. Recently, seminar promoters have begun offering seminars and courses promising to turn investors into successful stock "day traders." Regulars warn that the only people who get rich quick from these types of seminars are the con artists offering them. * Affinity group fraud: perpetrators of this type of fraud take advantage of consumers natural trust of people who are like themselves. Targeted media advertising is used to identify potential victims, often with offers of employment or financial advice. Typically promoters steal the money and no investments are made. * Abusive sales practices: state and other securities regulators have made progress in their fight against "microcap" stock fraud. * Telemarketing fraud: new so-called "boiler rooms" open constantly, selling illegal or fraudulent investments. Investors can protect themselves by using telephone answering machines to screen their calls and not answering solicitations by cold-calling salespeople. * Promissory notes: this is a growing area of fraud, regulators report. These notes are supposedly "insured" and backed by real assets. In fact, they're only backed by a worthless promise to repay. These "investments" are often sold by life insurance agents and they offer high interest rates to investors. * Viatical investment scams: described as "one of the hottest new investment products and one of the riskiest," viatical contracts are interests in the death benefits of terminally ill patients. The insured gets a percentage of the death benefit in cash. * Entertainment fraud: con artists target investors hoping to get rich by buying into the next hit movie or other entertainment product. * Ponzi/pyramid schemes * Illegal franchise offerings Kundert said investors need to remember that "time is their friend when it comes to accumulating wealth. There are very few legitimate opportunities that can make us rich quickly, and the risks involved may be just too great for the average investor." -
ekingoff@cutimes.com
