Sophisticated Thief

by Mindy Wood & Stacy Brasher

Sharen knew something was wrong. She could feel it through her body.

It wasn’t the instant gut-punch of a purse violently snatched from her arm – it was something much more sinister that raised the hair from the back of Sharen’s neck. In fact, it was merely by accident that she learned her 88-year-old mother was a fraud victim, hooked by a sophisticated thief targeting the elderly.

Blending into today’s society are cunning salesmen all around us wearing suits and driving nice cars with briefcases full of promises to make you more money than you ever dreamed.

When Sharen had a friend look at her mother’s statements, they discovered a broker moved more than $400,000 into an annuity. The only problem – her mother’s circumstances didn’t warrant such a risky investment. Even worse, the excessive activity in the account was stripping away her mother’s savings in fees, commissions and losses. Since Sharen and her siblings were unaware of their mother’s investments, it was a terrible shock.

With stock market woes and a down economy, some financial advisors are costing investors their college funds, retirement savings, and estates by either acting irresponsibly or committing fraud. As they ignore investment regulations and restrictions for elderly or newly retired people, some shark brokers are after big fish commissions in fast moving stocks or questionable annuities.

When Sharen and her brother brought the matter to their mother’s attention, it created another problem. “We went to her house and told her this broker was basically a thief; that he’d been moving her money around to get huge commissions. She didn’t believe us and she got very upset with us,”
said Sharen.

Although the family was able to recover $400,000 from the insurance agency without penalties, it was an “exhausting and horrendous” two-year emotional rollercoaster full of painful dips and stressful twists, according to Sharen.

The fraud strained their family relationship, but they remained sympathetic to their mother, knowing her reaction was a common response from victimized senior citizens who defend their competency. Investment Recovery Advocates co-founder, Terry Weber understands. “We all got into this business because our mothers had been fraud victims and we wanted to help others,” she said. “We all make mistakes, but seniors are afraid to tell their kids, for fear they will be put away.”

Investment Recovery Advocates (IRA) is a legal-services firm dedicated to recovering funds for investors who have lost money due to their financial advisor’s actions. The firm is armed with former securities commissioners and attorneys, accountants, and securities experts who evaluate cases and work on behalf of the investor.

Sharen’s story is not uncommon, and a reminder that the average investor should pay very close attention. If an investor suffers significant losses due to an advisor’s bad advice or negligence, often they are eligible to pursue recovery according to IRA. “Most people don’t even realize recovery is possible,” said Weber. “It keeps happening, but no one wants to talk about it. The more we talk about fraud openly, the more transparency and accountability is brought to the table.”

When investigating, IRA goes straight to the party responsible for overseeing the advisor’s actions. Edmond resident Randall Calvert, co-counsel for IRA, said elderly people are targeted frequently. “They’ve got investable funds at a stage in life when they have money. Often these brokers live out of state and the whole thing is done over the telephone. A lot of times brokers will do this through lunches,” he said. Too many investors attend the free lunch only to realize they will dearly pay for it.

“Other cases are the result of mismanagement of their accounts, making recommendations to the investor they are not qualified to make. Quite often what you see is a correlation between high commission products and investments that are not suitable,” said Calvert.

Weber and Calvert said although victimized investors are embarrassed and reluctant to hold
their broker responsible, they should know most cases never see a courtroom. “They feel inexperienced, intimidated when they call their broker for an explanation,” said Weber. “Eighty-percent of these cases are settled quietly by arbitration,” said Calvert, “a simple exchange of documents in a hotel conference room. It’s a private process.”  

According to Weber, the Edmond area is especially targeted as a wealthy community. “There are a lot of people in Edmond who have been clearly taken. Several senior citizens went to a lunch, were sold an annuity or bonds, then the company went belly up and they lost everything. The broker is still out there selling,” she says.

She cautions residents to watch for signs. “If you’re losing a large amount of money, say 30 percent, in what should be safe retirement funds, that’s a red flag. When a broker tells you not to worry, doesn’t call you back and doesn’t explain things to you – these are other signs,” she warns. “You need to open your statements and find out what your losses are for the year. Make your advisor explain why, not what they expect or hope to see in the future.”

Calvert suggested investors act quickly. “If you have a nagging feeling, get a second opinion. Investment Recovery has many retired brokers who review statements for suspicious activity at no charge.” Weber says, “There’s so many wonderful advisors who are committed to their clients. You just have to be careful who you select.”
Sharen also offers valuable advice for concerned children who may be worried their mother or father are being taken advantage of in this uncertain financial climate. “Sit down with your parents and ask them to help you understand what they have done with their investments just in case something happens,” she says. “When families communicate, the adult children can better protect their parents.”

“With just a little bit of information, we could have probably stopped this from happening,” said Sharon.