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Personal Finance: Sound Too Good? Hide Your Wallet

Personal Finance: Sound Too Good? Hide Your Wallet

Claudia Buck

Nothing like a Wall Street rally to pump up investors. Eager to recoup losses from last year’s market plunge, many recession-battered consumers could be eyeing the Dow’s recent recovery as a chance to dive back in.

But don’t take the leap with your eyes closed.

Investment fraud is always out there, and every year plenty of otherwise-smart people get suckered into phony investment scams.

Just ask the thousands of big-name investors and highprofile institutions that were financially devastated last December when Bernie Madoff’s $50 billion Ponzi scheme collapsed.

You could be next.

“People need to be aware: There are many mini-Madoff schemes that don’t make the press,” said John Gannon, president of the FINRA Investor Education Foundation in Washington, D.C.

What’s the tally? No current estimates are readily available, but investment fraud nationwide in 2000 exceeded $40 billion and losses from Internet- related stock fraud topped $10 billion, according to data compiled by the National White Collar Crime Center in Washington, D.C.

But in 2008 alone, those statistics were swallowed up by just two cases — Madoff and Texas financier R. Allen Stanford.

Here in Sacramento, the FBI’s white-collar crime unit is backlogged with 40 or 50 investment fraud cases involving thousands of investors — all tied to the market meltdown.

“When the market originally tanked and everything was imploding, Ponzi schemes were being uncovered at an unprecedented pace,” said Kevin Baker, head of the FBI’s financial crimes unit for the Sacramento and Central Valley region.

That pace has slowed. But Baker said the current economic environment, where investors are hungry to recoup losses and getting only measly returns from their CDs and money market accounts, is still ripe for abuse.

“This is when we see the fraudsters peddling two (types) of investment pitches: ‘risk free’ and ‘guaranteed return,’ " said Baker.

Whether pitched by a friend, offered at an investment seminar or sent by mail, those types of high-yield scams offering unrealistic returns are not uncommon.