PROGRAM: Dave Penland introduced the speaker for today, Fred Joseph, Director of Securities for the State of Colorado. Licenses stockbrokers and financial advisors. Registers securities for local companies. Biggest part of job is chasing suspected securities fraud.
Best example of securities fraud is good old Charles Ponzi of Ponzi scheme fame. He promised 50% returns in 45 days. Eventually the scheme dried up and fell apart. He was convicted, served 3 years and got out to start another scheme. He got deported and died in 1955 in South America.
March 3 rd is Ponzi's birthday, which is celebrated at the Securities office to this day, since this is the man that gave them a job.
Can pursue cases three different ways: Administratively, Civilly or Criminally (through the DA's Office).
One administrative case was a scam to sell you an investment in ATM machines. Another was a Georgia firm that did business in Colorado without first registering their security with the Department.
Oil and Gas partnerships that were sold in Colorado were shut down for failure to register the security. There is a lot of doubt as to whether the wells actually exist. A hedge fund out of Parker was sued for taking in money without registering the security. They were promising 18% return.
A company out of the Springs took in $10 million in paper on mobile homes. Again a failure to register did them in. A hedge fund in the Springs was sued because the money was not going where it was supposed to be going. Namely to a $5 million corporate jet.
Word of warning, if you get a call out of Boca Raton, FL then run. (Boca Raton means “Mouth of the Rat”, honestly). Boca or Long Island, NY are both hotbeds of investment fraud.
Sued a company out of Denver called Mile High Capital Group. They were supposed to build 200 duplexes but instead they only build 50 and spent the rest. Originally sued them civilly and then went after them criminally in conjunction with the Denver D.A.
Prime bank notes. 25-50 biggest “prime” banks. Trade among themselves with secret securities. Scam goes like this... we have an “in” and can make you up to 40% a month. It is a scheme that has been around since the 1970's and is on par with the Nigerian letters that you get in your e-mail.
Don't think you are immune. Joe Coors got sucked into putting $20 million into one of these schemes. He managed to escape with 18 million. A cool 2 million to earn a valuable lesson.
Will Hoover is a good artist that most people have heard of. He took in about $20 million and spent most of it. All the money came from investors. Was indicted for 48 counts of securities fraud and is currently serving a 100 year sentence. Twenty five 4 year sentences served consecutively.
Securities fraud is a class 3 felony. You get 4 to 12 years per count. In the case of Mr Romero who went back after his first stint in prison for a second bite at the apple he got an additional 16 years from the judge for aggravating circumstances.
He has been threatened, but the guy was stupid enough to leave the threat on his voice mail. Not exactly rocket scientist material.
Beware expectations of large profits, low risk, urgency, and confidence.
Norm Smith is another famous con artist that took 1000+ investors on 4 different continents for close to $76 million dollars. His investors were lucky in that they got about 36 cents on the dollar back. Most people are lucky if they get a nickel.
These schemes come to the attention to the department usually when the scheme is falling apart. Sometimes they find them via newspaper advertisements or on the Internet. Rarely they will find them by undercover work and that sort of thing.
How long does it take to close one of these things? Some go quick, some take years. If they plead out it will be quick, but if you go to trial it can take quite a while.
Why sometimes the A.G. And sometimes the D.A.? It depends on the level of local interest. Local DA's will go after cases more aggressively then the state AG if it involves local interests (and voters.)