For retirees, investment fraud hits too close to home
BY JOHN GANNON, PRESIDENT OF THE FINRA INVESTOR EDUCATION FOUNDATION
Ruth and Len Mitchell were defrauded
out of their retirement savings by their
accountant—someone they socialized
with and trusted to handle their finances.
Barry Korcan was their neighbor, kept
the books for Len’s business and did
the Mitchells’ personal taxes. So when
Korcan—who also ran an investment
company—offered to help the retirees
invest $100,000 in real estate bonds, the
Mitchells wrote him a check.
Over time, many of their friends and
business associates began investing with
Korcan, too. Although they received
statements from Korcan detailing their
earnings, there was no investment company and there were no real estate bonds.
And after the IRS uncovered Korcan’s
$11 million Ponzi scheme, he was convicted for mail fraud and tax evasion.
The Mitchells lost their money.
How did Korcan do it? First, he spent
time getting to know his victims to
understand what motivated them and
when they would be most susceptible
to the con. Then, he applied several
tactics commonly used by fraudsters to
gain their trust and take their money.
He used his status in the community to
set himself up as a financial expert—
a tactic known as “source credibility.”
He then used his relationship with the
Mitchells to gain access to other friends
and acquaintances. This is referred to as
“social consensus.” Since the Mitchells
were investing, their friends thought, it
must be a good opportunity.
Today, the Mitchells are dedicated to
fighting fraud and reminding others
about the importance of researching
potential investment opportunities—and
the seller—in two easy steps:
First, ask questions. Ask if the person
selling the investment is registered with
FINRA, the Securities and Exchange
Commission or your state regulator. Ask
if the investment is registered with the
SEC or your state.
Second, follow through and check the
answers. Don’t just take their word for
it. Check the information you receive
with the proper authorities. Find contact
details at SaveAndInvest.org/55Plus.
Ruth is one of several investors profiled in
Trick$ of the Trade: Outsmarting Investment
Fraud, a free documentary offered by the
FINRA Investor Education Foundation
to help investors understand the persuasion tactics used by fraudsters and defend
against fraud. Order your DVD today:
or call (866) 973-4672.
We lost our retirement savings. Don’t let it happen to you.
Two years before retiring to Arizona,
my husband and I were defrauded out
of our retirement savings. Our longtime accountant presented us with what
sounded like a promising investment
opportunity. We learned the hard way
that it was all part of a complex Ponzi
scheme. There were no real investments—
just empty promises of future wealth.
In the end, we lost more than $100,000.
If it happened to us, it can happen to
you. Be sure you understand what you’re
investing in and take steps to protect
yourself by checking to see if your financial
professional and investments are registered.