Beware of investment scams

Be cautious of guarantees, know the red flags

Published On: Jan 16 2013 10:11:42 PM EST   Updated On: Jan 17 2013 06:20:00 AM EST

Hundreds of people across the country are learning the hard way that when someone promises you a huge, guaranteed return on your investment, that's a red flag.

“They can be risky investments,“ warned U.S. Postal Inspector Marydith Newman.

Postal Inspectors want consumers to know all investments carry some risk.  In one case, A&O Resource Management told investors they could be guaranteed big returns if they bought a life insurance policy product called "A Life Settlement."

“The return rates that were offered to people were very high in this instance between 12-15 percent on the investment,“ said Newman.

Hundreds of people were lured in. 

Newman says most of them senior citizens, “Who pulled money out of their 401Ks or refinanced their home to invest in A&O because they were told this was a guaranteed investment and they saw this as a lucrative thing to help them later in life.”

But it was a scam.  Eight hundred victims across the country lost $100 million.  And the con men spent all of it on luxury homes, several high-end cars, jewelry and antiques.  The victims were left with nothing.

"They’ve lost their life savings and they have to go back to work – have to find a job when it’s not easy to find a job," said Newman.

The two men at the top of A&O Resource Management are behind bars after receiving more than 45 years in prison for their roles in the scheme.  The take away: whenever you hear the word guarantee, check out the investment extra carefully.

The Better Business Bureau says other red flags to look for include:

Requires a large up-front investment. Untrustworthy schemers might try to convince investors to pay a lot of money upfront so they can get out of town with a large haul, rather than wait for the funds to trickle in.

Promises high returns for low risk. Every investment comes with a level of risk. Typically the amount of risk increases in line with the potential return on the investment. If the seminar is trying to sell an investment scheme that claims a high return with little or no risk, beware, even if it comes with the promise of a money-back guarantee.

Employs high pressure sales tactics. Seminar leaders often use high pressure sales tactics to get people to sign up without thinking it through. They might claim that there are only a few spots left or that you need to get in on the ground floor today to see the largest earnings. Any reputable investment company will let you take your time and do your research and will not pressure you into signing a check.

Relies on off-shore investments. Many hucksters try to give their scheme an air of sophistication by relying on overseas investments such as foreign currency, property, stocks and bonds. They also might claim—incorrectly—that you can avoid taxes by investing overseas.

Sounds too good to be true. At the end of the day, if the offer sounds too good to be true, it probably is. Always listen to your instincts because the potential payoff is rarely worth the risk.

For more advice on how to protect yourself from investment scams go to northeastflorida.bbb.org.