"Get Your Finances Ready for Retirement"-Scam-Proofing Your Savings
Monday, March 30, 2009SUZANNE PRATT: From admitted swindlers like Bernie Madoff to alleged scam artist Allen Stanford, financial fraud is alive and well, even in a bear market like this. The scenario is all too familiar, eager investors looking for solid returns, but losing their entire retirement savings. So as we continue our series, "Get Your Finances Ready for Retirement," Connie Hicks looks at what retirees can do to avoid being victimized.
CONNIE HICKS, NIGHTLY BUSINESS REPORT CORRESPONDENT: This is how Larry Collier envisioned retirement. After years working for a telephone company he and his wife Leslee prepared to live out their lives at this mini-farm in Sarasota, Florida. To be sure they had enough money, he invested more than $400,000 in retirement savings with a local hedge fund manager. But then
LARRY COLLIER, RETIREE: Poof. Disappeared!
HICKS: Collier means both his money and the hedge fund manager, Art Nadel. Nadel skipped town, just as he was indicted for bilking his clients out of millions of dollars. He was eventually arrested, but the money he allegedly took hasn't been recovered. While the amount pales in comparison to the $50 billion Bernie Madoff admits to taking from investors in his Ponzi scheme, it's all the same to the Colliers.
COLLIER: I lost 80 percent of my total investments that I'd made.
HICKS: Clients of both Madoff and Nadel never suspected anything. Their statements seemed to show they were making money. And for years, the reports Collier got from Nadel's office indicated strong returns.
COLLIER: In May of 2005, performance year-to-date was 7.32 percent. Performance since inception was 360 percent.
HICKS: Many con artists target retirees because it can be easy to get their trust. And Bentley University professor and attorney Steve Weisman says referral by a friend often sets them up.
STEVE WEISMAN, AUTHOR, "THE TRUTH ABOUT AVOIDING SCAMS": You get recommended to someone who seems to be promising something that's nice. He's a person like us. We like him. He's likeable. And con artists are always very, very likeable.
HICKS: Retirees Frank and Hazel Peters found that out.
HAZEL PETERS, RETIREE: We had a couple of men that led us to believe they were honest folks and they were honest businessmen and they were going to treat us properly and they didn't.
HICKS: The Peters didn't have money to invest, but needed a new water system at their Florida home. They say they were talked into buying one on an unsuitable payment plan that nearly drove them into bankruptcy.
PETERS: When you're paying $3,000 and $6,000 for a water system and you find out that when it was put in, that it was broken and you don't know it at the time and you're making the payments.
HICKS: Steve Weisman says many scams happen because people don't read or don't understand the contract.
STEVE WEISMAN, BENTLEY UNIVERSITY PROFESSOR: If you can read the fine print, go through the rules and the regulations and see what the terms of your contract are. Very often you'll find that you're not getting your money's worth. You're being taken advantage of.
HICKS: Experts suggest to avoid becoming a victim of scams, don't accept just the word of a salesperson, check it out. Make sure the person or company is registered with Federal, state or industry regulators. If you're investing through an investment manager, see if your money and securities are held by an independent custodian, rather than by the manager's own office. And always be wary if the deal sounds too good to be true.
There's another easy way: go to Google, type in the name of the person or the company and the word scam and see what comes up. The Colliers have learned, the hard way. They're now cutting back on expenses, offering less help to their children with college expenses. But they hope their story will prevent other retirees from getting scammed out of their hard- earned money. Connie Hicks, NIGHTLY BUSINESS REPORT.
