Simon Read: Don't get caught out by con tricks
Saturday 30 January 2010
There's something quite reassuring to read that hard man Jack Bauer has become a victim of a Ponzi scheme. Actually, it's not Jack who's been caught out but Kiefer Sutherland, the actor who plays him in the hit television show 24. He was persuaded to hand over $869,000 – around £540,000 – to a steer-roping promoter for a lucrative cattle deal which was set to net the actor a handsome quick profit. But the cattle never appeared and the cash vanished.
It may sound like the script of an action thriller, but the story bears all the hallmarks of a classic scam. The promoter Michael Wayne Carr – whose last two names could have been a clue as to the type of person he is – tricked many others into investing in his scheme by, first, building up their trust. With Sutherland, Carr had earlier turned a $550,000 investment into $685,000 in just 30 days. It looks like the cash was simply the actor's own money returned to him with someone else's investment added into the pot to make it look like a profit had been made.
Such tactics are typical of Ponzi schemes. Early investors get paid from the investments of later investors while the people who set them up build up a juicy nest egg by creaming off whatever cash they can. They're named after an Italian immigrant who made millions in the early part of the 20th century by persuading Americans to hand him their cash on the promise of returns of as much as 400 per cent. The schemes collapse as soon as the well of new investors funding payouts dries up. And when they do, the result is misery for many, as happened with the $65bn scheme run by the disgraced US financier Bernie Madoff, who was caught and jailed for 150 years in 2009.
There's a simple way to spot a Ponzi scheme. If you're offered a deal that looks too good to be true, it is almost certainly a scam. But people are still caught out all the time, probably through a mixture of greed and the attraction of a "once in a lifetime" opportunity. Take the 1,750 investors who were conned out of £25,000 each in an £80m buy-to-let property fraud a year ago in the North-east of England. It was only an investigation by the Serious Fraud Office that uncovered the scheme and saved the investors from being suckered into handing over even more cash.
My advice? check out the Government's scam-warning site at www.consumerdirect.gov.uk/watch_out/ to read about a whole range of cons and tricks all designed to trick you out of your cash. Learn more about such scams as pyramid selling, land banking, advance fees, chain letters and phishing frauds and you'll be less likely to fall prey to the crooks.
Meanwhile, a new pressure group has appeared in our midst promising to save savers. Their mission? To achieve fairer treatment, political recognition and policy support for people who save. The group – whose website is at www.saveoursavers.co.uk – says it will take the battle to politicians. Launching in an election year obviously makes sound sense, and if the group can get the scandal of low-paying accounts and the poor treatment of savers on to political agendas, then that is to be applauded. But with the people behind the group including an entrepreneur, a priest and a television nutritionist, they appear to be a well-heeled bunch who probably haven't had to struggle in the just-passed recession. Hmmm. I hope they're not just another political group blowing hot air.
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