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funding for this program made possible by the investor protection trust the state of Alaska division of banking and securities and AARP Alaska in today's program we'll hear the remarkable story of Bill Burke an Alaska victim of financial fraud who got as money back in a rare consumer victory now here's your host and Seacrest hello everyone and welcome to AARP Alaska joining us is Christy nailers Securities and enforcement chief and David Newman senior examiner for the state of Alaska division of banking and securities Christine David thank you again for joining us wonderful to have you here first we've got a lot to talk about in this program but I want you to give an overview of what the division of banking and securities does the division of banking and securities regulates 12 different financial programs financial institutions from banks credit unions trust company's securities mortgage lending money service businesses payday lenders and others were very busy and I want to bring up a slide of what your mission statement is our mission is to protect and educate consumers of financial services and promote safe and sound financial systems and that consumer protection is very important to us in addition we have a lovely photo of your boss that's Kevin Anselm our boss in our we're going to talk about scams in this program scams that target seniors unfortunately and tragically one gentleman in Anchorage got caught up in a scam and David I know that you in George um also the division of banking and securities you had an opportunity to interview mr. Burke if you would tell us a little bit more about about this gentleman well I handle a lot of the enforcement for the division and so we came across mr. Burke mr. Burke was a Korean War veteran former boxer a successful commercial fisherman this point mr. Burke was about 78 years old he was in at this time pretty poor health so he would be alone a lot during the day his daughter would come in in the mornings and visit him but a lot of times he would be alone and so day he got a call from a firm in New York that was interested in having him invest with them and so mr. Burke said he would be interested in that so I can back up a little bit what happens is in mr. Burke's case and in a lot of cases for elderly people a firm will call them and there would be an agent on the phone wondering if they're interested in investing with them they say and if the person says yes what happens is that person doesn't even talk to them it's kind of the lead person to get somebody on the hook and so the next thing that happens is they develop what's called a qualified lead card and they pass it along to another agent who might be a little more talented better at selling its selling and there wasn't another individual that called mr. Burke and explained to him that they had this great deal for him and they actually promised him a safe investment that was promising returns of sixteen to eighteen percent and so obviously to mr. Burke you know anytime you can get a safe investment for sixteen to eighteen percent that sounds like a great deal so he said okay let's go ahead and go with it and a few days later FedEx package arrived in the mail and there was an investment opportunity for twelve thousand dollars what mr. Burke didn't realize at the time was that this quote safe investment was actually for what are called junk bonds which are bonds that are rated just above default so anything can happen where they can fall and that the bonds would be worth nothing but mr. Burke didn't realize that he thought they were safe investment they were promised to be a safe investment and he actually based on some of the materials he was sent thought that he was investing with the Royal Bank of Canada and so obviously in his mind that seemed like a safe investment for him more like a savings account so he sent the twelve thousand dollars in three days later he gets another fedex package where they're asking him to invest another fifteen thousand dollars so he goes ahead and sends in another to them for fifteen thousand dollars and so the total amount that he invested at that time was twenty-seven thousand dollars and unbeknownst to him those things started to drop in value very quickly but at the same time and what's even more terrible is that this company in New York continued to try to get money out of mr. Burke they sent him two more offers one for fifty thousand dollars and one for $80,000 the $50,000 one had no credit rating to it whatsoever the second one was even worse it was for something called the zero coupon bond which doesn't pay any interest until it matures and this coupon bond would not mature until the year 2019-20 5420 5420 54 when mr. Burke would be 119 years old luckily mr. Burke did not invest in those two things so he didn't invest the extra 130,000 but you can see how this would set up they set somebody up to call they find somebody on the hook they tell them that they're very safe investments and then the money starts dropping and dropping a job now he so he heard safe he heard sixteen to eighteen percent he thinks it's going to a bank in Canada so he's he's buying into the whole thing and these sales people are reading off a script right and you know they're very good at selling there was urgent see to the message that it was you something you got to get on right away well we can send you the materials right away we'll send you that they even sent him the FedEx package to send it back to them so that they could get her overnight very important right away yeah get all those documents back they filled out you know the forms for him and we did discover in the course of our investigation that they were selling these as safe investments and that senior agents at this company global arena capital were in fact telling the junior agents to tell this as a safe investment how did this this gentleman come to the attention of the division of banking and securities well at first what we came to realize after speaking with mr. Burke and a couple of occasions was that when he started losing money and started getting these reports that he was losing money he was very ashamed and embarrassed and he didn't share it with his daughter that this was happening but luckily he came around and decided to tell his daughter and he wrote a hand written in pencil note to the division of banking and securities basically saying I've invested with his people I'm starting to lose my money they won't call me back and I don't know what to do about it can you help me and so at that point we immediately initiated investigation to see what was going on alright let's take a look at part of that interview okay so it at no time during the first or the second call when they talk to you did they ever did they discuss with you the fact that the sixteen percent return that they were talking about was based on this particular corporate bond and that that bond was rated Triple C minus which is one step above the fault and now hey hey the only thing I can remember is a it said and I went to get sixteen to eighteen percent entering did they ask you where this money had come from that you were invested yeah the next question is not really a question they just it talks about the account source and this was a cold call you've never heard of them before they call it on the telephone and so those bonds were supposed to mature in 2050 for that's what it says on the total work there I know and what's your current age seventy seventy-nine okay that's amazing what is the first thing the division did with mr. Burke's case well the first thing we did was to try to get as much information from mr. Burke as we could any paperwork that he received to them any memories of people that he spoke to any notes that he had taken down from anything and from that information that we were able to obtain we reached out to this particular firm as for any information from them that they had on his account so we were able to put you know compare the information that he had versus the information that they had and then we reached out to them and started interviewing the agents that had contacted him what and Bill was was great at taking notes he kept a file he had a little notebook by his phone so that when he had phone calls he wrote down who he was speaking with the day at the time this was completely important to our investigation he saved all the paperwork that they ever sent him and he had handwritten notes on that and we we probably wouldn't have been able to get what we did in the outcome without his assistance Mary what responsibility does the salesperson or the management of global arenas capital have in their relationship with mr. Burke well I mean obviously when they contact him they have the obligation to find out how much money he has his age what his risk tolerance is to find out what investments are suitable for him obviously they didn't do that at all in this particular instance the paperwork that they sent back said mr. Burke had a much higher net worth than he actually did there was also a box check that mr. Burke was supposedly interested in high-risk and speculative investments when of course that's the exact opposite that he was looking for he was looking for conservative investments and obviously the promises for the sixteen to eighteen percent returns were completely deceptive and misleading so they violated both those things by explaining those things in just one phone call to mr. Burke what red flag see you were there in the room what red flags went off right well I would say just obviously right off the top any promise of a safe investment of sixteen to eighteen percent it's crazy especially these days when any sort of regular investment in a safe in your savings account or in a certificate certificate of deposit which is the CD is anywhere from 12 at the most two percent these days and these people are offering sixteen to eighteen percent safe returns that's a huge red flag what's the end of the story for what was the what was the end of mr. Burke story well we did take a cease and desist order against the firm and a number of its principles and issued a fine against them which we hope to collect 175,000 dollar fine against those individuals and we were able to negotiate a settlement with one of the individuals who was involved in this case to repay mr. Burke the money that he lost he luckily had some still in his account at the time that we intervened and they release that back to him but there was about seventeen thousand dollars of loss and that was repaid to mr. Burke and Dave and I had the pleasure of delivering that to him ourselves so you went to his home and handed him the check yes well what was his reaction he was thrilled and he actually got a little emotional and his daughter got a little emotional but in on a personal site for us it was one of the most rewarding things in my professional career so far to be able to give him that check and to see the reaction of them and he had no idea yeah yeah he had no idea we wanted to make it a surprise so we could just bring it over once 12 you will be right back with Kristin Taylor and david newman after this break before making any investment check it out your state securities regulators should be the first call you make before you turn money over to a broker or investment advisor in Alaska call toll free eight eight eight nine to five to five to one it's your money it's worth a phone call to check it out we're back with Christie nailer and david newman with the division of banking and securities state of Alaskan thinking about mr. Burke it's you know it's not uncommon to have a senior who's home alone and the telephone is right there and you know he may have an eager to talk to someone and have a conversation so and unfortunately the fraudsters know this so when how do we get ahead of that well recommend any time you get a cold call with some kind of investment opportunity or something like that just saying of the phone you won't hurt their feelings I promise but if you do want to talk to them and that's you know fine don't be pressured by high pressure sales tactics they usually have a sense of urgency in the sales pitch that you need to make a decision right now commit to something on the phone they may want to take money over the phone don't do that ask for everything in writing ask them to send it to you ask you know that you have some time to look at it and then when you get everything in writing take it to a trusted family member take it to your investment professional or take it to us and we can point out some of the red flags that maybe or we can at least check to see if something it's registered if the sales people are on the up and up and so forth now in addition to your office as far as checking out a broker you've got some recommended there are two recommended sites that we want to share the first one is broker check FINRA org what type of information can be found there so broker check can tell you the employment history of someone where they're registered to do business what type of business that they're allowed to do do they sell insurance products and securities do they just sell securities things like that and it can also tell you most importantly regulatory and disciplinary history including customer complaints with a narrative of what happened with the complaint how it was resolved any actions enforcement actions that state or governor all government agency has taken or if the firm has taken disciplinary actions against them that's all in there can't tell you if they're going to do a good job managing your money but that will help you make a good decision about whether you might want to hire them and then tell me about this second place that is under sponsored by the SEC in the North American security administrators in association it's it's very similar to broker checked or thinner it's just another website to the Securities and Exchange Commission on SEC gov it's called the investment advisor public disclosure database it's usually referred to as I APD and you can go on there and get a lot of information about investment advisors and again same type same type of thing everything the Christie and all that stuff will be on there and if Kenny people are thinking about it go there call you folks right dad those are the three things i would say we recommend to people to most obviously call us we're always here we're always willing to talk to people anytime if anybody has a question about really anything regarding baking insecurities kristy and i are here obviously other examiner's or investigators in our office are there but we also recommend the broker check and the guy epd very good a silly question is is this type of check free can can people go on this and no church absolutely okay all right yeah so were the calls to us and sadly we have another example of fraud and a short video this time it's a real estate Ponzi scheme so let's take a look at that video after all he had prepared my taxes for two or three years he said if I could give you a real low risk moderate return investment would you be interested in well it sounds good to me I lowers the risk it says almost no risk the original investment was 34,000 and change and at the end of six years I was supposed to have already received back in payments forty-one thousand dollars and change that looked real good to me I mean this is solid right I mean I can't lose I invested over thirty four thousand dollars I received 11 hundred dollars back and change and the rest was lost at the time it was about half of what i had saved and there's nothing i can do about it grin and bear that's tragic yeah this was a major ponzi scheme a real estate ponzi scheme out of New Mexico New Mexico Securities Division has produced a great video about this scheme that happened there and you know with this so that you you notice some things that are interesting is that his tax preparer he heard referred the investment to him that he heard about it through a friend or a trusted a trusted person and that's something that you often see in these types of fraudulent scams so you're speaking of affinity fraud exactly an affinity fraud you know one that's common that people think o
is religious groups that you hear about things through your church organization but it can be any type of affiliation you know ethnic racial it could be an alumni association is yeah educational of any of those and those of you know it's it's that some people get into an investment they hear about it and it sounds like a great deal because they're starting to get returns and they want to share it with their friends and why wouldn't you you know of course you would and so a lot of times the people who are being scammed help further the scam unknowingly because they are sharing it with their friends and bringing more people into the scam that's that's exactly what happened with this case in New Mexico and it brings up the old saying if it's too good to be true it probably is and that's very similar to stuff we see all the time even if your friends are saying that they're getting high returns things look great a lot of times your antenna goes up and says wait a second this seems too good and a lot of times it is too good to be true because when they're promising you high returns with no risk that's just that doesn't happen it's that's just not available so people really need to when they think something sounds a little fishy to again reach out to us or reach out to other services that are available to check in on these things and just don't go ahead and trust somebody because they're your family or their in your you know religious group or anything like that when we were preparing for the program Christian you talked about the senior population why we're often a target well the United statistic that we often hear is that 10,000 people become seniors enter the senior community every day and that you know Alaska has a very high per capita senior population we also have a very high income compared to or you know a wealth compared to the lower 48 and you know the fraudsters know that they hear that and people you know seniors typically own their own home outright they have a little bit of money they may have a pension they may have investments that they've had for a long time and they are target's let's talk a little bit of a lack of due diligence led to some investor harm and this one's called Peru case tell me about that this is another one of the cases I worked on we had an individual resident here in Alaska who just searching around on the internet and found somebody who like to talk about commodities and gold and silver trading and stuff like that in bonds in bonds and all certain thing all those different type of things and he found that the website very interesting and this person was offering to invest money for people and so this person unfortunately thought they were doing their due diligence because he looked up the company name and he looked up one of the state websites and it actually showed a valid business license a valid corporate corporate registration but what he failed to do was to look into contact us and look into the broker check or the SEC gov and so what you can think is really good due diligence that you're doing unfortunately leads can lead to a bad result because what happened is this individual ended up investing wonder 120,000 120 thousand dollars and it turned out that what he thought was a legitimate operation out of Nevada turned out to be a fugitive who was running this website out of Peru and he just so happened to be a fugitive that was wanted by the FBI for a large Ponzi scheme case that he had run a few years earlier back on the East Coast Oh My heavens so the victim in this case thought they were doing due diligence by checking out the corporate business the business license a but they didn't take that one next step right by checking on FINRA by calling your office and asking those important question by checking out if this individual basically was who he says he was whether he was properly registered and whether the firm was properly registered as well was but was he using his real name he wasn't know he was going by a very generic name r and he was calling himself robert williams which you know that could be anybody but you know the the person he really was named Eric Bartoli and if he had known that name he would have really easily tied him to the Ponzi scheme but you know some red flags were that the investment company that he was using and he himself you know he's trading commodities there's another different agency that regulates that outside of securities and then the Securities also you know he would need to be fin or registered and he wouldn't have found that and it would have been a big red flag let's talk about Gia's capital what was involved there okay this was another one of my enforcement cases that I worked on this was an individual out of California who was promised a great investment in what was supposed to be like a seafood processing company up here in Alaska and of course that sounds good because you know salmon halibut Alaska it sounds like a great thing but what was most interesting about this one and what other people have to realize as well is that in addition to the investment this person was offered they were also promised a leadership role in the company with a salary I think it was promised to be the president with a pretty high salary so it was another way for these people to get this individual to invest when in fact there was no job available and the forty thousand dollars just disappeared so he was asked to invest 40,000 you will become the president of this new startup company yeah he said we the sales people here in Alaska said if you that if you you know give us us forty thousand dollars then we can you know tie up some loose ends with our financing and we have a company over here who's ready to give us 10 million dollars and all we need is just this 40,000 to get off the ground and then we'll get 10 million dollars and you'll have a great job as the president of this multimillion-dollar company and DD company never promised 10 million dollars for the sefer did you check out anybody no not in this instance he did not he thought everything was valid he he had a written contract in front of him that were signed by the parties that looked right everything looked in order for him the opportunity sounded great it sounded exciting for him so he just didn't do the due diligence so he was out 40 grand yes Wow I want to put up your contact information please if anyone has any questions contact you under any circumstances there any circumstances like I mentioned we regulate a lot of different financial industries so even if it's not something that we regulate we can get you to the right place we have a lot of connections so please give us a call wonderful I'd like to thank our guests Christy nailer and david newman of the deed alaska division of banking and securities it was wonderful having both of you here AARP is a nonprofit nonpartisan member organization with more than 87,000 members in alaska AARP is dedicated to enhancing the quality of life for all as we age we leave positive social change and deliver value to our members through information advocacy and service thank you for watching AARP Alaska funding for this program made possible by the investor protection trust the state of Alaska division of banking and securities and AARP Alaska
