SCAM WARNINGS: Only Amateurs [Con Artists] Make It Sound Too Good to Be True!!!

HAT TIP:  The Vigilant Investor

This is a very long read, includes some amazing articles about how “Experienced Hedge Fund Mangers” were easily conned by very sophisticated Con Artists!!!

Pre RV and Post RV, you MUST be Vigilant about who and what you invest your hard earned money in to.  If you want to keep your money, you should PREPARE yourself NOW by reading as many articles and stories you can!

One of the biggest lessons is to learn to ask the right, logical questions!!!  One of the stories in this linked article talks about an Investor who was presented by con artists who had representing themselves as “the General Counsel” of a very large Teacher’s Investment Group – but, because the man had asked the Receptionist, was that really Mr. “X”, she replied “no, I don’t know who that was” and she immediately called the police!!!  You need to read this full article in The Vigilant Investor.

~ Mr. IQD

One of the many articles at The Vigilant InvestorBeing Anyone You Want to Be

Marc Dreier had impressive credentials. After earning an undergraduate degree from Yale and a law degree from Harvard, Dreier worked at some of New York’s most prestigious law firms before opening his own firm, Dreier, LLP, in 1996. Dreier employed 250 attorneys and had a biweekly payroll of more than $2.5 million. Works by Picasso and Warhol lined the walls of his Park Avenue law offices. Dreier attracted the best and the brightest and appeared to be able to afford to pay the lavish salaries that he doled out to attract top legal talent.

In 2002, the pressure of maintaining both his law firm and his lifestyle led Dreier into the investment business. He began selling promissory notes, some of them issued by New York realty company Solow Realty. The only problem was that Solow Realty knew nothing about it.

With his Ivy League education and his apparent success, Dreier had no trouble attracting investors. In fact, 13 hedge funds bought almost $400 million in promissory notes (paying purported interest rates of between 7 and 12 percent), and individual investors snapped up what the hedge funds did not buy.

Dreier was running a con that would ultimately raise more than $700 million, lead to his arrest on July 13, 2009, and land him in prison until 2026. If you have never heard of him, it is only because Bernard Madoff still dominated the headlines with his record-breaking scam.

Dreier is now inmate number 70595-054 at the Sandstone Correctional Facility, 100 miles northeast of Minneapolis, Minnesota. He will be 86 years old when he walks out of prison, if he lives that long. But his legacy will live far beyond that day. Dreier’s con taught scamsters two of the most audacious tricks that I have seen in more than 20 years of interviewing con men and wading through the wreckage of their schemes.

In November 2008, Dreier was soliciting a sale of a $33 million promissory note to a New York hedge fund. Dreier told the mark, the manager of the hedge fund, that an Icelandic hedge fund would issue the note and a large pension fund out of Ontario, Canada, would guarantee it. Dreier had communicated with the mark only over the telephone.

Expecting the mark to make at least some attempt at a due diligence investigation, Dreier arranged for him to speak to the supposed guarantor of the note as well as to an official of the hedge fund based in Iceland. But how could he arrange a conversation between the mark and two people who did not exist except in Dreier’s imagination? Enter former SEC enforcement attorney Robert Miller.

Robert Miller served on the enforcement staff of the SEC from 2000 to 2005. In exchange for $100,000, Miller agreed to pose as a representative of the Icelandic hedge fund and as a representative of the Ontario Teachers’ Pension Plan, which supposedly guaranteed the note. Dreier provided Miller with cell phones that matched the dialing codes for Reykjavik and Toronto and an outline detailing what he should say in response to specific questions. The mark made the calls, and Miller fulfilled his end of the bargain. Dreier wired him $100,000.

But Miller’s telephonic theatrical debut was underwhelming. The mark was still unconvinced. So Dreier hatched a scheme to arrange a face-to-face meeting with the mark at the offices of the $100 billion Ontario Teachers’ Pension Plan. On the pretense of seeking legal work from the organization, Dreier scheduled a meeting with its general counsel one hour before his scheduled meeting with the mark. As is customary, the two men exchanged business cards. When the meeting was over, Dreier remained in the conference room. When the mark arrived, Dreier met him in the lobby, introduced himself as the general counsel for the Ontario Teachers’ Pension Plan, and handed the mark the general counsel’s business card.

The trick was bold, and it might have worked had the mark not been so diligent. The hedge fund manager who met with Dreier that day deserves a spot in the Due Diligence Hall of Fame. Before leaving, the hedge fund manager asked the receptionist, ‘‘Is that the general counsel?’’  ‘‘No,’’ she said, and called the police.

Dreier, who was lingering in the conference room to maintain the illusion that he worked for the organization, was arrested by the Toronto police and charged with impersonation. When he was released on bail and returned to New York five days later, FBI agents were waiting for him. His six-year charade was over.

As it turns out, the scheme would have collapsed even if the hedge fund manager had not been so diligent. One of Dreier’s hedge fund clients had called Solow Realty to inquire about an overdue interest payment, and Solow learned for the first time that Dreier had commandeered the firm to enrich himself.

Seemingly obvious questions unmasked a sophisticated scam. And yet 13 hedge fund managers failed to ask the right questions before giving Dreier $400 million. You might think that it would take a team of forensic accountants to uncover a scam as large and well disguised as Dreier’s, but it doesn’t. A few probes can determine whether a seemingly successful investment business is a castle on a strong foundation or a house of cards.

Ask stupid questions. Talk to the people from whom the profits supposedly flow. In Dreier’s case, it was Solow Realty. A single phone call to confirm that Solow had issued the promissory notes would have unmasked the scam in its first week. As to how to unmask one person impersonating another, use the Internet. Look for the Facebook page, the LinkedIn page, or the Twitter account for the person you supposedly just met. You might find a photograph there. If not, LexisNexis, in addition to the courthouse records information it can give you, will give you a date of birth. Does that information match the person you just met, or was the person you met 20 years older than the person she claimed to be?

Why didn’t anyone else ask the ‘‘stupid’’ questions earlier in the Dreier case? Dreier gave the answer in a <em>60 Minutes </em>interview: ‘‘It was clear to me that the more you showed people that you didn’t need money, the easier it was to attract money. So having the trappings of success was a very important part of the plan.’’

Dreier is right: It’s easier to attract money if you look as if you don’t need it. But asking questions aimed at unmasking someone who appears to have earned vast success seems like the height of effrontery; the kind of insult that would have sent eighteenth-century gentlemen to their dueling pistols. The vigilant investor resolves that dilemma in one of three ways: (1) by asking those questions, politeness be damned; (2) by hiring someone to ask those questions; or (3) by saying no to the investment. Following any other course is dangerous.

There are many more “similar” scam stories on their website, please take a few minutes to read them, and please share this post from The Vigilant Investor and their website with your Dinarian Friends!  🙂


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