Consumer Alert: Be wary of who's investing your money - KTIV News 4 Sioux City IA: News, Weather and Sports

Consumer Alert: Be wary of who's investing your money

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One financial advisor.  $33 million in investments and all of it gone.  How did it happen?  The answer boils down to too much trust and not enough scrutiny.

"Monroe Beechi was in charge of the large investment pool for Amish folks who were interested in saving for retirement. He invested it in the stock market.  Unfortunately, he invested in a lot of high risk stocks," said Terrence Sullivan, US Postal Inspector.
 
The victims in this case were members of the Amish community who lost their retirement money because they trusted one of their own.
 
"The consumer is less likely to ask those really hard due diligence questions when they have the philosophy 'I go to church with them. I bowl with them so I know them and they aren't going to rip me off,'" said Sullivan.

Postal inspectors call this affinity fraud.  Mr. Beechi told investors they were invested in government bonds.  There was no risk and they always would be guaranteed a return.
 
"In actuality, Mr. Beechi was investing in a lot of high risk stocks like the dot coms, the penny stocks and the junk bond market," Sullivan said.
 
Mr. Beechi's high risk investing took a hit.  In the late 1990s, he lost 50% of the portfolio - more than $16 million.

"Instead of telling people in his community that he made some bad investments, he just continued to solicit new investors into, and he used the new investor to pay dividends to the old investors rather than tell investors he made bad stock investments," said Sullivan.
 
And when he began making unusual bank transactions, the SEC alerted postal inspectors.  Once he heard inspectors were talking to victims, Beechi realized he was in trouble and filed for bankruptcy.
 
"Many of them felt it was internal issue within their community, and they were uncomfortable talking with investigators," Sullivan said.
 
Postal inspectors say always be wary of "guaranteed returns."
 
"It's very hard for one person to offer 10% when the regular market is offering 3%. If they say no risk it's whoa back up. The only way you get high return is with high risk," Sullivan asserts.

Monroe Beechi was sentenced to more than six years in prison for mail fraud.
Usually a crime like this would result in more prison time, but the judge made an exception when it was shown that Beechi did not profit from the scheme or use the money to improve lifestyle.  He set up the ponzi scheme rather than admit he lost his clients money.

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