SEC Fights Financial Scams Targeting Seniors
RENEE MONTAGNE, host:
On Fridays we focus on your money. Today, America's elderly make up 15 percent of the population. They're victims of investment fraud 30 percent of the time. Next week, federal and state regulators, as well as consumer activists, will discuss this problem.
NPR's Jim Zarroli spoke to an Ohio woman who lost most of her savings to fraud.
JIM ZARROLI reporting:
Ruth Mitchell(ph) still has trouble believing the way it all happened, how the man she trusted with her money ended up cheating her.
Ms. RUTH MITCHELL (Investment Fraud Victim): They sat at our table for dinner and were guests at my husband's surprise 75th birthday party in 1999. And I never, ever thought Barry Korcan was capable of stealing money.
ZARROLI: Mitchell and her husband, Len, were close to retirement when they invested more than $100,000 with a company called Guardian Investments. The company was run by Barry Korcan, her husband's long-time accountant. Korcan and his wife were also neighbors, with an expensive lifestyle that seemed to testify to their financial smarts.
For a while the Mitchells received regular interest checks from Guardian. Then one day last year the checks stopped.
Ms. MITCHELL: So Len called the office and asked one of the girls, well, you know, we haven't gotten our income tax things, and we also haven't gotten the interest check from Guardian. And she said, I have no idea what you're even talking about. And this office is shutting down for good this Friday. And I'll tell you, that day was just awful.
ZARROLI: It turned out that Korcan had stolen some $11 million from more than three dozen clients, many of them over the age of 60. Last month Korcan was sentenced to seven years in federal prison after pleading guilty to mail fraud and income tax evasion.
Securities and Exchange Commission Chairman Christopher Cox says cases like these appear to be on the rise.
Mr. CHRISTOPHER COX (Securities and Exchange Commission): There are a great many professional scam artists who prey upon seniors. And each rock we turn over seems to uncover bad stories.
ZARROLI: People of any age can become victims of investment fraud, but regulators say seniors tend to have easier access to retirement funds than younger people. Scam artists know that and take advantage of it.
Seniors also have time on their hands to listen to investment pitches. One of the most frequent venues for fraud these days is the so-called investment lunch. Elderly people are promised a free meal if they show up to hear an investment pitch at a restaurant or hotel. At one series of seminars, elderly people were encouraged to put their money in notes with a guaranteed return of 5.5 to 8 percent. The victims invested a total of about $150 million. Much of it came from people's IRAs.
The AARP's Sally Herme says a lot of senior citizens are susceptible to pitches like this.
Ms. SALLY HERME (AARP): They are very hungry for information. They're very concerned that their money is going to last. They want to be sure that they're going to have enough money to maintain their lifestyle, and so if somebody is offering free information, they go.
ZARROLI: On Monday, the SEC and the parent company of the NASDAQ stock exchange, together with consumer activists and academics, will gather in Washington to discuss the problem.
SEC Chairman Christopher Cox says it's virtually impossible to say how many seniors fall victim to fraud, but he says that as Baby Boomers begin to age, it's bound to become a bigger problem.
Mr. COX: There's no question that investment fraud against seniors is on the rise and its going to be continually on the rise if for no other reason than there are more seniors to prey upon.
ZARROLI: In most cases, fraud victims have trouble recovering any of their money. Ruth Mitchell says the money she lost means her retirement has been a lot less comfortable than she'd hoped. She and her husband own their own home in Ohio, and have about $2,000 a month in Social Security. She's also gone back to work as an ice skating teacher. But money remains tight.
Ms. MITCHELL: We never lived extravagantly. But if we wanted to go out to dinner or we wanted to go see a play, or do something, we could. Now we can't.
ZARROLI: These days Mitchell also talks to senior citizen groups about investment fraud. She says she regularly tells older people they need to carefully check the records of anyone they invest with, even if the person seems upstanding.
Ms. MITCHELL: Just because you know someone all these years, just because they sit at your table for dinner, just because they are really, really supportive of their particular church or charities or whatever, doesn't mean that you can trust them.
ZARROLI: Those who fail to invest carefully could end up losing much of the retirement money they spent years accumulating at a time of life when most have little real hope of earning any of it back.
Jim Zarroli, NPR News.
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