The best way to avoid the financial loss and the time required to identify, prove, and get restitution from an act of fraud is to avoid getting "suckered" in the first place. Unfortunately, it isn't always easy to identify a con artist. Your best defense is personal education.
We all remember Bernie Madoff who recently pleaded guilty to securities fraud, mail fraud, wire fraud, money laundering, and perjury. He will likely spend the rest of his life in jail, but what about his victims? In many cases, their financial lives are ruined. And for all of the victims, the question remains “how did this happen to me”?
Why are we so Gullible?
Those of us not impacted by the Madoff Ponzi scheme, may wonder how investors were so blind to what now appears to be obvious warning signs. The answer is quite simple. Everyone likes to feel privileged. So when offered an opportunity to be part of an exclusive group of investors, many jump at the chance. Our society gives credibility to being part of an inner-circle. So much that we believe the right connections can allow us to gain access to opportunities that are not available to others. On top of that, we all believe we are smart investors and good judges of personal character. For these reasons, we are often blinded to the obvious.
But not all fraud comes in the act of investing money. You can be “taken” by a con artist who simply plays to a person’s empathy and kindheartedness. Regardless of the method, both will create financial harm.
Elderly Parent Loses Thousands
You may believe that your family is protected from fraud because you have a good relationship with your elderly parents. However, this may not be enough to protect them.
I am familiar with a situation where an individual took advantage of the kindness of an older gentleman. After befriending the gentleman, this younger female began sharing stories of her unfortunate life circumstances. What evolved was a father-daughter relationship. Eventually, the gentleman provided the young lady with money to help with her children, thinking that this one-time gift would allow her to resolve her stressful situation and her life would be better. However, after the first money was provided, the hardship stories continued and the young lady began asking for more money. After several more “gifts”, the older gentleman realized that he may be jeopardizing his own financial situation. He tried to stop his contact with the young lady, but her phone calls continued and she began to threaten the older gentleman.
It was not until his adult children became knowledgeable of the situation that the young lady stopped her harassment. As was learned later, this young lady had done this to others. She was truly a con artist. The older gentleman saw himself as a “good Samaritan” by attempting to assist a person in need. Unfortunately, the young lady saw him as easy prey.
Financial literacy and the increased awareness of fraud have become top priorities of Indiana’s Secretary of State Todd Rokita. To assist the citizens of Indiana, the Secretary has created Indiana Investment Watch. (Go to www.sos.in.gov and click on Securities Division, then Indiana Investment Watch.) The website provides financial tools along with a listing of various workshops.
Money Smart Week, October 10 through 17, is another initiative supported by Secretary Rokita. During this week, financial workshops and seminars will be held around the state. You can find a schedule of the events at www.moneysmartweek.org/indiana or at the website listed above.
Summary
The best way to protect yourself and your family from falling prey to fraud is to understand how to avoid potential harmful situations. The more you know about handling your financial affairs and managing your money, the less likely you are to make costly mistakes or be drawn into harmful financial schemes. Take advantage of every opportunity to increase your financial knowledge and decrease your vulnerability.
Elaine E. Bedel, CFP®, is president of Bedel Financial Consulting, Inc., a wealth management firm providing fee-only financial planning and investment management services. She is the author of “Advice You Never Asked For…But wished you had!” available on Amazon.com. For more information, visit their website at www.BedelFinancial.com or email to ebedel@bedelfinancial.com.
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