Financial Professionals Are Not Immune from Affinity Fraud

Affinity fraud is widespread and is seen in all groups and religions, from Bernie Madoff, who targeted Jewish individuals and organizations, to new immigrants, whose fellow countrymen may take advantage of them, to Christian churches and school associated scams. One example of church-based fraud was Greater Missionaries International Church, an internet based church used by its founder to take over $550 million dollars from thousands of fundamentalist Christians in Pennsylvania, Ohio, and Virginia. While frequent targets are merely trusting individuals, many are educated financial professionals.

Even Experts are Vulnerable

Even sophisticated stock brokers or agents can be convinced to sell fraudulent products to investors based on inaccurate representations made by people they know and trust. When that person or organization is left without funds or facing civil or criminal charges, the stock broker or agent who sold the product is a victim, too. Often ordered to pay restitution and/or charged with misconduct, the complaint must be reported to federal agencies nonetheless. In some cases, this may be sufficient to ruin an otherwise promising career.

Trouble in Our Own Backyard

Michigan has seen many of these schemes result in millions of dollars of losses. In just one example, two men from Grand Rapids and Fruitport, Michigan were indicted in the fall of 2016 in a fraud scheme targeting financial planners and involving over $2.1 million dollars. According to the allegations in the indictment, the product was designed to help non-profit organizations raise donations. Presentations were made to financial planners and insurance agents in an effort to persuade them to become agents for the company run by the defendants. Through false representations and pressure to sign up, the defendants caused each victim to pay between $35,000 and $50,000 for a license to sell, with a money-back guaranty. When this did not occur and the representations turned out to be inaccurate, a criminal indictment followed.

While we would all like to believe that neither ourselves nor our financial planner would be taken in by such actions, the opposite is generally true. The folks who perpetrate affinity fraud are successful precisely because they are professionals. They are people you know, trust, and who have the gift of gab. In short: it’s easy to fall into their traps.

We’re Here to Protect You

If you are a stockbroker, agent, or other financial professional in need of confidential advice, call Joseph H. Spiegel PLLC at 734-761-8475. We practice before many federal agencies and can explain which options are available to you and your partners.