A few days ago, the Los Angeles Times reported that Irvine Police Department detectives had arrested three people in connection with an elaborate plot to defraud more than a dozen people for nearly a million dollars. As the case unfolds, there is no doubt this number will go even higher. The scheme was not elaborate, but preyed on the naivete of the victims, and could have been avoided if the investors had performed a little due diligence (background checks and asset searches) on the bad guys.
This post discusses the cases, and how investors can avoid investment scams with a minimum amount of time and money.
Steven Sears promised to assist people in protecting their finances and assets by taking their money and buying and investing in legitimate corporations. He did just that. The only problem was the corporations were all created under a false premise and set up by Sears himself. They simply did not exist.
Mikael Sears and Norma Hoskins were also arrested yesterday as co-conspirators assisting Sears. These three alleged thieves operated in several states from California to Oklahoma. In an even more blatant action, Sears is accused of opening bank accounts to funnel and launder money from his ill-gotten gains in the false corporation he established.
This type of story seems to be in the news media, TV, radio and press on a daily basis. It is mind-boggling to me that people would take their hard-earned money and give it to someone without any due diligence or investigation into that person or their company. Can you imagine giving $100,000 of your savings to someone who claims they will invest and give you a return of between 5-9%? Can you imagine someone taking their entire retirement account and giving it to someone whose background and life-history is totally unknown to the investor? Sadly, it is done hundreds of times everyday in this county.
This case and the loss of money was 100% preventable. Sears used aliases. For a mere $20, a surname index check by a local private investigator would have revealed his aliases, multiple dates of births and social security numbers. That would be a huge red flag to investors.
Sears gained the confidence of investors by advising them that he was an attorney who was very schooled in the art of corporate investments. A free check on the internet would have disclosed that Sears was disbarred in 2011. All you have to do is Google “State Bar of” and the state name. This will then take you to the state bar website where you can click on “Attorney Search.” Put in the attorney’s name and they will show you the following:
- Current Status
- Bar Number
- Phone and Fax Numbers
- Email Address
- Undergraduate School
- Law School
- Status History – When admitted to the State Bar
- Actions Affecting Eligibility to Practice Law
- Disciplinary and Related Actions
- Administrative Action
- Areas of Practice
In this case, if you spend just $20 with a competent private investigator and perform a FREE search on the principal of this scam, you would have run from this deal immediately.
You are not alone if you feel you have been a victim. 90% of the clients that come to us to perform background investigations on financial advisers have already invested their money. Most do so after they don’t feel warm and fuzzy about their investment and/or they want us to “bless” the principals and firm where they invested their hard earned dollars. Why won’t you investigate before you invest?
Here is a teaching point that can save your money and well-being. If you want to retain a top-notch investigative firm to do an extensive background/asset search on a subject or firm the cost will vary with the amount of information you want to glean. The most you should ever have to spend would be approximately $950. Many of us can determine the validity of a subject or firm for a few hundred dollars. Our mission is to determine if we would actually invest with the subject or the firm. The vast majority of time they are found to be on the wrong side of the law and simply out to steal your money.
Any private investigator can provide a comprehensive report that confirms the subject’s 20-year address history, social security number and date of birth. One of the most important databases is the United States Consumer Public Filing Index. This gives the subject’s history of bankruptcies, notice of defaults, judgments, tax liens and problems with the Internal Revenue Service. Would it be helpful to know if the subject has any civil or criminal history? That would be included. Corporate and Limited Partnership records are included along with the Uniform Commercial Code Index which contains debtor and secured party information. Fictitious Business Name Index filings along with Professional Licensing are also included. The list goes on forever. Why throw you money away when there is an easy fix by investigating where you place your investment dollars?
All of this information is included in our own in-house computer system, which contains highly proprietary information not available to the public or the internet.
Be smart: Do your homework so you don’t read about your own financial advisers in the newspaper.