Montana State Auditor's Office

• Don't be a courtesy victim. Con artists will not hesitate to exploit the "good manners" of a potential victim. You are under absolutely no obligation to stay on the telephone with a stranger who wants your money. Save your good manners for friends and family, not swindlers.

• Always stay in charge of your money. Don't seek companionship from someone whose real interest is getting his or her hands on your money.

• Ask tough questions. Do not be swayed by assurances that such practices are routine and in your best interest.

• Watch out for salespeople who prey on your fears. Remember that fear can cloud your good judgment and leave you in a terrible financial position.

• Never judge a person's integrity by how they "sound." Swindlers will combine a sales pitch that sounds professional with extremely polite manners, knowing that many older Americans are likely to equate good manners with personal integrity.

• Keep a disposable camera in your car in case you have an automobile accident. Take lots of photos of the scene. This could prevent a situation where the driver of the other vehicle claims there were more occupants than actually were present.

• Rip, burn or shred your old checks and bills before putting them in the trash.

• Never give your credit card, bank, or Social Security numbers or any other financial information to a person who calls you on the telephone.

TEN WAYS TO SIDETRACK A SCAM

Ask the following questions.

CAN YOU SEND ME WRITTEN MATERIALS TO BACK UP YOUR CLAIM?

WILL YOU EXPLAIN ALL THE RISKS INVOLVED WITH THIS INVESTMENT?

WOULD YOU BE WILLING TO EXPLAIN YOUR PROPOSAL TO MY ATTORNEY, ACCOUNTANT OR BANKER?

WHAT GOVERNMENT AGENCY SUPERVISES YOUR ACTIVITY?

HOW LONG HAS YOUR COMPANY BEEN IN BUSINESS?

HOW MUCH OF MY MONEY WILL GO TOWARD FEES AND COMMISSIONS?

WHERE, EXACTLY, WILL MY MONEY BE HELD?

WHAT TYPE OF WRITTEN STATEMENTS DO YOU PROVIDE AND HOW OFTEN WILL I RECEIVE THEM?

WHO ARE YOUR FIRM'S PRINCIPALS? CAN YOU PROVIDE REFERENCES FOR THEM?

Here is a list of the TOP 10 SCAMS ranked roughly in order of prevalence or concern:

1. Unlicensed individuals, such as life insurance agents, selling securities. To verify that a person is licensed or registered to sell securities, call your state securities regulator. If the person is not registered, don't invest.
2. Affinity group fraud. Many scammers use their victim's religious or ethnic identity to gain their trust - knowing that it's human nature to trust people who are like you - and then steal their life savings. From "gifting" programs at some churches to foreign exchange scams targeted at Asian Americans, no group seems to be without con artists who seek to exploit others for financial gain.
3. Payphone and ATM sales. In early March, 25 states and the District of Columbia announced actions against companies and individuals - many of them independent life insurance agents - that took roughly 4,500 people for $76 million selling coin-operated customer-owned telephones. Investors leased payphones for between $5,000 and $7,000 and were promised annual returns of up to 15 percent. Montanans invested about $900,000.
4. Promissory notes. Short-term debt instruments issued by little-known or sometimes non-existent companies that promise high returns - upwards of 15 percent monthly - with little or no risk. These notes often are sold to investors by independent life insurance agents.
5. Internet fraud. Scammers use the wide reach and supposed anonymity of the Internet to "pump and dump" thinly traded stocks, peddle bogus offshore "prime bank" investments and publicize pyramid schemes.
6. Ponzi/pyramid schemes. Always in style, these swindlers promise high returns to investors, but the only people who consistently make money are the promoters who set them in motion, using money from previous investors to pay new investors. Inevitably, the schemes collapse.
7. "Callable" CDs. These higher-yielding certificates of deposit won't mature for 10 to 20 years, unless the bank, not the investor, "calls" or redeems them. Redeeming the CD early may result in large losses - upwards of 25 percent of the original investment. In Iowa, for example, a retiree in her 70s invested over $100,000 of her 97-year-old mother's money in three "callable" CDs with 20-year maturities. Her intention, she told her broker, was to use the money to pay her mother's nursing home bills. Regulators say sellers of callable CDs often don't adequately disclose the risks and restrictions.
8. Viatical settlements. Originated as a way to help the gravely ill pay their bills, these interests in the death benefits of terminally ill patients are always risky and sometimes fraudulent. The insured gets a percentage of the death benefit in cash and investors get a share of the death benefit when the insured dies. Because of uncertainties predicting when someone will die, these investments are extremely speculative. In a new twist, Pennsylvania regulators say "senior settlements" - interests in the death benefits of healthy older people - are now being offered to investors.
9. Prime bank schemes. Scammers promise investors triple-digit returns through access to the investment portfolios of the world's elite banks. Purveyors of these schemes often target conspiracy theorists, promising access to the "secret" investments used by the Rothschilds or Saudi royalty. In North Dakota, state securities regulators are alleging a small group of salesmen, including a local pastor, used religion and family ties to bilk investors out of $2 million in a prime bank scam.
10. Investment seminars. Often the people getting rich are those running the seminar, making money from admission fees and the sale of books and audiotapes. These seminars are marketed through newspaper, radio and TV ads and "infomercials" on cable television. Regulators urge investors to be extremely skeptical about any get-rich-quick scheme.

Please contact the State Auditor’s Office if you have additional questions: