A Discussion Forum for the Mississippi Estate Planning Community
Category Archives: Fraud Protection
In another example of a good concept gone bad, KUSA TV in Colorado, reported that a Commerce City couple has pleaded guilty to stealing more than $200,000 from their grandparents.
William Young, 41, and his wife, Karen Young, 42, both pleaded guilty to theft of an at-risk adult.
Young had power of attorney for his grandmother, Francies, between June 2009 and December 2012. Investigators discovered that Young and his wife emptied the Gibbs’ bank accounts and used their credit cards for personal use. In total, the Youngs’ stole $227,000.
William Young faces a four to 12 year sentence. Karen Young faces one to three years in prison.
Powers of Attorney are excellent vehicles for facilitating the management of one’s affairs if they become incapacitated. Unfortunately, they can also be abused by the holder of that power. Great care should be taken when selecting the person or persons that you want to step in and manage your affairs (for your benefit) should you be unable to. Often, a professional fiduciary who is accountable to a court or other regulatory agency can be a better option.
I wish to extend my sincere appreciation to Dr. Andre Leibenberg and The University of Mississippi’s Insurance and Risk Management Department for the warm welcome and hospitality shown to me this week. I was invited to present twice during the two-day symposium held on the campus of Ole Miss which was well-attended by more than 100 professionals in the life, health, and property insurance industry. Keynote speakers included Mississippi Insurance Commissioner Mike Cheney, Terry Headley of Headley Financial Group in Omaha, NE as well as several other insurance industry experts. I must say, it was a humbling experience to be in the company of these and other heavyweights. Thanks also to those who attended my sessions on Identification and Prevention of Elder Financial Abuse, and Fiduciary Liability and Trust-Owned Life Insurance. I hope that you learned a little more about these two issues.
These presentations and their supporting materials can be found on this website under the Presentations tab. Please contact me if you would like to discuss a situation where I can be of assistance. Also, please visit our other websites to learn more about how we can assist with your Trust business or if you are working with clients of aging parents, or need assistance in this area. These websites are:
The Indiana state securities regulators pursued an action alleging that Jerry Smith and Jasen Snelling bilked investors out of more than $4.5 million in a nearly decade-long Ponzi scheme where Mr. Smith and Mr. Snelling told investors they were talented day traders and promised up to 20% returns. Mr. Smith and Mr. Snelling, through various companies, encouraged investors to roll over their traditional IRA accounts into self-directed IRAs at a trust company. Mr. Smith and Mr. Snelling would immediately take the funds from those accounts and use them for personal living expenses, but investors continued to receive statements from the trust company, as well as bills for custodial fees, even after their money was taken out of the ac-counts. Mr. Smith and Mr. Snelling are charged with more than fifty counts of violations of the Indiana Uniform Securities Act.
To read more on this case, click here.
The SEC filed charges alleging that a company and its partners perpetrated a Ponzi scheme in which at least $20 million was raised from more than 120 investors. In particular, the SEC alleged that the defendants promised safe, guaranteed returns in purported investments in foreign bonds and raised money by convincing investors to invest in self-directed IRAs and steering them to custodians who offered the self-directed IRAs. $20 million of the funds invested in the fraudulent scheme came from self-directed IRAs.
The SEC alleges that USA Retirement Management Services (“USARMS”) and managing partners Francois E. Durmaz and Robert C. Pribilski mass-mailed promotional materials to prospective investors and invited them to estate planning seminars held at country clubs and banquet halls. They gained retirees’ confidence in follow-up meetings and portrayed themselves as educated and experienced in foreign investments specifically tailored to the needs of seniors. Durmaz and Pribilski then pitched what they represented as safe, guaranteed investments in “Turkish Eurobonds” through the purchase of USARMS promissory notes that would earn annual returns between 8 and 11 percent.
The SEC alleges that USARMS raised at least $20 million from more than 120 investors, but did not actually invest the money in Turkish Eurobonds as promised. Instead, returns were paid to earlier investors with funds received from new investors in Ponzi-like fashion. Durmaz and Pribilski further misused investor funds to finance their other businesses and purchase such things as luxury automobiles, homes, vacations, and web-based pornography. They also wired investor money into bank accounts belonging to individuals living in Turkey who are named as relief defendants in the SEC’s case.
To read the full complaint, click here.
The SEC filed charges alleging that an individual perpetrated an offering fraud and Ponzi scheme in which at least $16 million was raised from more than 140 investors. In particular, the SEC alleged that the defendant promised “safe and risk free” returns in purported investments in real estate and commercial mortgage loans. The defendant raised money by targeting, among others, investors in self-directed IRAs. Approximately $9.2 million of the funds invested in the fraudulent scheme came from self-directed IRAs.
According to the SEC’s complaint, from at least 2006 through the present, Robert Stinson, primarily through Life’s Good, Inc. and Keystone State Capital Corporation, two companies he controlled, sold purported “units” in four Life’s Good private real estate hedge funds. (“Life’s Good Funds”). Stinson falsely claimed that the Life’s Good Funds generated annual returns of 10 to 16 percent by originating more than $30 million in commercial mortgage loans, and other investment income gained on the sale of foreclosure and investment properties. In reality, the SEC’s complaint alleges that Stinson has been stealing investor funds for his personal use, transferring money to family members and others, and using new investor proceeds to make payments to existing investors in the nature of a Ponzi scheme.
To read the full complaint, click here.
The SEC filed charges alleging that two companies and four individuals misrepresented and concealed numerous material facts in connection with the offer and sale of $10 million in bonds to approximately 100 individual investors in various states. In particular, the SEC alleged that the defendants promised guaranteed returns in purported investments in medical technologies and raised money by convincing investors to invest through self-directed IRAs and steering them to custodians who offered the self-directed IRAs. Approximately $3.5 million of the funds invested in the bonds came from self-directed IRAs.
The SEC’s complaint alleges that the defendants misrepresented and concealed numerous material facts in communications with investors. They assured investors, for example, that UAV had a strong track record of profiting from medical-related investments and that investors would earn a guaranteed 25 percent annual return on UAV’s bonds. In reality, UAV had no such record or experience, and never earned a return from any investment. Instead, UAV used nearly all of the money it raised from investors for purposes other than investments in medical ventures, such as paying exorbitant salaries and benefits, paying referral fees, and making Ponzi-type interest payments to investors. Further, the defendants misrepresented their venture capital experience and educational background, and failed to inform investors that one of the principals was previously barred by a California court from being involved in any securities offering.
To read the full complaint, click here.
Self Directed IRA’s (SDIRA) can be a great way for individuals to invest IRA assets outside of traditional financial assets. With some limitations on permitted investments such as collectables, and Non-U.S. minted coins, investors can direct IRA investments into such assets as investment real estate, limited liability companies that hold allowable assets, limited partnerships, mortgage notes, and even interests in closely held corporations as long as certain self-dealing rules that apply to ERISA Plans and IRA’s are followed.
A court appointed conservator in Alabama has been sentenced to three months in Federal prison and ordered to reimburse more than $100,000 of misappropriated funds for several elderly wards. Zondra Hutto was a Tuscaloosa county conservator and was routinely appointed as conservator for elderly wards of the county. As the county’s conservator, Hutto was responsible for the finances of elderly people who were unable to manage their affairs. According to the indictment, which resulted from an audit of her conservator accounts, Hutto knowingly allowed her legal assistant to use funds belonging to her wards for personal gain. Audits of her accounts reveal that Hutto would approve payment for services that were never performed, and “charged thousands of dollars in unneeded postage, storage and lawn care fees.” To read the full article, click here.
Conservatorships are something we usually advise our clients to avoid. They can be a costly and humiliating process for the ward. But they also provide a system of oversight – annual audits and fidelity bonds – and it was this oversight that led to Hutto’s indictment. Powers of Attorney and Living Trusts can avoid conservatorships, but these documents generally waive the requirement that the person(s) holding the power provide accountings to the court or post bond. In this case, the Court did its job. With the rise in elder abuse even among family members, I wonder if we will start seeing less of these waivers in the future.
In a plot that is thicker than the 2003 Robert Redford film, the real life drama unfolding in Naples Florida, makes that film dull by comparison. The plot in this sure-to-be reality movie involves a disbarred-lawyer-former-escort-service-owner who allegedly loaned the sexual favors of his 62 year old wife to the aging millionaire in exchange for monetary favors that included the financing of a 2.4 million home, club memberships, and the purchase of a $439,000 mountain worth $11,100. This one is worth your read.
IR-2011-39, April 7, 2011
WASHINGTON –– Hiding income in offshore accounts, identity theft, return preparer fraud, and filing false or misleading tax forms top the annual list of “dirty dozen” tax scams in 2011, the Internal Revenue Service announced today.
“The Dirty Dozen represents the worst of the worst tax scams,” IRS Commissioner Doug Shulman said. “Don’t fall prey to these tax scams. They may look tempting, but these fraudulent deals end up hurting people who participate in them.”
The IRS works with the Justice Department to pursue and shut down perpetrators of these and other illegal scams. Promoters frequently end up facing heavy fines and imprisonment. Meanwhile, taxpayers who wittingly or unwittingly get involved with these schemes must repay all taxes due plus interest and penalties.
Click here to read the full list.