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Center for Public Broadcasting. Production funding provided by public television stations the Ford Foundation and the Corporation for Public Broadcasting. To swindle to obtain money or property by fraud or deceit to cheat. Hello I'm Larry Lohmann. The old saying crime doesn't pay doesn't seem to apply to swindlers in the investment business because even when they're caught most of them don't return the money they steal taxpayers and the investing public take the beating for billion dollar beating every year in securities swindles alone. Of course Windows don't club their victims on the head to get their loot. Many victims hand over their savings for a little more than the promise to get rich quick. It's our gullibility that makes us vulnerable.
So this week we'll try to arouse the skeptic in you. We'll look at security swindles silver and gold frauds and not so real real estate investments. Bob Smith will examine bogus business opportunities reify can look at the evangelical world of pyramid schemes and of course friend Joe Hanson will have our survival kit. Let's start by finding out how much you know about the Securities and Exchange Commission. That's the FCC the Federal agency that regulates the securities business. The world of stocks and bonds. There you are number one. All securities offered to the public must be registered with the FCC. True or false. Number two the FCC registers securities only if it feels the issuing company has quote reasonable prospects of success and quote true or false. Number three when a securities fraud is exposed the FCC can help you get your money back. True or
false. Now the answers. Number one is false. Not all securities have to be registered with the FCC but the vast majority of them do. That's because most securities are sold interstate and the law requires that securities sold in more than one state must be registered with the CC on the other hand if securities are sold only to residents of a company's home state. They may not have to be registered with the FCC. Fortunately these intrastate offerings must usually be registered with the state's Securities and Exchange Commission swindlers off and so on registered securities. You can head off trouble by simply calling your state securities office or the regional office of the Securities and Exchange Commission of the federal government to find out if a security has been registered. Number two is faults the FCC must register securities regardless of whether or not it feels a company has reasonable prospects of success. The registration process guarantees nothing about a company's assets or the
value of its securities. The purpose of registration is to make important information about the company available to everyone so the investing public can make intelligent assessments of risk before investing. And that's what's important to remember. The law assumes you will investigate before you invest. Number three is also faults. Normally the FCC cannot directly help defrauded investors to recoup losses You've usually got to take your chances in court. Generally there are two kinds of securities swindles. The first is very sophisticated. A company manipulates its records falsifying information to make it look a lot better than it really is. That information is released to the financial community and important investment decisions are made based on bad information. The stock sells for much more than it's actually worth until someone finds out that the information is bad then the stock price plummets and the investor is left holding the bag. A perfect
example is the equity funding corporation scandal that broke in April of 1073 many reputable brokers recommended equity funding securities to their clients. Their recommendations were based on bad information. And when that fact became known thousands of investors including many very sophisticated investors lost money. The saddest part of this kind of Swindle is that there is no way you can see it coming through the use of some very brazen deceptions. Equity fundings management fooled everyone for years including the pros and the government regulators. And the second kind of swindle you can spot. We've asked Louis Rukeyser host of Wall Street Week to show you how. Hello. Well most securities windows involve someone approaching you with an investment idea. Often it begins like this. Got some interesting investment information here about a new company Astro electro computer clamps. Did you send for it.
I don't remember warning signal number one unsolicited investment information concerning a specific stock. Any time you receive this kind of information that you didn't request a yellow caution light should go on your mind. It could be legitimate but be careful who sent it. Mario think Speer's fundament Smith is American big brokerage firm with the commercials with the bulls. No it isn't and that's the second warning signal mimicking the name of a well-known company Merrill Lynch Pierce Spencer and Smith is a well-known and reputable brokerage house and it is the one with the balls. But this brochure is from something called moral French. Pierce Fenner and Smith. A sure sign of deception I think in New York. Yeah New York Post Office Box eighty five warning signal number three.
The post office box address although some reputable firms do sometimes use Post Office Box addresses fraudulent operators almost always use them. So if you see a post office box address Be careful this computer clamp company that the company that uncle knew report said was that your good investment number for the hot tip. Since the average investor is usually the last one to hear so called hot tips but the first to hear useless rumors I'm going Norbit STIP is probably either ome new or a plant. You should always view hot tips with cool skepticism should you miss these early warning signals. Others come later. You know I mean Johnson. Now this is Larry Smith of March. Thank you Kyra. We've been sending you our market letters and I would number five phone calls from strangers. The salesman on the phone is a Coxey your opener as he's known in the trade. He's the guy who makes the initial call after the Malians have had a
chance to sink in. Phone calls from strangers especially strangers from out of state are a sign of potential trouble. Astro electro computer client is now selling at 5. Yeah but here is I'm talking to you on this phone it will reach out and $12 in the next 60 days. Now if we move quickly we can get you we don't the ground floor. Number six a promise of spectacular profits designed to appeal to the get rich quick instincts in all of us. Reputable investment people don't promise overnight riches. Hello Mr. JOHNSON. Yes this is I this is Peter Willoughby I work with Larry Smith of Merrill Lynch. I'm calling about the Astro electric computer classes. This stock may take an overnight jump somewhere around eight nine and a half dollar figure I think it can be a very wise move for you to pick up a couple of hundred shares right now it's seven a share. Gee I can't afford that right now. Come along with me in a smarter way then how
about 50 shares. Number seven pressured to make a quick investment decision. This second salesman is called a dynamiter a securities sales veteran whose job it is to unload as many shares as possible on a customer. The pressure he uses to do that job is a sign of Freud. I myself am holding 900 years of ass to electro compute. Collapse because this company's product has made everything else in the field obsolete. Number eight claims of new or exotic products. If this fantastic new product was actually going to make an entire industry obsolete it probably would have come to public attention earlier claims of new or exotic products are warning signals of fraud. I haven't received a prospectus yet. Well you see I upset printers work is the strongest warning signal is the failure to receive full information about the terms of an offering. The people involved the financial condition of the Enterprise and its prior
business record before you invest you have a legal right to know all the risks that might affect your investment. If for any reason you don't get or can't get this information you should be especially suspicious. Don't be afraid to ask questions and to demand that the answers be presented in writing so you can have them verified by a professional. Ask a banker accountant or broker for his or her opinion. In many instances there will be a charge for this outside professional advice. If you can't afford it you shouldn't be investing in such ventures in the first place. By the way one of the best protections against this kind of preventable swindle is to deal not with an unknown voice on the phone but with a reputable broker at a reputable brokerage firm. It's a good bet he won't sell you bogus securities. And when you hear wild schemes from others he can give you a professional opinion of their quality. His advice may or may not make you money but at least his mistakes should be
honest ones. The securities swindler steals money by misleading you into an investment in a worthless company. A pyramid operator steals money by misleading you into an investment in a worthless business of your own. The. Real world just America dude. Made 7000 spaceport. Then I was lucky enough to enjoy Dr B. They are. Living proof of what you can do if you have the confidence to me. But its doors are huge. I got rid of my own view. And all because of that. I always read right. Only you're right.
You bet he wants to take it right out of your pocket. The simulated meeting you just saw is typical of a pyramid scheme. The enthusiastic audience was made up mostly of shills people put there by the promoters to hype up the crowd. The evangelical atmosphere helps people part with their money. Three thousand dollars is typical. Most of which will probably never see again. The reason when investors buy into the scheme they get the right to sell the company's product and to recruit more people to become distributors the product is primarily a front from the beginning investors are told the big money is in recruiting more people. The pitch is simple. All you have to do is recruit six people at a $500 commission to you for each one and you've got your money back. After that everything is pure profit and surely you have six friends who would jump at the chance to make big money don't you. Well you may think you have a lot of friends but you'll be surprised how unfriendly they can be when it
comes time to part with $3000 and friendship aside it's mathematically impossible for everyone to profit. The people at the top of the pyramid like the promoters can make money but by the time the skin reaches the meeting's stage it's too late. That's because a pyramid scheme is a business variation of the familiar chain letter. Let's say you do sell distributorships to six friends those six friends have to get six others making thirty six who have to get others and so on. You can see that only 11 steps down the chain you've exceeded the population of the United States and who has that many friends pyramid plans are another good reason to investigate before you invest. Be suspicious of any investment opportunity which stresses recruitment of others and not efforts to sell a product sets no qualifications for recruits and no limit upon the area in which they can be recruited. Promises high potential earnings with a minimum of effort. The only sure thing about a pyramid scheme is
that sooner or later the bubble bursts and many investors end up wishing they never grabbed that once in a lifetime opportunity. What looks sweet and delicious cost 25 cents and has no calories in it air can be the invisible surprise you get from lousy vending machines like this one. There's a lot of these around too because vending machine franchises are leaders when it comes to business opportunity for all. And here is where many small investors get wind of these fraudulent franchises in the classifieds under business opportunities. I wanted the ending machine distributor. I think it must have car references. Six hundred to twelve hundred dollars of investment capital and be willing to make two hundred to three hundred fifty dollars a month for eight hours work per week. No
experience necessary. The problem here is not enough people investigate these claims before they invest. By calling the Better Business Bureau for instance they find out that 95 percent of the people who've responded to vending machine ads have lost money vending machine schemes aren't the only problem. Franchises in everything from film to burglar alarms are deceptively advertised to promote frauds. So let's backtrack a minute. What does it mean to invest in a franchise. Usually it means a well-known company sells you the right to sell its product and use its trade names know how and method of doing business. Good examples of legitimate franchises are McDonald's hamburgers and Avon cosmetics. Legitimate franchising is a billion dollar a year enterprise illegitimate franchising is a losing proposition for the investor because all you get are promises of big profits. The contract says nothing about profits. It does
say the franchisees. That's the investor is not relying on any oral or written expressions promises or warranties made by anyone to consummate this transaction except those expressly stated here in. In other words what ever profits the ads may have promised or what ever the con artist might have told you is meaningless. It's easy to prevent getting taken by a bogus business. I just keep these tips in mind. Ignore it get rich quick and deal with reputable firms you've already heard of. Check out any business opportunity with your local Better Business Bureau or consumer protection agency. They have a long list of complaints about fraudulent operators and can nip your bad investment in the bud. Get a prospectus from the franchise and talk to other franchisees to see how their investments are working out. Get everything in writing to and read it carefully and before
you sign anything. Have an attorney look over all the papers. These tips will help you separate the legitimate franchises from the illegitimate. Not only is the machine bad. So is the candied swindlers are masters at exploiting our latent fears ignorance and greed. So it's natural when a crisis arises like the economic recession that's been with us for the past few years that swindlers find investors are ripe for picking silver and gold. Investment frogs are good examples of crisis generated swindles unscrupulous promoters have been misrepresenting the benefits of investments in precious metals as a hedge against inflation. Here are some facts you should know if you're thinking about investing in precious metals silver and gold are volatile commodities. Historically the value of investments in these metals has fluctuated wildly. That's why any sizable investment of this kind requires a
sophisticated investor who can afford to lose money or you can buy silver and gold in callings minted by the U.S. Treasury or in bullion through a broker doing business with an established commodities exchange. You'll pay the going wholesale price plus commissions. Now some promoters may insist that you with a small investor can't buy at the wholesale price they want you to buy from them at a higher retail price. These people are swindlers. A word about counterfeit coins. This is a problem to consider carefully if you're thinking about investing in gold coins minted by the U.S. Treasury. A safe way to buy these gold coins is through a reputable dealer who will guarantee the authenticity of the coins he sells by providing written buyback guarantees on his sales. You should demand these written guarantees for any investment in gold or silver Kongs. Some promoters may tell you private mint products like this silver coin are a great buy some bear do an investment in call ins minted by the US Treasury. They're
lying. Private mint products are generally the most expensive form of investment in precious metals. This commemorative coin contains three dollars worth of silver that sells for $20. What gives this the added $17 in value. That's a good question. The theory is that since only a few of these limited edition made that go up in value as collector's items. But there's no guarantee that they'll appreciate in value and many of them don't. Buying commemorative coins as an investment is quite chancy if you're interested. Check the company's reputation carefully before buying and remember you're not investing in the value of the silver and gold but in an art object that you hope will go up in value. There are ways to purchase silver and gold safely but like most non speculative investments the returns are not extraordinary. There are no guarantees and you need the help of reputable professionals to avoid the frauds. It's the same old story. You've got to investigate before you invest.
TV land rights and land. On your starry skies above. Don't fancy me and how do you pardner. You've got a yearning for the wide open spaces away from congested cities and polluted air. Oh yeah a place where the thoughts roam free as a riot of Louisiana arisen Maria. I know what you're sayin. It's an unsettled wild place the law is a six gun and the man is only as good as his trigger finger and the truth is you gotta know the weapons of the land. You gotta take the law in your own hands. Now you just stand back and when you're ready you just say Draw draw. Oh I love the Bell That's right. You gotta take the law in your own hands and read it. If you're buying land this is your protection property report with this on your side you're kind of like a developer right square in the eye and say yeah me I know I am. Which is the law says the developer
must show you this. But this salesman may try to make it sound like that stuff and so before you decide to get along little doggies out there where the deer on the antelope play. Daddy you're a prop. reporting. Contrary to what land developers might tell you land is not always a good investment. And according to experts buying lots in recreational communities as an investment may not be a good idea. The best way to protect yourself when buying recreational land is to study the land developers property report with an attorney who knows something about real estate. The law requires land developers who sell land interstate to furnish you with a property report. You should read it and understand it before you sign anything. Here's why. It tells you where the land is in relation to existing communities and facilities. If the land is in the middle of the swamp that's where it will say so in writing. The report also tells you whether or not the developers creditors like the bank that loaned him the money
to buy the land in the first place will be able to foreclose on him with no obligation to you. If the developers creditors have liens on his land it means he's trying to sell you a lot that he doesn't have a clear title to himself. Why should the developer claim bankruptcy. You will probably take a worse beating than he does if the developer makes any claims that the value of the land will appreciate in the future. He also has to put them in writing in the property report. Unscrupulous land promoters frequently apply great pressure with free trips free dinners even free lots just to get you to sign an installment contract before you've read the property report or even looked at the land. If you do buy land sight unseen without reading the property report your courting financial disaster. Now here's Fran Johansen. Investing is tricky business. In this week's survival we have plenty of information on how to avoid the frauds and some basic information on how to invest the right way.
One article is titled How to spot a con artist. And after you read it you'll know why it pays to investigate before you invest. Business opportunities such as bogus franchise operations are also covered. We've also got a checklist that will help you decide if you're ready to invest. It helps you sort out your personal assets and evaluate your own attitudes about investing. They can explain the different types of securities and other fundamentals of the investment game and take a look at how you can earn while you learn by joining an investment club. One article in the kit looks at the pleasures and pitfalls of investing in art and another examines the market in silver. The series Wall Street Week receives thousands of investment questions each year in Arquette will include their 10 most frequently asked questions and the answers that the panelists and guests of the program provide to get your consumer survival kit on investment frauds. Send $1 to cover reproduction postage and handling two frauds.
Box 1975 Owings Mills Maryland 2 1 0 1 1 7. That's $1 to frauds. Box nine thousand seventy five. Maryland too if you think you may have been the victim of a securities fraud complain to the Securities and Exchange Commission of the federal government although they can't help you directly. Your complaint may lead to investigations and enforcement proceedings that will help you later in court. For instance many investor complaints about brokers are resolved annually as a result of investors writing to the FCC. That addresses Investors Service branch Securities and Exchange Commission. Washington DC 2 0 5 4 9. Again that's investor service branch. The Securities and Exchange Commission. Washington D.C. to all 5 4 9. If you don't get satisfaction consult an attorney to determine what steps you should take to assert your rights.
If you think you've been victimized by a business opportunity swindler or an unscrupulous promoter of gold or silver contact the Federal Trade Commission division of special statutes. Washington D.C. 2 0 5 8 0 0 0. Your complaint may prevent others from being defrauded. Again the address is the Federal Trade Commission division of special statutes. Washington D.C. 2 0 5 8 0. If you bought land that isn't like the developer said it would be you should complain to the office of interstate land sales registration for 5 1 7 Street Southwest Washington DC to all for one. Oh this office has been successful in getting refunds for investors in the past. In cases of misrepresentation and fraud. Again that address is. Office of interstate land sales registration 4 5 1 7 Street Southwest Washington DC 2 or 4 1 0. Fortunately you may be able to get the most direct help from your own community.
If you think you've been victimized by any investment swindler you should get in touch with your local consumer protection agency. They can get swindlers in the court and they can sometimes help consumers in settling claims for securities frauds. You should also complain to your state's Securities Commission for land frauds. Get in touch with your state's real estate commission. These specialized agencies may also be able to help you settle complaints. At the very least these agencies want to know about any investment schemes that involve misrepresentations. You can find the addresses and phone numbers of these agencies in your phone book under a state heading. The surprising thing about investment fraud is not the ingenuity of swindlers But the fact that most of these schemes could never get off the ground. If investors investigated before they
invested it's dead simple to avoid investment fraud. You've got to be skeptical and you've got to assert your right to know all the risks that might affect your investment. That's how you will find out that there's no such thing as a get rich quick opportunity. We'll see you next week on consumer survival kit. Consumer survival gift is a production of the American Center for Public
Broadcasting.
Series
Consumer Survival Kit
Episode Number
207
Episode
Investment Frauds
Producing Organization
Maryland Public Television
Contributing Organization
Maryland Public Television (Owings Mills, Maryland)
AAPB ID
cpb-aacip/394-56zw4137
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Description
Episode Description
investment Frauds, #207, production #25-802
Series Description
Consumer Survival Kit is an educational show providing viewers with information about consumer affairs issues.
Broadcast Date
1979-06-17
Asset type
Episode
Genres
Instructional
Topics
Education
Consumer Affairs and Advocacy
Subjects
investments
Media type
Moving Image
Duration
00:28:59
Embed Code
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Credits
Copyright Holder: MPT
Producing Organization: Maryland Public Television
AAPB Contributor Holdings
Maryland Public Television
Identifier: 27445.0 (MPT)
Format: U-matic
Generation: Master
Duration: 00:30:00?
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Citations
Chicago: “Consumer Survival Kit; 207; Investment Frauds,” 1979-06-17, Maryland Public Television, American Archive of Public Broadcasting (GBH and the Library of Congress), Boston, MA and Washington, DC, accessed March 29, 2024, http://americanarchive.org/catalog/cpb-aacip-394-56zw4137.
MLA: “Consumer Survival Kit; 207; Investment Frauds.” 1979-06-17. Maryland Public Television, American Archive of Public Broadcasting (GBH and the Library of Congress), Boston, MA and Washington, DC. Web. March 29, 2024. <http://americanarchive.org/catalog/cpb-aacip-394-56zw4137>.
APA: Consumer Survival Kit; 207; Investment Frauds. Boston, MA: Maryland Public Television, American Archive of Public Broadcasting (GBH and the Library of Congress), Boston, MA and Washington, DC. Retrieved from http://americanarchive.org/catalog/cpb-aacip-394-56zw4137