Newspaper: Investors lose almost $1 billion as SEC battles fraud
The Associated Press
FORT LAUDERDALE, Fla.
Investors in the southeastern United States have lost almost $1 billion in the past five years to securities fraud and other schemes, despite efforts by federal regulators to protect them, a newspaper reported Sunday.
About a quarter of those who ran the scams had previously been convicted for fraud or economic crime, or cited by regulatory agencies, according to the South Florida Sun-Sentinel's review of the 121 cases filed by the Securities and Exchange Commission's Miami regional office during the past five years.
About 80 percent of the cases examined dealt with investment fraud, as opposed to violations such as accounting irregularities or insider trading. Investors' losses totaled at least $928 million.
The newspaper analysis of cases involving 262 individuals and 109 companies found:
- Only about 20 percent of the cases against violators resulted in criminal prosecutions, even though some involved millions of dollars in investor losses.
- Only 16 of the 262 violators have gone to prison. More than two dozen others are awaiting trial or sentencing.
- Of the $176 million in fines and penalties that violators were supposed to pay, only about $6.5 million has been collected.
Many cases, particularly in South Florida, revolved around boiler rooms, rented offices where aggressive salespeople on banks of phones cold-call potential investors, the newspaper found. Others were "Ponzi schemes," in which money from new investors is used to pay off old ones until the company collapses.
David Nelson, who oversees eight states as the SEC's regional director in Miami, said it's tough to prevent fraud. He said his office has been doing "a good job," despite limited resources and an enforcement staff of about 38 attorneys, accountants and others.
"We're trying to get in before the scheme is over. The difficulty is finding out about it," Nelson said. "Victims don't always know they've been victimized right away."
Alma Carney, 59, was one of the victims found in the review. She put $10,000 in savings in a Miami investment firm after an aunt convinced her that it was safe, and that she would get a 30 percent return each year.
Instead, she, her aunt and more than 2,000 other investors in Florida and the Caribbean were bilked out of at least $31 million in an alleged giant fraud scheme, said federal regulators who shut down A.B. Financing and Investments Inc. in December.
"We were just suckers," said Carney, a nurse's aide from Fort Lauderdale. "It was all the money I had."
Regulators said A.B. Financing was selling unregistered securities, then placing funds in speculative real estate and other investments that lost millions.
Company CEO Anthony Blissett agreed in March to a permanent injunction that bars him and his company from committing fraud. He did not admit or deny the allegations, which is common in SEC settlements.
In an e-mail statement, his attorney, David R. Chase, said his client is "fully cooperating" to "maximize the return of assets" to investors.
The newspaper analysis comes a year and a half after the SEC and U.S. Attorney's Office in Miami said they had set up a task force to crack down on phony investment schemes. The SEC can only file civil lawsuits; criminal cases must be referred to the U.S. Attorney's Office for prosecution.
Eric Bustillo, the assistant U.S. attorney who heads the Miami office's economic crimes unit, estimated that the number of SEC-related prosecutions grew from 11 in 2001 to 27 in 2002.
Still, he said his staff members have their hands full with other white-collar crime cases, such as identity theft and money laundering.
Securities regulators concede that investors are lucky to get a dime or, at most, a quarter back on every dollar they've lost to offenders.
"When we find them, we try to stop them as quickly as possible, and grab the money, but they often send it offshore or hide it in other ways," said Joan McKown, chief counsel for the SEC's division of enforcement in Washington.
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Information from: South Florida Sun-Sentinel,
Last modified: July 06. 2003 6:31PM |
