The Art of the Steal

10

[EMPTY PROMISES]

Uniprime Capital Acceptance was a small automobile dealer based in Las Vegas. Its shares were publicly traded, but it hadn’t made much earth-shattering news in awhile, and its stock price reflected that. You could buy a share for less than a buck, and normal volume was a meager 20,000 shares a day. Then one day in the summer of 1999, it made a stunning announcement for any company, but particularly for a car dealer: it had come up with a cure for AIDS.

Not surprisingly, the news was the talk of Internet stock chat rooms. There was, of course, patter about the considerable medical and humanistic ramifications of this development, but the chat room talk was more focused on monetary impact. One message called Uniprime “the greatest stock ever.” Another spoke of it as “a once in a lifetime opportunity!!!” and was like “buying Microsoft now at a nickel.”

The day of the announcement, Uniprime’s stock rocketed from $1.75 to $5.00, and 5 million shares changed hands. Just like that, the company had a market value of $100 million. One bulletin board message said: “Hallah! Hallah! Hallah! Shout it from the rooftops of the banks.” Thousands of messages were posted about the stock.

The AIDS cure was reported as the work of a new Uniprime subsidiary, New Technologies and Concepts, which was headed by a man named Alfred Flores, who described himself as a doctor. According to the news the company put out, New Technologies had developed an intravenous treatment called Plasma Plus that Flores had been testing for fifteen years at General Hospital in Madrid. It said the treatment reversed infections from HIV in five patients treated at the hospital.

It seemed too amazing to be true—and it was. The Securities and Exchange Commission (SEC) determined there was no cure for AIDS. It said Alfred Flores was a con man. In fact, during much of the time he was supposedly testing the AIDS treatment, he was in a Colorado prison serving time for a conviction for conspiracy to commit murder. But he had been in the vicinity of the medical profession. He had apparently spent some time as a janitor in a nursing home.

Alfred Flores was arrested and trading in Uniprime stock was halted. When trading resumed, the stock settled down at a quarter a share. Investors who bought in the heat of the frenzy collectively lost millions of dollars.

Unfortunately, securities and investment opportunities are a particularly ripe focus for crooks, because there have been so many real rags-to-riches tales brought about by the stock market. And, as we’ve seen again and again, there’s a slender line between what’s real and what isn’t. A band of criminals posted an actual SEC warning about online scans on a website of theirs that was itself promoting an online securities scam.

The money funneled into investment scams is breathtaking, even to me. One well-executed scheme can attract $100 million in ill-gotten gains. And if you’re one of the hapless victims, the chances of getting your money back are abysmal, even if the swindler is caught. USA Today did an analysis of how well the SEC has performed in recovering illegal gains that convicted financial scam artists have been ordered to hand over. The newspaper found that between 1995 and 2000, the agency collected less than 17 percent. A decade earlier, the recovery rate was more like 50 percent. In a number of large cases, the SEC had recovered nothing.

PUMP AND DUMP

One easy way callous con artists make money in the market is with “pump and dump” cons. Popular as far back as the 1920s, they are now going stronger than ever. These days, stocks are hyped with fictitious positive news on Internet message boards and in chat rooms by scam artists posing as experts. But all they know is how to take your money. Then the scam artists dump their shares, sending the price down before investors can get out.

A man who worked for a company called PairGain Technologies set up a website to resemble the Bloomberg business news site that many investors turn to for the latest business and financial news. He then posted an article on the site saying that PairGain was about to be bought by an Israeli company. To create further buzz, he wrote messages on bulletin boards with links to the fake Bloomberg site. The day he concocted the fraudulent story, PairGain stock rose about 30 percent before the company put out a release disavowing the report.

In another case, several criminals bought a hundred and thirty thousand shares in NEI Webworld, a bankrupt company whose assets had been liquidated several months before. Then they posted fake e-mail messages on hundreds of Internet bulletin boards, suggesting that NEI Webworld was going to be acquired by a wireless telecommunications company. Before the postings, the stock was trading at between nine and thirteen cents a share. On the morning of the postings, the stock rocketed to $15 5/16, before plunging back to a quarter a share. The criminals realized a gain of $362,625.

A twenty-three-year-old California man sent out a fake news release to Internet Wire, a company that distributes business news releases, saying that the chief executive officer of Emulex Corporation had resigned. He hadn’t, but within an hour of the release’s posting, the stock of the communications equipment maker plunged from $113 to $45. The actual value of the company declined by a staggering $2.5 billion. The hoax was quickly revealed, and the stock recovered. But investors who sold during the selling spree lost more than $100 million. In this case, the scam artist had sold shares short, betting on their decrease in price, and thus profited from the sharp fall.

The explosion in online trading has allowed mere kids, between their math and social studies classes, to dabble in securities fraud. We saw that when a fifteen-year-old New Jersey boy was caught by securities regulators in 2000, after he racked up profits of hundreds of thousands of dollars in a pump and dump scheme. The kid, who became the envy of a lot of other teenagers for his prowess, bought shares of lightly traded companies and then promoted them with hundreds of messages on Internet bulletin boards. When they soared, he bailed out. He was the youngest stock swindler the government has ever come across, but I fear he won’t be the last. When asked why he did it, he said, “Everybody does it.”

Part of the problem is that greed obscures judgment. Even though it makes no sense to risk your savings on unknown people who call you up or post messages on online bulletin boards, otherwise intelligent people seem to do just that with outright fervor. Here’s my favorite illustration of how ridiculous it can get. In 1994, the Motley Fool, a popular personal finance website, concocted a fictitious stock as an April Fool’s joke. They mentioned a company, Zeigletics, in their newsletter, and said it developed technology that connected sewage disposal systems in Chad and traded on the Halifax Exchange. Almost at once, messages turned up on financial bulletin boards discussing the merits of the company, and people actually tried to buy shares in it.

CAPER CRUSADERS

It’s astounding how far a con artist can take a securities scam. No matter how outlandish the pitch, there are investors who swallow it. Two New Jersey scam artists collected nearly $2 million by promising safe, high yields investing in wishing wells that solicited money for charity. In another case, a bunch of people saw no reason not to invest in an eel farm. If this seems far-fetched, it isn’t. The animal kingdom is actually quite well represented in the scam world. There are schemes centered on snail ranches and ostrich stud farms. There was an ostrich farm in Australia where the ads claimed, “The birds just won’t stop laying.” A coconut production business in Costa Rica was promoted on a website. The promoter said he had agreements with A&P for coconut chips.

A popular fraud has to do with selling “U.S. Dollar Bonds.” Scamsters who market them spin colorful tales of how they were issued in the 1930s and 1940s by the Central Intelligence Agency (CIA) to assist Chiang Kai-shek in fighting the communists. The way they tell it, the bonds were buried in caves by his generals and their descendants, and then lay there untouched until they were recently discovered; now you can buy them for just a fraction of their face value. The con artists print up official-looking Treasury bonds that they sell, and people do buy them, often clients in China, Taiwan, and Singapore.

No such Treasury securities were ever issued, and they don’t even look like anything the Treasury ever issued, as they often list the Ministry of Finance of the United States and the Washington Bank of America as their place of origin. Neither ever existed. Confront the con artists with this information, and they’ll say, “Well that’s the CIA for you, you know how they are.”

There are many instances of criminals essentially creating a shell company simply to attract investors. One of the most ambitious was the infamous ZZZZ Best carpet-cleaner caper. This was the one where a teenage swindler named Barry Minkow truly constructed a house of cards. In 1982, when he was sixteen and living in Reseda, California, he began a rug-cleaning business in the garage of his parents’ house. He called it ZZZZ Best. Friends admired his drive and lofty aspirations. The business always seemed prosperous, although in fact it lost money. But Minkow had thievery in his blood, and he raised capital to fund the business in ways that most corporations rarely consider. He orchestrated burglaries to collect insurance money. He forged money orders from a local liquor store. When customers paid with credit cards, he would add fraudulent charges to the accounts.

Feeling the need for a bigger arena, he created a fake appraisal company that purportedly arranged restoration work for insurance companies. A bizarre friend of his became the company’s head. The fake appraisal company created fictitious paperwork indicating that Minkow’s company had received contracts from insurers to restore fire-damaged buildings. Minkow used this fictitious business, confirmed by the appraisal company, to persuade bankers and investors to give him money. Out of thin air, he concocted endless contracts from insurance companies to tackle office buildings that had been devastated by fire and water. He had an associate draw up forged documents representing the contracts, but there were no actual carpets to restore. Investors looking into the business would be referred to the fake appraisal company, which confirmed the deals. One time, when an auditor wanted to look at a restoration, the company hurriedly leased a building and dressed it up to look like a work site. It fooled the auditor.

In 1986, Minkow took his ruse of a carpet-cleaning company public, and the market capitalization swelled to more than $200 million. His young age captivated the press, and he gained wide publicity, which served to further stimulate investor interest. The fraud began to unravel when word got out about Minkow’s credit card overcharges. Once investigators began probing the company, the end was near. In 1988, Minkow was convicted of fifty-seven counts of fraud and sentenced to twenty-five years in jail. Investors lost more than $100 million.

THE FORECAST? STORMY

Many of the most successful investment scams work their prey slowly, reeling them in like a trout. That’s how the forecaster scam works. A man who identifies himself as a broker calls or writes you and, insisting no obligation on your part, offers you an investment tip. He tells you about a stock to watch that he thinks is going to do very well in the near term. “I don’t want you to buy the stock, or even think of investing any money with me,” he insists. “After all, you don’t even know me. Just keep an eye on this stock and see how it does.” Ostensibly, his point is to demonstrate his market savvy, and the sort of market intelligence he’s privy to. His real point is to set a trap.

So, out of curiosity, you watch the stock and, sure enough, it goes up. A couple of weeks later, he contacts you again and offers a second tip, a stock he dislikes that he predicts will take a beating. “I don’t want you to short it or anything,” he says. “Just notice how it does.” Sure enough, that stock goes down. Now you’re hooked. He calls again, and this time he has an investment opportunity for you, a sure-thing stock that he strongly urges you to buy. You’ve been mightily impressed by his uncanny feel for the market, so not only are you willing to invest, but also invest heavily. You send him $10,000 or $25,000 to buy the stock he suggests. He doesn’t buy it. He vanishes with your money.

How was he so insightful about those two predictions? He really wasn’t. He starts with a base of potential dupes. Say he identifies a hundred people. With his first call, he tells half of them that the stock he chooses will rise, and the other half that it will fall. It has to do one of the two, and so fifty people are going to be impressed with his prediction. Those are the fifty he calls back with his second prediction; again, he tells half a stock will go up and half that it will decline. He’s left with twenty-five who have seen him be right two out of two times, more than enough to fleece.

PONZI SCHEMES—TRIED AND TRUE

One of the oldest investment tricks of scam artists is the notorious Ponzi scheme, a persistent type of securities fraud where money is never invested in anything, but instead the cash that comes in from new recruits is used to pay obligations to earlier investors. And the scam artist, of course, always keeps a healthy apportionment for himself. The fraud is named for Charles Ponzi, who defrauded Italian-Americans in Boston in 1920 with a scheme purportedly involving postal reply coupons, which were prepaid return postage used in foreign correspondence.

Ponzi schemes come in every imaginable variety. You read about a new one almost every week, and they always promise enormous returns for short periods of time. I have to laugh at how absurd the pitches are. Some years ago, a group of companies in Kansas touted a get-rich-quick investment involving fungus. They sold investors “Activator Kits” that would grow fungus cultures. Most people wouldn’t imagine that much of a market for fungus exists, but these promoters convinced people that these cultures would be bought by a cosmetic manufacturer they were connected to for a hefty profit. To remove any worries, the promoters “guaranteed” the profit. Something like twelve thousand people in thirty states sent in their money. As in any Ponzi scheme, the promoter strung investors along by paying early ones with money from subsequent recruits, always keeping some for himself. Eventually, the pool of investors is exhausted and most people end up getting nothing back from their investment.

In another case, a young busboy in Ohio offered what seemed like an enterprising idea. He advertised for investors to pool their money with him so he could buy rock concert tickets in bulk. Then, as he explained it, he would scalp the tickets at substantial markups. Everyone had read about rock concerts selling out in one hour and people camping out in line for days, so why not? He rounded up more than $7 million from almost three thousand people. But he never bought any tickets. His Ponzi bubble burst like all the others, when he ran out of new investors to pay off the earlier ones.

A ONE-WAY TICKET TO MELCHIZEDEK

If there were a country where only scam artists lived, it would have to be the Dominion of Melchizedek. It’s a gorgeous, postcard-perfect tropical island in the South Seas. It’s got a heavenly climate. There are no taxes. There’s little banking legislation. The government is very much hands-off. Dozens of banks operate on the island, and you can open your own for a few thousand dollars. Or that’s how it’s billed.

Only don’t go looking for Melchizedek on a map. It doesn’t exist. It’s a fictitious country created for the purpose of perpetuating investment scams. A convicted con artist apparently thought it up in 1990, naming it after the “righteous king of peace” in the Old Testament, and it’s been at the center of a web of conspiracy for scam artists and their swindles ever since.

Law enforcement authorities have warned of innumerable scams connected to Melchizedek. In one typical scheme, investors were told that they would get a return of more than 300 percent in a matter of months, by investing in financial certificates arranged by a Melchizedek bank. Hundreds of investors in the United States contributed more than $1 million. But it was nothing more than a Ponzi scheme. So were other scams involving Melchizedek government bonds, Melchizedek certificates of deposit, and bonds of St. Charles University, a fictitious college that supposedly existed in the fictitious country. Frauds involving the mythical country have sprouted up in cities throughout the United States, as well as England, Australia, Hong Kong, and China.

The men behind the scams are often ex-convicts, including a guy who went to jail for trying to fix a horse race in Australia by dyeing a horse. After his release from jail, he was appointed “governor” of Melchizedek territories in the Pacific.

PYRAMIDS OF DENIAL

One of the oldest forms of securities fraud is the pyramid scheme, an overture laced with promise that is never fulfilled. It’s been around so long, I would think that everyone is aware of it and no one would dare fall for one. Nonetheless, people do every day. Pyramid schemes are similar to Ponzi schemes, but they are hierarchical and promise profits based on investors recruiting others to join the program, not from any product or investment. The variations are endless, but the principle is identical. They typically start with a chain letter or e-mail inviting you to make a small investment in order to reap immense rewards. Chain letters themselves aren’t illegal, but they’re a nuisance and I wouldn’t advise anyone to bother with one. When a chain letter asks you to send money, it crosses the border of illegality and becomes a pyramid scheme.

Many conventional pyramid scams ask you to send a small amount of money, five dollars or ten dollars, to five other people who have already signed on. You’re provided with a list of participants, and instructed to eliminate the top person and add your name to the bottom. Everyone in between moves up a spot. Then you’re advised to send copies of the letter to everyone you can think of. When new people join, each of them will send you money. Since the chain grows at an exponential rate, the money coming to you should grow to a staggering level.

“Gifting clubs” or “giving” programs seem to be the pyramid scam of choice in recent years. Here, the money you’re asked to send is termed a “gift”. And it’s often strongly pointed out by promoters of these gifting clubs that whatever money you subsequently receive is tax-free, because the Internal Revenue Service (IRS) doesn’t tax gifts under $10,000. In actuality, the IRS defines a gift as something given without expectation of getting anything in return, which is not the hook in these scams.

The way many gifting clubs work, participants, typically women, are invited to join a club of some sort. One club was called “Ya Ya Sisterhood” and another was the “Businesswoman’s Networking Club.” Some of them promote a charitable connection, and they usually claim they have the approval of the state Attorney General. To join, you have to make a cash gift to the highest-ranking members, those at the top of the pyramid.

In one gifting scam, participants gave cash gifts of $100 in order to move up through levels named freshman, sophomore, junior, and senior. There were ultimately six steps to the program, and the required investment ranged from $100 to $4,000. Once you completed the six levels, you needed to make a gift of $7,850 and you would receive a tax-free payment of $62,800.

Another gifting tree went by the name, “The Dinner Club.” This group was organized according to the four courses of a dinner party. Eight people known as appetizers filled the bottom row of the tree. They had to pay five thousand dollars apiece to the dessert person at the top of the tree, in order to be seated at the dinner party. As new people joined, the bottom rung advanced to the “soup and salad” level and on to the “entrée” rung before themselves becoming a “dessert”. If you became a “dessert”, meaning if enough people were suckered in to elevate you to that level, you were expected to receive $5,000 apiece from the latest crop of eight participants: $40,000. That’s a $35,000 profit on their original gift. Most people, though, never get to the top and lose all their money. The crooks, though, always arrange themselves in the tree so they ensure that they get their gifts.

When you examine the mathematics, a pyramid scheme looks awfully tantalizing. If you’re asked to send $10 to ten people, that’s $100 you’re out. But you add your name to the list of participants and get ten new people to join. They each send you $10, and you’re back to even. If each of those ten recruits ten additional people, then the next level of the pyramid has a hundred people. You collect $1,000. Another round produces a level of a thousand people. You get paid $10,000. The next level grows to ten thousand people. You collect $100,000. One more round brings you $1 million.

The trouble is that in order to perpetuate these pyramids, more and more people must be recruited to feed those at the upper levels. Once the supply runs out, the pyramid collapses and the people at the bottom are out their money.

And that’s why pyramids have to fail. The supply of people is not infinite. By the time one pyramid scheme reaches its eleventh level, assuming each new participant recruits ten new people, it will have exhausted the entire population of the planet. Plus, no new wealth is being created. Any money that one participant earns, another participant loses.

HANDICAPPING DEATH

The way a criminal thinks is, whenever something becomes popular as a legitimate investment is when it becomes a perfect candidate for an illegitimate investment. A case in point is what are known as viatical investments. The word viatical comes from the Latin viaticum, referring to the money and supplies given as traveling expenses to a Roman official when he departs on a journey. Viatical investments are, in essence, death futures.

A couple of decades ago, the idea was hatched of allowing terminally ill people a way to get money from their life insurance policies while they were still alive, to pay for needed medical expenses or to take one final vacation with loved ones. The way they work is that brokers arrange for investors to buy a certain percentage of the death benefits of the policies of the terminally ill, always leaving 20 percent or so for the estate. Someone given a year or two to live might have a $200,000 policy. For an investment of $100,000, investors might buy $150,000 of the face value. The ill person would get immediate cash and if he died soon, the investors would get a handsome return. How good a return, of course, depended on how well they managed to handicap death.

Policies that get viaticated are generally those of people diagnosed with AIDS, fatal cancers, and other catastrophic illnesses. It’s something of a ghoulish business, but investors look on it as helping a sick person. And, of course, there’s money to be made.

As recently as 1990, this was a small, arcane business, amounting to less than $100 million of viaticated policies. But it has grown to more than $1 billion. Consequently, criminals have taken notice and moved in, so much so that law enforcement authorities say viatical investment scams have become rampant, and rank among the top-ten investment frauds being perpetuated.

Viatical scams take different forms. Some are as blatant and straightforward as selling policies to investors on fictitious patients, or else selling legitimate policies over and over again. One viatical investment firm collected $115 million in investor money, but only $6 million was used to buy life insurance policies. The promoters found various other uses for the balance of the money. They bought twenty-five homes, thirty-four luxury cars, two helicopters, three motorcycles, and several boats.

Other viatical scams are more elaborate and cheat both the insurers and the investors. In these cases, scam artists recruit terminally ill people and help them obtain life insurance by lying on the applications about their condition. This process is known as “clean sheeting.” It doesn’t work with large policies, because medical exams and blood tests are required, but insurance companies skip those details with small policies.

These clean-sheeted policies are then immediately sold to investors. They’re also called “wet ink policies,” because the ink on the contract is barely dry when the policy is sold. Once the policyholders die, these policies are often contested as being fraudulently obtained, then canceled. Crooks in California obtained clean-sheeted policies amounting to more than $11 million before being caught.

Investors have been snapping up these policies. Thieves pitch them as a safe, high-return investment. And they add that the investor is engaging in a humanitarian act, providing desperately-needed funds to the terminally ill.

The truth of the matter is, even legitimate viatical investments are risky. Chronically ill people may live a lot longer than was estimated, cutting down on the yield to investors. New AIDS drugs and other medical breakthroughs work against your investment. In addition, many of these policies are term policies, and if the person outlives the term, there is no death benefit at all. An eighty-four-year-old California woman invested $85,000 in the hope of receiving $139,000 when a policyholder died. The expectation was that he would die within a year. Years later, he was still alive. He might outlive the woman.

WHAT TO CHECK

Given that you can lose money on these investments if they’re legitimate, imagine what it’s like to invest in a scam. There are some telltale signs to be aware of, though none are guarantees. Many legitimate viatical investments are themselves insured, but no viatical scam is, at least not with any real insurer. A legitimate investment will allow you to pay your money to a reputable escrow agent; a scam artist won’t. If it’s on the up and up, the purchase agreement should state that the insurance policy you’re investing in is past the period of contestability, generally two years from when it was issued. The best protection of all, though, is only to deal with a reputable and large viatical broker. And realize that you’re making a speculative investment no matter what.

THE MYTH OF THE INNER CIRCLE

There’s a natural inclination by people who don’t have a lot of money, to think that people who do have a lot are privy to investment opportunities that are closed to them. It wouldn’t surprise them to learn about clandestine securities peddled only to the rich, for suspicions about the government and financial institutions are widespread. Criminals are well aware of such suspicions, and exploit them with appalling consequences for investors.

In the little town of Mattoon, Illinois, population 18,500, a sixty-six-year-old retired electrician started an investment fund called the Omega Trust and Trading, which promised a fifty-to-one return. According to the fund’s literature, its head was an international banker who had worked for Fortune 500 companies (when investigators interviewed him, he couldn’t quite remember their names) and was one of a handful of people in the world who had the know-all and ability to conduct secret multimillion-dollar trades.

It was not an original thought. Many investment schemes tell people there’s a secret banking system in which “prime banks” and the wealthy participate. The returns are well beyond what ordinary people can realize, as much as 70 percent a week. Ordinary people can share in the bounty if they pool their money and allow someone connected to this system to invest it for them.

A common pitch is, you’re asked to put money into a trust account backed by a guarantee (often fake) from a “prime bank,” “top-100 world bank,” or “top-25 European bank.” You’re told that your money will be leveraged to buy prime bank instruments, which can generate enormous returns. In fact, your money goes offshore, never to return. Another pitch: You pay the promoter a fee in return for a promise that you will be “leased” a much larger sum of money to invest in prime bank instruments at great interest rates.

In the Omega trust, investors were told their capital would be invested in foreign bank debentures. Money was invested from all over the country, as well as from Australia and China. The mastermind of the scheme laundered the money by handing out interest-free loans to local residents and by starting businesses.

There is no such thing as bank debentures. No secret banking system exists, at least not on this planet.

One of the giveaways in Mattoon was when residents began buying new trucks and cars and opening businesses, even though some of them had jobs that paid minimum wage. In the fall of 2000, law enforcement authorities charged a group of Mattoon residents and others with perpetrating an investment scheme that duped more than ten thousand people throughout the world of more than $12.5 million.

RED FLAGS

Obviously, you just can’t be too careful with your money. Before you part with it, look at all investments on the SEC database to be sure they’re registered. All American companies with more than five hundred investors and $10 million in assets must be registered with the SEC. Smaller companies have to file information with the SEC, or with the state securities regulators where they’re based. To check if a broker is licensed, go to the website of the National Association of Securities Dealers Regulation. One thing the Internet has done is made it easier to do research on a company, so go to reliable sites and check analyst reports. There’s no need to rush into something.

I would never invest in anything described as “risk-free” or “guaranteed,” particularly offshore investments. It’s an automatic red flag if the promoters say the state Attorney General has approved it. Check with the Attorney General’s office and find out for yourself. Take note of how you’re asked to pay. If a broker wants your bank account number to speed things along, forget it. If you’re told to send money to a P.O. Box or someplace offshore, forget that, too.

The bigger the promised return on an investment, the higher the likelihood that it’s a scam. But just because a return is reasonable, don’t assume the investment is real. One of the biggest scams in recent years is fraudulent promissory notes sold to the elderly. Promissory notes are a short-term debt companies use to borrow cash. Con artists exploit a loophole in securities laws that exempt some nine-month promissory notes from regulatory scrutiny. The con artist starts a marketing firm and recruits unwitting insurance agents to sell the notes. Unlike so many investment schemes with their 100-percent-plus returns, these typically promise 9 to 12 percent interest, enough to attract a conservative investor without arousing suspicion. They’re touted as risk free and bonded by foreign insurance companies, which usually are fake. The local agents are often known and trusted by the investors, and are fooled as well by the con artists. Eventually, investors get notices that the company behind the notes has gone bankrupt and that’s the end of their investment.

A good rule of thumb is, the more exclusive something is positioned to be, the more likely it’s trouble. Once-in-a-lifetime opportunities are usually once-in-a-lifetime chances to lose all your savings. If something is billed as getting “imminent” regulatory approval, that means it will never get regulatory approval. When I see ads on television promoting some new elixir or wonderful product, the words that always tell me it’s a scam are “not sold in stores.” Think about it, if someone has a great product, why wouldn’t he sell it in stores? The reason is because there’s something fishy about it.

It’s the same with investments. When I hear about an investment opportunity and am told it’s not available through brokerage houses, then that’s criminal-speak for “only available through con artists.” If you really could make 100 percent on your money in a week, you wouldn’t need to find out about it in an e-mail from a total stranger. You can bet Merrill Lynch and Paine Webber would be selling it, too.