Newspaper article THE JOURNAL RECORD

Investment Scams Call for Protective Measures

Newspaper article THE JOURNAL RECORD

Investment Scams Call for Protective Measures

Article excerpt

As the legitimate investment world has boomed in the 1980s, so has its dark underside, where the ripoff artists ply their trade.

Stories abound of operations selling ``gold'' that is actually dirt, penny stocks at pumped-up prices, packages of government securities that never existed, and tax shelter deals that can't stand up to the slightest scrutiny.

Of course, financial scams are just about as old as the history of money. A lot of the ploys in use today are merely recycled versions of schemes dreamed up long ago.

But the volatility of all securities markets in this decade, and the fast-buck atmosphere it has helped foster, seems to have created an especially fertile breeding ground for financial phony business.

``We've never been this aware of so many frauds in things such as penny stocks, coins, gold piles and so forth,'' said Raymond F. DeVoe Jr., an analyst at the Wall Street firm of Legg Mason Wood Walker Inc.

One apparent cause of this, DeVoe says, is the proliferation of new investment vehicles that Wall Street has devised to offer to pension fund managers and other sophisticated clients.

``Some of the financial creations of the last few years are so bizarre that even professionals don't completely understand them,'' he observes.

``Because the legitimate financial creations are so complex, it is very hard to tell them from the phony ones.''

All this leaves many individuals who have money to manage in a tough spot: How to protect themselves while still attempting to invest their money productively.

Harold Finlay at the Cleveland-based investment firm of Prescott, Ball & Turben suggests three basic rules: ``Beware of very high yields. Know the person with whom you do business. Don't make hasty decisions.

``It seems laughable that many people spend more time selecting a necktie or dress than investing their life savings,'' Finley observed in the firm's monthly publication Investor News. …

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