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After Madoff: Ensuring Your Money Isn't Stolen

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Jun 30, 2009 9:14 pm US/Mountain

After Madoff: Ensuring Your Money Isn't Stolen

Good Question: How do you keep your investments safe?

Written by Alan Gionet

Reporting
Alan Gionet
DENVER (CBS4) ― The Bernie Madoff scandal is far from over. Tuesday, The Associated Press reported authorities are pursuing charges against 10 more people.

Monday Madoff was sentenced to 150 years behind bars for running a massive Ponzi scheme that's yet to be fully unraveled. U.S. District Judge Denny Chin said it cost investors $13.2 billion by conservative estimates and $50 billion by the estimate Madoff gave his sons in December. It's two vastly different sums that show how intricate financial fraud can be.

"None of us will be made whole, ever," said one man outside the New York courthouse where Madoff was sentenced. A woman said, "If we're not safe, you are not safe either."

We're not.

Year after year investigators uncover Ponzi schemes and other financial fraud. The question is, how can you protect yourself? It's simple enough for Colorado's top watchdog.

"If it sounds too good to be true ... it is," said Fred Joseph, Securities Commissioner for the Department of Regulatory Agencies Division of Securities.

Joseph says there were some things that might have made investors who put their money with Madoff wary.

"You want to look out for three things. One is the guarantee of a high return. There's a red flag right there. A guarantee of low-risk or no-risk, there's another red flag. And another one is urgency. 'You need to invest today.'"

Madoff was promising a consistent return of about 10 percent. As volatile as the markets are, consistency simply doesn't happen. Madoff exploited the opportunity to act as both investment advisor and custodian of his clients' assets. That meant there was no one to verify whether the assets existed, or whether the trades he claimed he was making were going through.

Joseph points out that Madoff used a small accounting firm rather than one of the big four. Why? With the amount of money he was handling, it seemed natural the accounting would be done by one of the industry standard bearers.

To make sure you're not getting ripped off, Joseph suggests, "You probably want to call the Division of Securities, DORA, and make sure this person is licensed to sell securities and investments like this. And number two is we can also check and see if what they're selling is a registered security."

Here's a link to their website: http://www.dora.state.co.us/securities/index.htm The Division's phone number is: (303) 894-2320.

It's okay not to understand. Ask questions and keep asking.

"I always have a rule," said Joseph. "If I don't understand it in 30 seconds I don't want it."

He notes that investment fraud is often perpetrated on middle-aged males, because those are the people who like to think they know what they're talking about when it comes to investments.

"I call that the tooth fairy syndrome. We have a lot of investors that want to believe."

Believe too much though and there's a chance you could end up a victim. Keep checking on your money and checking out your financial advisor.

(© MMIX CBS Television Stations, Inc. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.)

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