Forgery update

By Greg Wright

MBA, CFE, CFP®, CLU, ChFC

Certified Fraud Examiner

National Speaker

Updated Dec 2, 2018 - David has met with the FBI Special Agent and Postal Inspector I referred him to as well as his county Prosecutor.   He learned from law enforcement that his former insurance agent has “taken the fifth” and would not answer any questions posed by law enforcement. 

Government investigators have ordered the insurance agent's out-of-state trust company to provide a list of the insurance agent’s clients.  They have identified two individuals stung by the same IRA scam and expect to find more. 

The insurance agent appears to be attempting hiding assets and keeping a low profile.  According to David, he is living in a vacation lake home and has transferred his personal residence into his wife’s name. 

David was assured by the Government investigators that the case was a “slam dunk.”  Maybe.  However, the wheels of justice are slow to turn.  

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Yesterday, David met with the Indiana Securities Division and has an invitation to meet with the FBI.  

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The last time I saw David, it was months ago. He was in the audience when I gave a presentation to his business group. 

Three weeks ago, David called and said, “What do you think about self-directed IRAs?”  I told him that it depends on the underlying investment and the honesty of those involved in the transactions.  I suggested that he read an article I wrote three years ago, “Self-directed IRA Fraudster.”

A few days later David asked to meet with me regarding a confidential matter.  He said that he would buy my lunch.

A self-directed IRAs is an individual retirement account that the investor controls with investments of his or her own choosing. These IRAs may invest in real estate, private mortgages, promissory notes, precious metals, cryptocurrencies, and private company stock. Last month, the SEC warned that assets in traditional IRAs — stocks, bonds, and mutual funds — generally fall under the agency's oversight, but that is not the case with self-directed IRAs, “which lack transparency.” 

David and I met at a Cracker Barrel restaurant.  He brought along his best friend.  I’ve known David (not his real name) for several years.  He has an easy laugh, is in his 40s, married with kids, and found him to be a straight-forward, church-going business person.

He said that, four years ago, he changed jobs and his insurance agent suggested that he use a self-directed IRA to improve his investment’s return.  At that time, you were lucky if a bank CD paid one-half percent.  His insurance agent said that he could get him seven percent.  The insurance agent set up the IRA and David wrote checks that totaled just under $50,000 to the IRA Trust company located in Ohio.  Next, he authorized the purchase of a promissory note that paid 7% and had a balloon payment to be made by the borrower that was due in three years – the payments were due a year ago. 

The promissory note was a year past-due!

After the balloon payment dates had not been not met, the insurance agent continued to stall and avoid David for several months.  When David contacted the trust company, he found that he had not received all the paperwork, and he did not recall seeing or signing some of the documents.  Another of David’s friends (a mortgage broker) said that the some of the signatures looked “exactly” the same and could be “traced forgery” signatures. 

A forgery expert taught a CE course I attended and suggested to the class that document signatures that appeared identical were often “forged.”  A “traced” signature is forged by tracing a genuine signature.  Often, the genuine signature is placed on a glass window and the target document is placed on top,  The fraudster then will trace the genuine signature producing a signature that is exactly like the original.   You probably couldn’t sign your name exactly the same two times in a row. Here is my past article on forgery. 

I told David that federal investigators have told me that forgery was a leading cause of insurance agents being convicted of fraud, going to prison, and losing their license.  In a complex investment crime, it was often the easiest part of the crime to prove.

David asked what I would do.  I suggested that he speak with his attorney, and I would be happy to help his attorney. 

It has been my observation that fraudsters use the same scheme several times.  If it worked on David, it probably would work on his other clients.  Someone might speak with the agent’s general agent.  Also, he might meet with the Indiana Department of Insurance or the Indiana Securities Division.

David called me a few days later to say that he found that a friend that had also invested in similar high return promissory notes and used the same Ohio trust company.  All of the promissory notes resulted in the money flowing directly into the insurance agent’s business account. 

Yesterday, David called to tell me that he was meeting with the Indiana Department of Insurance next week.

“I am more concerned with the return of my money than the return on my money.” – Will Rogers