COMMISSION NEWS |
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ARIZONA CORPORATION COMMISSION |
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TO: EDITORS, NEWS DIRECTORS |
DATE: March 31, 1998 |
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FOR: IMMEDIATE RELEASE |
CONTACT: Michael G. Burton (602) 542-4242 |
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SECURITIES DIVISION WARNS OF FRAUD TRENDS; |
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The second half of 1997 proved to be a busy one for scam artists and, as a result, the Securities Division of the Arizona Corporation Commission. The Division, which enforces Arizona's securities fraud laws, filed 30 civil administrative actions and took part in 4 criminal cases. The Division's efforts resulted in more than $13.2 million ordered in restitution and penalties and 21 indictments. |
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Unfortunately, Arizona has long been recognized as a hotbed for securities fraud due in part to its large senior citizen population and Baby Boomers increased interest in investments. |
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The Division has spotted several types of schemes that appear to be on the rise in Arizona. |
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One popular scheme concerns the promotion of "prime bank" financial instruments, also known as "roll programs," "trading programs," or "high-yield investment programs." Promoters say that these instruments are issued by "prime" international banks to other banks at a significant discount. These prime bank investment opportunities usually involve a high rate of return, with little or no risk. There's one catch - they don't really exist. |
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Another ever-popular scam concerns ponzi or pyramid schemes. Unlike a legal multi-level marketing scheme, where participants receive income from the sale of a product or service and from the membership fees of subsequent members, an illegal pyramid program promises extraordinary profits based on an ever-expanding circle of new sales people. A member of a pyramid scheme receives compensation principally from the introduction of other persons in the program. The sale of goods or services generates, at best, only a small income. Any person who establishes, operates, advertises, or promotes a pyramid scheme in Arizona is guilty of a felony. According to Michael G. Burton, Securities Division Director, "Pyramid schemes are the financial equivalent of a house of cards. It's not a question of whether they will collapse, only when. Our mission is to stop these types of schemes before the investor writes the check and before these scams gain momentum and grow." |
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The Division also warns against fraud from mining claims, where promoters of fictitious or worthless mining operations promise a king's ransom of everything from gold and silver to oil and gas. The mining fraud cases come in many forms, including investments in the purported mining companies themselves or in the promised future "mother lode" that never comes. |
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Another area of concern involves registered securities salespersons who deceive their clients and oftentimes their own firms by "selling away" - transacting business without the approval of their firm so that the deals are not recorded on the books and records of the firm. Oftentimes, the selling away occurs because the firm would consider the investment unsuitable for sale to the salesperson's client, or in some instances the "investment" simply is a vehicle for the salesman to steal the customer's funds. |
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The Division also is promoting a National Investors' Town Meeting on April 4, 1998. The information follows. For information about this release or the Town Meeting, the Division may be contacted at (602) 542-4242 and the public is encouraged to frequently visit the Division's new web site at www.ccsd.cc.state.az.us. |
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See attachment for further information about the fraudulent schemes cited in this release. |
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Saturday, April 4, 1998: National Investors' Town Meeting Location: ASU Downtown Center Time: 10:00am - 1:00pm. Registration: FREE Program of Events: Seminar at 10:00 am Information: www.cc.state.az.us/securities |
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For further information about fraudulent investment schemes, copies of the following press releases issued by the Arizona Corporation Commission Securities Division, listed by topic, may be requested by contacting Lisa Kelley, Counsel, at (602) 542-0152, or by e-mail lk@ccsd.cc.state.az.us: |
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Prime Bank Instruments Ponzi/Pyramid "Corporation Commission Orders Charles T. Brown and Sun West Investments To Pay Over $5.1 Million In Restitution" "Corporation Commission Orders $6.1 Million Repaid to Arizona Investors" Mining Selling Away/Industry Member Actions "Phoenix Broker Jailed For Stealing Client Funds" "Securities Salesman Terminated and Facing Revocation For Failing To Cooperate In Investigation" "Securities Salesman Registration Revoked For Failing To Cooperate In Investigation" |
"Securities Dealer Registration Revoked For Engaging In Fraudulent Conduct" "Securities Salesman and Stock Research Company Committed Fraud" Exotic Frauds "Commission Orders End To Children's TV Investment Scam" "Corporation Commission Orders $6.1 Million Repaid To Arizona Investors" Seminar/Newsletter Actions "Publisher of Financial Newsletter Fined Over "DRIP" Deal" |