Your Money

July 31, 2010
CNN


ALI VELSHI:

You have heard of the biggest names, Bernie Madoff, Charles Ponti (ph). But financial con artists are all around us scamming people just like you or me. Even though we may not always hear about it in the headlines. Now, Tom Ajamie is the co-author of a new book called "Financial Serial Killers: Inside the World of Wall Street, Money Hustlers, Swindlers and Con Men."

Tom and I go back a long way, we have worked together for many years. I read the book before it went into print and gave him an endorsement of the book. So I just want to tell you that I read it and I know it. Tom the interesting thing is you cover everybody from Bondi to Madoff, but a whole bunch of people we've never heard of. You've even been involved in some of those cases as a securities lawyer. How common is financial swindling?

TOM AJAMIE, CO-AUTHOR, "FIANCIAL SERIAL KILLERS:"

Well you know, Ali, it's very common. The sad thing about is its common in relationships of trust and longstanding relationships. I think what was most interesting we found that our resources when we put the book together is how many people are swindled by investment advisers or brokers they have known for say 10 or 20 years or longer. How often are they swindled by family members and relatives even?

VELSHI:

All right. Let's talk about some basic things; they are similarities in many of the stories in your book. It is a good read because by reading it you'll get familiar with techniques that these con artists have in common. Who's most vulnerable? Who's most likely to get scammed by a con artist according to what you have seen?

AJAMIE:

Well I think generally anyone whose lost money in the last few years is extremely vulnerable. And that is a lot of people. And what we find is that when you've lost money you become a little more desperate to try to earn your money back. Especially if you are getting close to retirement or so you say, wait, I'm down 20 percent, I'm down 30 percent, what am I going to do. So you're susceptible to these scam artists and they know that and they move in on you.

The second group of people that are extremely vulnerable and this is becoming more and more to light day by day as the boomers age are the people who are getting older, who are elderly. What happens is you start to lose say some of your perceptive abilities, you become lonely, and a lot of these people they live alone and they don't have family members near by. And they are extremely vulnerable to being preyed on by people who try to win over their trust.

And then finally people who are going through periods of grief. We call them the bereaved. If you just had a family member who has passed away, a spouse has died. Of course you're not altogether emotionally stable because of what you've just gone through and these scam artists, they know that, and they prey on these people.

VELSHI:

All right. So if you know somebody who is recently bereaved or somebody who's getting older try and stay involved at least in having them talk to you about what is going on in their lives and who's trying to invest for them? Talk to me about the strategies that these con artists use to scam average people. Give me some warning signs.

AJAMIE:

Well the first thing is these are very false emotional bonds they'll try to create. They'll come in and they will tell you things like, hey, I've known your father for all these years or you and I go back to high school, remember when we use to do this and this? Or don't you remember when we use to sit next to each other in church. So they'll try these emotional bonds which often work and then they'll move in with promises of very good returns that say you can double your money or you might get 15 percent returned a year in a market like right now where interest rates are extremely low. That's very suspicious.

VELSHI:

One of the things that was interesting in your book is that people - and Madoff did this and Ponzi did this. This idea that I have a new way of investing, the old way doesn't work. Everybody else can't get you more than 10 percent in a great year on the market; I have some other way that hasn't been discovered.

AJAMIE:

That's the new paradigm, the new economy. And you know going back to the late 1990's and into the 2000's we heard that a lot with certain types tech stocks, remember the pet.com company and things like this. And these were sold. Investors would say, wait a second, here is a company that has not really been making money, or how can it be doing this. But the response would be, don't worry this is a new economy we are in now, this is a new theory, this is a new product. These types of things will often hook investors.

VELSHI:

All right. Great book worth reading "Financial Serial Killers: Inside the World of Wall Street, Money Hustlers, Swindlers and Con Men." Co-authored by my good friend Tom Ajamie. Thank you Tom.

AJAMIE:

Thank you Ali.