Scams Against Chinese Community Targeted : Investment: A Monterey Park councilman wants new brokerages more closely regulated. Two companies are suspected of conning people out of millions of dollars.

Chinese investors in San Gabriel Valley have lost so much money recently in questionable schemes that a Monterey Park councilman is working on an ordinance to regulate new investment companies.

Just within the past month, investigators have targeted two Chinese-owned investment brokerages that allegedly conned members of their own communities into losing millions of dollars in a practice known as “affinity fraud.” Although the cases are still pending, Councilman Samuel Kiang is moving now to stave off investment fraud.

“These people are victimizing their own people, and these things aren’t supposed to happen,” Kiang said. “(Immigrants) have culture problems. They have language problems. They are working very hard, and someone comes along and cleans them out.”

In January, 30 federal, state and local investigators raided the Monterey Park, Pasadena and Los Angeles offices of a Hong Kong-based investment conglomerate called Jin Bao, which means gold treasure. (The company’s American name is Pundi-Forsten International Holdings Ltd.. Its lawyer denies any wrongdoing.)

The raid came on the heels of reports that Chinese developer John Chi is under investigation by the state Department of Corporations after complaints that he persuaded hundreds of Chinese churchgoers to invest as much as $50 million in his Irvine-based Trinity Valley Investment Corp. and then disappeared.

And last year, in a highly publicized bust, federal authorities shut down East Ocean International Inc. for allegedly running an illegal Pasadena commodities pool and bilking 100 Chinese investors of $1.7 million. At least three other cases involving allegations of investment fraud by Chinese-Americans against other Chinese are pending in courts around the nation.

In addition to developing an ordinance to leash investment companies, the details of which are still being worked out, Kiang plans to form a volunteer consumer group to monitor new companies that advertise in Chinese newspapers and often escape the scrutiny of state and federal regulatory officials. In addition, an investment seminar to inform Chinese immigrants about investment scams will be offered in the next couple of months, Kiang said.

One San Gabriel Valley woman said she was lured into investing $320,000--her life savings and more--after she responded to Pundi-Forsten’s ads on Chinese-language television and in Chinese-American newspapers. The ads trumpeted high-yield, low-risk investments.

Most new Chinese immigrants trust other Chinese people to teach them the ropes about American investments, she said.

“For us, we believe in them,” the woman said. She declined to give her name, age, residence or occupation for fear that her family members and friends would learn of her shame.

She is one of thousands of investors, most of them in the San Gabriel Valley and Los Angeles, who lost millions of dollars to Pundi-Forsten, according to the state Department of Corporations.

“Chinese people cheat Chinese people, I felt so sorry,” the Chinese woman said.

Affinity fraud scams usually go on for months before the principals flee, said her Pasadena attorney, Gary Hollingsworth. Scam artists in the Chinese community know that Chinese people are reluctant to report such crimes to the police because of shame, as well as fear of authority figures.

Pundi-Forsten escaped regulatory notice for more than two years, Hollingsworth said. “Nobody had made a complaint against them before,” he said.

An attorney representing Moses L. W. Wong, Pundi-Forsten’s CEO and majority shareholder, said the state’s case is based only on the complaints of disgruntled investors.

“All you have is a bunch of people who lost a lot of money in investments and now they’re saying there’s misrepresentation,” said attorney Fred Wong, no relation to his client. Fred Wong declined to respond to specific charges.

In January, the Department of Corporations and the U.S. Commodity Futures Trading Commission sued Pundi-Forsten in federal court and won a preliminary injunction to freeze the company’s assets, in effect shutting down operations. Investigators allege that Pundi-Forsten violated the federal Commodity Exchange Act and various provisions of the California commodities law by offering off-exchange sales and trades of gold, silver and various foreign currencies, instead of trading on a legitimate market.

A court-ordered receiver is perusing Pundi-Forsten’s records to determine the exact number of investors and the amount of the company’s assets, as well as evidence of wrongdoing.

“There is no evidence that any investors got any metals or currencies, nor indeed that any trades were ever made on behalf of many investors,” a Department of Corporations statement said. Investigators said the company invited investors to make down payments of 15% for futures contracts in precious metals and various foreign currencies; their purchases would be managed by “account executives” to whom the investors gave powers of attorney.

Investigators say they believe the scheme is one of the biggest of its kind.

“In this case, several Asian communities were victimized by members of their communities,” Commissioner of Corporations Thomas S. Sayles said in a statement. “. . . This is an abuse of trust of the most destructive kind because it relies upon and ultimately undermines people’s faith in their own communities.”

Warning Signs for Investors

The techniques used by Pundi-Forsten International Holdings Ltd. to draw investors were typical of investment scams, according to Thomas S. Sayles, commissioner of the state Department of Corporations. Sayles listed some signs that should raise red flags for potential investors:

Promises of big profits with no risk.

Overseas trades that the investor has no way of understanding or verifying.

Statements showing quick profits to get the investor to put in more money.

Invitations to bring in family and friends.

Secret formulas for predicting market trends.