20,000 Nationwide Invested in Phony Retirement Plans, Officials Say : Securities: About 1,000 Californians were allegedly bilked of as much as $30,000 each in the $1.5-billion scheme.
About 20,000 people nationwide have invested an estimated $1.5 billion over the past 18 months in allegedly phony retirement plans, which were falsely promoted on television as being approved by the Internal Revenue Service, securities officials from several states disclosed Tuesday.
In California, the Department of Corporations--in its largest enforcement effort--has taken legal action against 426 individuals and entities that took in several hundred million dollars through the scheme, said G.W. McDonald, chief of enforcement. An estimated 1,000 California investors were bilked of between $1,500 to more than $30,000 each, he said.
“It’s extraordinarily unlikely that people would get their money back” based on past fraud cases, McDonald said.
In television infomercials, promoters targeted the holders of individual retirement accounts by promising incredibly high rates of return--up to 600% over five years--and the safety of “IRA-approved” offerings endorsed by the IRS. The investors’ money would supposedly be used to build high-tech communication projects based on the government licenses for interactive video, mobile radio and other wireless forms of communications.
But the IRS does not approve or endorse any individual investments, and the licenses held by many of the promoters have proven to be either overvalued or nonexistent, according to investigators. In fact, most of the investors’ funds have been eaten up by large fees charged by the promoters.
“These investors were looking to provide for themselves in their retirement years,” California Commissioner of Corporations Gary Mendoza said in a statement. “It’s a cruel hoax to raise false hopes of investment return with no prospects of delivery and rob people of their retirement plans.”
California investigators made a crucial breakthrough when they identified a Pasadena pension fund administrator that the promoters used to gather the investors’ funds. The administrator, who was not identified by state officials, agreed to provide investigators a list of the 7,000 investors and more than 140 individuals and firms involved in the deal.
As a result of the yearlong investigation, the Department of Corporations has recommended the criminal prosecution of seven Southern California residents on charges of securities fraud and the sale of unregistered securities, McDonald said.
