# W5 reporting on Ponzi schemes in Canada



## carverman (Nov 8, 2010)

Watched the W5 segment on "All that Glitters" last night and I just can't
believe that so much of this fraud is going on in Canada. The segment
starts off with a couple in their 70s, that have lost $400K of their life
savings to these fraudsters. Even though the two crooks that ran it,
IFFL (Institute For Financial Learning)...(now wouldn't that prompt you
to investigate what that is about first? )....have been arrested and one
is in prison, the others involved are out on bail. 

http://www.ctv.ca/CTVNews/WFive/20111001/w5-all-that-glitters-investment-schemes-rcmp-asc-111001/

A forensic accounting investigation is ongoing to find out where the hundreds of millions, possibly even billions , of money bilked out of this Alberta retired couple and other investors in Canada just like them, has gone. 

It is suspected most of it was channeled by the fraudsters to South America
to "finance operations there", (where the supposed "gold mining" operations
as told to the investors, were supposed to be ), and then to European 
(or Swiss) bank accts. 

Here in a nutshell is how it happened.

a) This investment scheme was recommended by the elderly couple's
accountant of 30 years, a person that they TRUSTED.

b) After a slick staged presentation, where the fraudsters promised 35%
return on the couple's investments.... (unless, of course, the value of gold dropped
down to $0)... there was NO WAY THEY COULD LOSE their money.

c) To convince the couple and others like them, that this was "legit",
they were invited to fly down to Ecuador, and see for themselves the results of a "Gold Mining" operation, where they could touch and feel bars of gold,
and processed gold in various stages of the mining operation, at a predetermined location.

d) The couple received monthly statements on how well their "investment" was
growing on paper, to give them peace of mind over several years and keep them
from becoming suspicious. 

e) Up until the scheme collapsed, when the couple stopped receiving monthly
reports on how much their $400k investment was worth on paper, the
couple had no idea that they were being duped. In fact, on the LAST monthly
report there was handwritten words of how well things were going and a signature
to give the couple a feeling that this was still a good investment vehicle.


Then it all collapsed! The couple's accountant MOVED to Europe, 
and so far no paper trail exists to see what happened to the couple's money.

While some money (only a few million) out of the hundreds of miilions that were
handed over to the fraudsters has been identified , and may in time be
recovered, it is a small comfort to the retired couple that may not live
long enough to receive even a few pennies on the dollar of their "surefire
investment".


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## sags (May 15, 2010)

There are long lists of scams uncovered at the OSC, ASC, and other Provincial websites. Hundreds of millions of dollars............

What I always wondered was how people smart enough to save big piles of cash could be so dumb as to invest in these programs.

I suspect much of it is inherited, because usually people who have to struggle and work to save, don't throw their money away on a risky sounding venture.


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## andrewf (Mar 1, 2010)

Another good reason for the government to create a public defined contribution pension type scheme... giving people an appropriately managed alternative to too-good-to-be-true scams.


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## OhGreatGuru (May 24, 2009)

I'm of 2 minds about this.

If anyone promises you a guaranteed return of 35%, you should know it's a scam and call the cops. If you don't know that much, you shouldn't be managing your own money, and maybe shouldn't be allowed outdoors unsupervised. 

Also every confidence scheme relies on the greed of the victims, who are expecting to make an unrealistic profit.

OTOH in this instance the couple relied on the advice of a trusted source (their accountant), who is perhaps the real culprit here.


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## sags (May 15, 2010)

andrewf said:


> Another good reason for the government to create a public defined contribution pension type scheme... giving people an appropriately managed alternative to too-good-to-be-true scams.


I would rather see a DB pension plan setup, but with some ingenuity, a DC plan could work.

Why not set up an accompanying "Canada Infrastructure Fund" at the same time, for the dual purpose of providing private funding for long term, income producing infrastructure projects (public transit, toll roads), and allow Canadians to invest the proceeds of their DC plan into it? Without debt, these projects would be spinning off revenue from the outset.

It would mitigate some of the investment risk.


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## HaroldCrump (Jun 10, 2009)

sags said:


> Why not set up an accompanying "Canada Infrastructure Fund" at the same time, for the dual purpose of providing private funding for long term, income producing infrastructure projects (public transit, toll roads), and allow Canadians to invest the proceeds of their DC plan into it? Without debt, these projects would be spinning off revenue from the outset.
> 
> It would mitigate some of the investment risk.


Or simply make the income from federal govt. bonds tax exempt.
That'll be an incentive to buy federal bonds over others.
Then they can use that money for infrastructure or whatever makes sense.

Regarding pension, yes absolutely, the private sector and self employed workers need a govt. backed DBP or an expansion of the CPP to serve a similar purpose.
Or convert all current govt. backed pension plans to DC moving forward to level the playing field.


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## carverman (Nov 8, 2010)

andrewf said:


> Another good reason for the government to create a public defined contribution pension type scheme... *giving people an appropriately managed alternative to too-good-to-be-true scams*.


That would be our income tax system, and HST, liquor taxes, property taxes, excise taxes, eco-fees and other possibly hidden taxes. 

Great idea though, had they thought of that 30 years ago, it might have
been a viable alternative to the CPP..which may go broke in the future
as all the baby boomers retire and start drawing from it..but then they
can just change the tax schemes to make up for the shortfall..unless we
are planning to follow in the footsteps of the US and their unmanageable
debt now approaching 15 trillion?


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## carverman (Nov 8, 2010)

HaroldCrump said:


> Or simply make the income from federal govt. bonds tax exempt.
> That'll be an incentive to buy federal bonds over others.
> Then they can use that money for infrastructure or whatever makes sense.


Gov't bonds are paying diddly squat these days in interest. TFSA limit you
to $5K per eligible contributor and the banks pay diddly squat in interest on
that. The inflation rate is higher each year than the income you earn on
the money.

I though about using my hard earned savings and investing it in Gov't savings
bonds, but since the interest rate is so low and you are locked in for years,
it doesn't make a lot of sense right now..might as well keep your money under
your mattress in a shoebox..(I'm kidding here )

The way I see it..If the gov't can afford to spend billions on a bunch of
"next gen" fighter jets, then they can afford to pay me a bit more interest
on CSBs..otherwise, safe as they are...no thanks!


Now this couple mentioned in "all that glitters" (is not gold) were advised by
a trusted account, one they had for over 30 years, and they believed him.
Whether he was misled by the scammers and was involved somewhat 
(percentages or graft?) or just another victim that had to flee Canada after the scam was uncovered..well that turned out to be really bad luck for the couple and
other like them. 

The scam convinced people to invest with the trips to SA, where the scammers bought gold in various stages of processing to show their er.."suckers"
that it was real gold and worth investing. A sure fire deal! 

This was 5 years ago..what was gold worth then per ounce?
Now it's approaching $2000 a troy ounce because of the speculators out
there buying it driving up the price of gold even more.

So had this "investment scheme" been legit right from the start, the couple
would have made something on that $400k, even if most of the money was
used frivously for "adminstration" or even mining/processing operation.
Unfortunately for them and others like them who lost their life savings...
it turned out to be "Fools Gold".


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## carverman (Nov 8, 2010)

sags said:


> Why not set up an accompanying "Canada Infrastructure Fund" at the same time, for the dual purpose of providing private funding for long term, income producing infrastructure projects (public transit, toll roads), and allow Canadians to invest the proceeds of their DC plan into it? Without debt, these projects would be spinning off revenue from the outset.
> 
> It would mitigate some of the investment risk.


I have just the Federal minister to administer this "infrastructure fund"...
Tony Clement and his "infrastructure improvements for areas that didn't
even have anything to do with the G6 conference in Huntsville.
Then there are all these ministers that use gov't jets to get around free
at $30,000 an hour..to check on how things are going on the bridges
that lead to nowhere (like the one they are building in Windsor).


With the Federal auditor general's 10 year term expired (Sheila Fraser),
and now they are looking for a new one, I wouldn't trust them to
with my money.


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## CanadianCapitalist (Mar 31, 2009)

carverman said:


> Great idea though, had they thought of that 30 years ago, it might have
> been a viable alternative to the CPP..which may go broke in the future
> as all the baby boomers retire and start drawing from it...


Why would the CPP go broke? The system is supposed to be actuarially sound for 75 years.


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## carverman (Nov 8, 2010)

CanadianCapitalist said:


> Why would the CPP go broke? The system is supposed to be actuarially sound for 75 years.


Well I guess I won't be around to see it "go broke" then.

Hopefully they have it invested in ...uh! gov't bonds? And the most critical
part of all is the CPP contribution increases every year. That way the working
poor today can subsidize any shortfall in the CPP system if too many are
drawing from it compared to those still working and making contributions.

I started collecting at 60 and in 7 years, I will have almost got back at least what I paid into it over the 35 years of my working life in contributions.
The contributions in my early years were sporadic and very little due to lower salaries compared to what I was paying up to 2003 when I was retired.


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## OhGreatGuru (May 24, 2009)

carverman said:


> ...
> Hopefully they have it invested in ...uh! gov't bonds? ...
> ...


Where have you been lately? The CPP Investment Boad was created in 1999 to start investing CPP surplus cash flows in equities, fixed income, real estate, and other ventures in order to increase long-term returns. http://www.cppib.ca/


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## CanadianCapitalist (Mar 31, 2009)

Getting back to the original topic, the list of financial scams is a long and depressing one. This FAIR Canada report that was mentioned in that W5 program lists some of them.

http://faircanada.ca/wp-content/uploads/2011/01/Financial-scandals-paper-SW-711-pm_Final-0222.pdf

I think penalties for financial fraud should be much stricter and there should be more prosecutions of financial crimes. These measures won't prevent crimes, so ultimately, it is the responsibility of individuals to be extremely vigilant about the people they are entrusting their money with.


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## carverman (Nov 8, 2010)

Well the link to the FAIR document certainly indicates this type of crime
is growing and widespread in Canada.

While the recommendations make perfect sense, identifying these scammers
before they take their financial toll on unsuspecting victims is going to be
difficult. Certainly, the recommendation that legit investing firms pay into
a special compensation fund makes a lot of sense (similar to the registered travel
agents), but in reality is it going to be enough, when millions can be lost. 

Sure, the public can do diligence on any investment firm, financier/mortgage broker out there, but only up to a point, as there is only a certain amount of information available to the public. While some fraud artists may work within the framework of a legitimate investment firm, yet steer potential investors to "surefire schemes" where they may capitalize on lucrative commissions,
it seems that most cases are just independent "operators" on their own, not registered with any securities commission. How much information can a potential investor find on these? 

Some scam victims are referred by those in positions of trust, such 
lawyer, accountant or minister of some church they belong to, etc.

Some scammers operate legitimate investment businesses for a while, then run into financial problems, gambling habits or other personal problems where the
temptation to abscond with hundreds of thousands, even millions of their client's
money occurs, so it's not always easy to advise the public ahead of time,
that their fiananced deal or investment is going to turn sour on them..
before they commit all their money.


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## kcowan (Jul 1, 2010)

Asking for audited financial statements is at least a first step to get rid of some scammers. Then you can sue the auditor! It is amazing how people hand over their money without any due diligence.


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