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Investor fraud summit in Colorado arms consumers with information to protect retirement funds and life savings

Colorado is One of Six Summits to be Held Around the Country

FOR IMMEDIATE RELEASE
October 10, 2012

DENVER – Colorado U.S. Attorney John Walsh, joined by five other U.S. Attorneys and a representative of the Department of Justice’s Criminal Division, along with representatives from the Securities and Exchange Commission (SEC), the AARP, the Better Business Bureau, the Colorado Attorney General, the Colorado Division of Securities, and the Financial Industry Regulatory Authority (FINRA) held an investor fraud summit in Denver today to help consumers protect their hard-earned money from fraud. The purpose of the summit was for regulators from across the Rocky Mountain region to provide an informative and interactive presentation about Investment Frauds targeting our communities – especially senior citizens.

"Investor fraud crimes can erode faith in our financial markets, threaten our nation's ongoing economic recovery, and undermine the fabric of our communities," said Attorney General Eric Holder. "That's why protecting the American people from fraud is a top priority for today's Justice Department. And through the Investor Fraud Summits, we'll take our anti-fraud efforts to a new level -- by raising awareness about these devastating offenses, educating consumers on how to report suspected fraud schemes, and empowering members of the public to fight back."

Today's Rocky Mountain Investor Fraud Summit featured U.S. Attorney John Walsh (Colorado), U.S. Attorney David Barlow (Utah), U.S. Attorney Michael Cotter (Montana), U.S. Attorney Sanford Coats (Western District of Oklahoma), U.S. Attorney Kenneth Gonzales (New Mexico), U.S. Attorney Barry Grissom (Kansas), First Assistant U.S. Attorney Loretta Radford (Northern District of Oklahoma), a representative from the Wyoming U.S. Attorney’s Office and Daniel Braun, Deputy Chief of the Department of Justice’s Fraud Section. Also featured were Colorado Attorney General John Suthers, Securities and Exchange (SEC) Regional Director Don Hoerl, Commissioner of Colorado Division of Securities Fred Joseph, and Financial Industry Regulatory Authority (FINRA) Regional Director Joseph McCarthy, plus representatives of the AARP. The Better Business Bureau was also a partner in the summit.

Summit attendees included federal, state and local law enforcement, community leaders, and members of the investing public, including senior citizens. The consumer protection experts mentioned above were on hand to educate members of the community to help identify instances of fraud or abuse and help them protect their investments.

“Our goal was to educate the public about current trends in investment fraud schemes,” said U.S. Attorney John Walsh. “With my regional colleagues, we were able to discuss the types of fraud various U.S. Attorney’s Offices have prosecuted. We also were able to discuss warning signs and ways the investing public can protect themselves from fraud.”

The FBI reports an unprecedented rise in investment fraud schemes, involving thousands of victims and staggering losses. Since 2011, the Justice Department's Criminal Division and 85 U.S. Attorneys' offices have reported that approximately 800 defendants have been charged, tried, pleaded or sentenced in approximately 500 federal prosecutions involving investor fraud. The total reported amount swindled from victims for this time period tops more than $20 billion. This staggering number includes cases where the total amount victims lost range from tens of thousands of dollars to hundreds of millions, and, in some cases, billions, in hard-earned savings. In the regions represented at today’s summit, there were a total of 41 cases, incarcerating defendants for a combined total of 189 years and 6 months (with 21 pending), and a total fraud loss amount of $1,751,000,000.

Although the defendants in these federal prosecutions used a variety of tactics and schemes, they often took the same approach, guaranteeing high returns and, in many instances, providing falsified investment documents to victims. As a result, those victims lost retirement savings, military survivor benefits, family death settlements, and money set aside for college tuition and mortgage payments. While the Justice Department has already obtained prison sentences for many of these scammers, including one sentence in the past two years of up to 50 years, for many of the more 100,000 victims the damage to their families is irreparable.

Several Colorado prosecutions were discussed during the conference, including defendant Norman Schmidt, whose $52,000,000 ponzi scheme resulted in the purchase of the Redstone Castle and a NASCAR race care team. Schmidt was sentenced to serve over 300 years in federal prison. Another Colorado investment fraud scheme was implemented by Philip Lochmiller. Lochmiller sold the same plot of land without title to multiple individuals. He was sentenced to serve over 30 years in federal prison.

Since 2011, the SEC, an FFETF partner agency, has charged 887 individuals and entities in 359 actions involving retail investor fraud. Nearly $9.7 billion have been alleged lost by over 1.2 million investors in those cases.

"Whether a cold-call, polished website, or email solicitation, fraudsters will use every means at their disposal to convince investors to part with their money," said SEC Director of Enforcement Robert Khuzami. "That is why investor education is so critical -- in maintaining financial health as much as physical health, an ounce of prevention is worth a pound of cure."

In addition to the investor fraud summits across the country, in the coming weeks the Victims' Rights Committee of the Financial Fraud Enforcement Task Force will host an unprecedented event, in partnership with the Justice Department, the Certified Financial Planner Board and the Foundation for Financial Planning, to offer free financial consulting services to 8,000 victims of an investment fraud scheme that was indicted in Chicago. In this case, the defendant falsely guaranteed high rates of return in a Ponzi scheme that caused the loss of more than $300 million of investors' funds. Many of the victims were retirees who found the promised high rates of return, coupled with other false promises, an attractive investment alternative for their individual retirement account (IRA) and other retirement-type investments.

If you think you may be a victim of investor fraud, please call your local FBI office for assistance. To find your local office, please visit: www.fbi.gov/contact-us/field.

For tips on how to spot investor scams and for more information on investor fraud in general, please visit: www.stopfraud.gov.

President Obama established the interagency Financial Fraud Enforcement Task Force (FFETF) to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. The task force, chaired by Attorney General Eric Holder, includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets and recover proceeds for victims of financial crimes. For more information about the FFETF, please visit: www.stopfraud.gov.

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