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Free lunch seminars can make you ill

  • Published
  • By Debora C. Whipple
  • New Jersey Bureau of Securities Director of Investor Education
NEWARK, N.J. --  One of the more understated, seemingly innocuous securities scams comes under the guise of a "Free Lunch Seminar." While many who hold these events are honest, some are not.

In both hot and cold weather, it seems like a nice idea to go inside and enjoy a free lunch and do nothing more than be present and listen. Seems harmless but many have been victimized by professionals who provide slick presentations and literature with impressive seals, phony investment statistics and big (false) promises of high returns.

Statistics prove the profits are great, but only to the scam artist - the professional - who hosted this interesting, free event that gave you a chance to finally be the one who makes big money - so you thought. Actually, professional scam artists use your money for their personal use and if you recover anything, it's usually only pennies on the dollar. The profits are great, but only to the scam artist who now has your money.

It's especially tough for seniors. According to AARP studies, more than 6 million seniors over the age of 55 have attended free lunch seminars over the past three years. And according to a study by the Investor Protection Trust, about 7.3 million Americans over the age of 65 have been victim to financial fraud; that breaks down to one out of five being victimized. That might be you, your parents or your best friend or neighbor. Be aware so you can help educate others.

At some point in time, you will probably receive a phone call, a letter in the mail, an e-mail invitation or see an ad in the paper about a free lunch seminar. Before you attend, the Bureau wants you to remember a few very important tips in case this event is about having you invest in something that you shouldn't. There have been cases where investors - only a limited "first" few - had the chance to invest in a real estate deal. Well, after the big hype, several rushed forward feeling fortunate they were one of the first to be part of this limited and exciting real estate deal. While the deal appeared good, the same real estate deal appeared really good to the next group of investors who, the next week, bought the very same piece of real estate that was sold to the investors the week prior. He sold the same property over and over again each week. Now do you want to check out the person to see if he is registered with the Bureau of Securities?

To protect yourself, remember these points:

Do not feel pressured to provide information about yourself. Understand that if you attend a free lunch seminar or something similar, you will probably be asked to provide contact information and certain personal financial information. Even if you feel that you are not providing any specifics, if you do divulge the fact that you have any investments, then you are providing scam artists with valuable news that you do, in fact, have money - money for them. Now, they merely need to figure out how to take it.

Understand that if you volunteer your personal information because you want to, since this engaging professional has asked, you could be handing over information that he needs to woo you with some great (fraudulent) deal. Just by checking off a little box indicating that you do own and not rent, or that you already have life insurance or retirement accounts, own a car, own a second retirement home, have stocks, have plans for college for yourself or for saving for children's or grandchildren's education, but note also that you are "not interested" in any more investments, you are telling them so much. You just told them that you have assets. You own and you have money set aside that they can try to get. Victim!

You might be told that you won't be solicited - "You will only be sent information about new investments that could reap you some great returns." They are counting on you wanting to invest in the deal they have. Remember, they already know that you have money available because you told them. You told them that you have assets when you checked off those little boxes.

Beware of promises of high returns and low risk. Investing, by its very nature, comes with some level of risk; those promises little or no risk could be a red flag for fraud.
Beware of the terms "guaranteed" or "risk-free" or a promise of a money back guarantee.

Beware of investments that force you into making a quick decision because "only a few spots are left," you are getting in on the ground floor or it is just about to go public and you need to make the decision immediately. Any legitimate investment that is good today is still good tomorrow. Don't be rushed.

Do your homework. Fraudsters count on the "greed" factor and that you will want to cash in on the outrageous opportunity that you are lucky enough to be able to give money towards - you know, invest in.

Beware if you are made to feel embarrassed by asking a question. Scam artists bank on the fact that you can be intimidated and since they don't want to answer certain questions, they often try to make investors feel foolish for asking. Ask! Ask! Ask!
Beware of false designations on business cards. Scam artists use titles such as "senior specialist" that make it appear they have a high or specialized level of credentialing. This is meant to impress you and earn your confidence. Laws are now in effect that prohibit these false titles on business cards. Please call us to check the person out.

Remember to always take notes of anything you discuss with your agent or ask him to do on your behalf. Notes are important to any future investigation should you have a problem.

Call us! Call the Bureau of Securities for free information about the person selling the investment before you do any investing or let them handle your investing dollars to see if he or she is actually even registered to sell securities. You can ask us for free background information that provides you with complaints, if any, which are on file against the person and their work history and disciplinary actions, if any.

Ask for the free CRD report or background report by calling (866) I-INVEST or by going to the website www.njsecurities.gov. You have the ability to take the first step to protecting your money by calling the Bureau of Securities, your state securities regulator. Before you trust that person, trust the report about him. Call and ask- it's free!

Visit our website at www.njsecurities.gov to view videos of actual fraud cases and other information about our enforcement cases, press releases, interactive educational games and much more. If you have any specific securities-related questions or requests for future securities related articles, please let me know.

The Bureau also participates in educational workshops offered by the joint base and Earle Naval Station.

*Editor's note: Please contact Debora Whipple at (973) 504-3615 or the Warfighter and Family Readiness Center at 754-3154 for more information on this