By Karen D. Lorentz
The Vermont Department of Financial Regulation Securities Division has oversight of 104,00 registered investment broker/dealer agents in Vermont. Those agents don’t have to live here, noted William “Bill” Carrigan, deputy commissioner of the Securities Division.
In addition to registering broker-dealers, investment advisors, and their agents and representatives and bringing administrative or civil actions against violators of the securities laws, the department seeks to educate Vermont investors, industry participants and businesses about securities laws. Carrigan was educating people when he spoke recently in Rutland at the AARP Scam Jam.
In keeping with the theme of avoiding being taken by scams, he recounted the case of Vermont storyteller Malcolm Parker selling promissory notes (interest rates of 12.5 to 30 percent) to fund “making a movie,” ironically called “The Birth of Innocence.”
“Mr. Parker is now in federal prison,” Carrigan noted.
That’s because he bilked Vermonters out of millions — for some, their life savings.
For those who don’t recall the case, Parker was a gregarious and well-liked Vermonter who had made a video for kids called “Let’s Go to the Farm.” He then solicited funds to make his movie in what turned out to be a $28-million Ponzi scheme — characterized by the judge who heard the case in 2013 as “one of the biggest, if not the biggest, fraud cases in Vermont history.”
When Carrigan began preliminary talks with Parker in 2009, he got some unsatisfactory answers to questions like: “How many investors?” and “How much money have you raised?” He did learn the budget for the movie was $1.8 million.
Carrigan told Parker he would have to review his records and that he should stop soliciting funds and think about getting an attorney.
Five weeks later Parker presented those records and at that time said he owed about $10 million to investors for the $1.8-million film. Carrigan also learned that Parker had raised an additional $20,000 since his prior visit, explaining he needed to “raise money to pay back people who needed their money.”
There is a fascinating backstory of the Connecticut chiropractor Lou Soteriou who led Parker into this scheme, which can be read online for those interested (archives.fbi.gov/archives/albany/press-releases/2012/multi-million-dollar-birth-of-innocence-fraud-prosecution-announced.)
However, it’s the answer to the question “How were you going to repay investors” posed by U.S. District Court Judge Christina Reiss that provides the best answer as to why it is necessary to investigate before investing.
“Parker had testified that Soteriou pursued a spiritual quest he believed would allow him to transcend earthly life and travel through space and time. That accomplishment, Parker told the court, would allow Soteriou to go ahead in time and see winning lottery numbers, then return to the present and win the money by purchasing lottery tickets and marking down the correct numbers,” Carrigan recounted, stating Parker “honestly believed this.”
“Over 700 investors — all ages, walks of life — and not one contacted us to see if Parker was registered,” Carrigan added.
Bottom line advice
“Investigate before you invest,” Carrigan advises, adding that includes making sure an agent or advisor is registered, which you can do online (brokercheck.finra.org). You can check on a security offering at www.sec.gov and click on the Edgar database to see if the security is real, he said.
“When it comes to money, you can’t trust anyone; look into backgrounds; know whom you are dealing with and know what you are dealing with when investing. People often don’t check out a person because they’ve known them forever,” he said, stressing that’s a big mistake.
“As seniors you might as well have targets on your backs — there’s a presumption retirees have money,” Carrigan added, cautioning, “If it sounds too good to be true, it is.”
He also warned about seminars that offer a free lunch or other incentives, noting that even if someone is selling “a legitimate product, it might not be the right product for you.” Additionally, the person might not be properly registered to recommend financial advice or to sell a product to you. “The way products are being sold is the problem,” he noted.
Learn more about choosing investment professionals, avoiding risky investments, or hosting an educational workshop at dfr.vermont.gov/securities/securities-division or call 1-877-550-3907.