Investors should beware of 'low-risk' opportunities, experts say

SALT LAKE CITY — Financial fraud has been an increasing concern in Utah, particularly when it involves preying on seniors. Last year, the Utah Division of Adult Protective Services investigated 1,816 financial exploitation allegations across the state.

One of those cases involved Hyrum resident Linda Christensen, 71. About eight years ago, she and her husband — at the recommendation of their financial adviser — invested a significant share of their retirement savings into a program run by Kaysville businessman Dee Randall that would purportedly pay them a high rate of interest at minimal risk.

After what she believed was careful consideration among themselves, along with other family members and friends, they all decided to invest in the opportunity.

“My husband had terminal cancer and he wanted to make sure I would be sufficiently taken care of,” she explained.

Christensen said they even contacted the Utah Division of Securities to find out if Randall had any negative complaints filed against him, which at the time he had not.

“(The investment) went well for a while,” she said. “But shortly (afterwards), the payments started to diminish.”

Man charged in alleged $72M Ponzi scheme

A Fruit Heights man has been accused of defrauding investors across the country of more than $72 million in a Ponzi scheme.

Randall came to their home and showed them brochures that, according to Christensen, were supposed to provide reassurance and detail how well all the investments were doing. But investigators say Randall used the investments from her and hundreds of others for purposes unrelated to their investments, including to pay for other entities he controlled and to pay off other investors.

“It’s gone downhill since then,” Christensen said. Her husband has since died and today she is left with the realization that she may never recover the money they had saved to keep her secure in her retirement years.

“I just simply know that the money is gone,” she said.

Earlier this month, the Utah Attorney General’s office filed 22 counts of securities fraud and one count of pattern of unlawful activity against Randall. He is accused of bilking more than $72 million from approximately 700 investors nationwide in what prosecutors say is one of Utah’s largest Ponzi schemes.

Randall also allegedly failed to disclose to investors that he had sizable judgments issued against him and that he had filed for personal bankruptcy.

"Dee Randall's massive alleged Ponzi scheme is a harsh reminder that all of us need to be very careful where we put our money no matter our age or the size of our nest egg," said Keith Woodwell, director of the state Securities Division. He urged potential investors to think very hard about what kinds of opportunities to put their money in.

“(Consider) the risk versus reward part of the equation that is inherent in every investment,” Woodwell said. "You don’t have to understand the inner workings of how (the money is being made) … but if they are telling you there is little or no risk, then that’s the lie."

“(If) he is telling you are going to get high rewards and (if) he is telling you that it’s low-risk, that’s never true,” Woodwell said. “There is no such investment. If it’s high-reward, then it’s high-risk.”

He also reiterated that many scammers rely on “affinity” to lure their victims. Affinity fraud involves marketing a sham investment scheme to members of an identifiable group or organization. The most commonly exploited are the elderly or retired, religious or ethnic groups and the deaf community.

Woodwell said such scams are especially common in Utah.

“Unfortunately, there is story after story where people fleece the flock,” he said.

With June being Elder Abuse Awareness month, some local financial institutions in association with AARP and the Utah Division of Aging and Adult Services are providing education about the issue as well as providing banking services and products for seniors and their caregivers that help avert elder financial abuse.

Francine Giani, the executive director of the Utah Department of Commerce, called such cases "disgusting" and said they illustrate the need for family members and neighbors to help protect older people from scam artists.

"It's absolutely terrible," Giani said. "We have to step up to the plate and be more conscientious and less trusting."

Criminal charges were also filed in May against Richard Loveday, 47, of Alpine who is accused of swindling an 88-year-old Washington County woman out of $100,000 and taking money from her while she recuperated from a broken hip.

The woman met Loveday's wife at a health expo in St. George, and in April 2013 the Lovedays allegedly showed up at her home unannounced.

Loveday, a principal in a firm named CGI Global Management, offered the woman a $70,000 investment in a pool with other investors for small loans to businesses and individuals. According to court documents, he promised her a 14 percent return, $875 monthly income payments and a $15,000 bonus for her investment.

Based on his verbal assurances and without a written contract, the woman told investigators that she gave Loveday a $70,000 cashier's check.

Loveday, who has dual U.S/Canadian citizenship, was not licensed to sell securities, authorities said. He also allegedly failed to tell the women about pending eviction and debt collection actions against him.

Prosecutors say he used the money for personal and family expenses and paid the woman $875 a month for three months out of her own money.

He was charged with securities fraud, theft and communications fraud, all second-degree felonies. In a plea deal, he admitted to communications fraud and prosecutors dismissed the other charges. A judge sentenced him to 40 days in jail and five years' probation. Prison time and a $10,000 fine were suspended.

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