All posts by Chris Majernik

Review of Scale House Records is the Best Source for Discovering Potential Security Problems

SCALE HOUSE – WATCH THOSE NUMBERS

Although there is some benefit in watching for abnormal behavior at the scale house itself, the primary solution is found in having accurate record-keeping practices and then conducting periodic audits to look for discrepancies and unusual situations that need further investigation.

When auditing the scale house documentation, look for the following situations, as they may point to potential problems:

1.    Questionable documentation practices:

  • Scale tickets or mill statements that don’t provide enough data.
  • Multiple tract names under the same contract/producer.
  • Logger delivering from more than one source.
  • Scale tickets used out of order.
  • Altered scale tickets. 
  • Missing delivery cards/ altered delivery cards.
  • Any unsigned scale tickets.

 2.    Questionable information:

  • Same or similar gross or tare weights on several tickets.
  • More trucks weighed than unloaded.
  • Unusual truck weights.
  • Shorter than expected turnaround times.
  • Trucks tare weight out of the normal range.
  • Shrinkage factors out of line.
  • Discrepancies in book inventory and actual inventory.

3.    Questionable scale house practices:

  • Scaler never takes a vacation.
  • Cash transactions of any kind in the scale house.
  • Scaler is the only one responsible for inventory.
  • Scales are outdated.
  • Scales tickets are hand-written.
  • When comparing scalers, the deductions for one scaler are much higher/lower than the other scalers.

4.    Questionable timing:

  • Date and time ticket punched prior to the previous numbered ticket.
  • Scale ticket shows the log truck leaving before it arrives at the wood yard.

5.    Questionable activities at the wood yard:

  • Truck’s in-and-out processing time is not normal for the wood yard.
  • Trucks leaving the wood yard without unloading.
  • Trucks pulling off of scales and then backing back up on scales.
  • Logs are stored in separate piles in the yard.

 RECOMMENDATIONS

  • Since most scale houses are set off from the main operations to allow for adequate waiting areas, security cameras are a good way to see what is happening at any given time. They allow others to observe and document all activities, especially those that are out of the ordinary. If some type of breach is discovered, the archived footage will serve as documentation and evidence for further disciplinary action or as court testimony should that be needed. Whether using cameras or visual observation, look for the circumstances described above and check out anything that is suspicious. Even if there isn’t anything amiss or at least it can’t be proven, your visible follow-up will serve as a reminder that you take this seriously and that any theft and/or fraud will not be tolerated. That follow-up in itself can serve as a deterrent for many would-be violators. If your operation is seen as not only easy to circumvent but also not well-monitored, your chances of theft and fraud are greatly enhanced.
  • Set up a clear process for documentation and ensure it is followed at all times. Provide periodic checks, training, and refresher training to reinforce your expectations. Make sure your process has appropriate checks and balances and that no document has a lone signature.
  • Conduct periodic audits of the paperwork trail that is established. You can either use an outside auditor or do this in-house. In either case, be meticulous about looking for the types of issues listed above. Be especially vigilant about timing issues – tickets out of sequence, altered, or incomplete, or which contain information that seems out of the ordinary, e.g., have similar weights, etc. (I know in computer-based systems ticket order should not be an issue, but lot’s of folks still use paper-based systems).
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Suppliers — The Fraud Focal Point of the Timber Supply Chain

We’ll start with a look at red flags that might indicate an issue with theft, fraud, and contractual violations. These generally stem from processes and practices that are sloppy and/or undisciplined. 

Here are some things that should trigger further investigation when overseeing logging operations:

1. Unfocused operations and processes: 

–      Loggers delivering wood from more than two sources at any one time, especially from company stumpage and private sources.

–      Loggers frequently move from one tract to another.

–      Poor utilization.

–      Improper merchandizing.

–      Loggers not knowing tract names.

2. Diversions and questionable practices:

–      Diverted wood (logger’s trucks seen heading the wrong way or in an unauthorized wood yard.

–      Loggers operating where they shouldn’t be operating.

–      Products separated on the landing which the contract doesn’t mention.

–      Firewood cutting during normal logging operations.

–      Loggers who divert your attention away from a specific area of the sale.

–      A sudden change in production (without a change in equipment) UP or down.

3. Confusing Company Structures

–      Loggers that have multiple names in which to haul wood.

–      Loggers who have multiple crews.

4. Contracts and payments:

– Producers being paid different rates for wood from the same source.

–      Products not listed in the contract being harvested or delivered on that contract.

–      Wood delivered on contracts that have expired or been closed.

–      Wood delivered from timber tracts that have not yet been opened.

5. Trucking and Delivery:

–      Sporadic deliveries of wood from one tract which interrupt the regular flow of wood from another tract.

–      Changes in trucking zones or trucking rates in excess of a ten-mile move toward or away from the mill

–      Multiple trucking contractors hauling from the same site

RECOMMENDATIONS 

1. Start on the right foot by clearly expressing your expectations in the very beginning of the business relationship. Doing this enables you to establish a solid, long-term partnership that can be mutually beneficial to both parties. 

  • Outline your expectations and what the supplier can expect from you in the terms and conditions of the contract. 
  • Establish the level of record-keeping you expect and ensure the producer has well-established and effective policies and work procedures. 
  • Have a clear contract including well-defined expectations for delivery, tract identification, land usage, ownership of residual products, and payment terms. 
  • Be wary of producers who seem to lack clear operating procedures, and have multiple company names, multiple crews, and multiple trucking contractors as this could be a means of shifting timber. 

2. Once agreement is reached and work has begun, the following precautions will go a long way to ensure the agreements you established up front are maintained and taken seriously:  

  • Periodically check the work site and look for the red flags mentioned above.
  • Check the work site in unpredictable patterns and remember, loggers are not bankers, their work schedules vary widely.  Your work schedule should also vary widely.
  • Keep accurate and updated records of contracts and check invoices for conformity with existing contract rates, products and terms and conditions.

3. As a long-term strategy, seek suppliers who work with integrity already and who can meet the quality and integrity standards you have for your own company. Consider looking for suppliers who have the potential to develop long-term relationships and help you find creative, sustainable solutions for moving your business forward. Begin building that long-term partnership by discussing and reaching agreement in detail on how the following areas will be handled: 

  • Insist on maximum safety standards and performance.
  • Promote business and environmental sustainability.
  • Protect the company’s interests in dealings and transactions.
  • Comply with all legal and regulatory requirements.
  • Protect confidential information from disclosure to unauthorized sources.
  • Maintain relationships based on fairness, trust, respect, and compliance.
  • Continuously improve the value of the relationship by seeking new ways to conserve resources, reduce pollution and waste, and enhance the communities in which they operate.
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Red Flags for Producers — The Foundation of the Timber Supply Chain

Harvesting timber for a variety of uses is what the timber industry is all about. Security breaches in the production phase of the process can have a negative impact on the landowners who are downstream from the logging operation and on the timber companies who receive the harvested timber based on contractual agreements.  Security issues related to producers must be considered from two different perspectives:

  • The producers themselves and the security issues they face on-site within their own operations. 
  • The timber companies have contracted with producers for timber harvested from a specific tract of land. 

The are two primary areas to consider when looking at security concerns for producers while working on the tract: 

  • Trespassers and the potential threats they bring to the safety and security of employees and property.
  • Theft and fraud from logging and transportation employees and sub-contractors who may siphon timber and other wood-related products for their own personal use.

THINGS THAT KEEP LOGGERS UP AT NIGHT (BESIDES CASH FLOW!)

With respect to trespassers, producers face the familiar issues of fuel theft, equipment theft and damage, and theft of wood. As fuel prices have increased over the past few years, the fuel utilized to operate wood equipment has become a target for thieves. To compound the problem, fuel thieves can cause additional damage and loss of land clean-up when fuel spills contaminate soil and water. 

Besides thieves, other trespassers can be as innocent as wandering hikers, nature lovers, and recreational hunters. However, others can be angry protesters or even drug dealers who use the wood’s remoteness as a cover for their operations. 

An equally serious problem for producers is a breach of security from other loggers and truckers (whether employees or sub-contractors) who are hired to harvest and deliver the timber in accordance with the contract. 

Red flag alerts with respect to loggers:

–      Noticing unusual traffic patterns into or around the logging site. 

–      Unlocked gates

–      4-wheeler traffic into and out of the logging site. 

–      Missing tools

–      Contract truck drivers who float among several loggers

–      Foresters who ask you to “kite” timber from one tract to another

–      Hostile hunt club members

RECOMMENDATIONS 

Most of the recommended precautions for producers are designed to protect property from theft and vandalism.   

1. Discourage access to the equipment during down times by blocking the entrance or leaving equipment near the homes of friendly neighbors or as far back in the woods as possible

2. Install anti-theft mechanisms such as locks, steel-braided fuel lines that cannot be cut, and anti-siphon screens on the necks of each tank. . 

3. Secure equipment and trailers to a stationary object.

In some cases, employees need to be protected from unwanted trespassers such as drug dealers who are looking for refuge in remote areas or angry environmentalists and neighbors who are seeking to take matters in their own hands to stop the operation. 

1. If there are unusual materials on the property such as trash, fertilizer bags, plastic garbage bags, 20–50-gallon drums, etc. and especially if there are distinctive, obnoxious odors, STAY AWAY. Contact the local authorities and the landowner. These could be signs of serious and dangerous illegal trespassing.

2. Although most demonstrators are merely voicing their opinions, be wary of those who are particularly angry and militant. Contact local authorities and the landowner.

3. Pay attention to things that are misplaced or out of the ordinary, such as hidden logs in the woods, unusual traffic patterns on the tract, and nearby timber cuttings from other producers. These could be unauthorized, and you could be falsely accused of working outside your contract.

Finally, although we hate to think about it, producers need to be concerned about employees and contractors who are providing logging and transportation services for your operation. 

The best security prevention with loggers (whether employees or contractors) is to have clear, well-established processes and procedures to keep everyone honest.  

  • Ensure employees and contractors are clear about contractual terms and conditions to avoid misunderstandings. 
  • Track fuel and supply usage.
  • Keep clear records of all shipments.
  • Train employees in policies, procedures, safe practices and performance expectations.
  • Have procedures for and expectations for reporting safety and security red flags.
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Red Flags for Procurement —  A Clear Separation of Duties is the First Step

When I first started in the timber business, I was given a checkbook and a stack of contracts and was told, “Get out there and buy some timber.” Sounds crazy to some, but this practice was typical at the time and likely still is with with smaller companies and wood dealers who have fewer employees. Each employee is expected to wear several hats. In today’s environment, however, timber purchasing companies, whether small or large, can’t afford to have such a casual procurement process. Even with a few employees, careful planning can ensure there remains a separation of duties and a business control environment that keeps people honest.

Other areas to consider:

1. Contracts – Well-written contracts and careful monitoring of their execution are the basis for establishing an unambiguous agreement that protects the interests of all parties and provides documentation for identifying and proving fraud. Red flags in this area could be::

  • Separate contracts for different products on the same tract such as one for pine and another for hardwood. (NOTE: This can make the final analysis of tract completion tricky and can create problems on the ground.)
  • Altered or unsigned contracts 
  • Frequent requests for extensions on contracts 
  • Missing parts of contract files such as maps, original cruises, etc. 
  • Delays in recording contracts (NOTE: This can lead to failure to record the contract at all which opens up opportunity for theft.)
  • Timber tracts which cut out almost to the penny. If you have cruised timber, you know your odds of all of them being on the money are astronomical.
  • Mention of a finder’s fee or marking fee buried in the details of the contract.
  • A high percentage of tract purchases are through the same timber broker. (NOTE: Perhaps you should consider hiring the timber broker and get rid of the forester?)
  • Foresters changing hauling rates on contracts during harvest. Haul rate manipulation can hide kickbacks.

2. Complaints – We all know complaints are going to come occasionally in the procurement business and legitimate complaints help us improve our business. However, consistent complaints concentrated in one area or region become a red flag requiring further investigation. Investigate all complaints, but especially those from:

  • Landowners lodging similar complaints against one particular forester. 
  • Foresters resisting changes in operations or personnel. Although resisting change is human, exaggerated concerns can be an effort to avoid scrutiny. Process changes require new ways of getting around the system. 
  • Foresters constantly blaming loggers for undercuts can be an excuse for “kiting.” Kiting occurs when timber is “reallocated” from one tract to another. 
  • Wood contractors complaining about being paid incorrectly. 
  • Loggers complaining about mileage payments and hauling fees. Check the details of the complaint and verify the contract details with the settlement details to ensure unauthorized deductions aren’t taking place. 

3. Deeds/Agreements – Red flags around deeds and/or purchasing agreements focus on ensuring the timber you are buying actually belongs to the seller. Be wary of the following:

  • The name on the deed differs from that of the seller.
  • You don’t receive timber deeds or agreements from your foresters. 
  • The timber tract files don’t contain correspondence with the landowners.
  • Deeds or agreements that split the land and the timber.
  • Company land sales can pull the rug out of “normal operations” for procurement foresters making them disgruntled enough to justify getting even with the big company that sold the land.

4. Payments and Record-Keeping – Here are a few things to look out for on the administrative end of the transaction, especially with regard to actual check payments:

  • Checks are received by the forester instead of going directly to a lockbox or accounting.
  • Records of company checking accounts where an employee is authorized to sign checks.
  • No original documents on file. Copies are much easier to fake than originals and could leave you with no documentation. In a world of e-files, this gets more difficult to monitor.
  • Forged or differing signatures on checks.

RECOMMENDATIONS

Many of the red flags within procurement operations center on the contract administration, e.g., terms and conditions, completeness and accuracy of documentation and payments. Use the following recommendations to ensure you are covering the basics of your procurement processes:

1. Ensure you have a segregation of duties within your own company, especially between the purchaser, the contract administrator and accounts payable. Create approval levels for contracts and payments and clearly define job responsibilities. If you’re in a small company that can’t do this, then business operations and controls will need a higher level of scrutiny.

2. Compare cruise numbers against actual cut numbers on each contract. If this isn’t being done, then why bother with the cruise to begin with? 

3. Conduct trend analyses of critical elements of the process such as harvesting costs, hauling costs, road building costs, and finder’s fees. Reports in these areas will indicate what normal is and highlight unusual costs. One example, if a region manager notices one forester has higher road costs than the other foresters in the region, this is a red flag requiring more investigation. Trends over time tell a story and reveal problem areas you might easily miss in the day-to-day operations.

4. Know your surroundings – the market availability, the competition, and the unusual markets such as firewood, mulch, cedar posts, etc.

5. Establish clear paper trails. Ensure your processes are followed and all documentation is complete accurate and original (no copies).

6. Conduct periodic audits of your process, including the documentation files, exception reports, and your trend analyses. Consider using outside auditors to get a fresh, professional, unbiased view.

7. Cross-reference all mailing addresses to ensure the proper person is contracted and paid.

8. Train your employees to look for red flags and establish a process for reporting discrepancies.

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Red Flags for Landowners

Before we delve into the risks that landowners face, let’s define the phrase “security risks for landowners.” I define security risks for landowners as anything that will adversely impact the productivity, profitability, or aesthetics of the land. This broad definition includes risks like dumping, drug production, trespassing, fire, timber theft, and other resource theft. Each of these risks brings with it different challenges to the landowner, but luckily for us, a watchful eye for red flags can alert us to areas where we have exposure to these risks.

Here are some areas where landowners specifically should be attentive:

  • Illegal dumping – To bypass landfill fees some will bypass the waste disposal system and dump material in the most convenient, out of the way place…your land. In years past one of the ways to combat this was to actually dig through the trash looking for a clue to who dumped it. Today, some dumps are created by drug production and the by-products are lethal. Be especially diligent if you see plastic pots, fertilizer bags, propane tanks, starter fluid cans and cold relief packages. Instead of digging through the dump, report fresh dumps to local law enforcement that are properly trained in identifying the trash. 
  • Unlocked gates – These are not only an indicator that there may have been trespassers on the property but could also be a precursor to someone’s intention to use the property illegally in the future. In either case it can also result in an open invitation for future visitors to enter. 
  • Heavy traffic patterns across property – Heavy traffic may be a precursor to illegal property use and trespass. This is especially a problem if there is high activity of unidentified cars coming to the property at strange hours. Thieves and drug dealers oftentimes check out the property first before making their move. Normally you can recognize the local traffic. When you don’t, there is a red flag to pay attention to other indicators and potential problems.
  • Signs of Trespassers – Trespassing comes in many forms from people fishing your pond to the use of your property for the manufacture of illegal drugs. Signs that someone else is using your property are new paths into the property, paths around your gates, strange vehicles parked on your property, trash dumps, marking tape you didn’t put there, and maybe even fishing line hung in the bushes around your pond that you didn’t put there. 
  • Adjacent landowners, especially those who are also in the forest industry who you don’t know very well or who don’t know you — Neighbors with adjoining properties can have easy access to your property without your even knowing it. Timber theft is one of the chief concerns of many landowners. Timber theft can include the theft of individual “high grade” logs, the theft of hardwood pulpwood for firewood, theft of unmarked trees, or the theft of entire tracts. Absentee landowners are most at risk here.
  • Tracts located a long distance from your residence, office or working operations – Be especially diligent about checking orphan tracts that are geographically remote where your access is difficult, and you seldom visit. These can be ideal locations for drug activities that seek remote locations to hide their work or timber theft.
  • Theft of other resources – Other resources found on the land are also at risk of theft if the product found on your land has value in the marketplace. Keep in mind the marketplace doesn’t have to be in your surrounding geographical area. Resources at risk for theft include clay, field stone, decorative rocks, gravel, sand, topsoil, exotics (e.g., Paulownia trees), roots, mushrooms, and pine straw.
  • Posted signs or no trespassing signs that shouldn’t be posted or which you didn’t post could be an indicator someone has “taken over” your property.
  • Travel trailers, tents or small mobile homes in out of the way locations – These could be adventurers seeking the wild and wonderful natural experience or a drug manufacturer that has been brewing his “potion” all day and is now high and usually armed to the teeth.
  • Distinctive, obnoxious odors – STAY AWAY.

RECOMMENDATIONS

A landowner’s primary goal is to make the best use of the land to yield the highest return for his/her effort and investment. Keeping a watchful eye out for red flags can provide alerts to activities that undermine that goal. 

  • Clearly mark and maintain your property lines. It avoids real or claimed misunderstandings and can be valuable documentation in case of litigation. Post your boundaries to communicate your property line and that you don’t welcome trespassers.
  • Limit access to your property. Install good, sturdy gates on roads or rights of way entering your property. Make the gate highly visible. 
  • Conduct periodic, unscheduled, and unannounced tract inspections. 
  • Pay attention to “out of the ordinary” things. Hidden logs in the woods, unusual traffic patterns on tract, pockets of uncut timber…any signs of trespass.
  • Know your neighbors and make a note of any who are living beyond their means. Consider leasing access to your property to hunter, farmers, recreational users, beekeepers, etc. This is an excellent way to expand your eyes and ears on the property and to add additional income. Create a specifically written contract.
  • Clean up old dump sites now. A small dump invariably becomes a large one. If you catch someone dumping be willing to prosecute. Nothing says “stay clear” to others as well as a notice in the local paper of an individual charged with cleaning up a dump. 
  • Utilize a theft and fraud hotline.
  • Contact authorities if you suspect drug traffickers. 
  • Review your risks with your land in mind or hire someone to help you review your risks. Each situation is different.
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And the Beat Goes On

Between 2010 and 2018, Lamar Adams continued his fraud scheme by tapping the Ole Miss network.

In March 2019, Receiver Alysson Mills sued Ole Miss quarterback Stewart Patridge, his mother Gee Gee Patridge, Jason Cowgill, Martin Murphree, Mutual of Omaha, and Bankplus, in an effort to recover funds for victims of Lamar Adams’ newest fraud scheme using his company Madison Timber. The scheme case amounted to $164 million from phony timber investments. Commissions from the scheme amounted to not less than $9,674,615.

Here’s how the players worked together:

Gee Gee Patridge was Bankplus CFO. Although Gee Gee Patridge only invested in Madison Timber until 2014 and received payments until 2015, she continued to provide advice about potential investors to her son who continued the fraud, sometimes even working with Baker Donelson to share potential clients.

Stewart Patridge (Gee Gee’s son) and Wayne Kelly were childhood friends and college roommates. Stewart was a starting quarterback for the Ole Miss Rebels football team. Kelly and Kelly Management utilized Stewart to recruit for him. Stewart received net “commissions” of $8,217,804. Kelly Management settled the case for an estimated $2 million.

In an effort to get additional clients, Kelly left Bankplus at the end of 2011 and joined Mutual of Omaha. Stewart and former Bankplus employee Martin Murphree opened a Mutual of Omaha office in Desoto County. Stewart and Murphree used the office of their friend, Jason Cowgill, the Bankplus branch manager to meet with Madison Timber victims even though they no longer worked for the bank. Kelly in turn paid them commissions.

Bankplus and Bankplus employees were charged with substantially assisting by recruiting new investors, lending their influence, serving as a reference to potential investors, lending their resources (e.g., office space, facilitating transactions, and facilitating transfers or “loans.” All of that masked Madison Timber’s insolvency – a similar pattern to the law firm’s involvement.

Bankplus was also accused of looking the other way when it was warned about suspicious behavior by Lamar Adams and his forest of fraudsters. Although Bankplus denied any wrongdoing, Receiver Mills cited several emails to support her accusations.

Mutual of Omaha was held responsible for the lax supervision of Murphree and Patridge as they sold the phony investments.

The SEC Receiver Alysson Mills has made the following charges:

Civil Conspiracy: All defendants.

Aiding and Abetting: All defendants.

Recklessness, Gross Negligence and Minimum Negligence: All defendants.

Violations of Mississippi’s Fraudulent Transfer Act: Stewart Patridge, Jason Cowgill, Martin Murphree

RICO Violations: Bankplus

Negligent Retention and Supervision: Bankplus, Bankplus Wealth Management, Mutual of Omaha.

So How Did It All End?

It will take several years in the court system to work things out, and it is unlikely that the investors will get more than a fraction of their losses when all the smoke clears.

I did further research, to try to find out progress on the investigation and court proceedings. There has not been much written since 2018, but here goes:

I found an Associated Press article published on April 27, 2023, Brent Alexander of Jackson, MS, pleaded guilty to a federal charge of conspiracy to commit wire fraud for participating in a fake timber investment scheme that caused investors to lose tens of millions of dollars. The Judge declared no release from prison for the $100M Ponzi scheme mastermind due to the pandemic. Alexander and Attorney Jon Darrell Seawright of Mississippi had been indicted on multiple charges in an investment scheme that affected hundreds of victims across multiple states over a number of years.

Arthur Lamar Adams received nearly a 20-year federal prison sentence in May 2018 after pleading guilty to running the timber scheme in which investors lost $85 million. He admitted that between 2011 and 2018, he took part in a scheme to defraud investors by soliciting millions of dollars under false pretenses and failing to use the money as promised.

On August 22, 2019, the SEC filed a complaint in federal court in Jackson, Mississippi, alleging that Terry Wayne Kelly, Jr. of Madison, Mississippi, through his wholly owned entity, Kelly Management, LLC, provided false information to investors by telling them that their money would be used by Madison Timber to secure and harvest timber and promising annual returns of 12 to 15 percent. In truth, Madison Timber never obtained any harvesting rights; instead, Madison Timber’s principal, Arthur Lamar Adams, forged deeds and cutting agreements and used investors’ money for personal expenses and to develop an unrelated real estate project. Kelly continued to provide false information to investors, even after a financial institution confronted Kelly and Adam with questions about Madison Timber’s business practices. Madison Timber has been dissolved. 

According to the Clarion Ledger, in August 2019, three Texas religious organizations agreed to return more than $300,000 as part of a federal court’s effort to recoup money from Kelly Management. Berachah Church and R.B. Thieme Jr. Bible Ministries of Houston, Texas, agreed to return $280,530.50, which reflected 100% of the contributions they received from Adams and 95% of the contributions they received from Kelly. Rick Hughes Evangelistic Ministries Inc. returned cash contributions made by Adams and Kelly in the amount of $43,657.95, and Philippi Freedom Ministries returned $16,125. None of these churches were aware this was a Ponzi scheme.

There are other cases of individuals who were recruited as “promoters” who received commissions from the Ponzi scheme.

Some are indicted for fraud. Others were asked to return the money they earned in order to pay back at least a small portion of what the investors lost. Clearly, anyone can be targeted. 

Friend or Fraud: Looking for Signals of Ponzi Schemes 

All of these red flags were in this scheme: 

Abnormally high investment returns – How can some investment promoters guarantee a high return when mainstream financial companies don’t? They can’t. There can be high returns but not without risk. 

Guaranteed returns – Nothing is guaranteed. In a scam, a high return is pitched as low risk. The higher the return, the higher the risk. It’s just that simple.

Consistently high performance – The world changes, sometimes quite unexpectedly. There are no guarantees. 

Vague business model – If you aren’t permitted or are discouraged from verifying the details of a deal, it’s probably a scam. Investment agreements might prohibit signers from contacting any parties related to the settlement without written consent. Even so, check public records and confirm anyway. Call your state securities regulator (find them at www.nasaa.org. Make sure the person selling the security is licensed in your state. 

The investment is being promoted by people you trust – Con artists are masterful in gaining the trust of unsuspecting investors, sometimes even getting on their knees and praying with their targets to win them over. 

You are offered a bonus to sign up friends. If recruiting other investors is key, you could unwittingly become part of a scam.

Testimonials about big payouts. Scammers love it when early investors brag about their returns. It adds legitimacy to the swindle.

The promoter gets angry at too many questions – If they act angry or dismissive when investors ask questions that is a huge red flag. If you are ever made to feel stupid or are shut down from asking questions about an investment opportunity, you are most definitely about to be conned. 

Pressure to reinvest – If they are scammers, and you were caught once, they now know your profile and assume you can easily be caught again.

Pressure to act now – You should be allowed the time you need to make a decision.

Credibility through association – Just because your friend or family member recommended you for this opportunity, doesn’t mean that you are both being swindled.
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