Spring 2014 • Issue 51, page 18

Ponzi-Proof Your Investments: A Book Review

By Mosier, Robert*

Each year, unsuspecting investors lose their life savings in fraudulent financial schemes. Collectively, these losses amount to hundreds of millions of dollars. Federal Equity Receivers know this better than anyone as they unwind the entangled financial schemes and administer assets for the benefit of the defrauded victims. Receivers face significant legal hurdles in the administration of these cases and rarely (if ever) return 100% to creditors and investors.

The best course of action is for investors to refrain from investing in a fraudulent scheme in the first instance. So the key questions becomes: How does an unsuspecting investor identify a potential Ponzi scheme? A new book offers the answer: Ponzi-Proof Your Investments: An Investor’s Guide to Avoiding Ponzi Schemes and Other Fraudulent Scams ( www.ponzi-proof.com ), written by RN’s editor, Kathy Bazoian Phelps, places the focus on the front end of fraud, encouraging investors to conduct due diligence and to avoid Ponzi schemes and fraudulent scams before they hand over their life savings.

Ponzi-Proof Your Investments tells investors in plain language how to best increase their odds of avoiding that fate. When asked why she wrote the book, Kathy answered:

In the course of representing trustees and receivers in these types of fraud cases, it became clear to me that the best line of defense for everyone – investors, financial institutions, auditors, lawyers and brokers –is to avoid getting involved in a Ponzi scheme in the first place. The available literature is generally overly simplistic, stating little more than, “If it’s too good to be true, it probably is.” For the unsophisticated investor who relies on friends, family and trust to make an investment, this advice is meaningless. Ponzi-Proof Your Investments empowers the individual to take a close look at the investment itself, and not just rely on word-of-mouth. Had Bernie Madoff’s victims asked the questions and conducted the investigations recommended in Ponzi-Proof Your Investments, billions of dollars could have been saved. The book arms investors with the ability and confidence to spot the red flags of fraud, ask the hard questions, demand solid answers, and conduct targeted due diligence.

Kathy Phelps is also the co-author (with Bankruptcy Judge Steven Rhodes) of The Ponzi Book: A Legal Resource for Unraveling Ponzi Schemes, the definitive legal treatise on Ponzi scheme law. Ponzi-Proof Your Investments benefits from her vast knowledge of the law relating to Ponzi schemes and provides real life examples of what has gone wrong for others in the past.

*Robert P. Mosier is a Southern California receiver and trustee and principal of Mosier & Company, Inc., a firm that has specialized in managing and turning around troubled companies for more than 25 years.