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'High-Return' Investment Schemes Target Affluent Seniors

International Banking Group's ultra-high-interest claims can't be verified

By Mc Nelly Torres
ConsumerAffairs.com
Copyright © 2009 All Rights Reserved

November 2, 2009

IBG lists 12 U.S. banks and several international institutions as the banks that supposedly issue the high-interest CDs, and claims that since its retail division was founded in 2008, the company has serviced over 35,000 new accounts worldwide.

But five of the seven banks contacted by ConsumerAffairs.com said they have never heard of IBG and at least one of them is in the process of seeking legal action because they claim that IBG uses their logo without permission. And state officials in California, where the company claims to have a Beverly Hills office, opened an inquiry after ConsumerAffairs.com asked questions about the registration requirements for corporations operating in the state.

“It looks like they [IBG] should be registered and that would make them in violation of the law,” said Mark Leyes, a spokesman for the California Department of Corporations. “Because we are aware of it, we are looking into the matter.”

Consumers in California and Florida have complained that IBG staff is making cold calls to seniors living in exclusive retirement communities, making sales pitches on the phone before mailing its brochure overnight. Database searches of incorporation records in California and Florida did not produce any registration records for IBG or its Web site, www.ibgmutual.com, ConsumerAffairs.com has found.

Disappearing act

IBG denies any wrongdoing but recently took down its Web site.

Robert, who asked not to have his full name used, said a long-time friend asked him to look into IBG’s background after receiving an unsolicited call. The 85-year-old widow who lives in Timber Pines, an exclusive retirement community near the Tampa, Fla., area, got a package from IBG days after receiving the call.

“I told her don’t send them any money,” said Robert, who contacted Florida Attorney General’s office and other state officials in Florida and California. “She was a little nervous about it.”

Harry T., of Camarillo, Calif., also received a brochure after getting a cold call from a salesman. The 92-year-old man, who lives in a retirement community, turned the brochure over to his son, an attorney, and said that other Leisure Village residents had also been contacted. Both asked that their names not be published. The son checked out the Beverly Hills office and found that it was a short-term "executive suites" operation that offers mail-forwarding for clients wanting to appear to have an established operation.

Until recently, IBG’s Web site, www.ibgmutual.com, listed an array of awards, including “Best Worldwide Private Bank in Western Europe” and “Best Private Bank in the United Kingdom,” both supposedly awarded by The Economist in 2008 and 2007, respectively.

But Sal Genna, an executive with the London-based magazine, said: “The awards that IBG claims on its Web site to have received from The Economist were not awarded to IBG by The Economist.”

The site, which was created on June 18, 2009, according to registration data listed at HostMonster.com, is now "under construction" and not accessible for view. HostMonster.com said the site administrator is Jason Santos, who listed an address in Singapore.

ConsumerAffairs.com contacted seven financial institutions in the U.S., Canada and Great Britain. JP Morgan Chase, Citibank, Royal Bank of Canada and Wells Fargo said that they have no relationship with IBG.

Neil Brazil, a spokesperson for HSBC North America, said: “Following a thorough investigation I can confirm that HSBC Bank USA, N.A. has no relationship with a company named IBG Group. The issue of inappropriate use of the HSBC logo is currently being addressed.”

Bank of America and Lloyds TBS did not respond to several requests for comment.

Wrongdoing denied

Roger Vanzant, a deposit broker with IBG in California, contended that IBG is a legitimate business. Vanzant denied any wrongdoing.

“We don’t make cold calls,” Vanzant said when contacted by phone Oct. 1. “We call existing customers or customers who have been referred by existing clients.”

Vanzant stated that IBG is registered with California Department of Corporations, but he hasn’t provided ConsumerAffairs.com any evidence to support that claim despite several requests. The company, Vanzant said, is headquartered in Hong Kong and has offices in Beverly Hills, New York and Canada.

When asked about the banks that denied doing business with IBG, Vanzant dismissed the banks’ claims as a "small oversight" by bank officials. Because IBG's retail division opened in 2008, Vanzant said, the public relations divisions might not be fully aware of it.

Seniors at risk

In a volatile economy, small investors, including seniors, are more likely to fall victims to risky investments, financial scams and unscrupulous financial brokers, experts say. Elder financial abuse cost older Americans more than $2.6 billion annually, according to a 2009 report by Metlife Mature Market Institute.

The true cost may be even higher. Financial crimes against older Americans tend to be under-reported because seniors are less likely to report fraud for an array of reasons. In many cases, seniors don’t know where to report these types of crimes, they are ashamed of falling victims to a scam or do not know they have been scammed.

Even so millions of senior Americans have fallen victims to financial exploitation, including mail, telemarketing and Internet fraud, the report shows.

Mark A. Tepper, securities fraud attorney based in Fort Lauderdale, Fla., said an investment product that is difficult to verify as legitimate is not worth the risk.

“A good question to ask is, if this is a good investment why is he/she calling folks to tell them about the investment?” Tepper asked.

U.S. Representatives Tammy Baldwin, (D-Wis.) and Howard Coble, (R-N.C.), introduced legislation (H.R. 3040) in June that would prohibit abusive mail, telemarketing and Internet fraud targeting seniors.

The Senior Financial Empowerment Act of 2009, which was referred to the subcommittee on Crime, Terrorism and Homeland Security in July, would also promote efforts to increase public awareness of the enormous impact that mail, telemarketing and Internet fraud have on seniors.

Investors' complaints filed with the Financial Industry Regulatory Authority (FINRA), an independent regulator for all securities firms doing business in the U.S., have jumped 15 percent to 5,405 complaints in 2008 from 4,687 in 2004. FINRA keeps a public registry of its broker-dealer members and their sales personnel.

Due diligence

It's essential for all investors -- not just seniors -- to check out all investments, especially those that claim to pay much higher rates of return than would normally be expected.

• To check brokers or firms call 800-289-9999 or log onto www.finra.org/brokercheck.

• To check a seller’s background visit www.SaveandInvest.org or call 888-295-7422.

• To file a complaint against a broker or firm go to www.finra.org/complaint.

• The U.S. Securities and Exchange Commission provides a list of unregistered entities or entities, which have been the subject of consumer complaints. To find the list go to www.sec.gov/investor/oiepauselist.htm.

Not all alike

According to FINRA, brokered CD’s are mostly offered by a stockbroker or investment professional, who serves as a deposit broker for the issuing bank. These CD’s are complex and carry more risk.

Though most brokered CD’s are bank products, some may be securities – and won’t be FDIC insured, FINRA warns. Also, you may have to pay a fee to buy a brokered CD, as a fixed amount or as a percentage of the amount you are investing.

Remember, FDIC insurance generally covers only $250,000 per depositor per bank. So if you are investing more than that amount, it's important to spread the money around among different institutions. There are exceptions. See the FDIC site for details.

Financial advisers said consumers should ask questions about the investment, and whether the broker or the product are registered with state or national regulatory authorities such as FINRA, to distinguish good investment offers from bad ones.

Be skpetical of salespeople

Steve Pomeranz of Pomeranz Financial Management in Boca Raton, Fla., said investors should be suspicious from salesmen who are soliciting door-to-door or making phone calls.

“CD’s are a bank product, but if the gain is significantly higher than a bank that’s a huge red flag,” Pomeranz said. “Also look twice when it says that it is backed up by the U.S. government, because sometimes that’s not the case.”

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