Wall Street Investment Fraud Lawyer Blog

According to the Atlanta Journal Constitution (AJC), the U.S. Attorney Office has filed an action against Robert Price Copeland, a Marietta attorney.  The U.S. Attorney's Office seeks to have Copeland forfeit a dozen properties that he allegedly bought with money he gained from the alleged ponzi scheme.

It is alleged by the U.S. Attorney's Office that Copeland used a number of businesses, including Axiom Development Group, Inc., We Buy Inc., Robert P. Copeland, P.C., and HBV Services, Inc. to perpetuate the fraudulent scheme.

Copeland has not yet been charged criminally with regard to this alleged conduct. Despite attempts by the AJC, Copeland refused to return phone calls seeking comment regarding the allegations made by the U.S. Attorney's Office.

According to the Georgia Bar website, Copeland was admitted to the Georgia Bar in 1995.

When ponzi schemes implode, there is usually no money left behind for the victims to recover.  One silver lining for victims who lost money in ponzi schemes that actually made investments is that the fraudster typically can not accomplish the fraud alone.  Collateral parties such as brokerage firms are often involved to help execute trades or be custodians of funds. Under some circumstances, those collateral parties can be held liable for their involvement in the fraud.  In addition, perpetrators of ponzi schemes often utilize a sales force to help them gather assets.  In exchange for new clients and funds, the ponzi scheme fraudster will pay those brokers a commission.

 

Those brokers often are employed by legitimate and solvent brokerage firms that are responsible to supervise the broker's business activities.  If you invested in a ponzi scheme through a broker or salesperson, it would be wise to take the following steps immediately:

 

 

 

 

 

 

1.   Start making a written chronology that touches on the following areas:

·         How did you learn about the investment?

·         Did someone recommend the investment to you? If so, who?

·         Why did you decide to invest?

·         What did you expect the investment to do for you?

·         Did you purchase the investment to generate income? If so, how much income did it generate and how important was that income to your overall financial picture?

·         How was the investment described to you? Was it described as a safe investment? Risky?

·         Were any promises made to you about the performance of the investment?

 

2.   Gather all of the written marketing materials that you received in connection with the investment.

The written chronology is very important because (1) memories fail over time and (2) the document is a living document because it can evolve over time when new information is added later. For example, many times an unrelated event such as a TV commercial will trigger a memory about a statement that was made to you about the investment. If you have already created a written chronology, it is easy to add that information.

The Securities and Exchange Commission (SEC) obtained a court order freezing the assets of an investment firm fraudulently claiming that Warren Buffett, the well known billionaire investor, was the firm's honorary chairman, according to the Los Angeles Times.  It is alleged that International Realty Holdings Inc. (IRH), of Palmdale, California, and its operators, Leticia Isabel Medrano and Ottoniel Medrano, bilked hundreds of thousands of dollars from investors with this scam.

The lawsuit, filed in the U.S. District Court in Los Angeles, alleges that the firm's representatives were promising returns of up to 15%. Further, it is claimed by the SEC that the representatives of the firm touted falsely that the company was owned in part by Credit Suisse, a Swiss banking giant.

 

A declaration made by Buffett himself was filed with the suit.  The declaration stated that Buffett was not and had never been the Honorary Chairman of the Board of Directors of IRH and that Buffett had not ever had any personal or business relationship with the firm.

Interestingly, the SEC claims that IRH actually misspelled Buffett's name in its brochures. The brochures also allegedly showed photos of Buffett with people said to be IRH employees, which the SEC claims was actually a photo taken of Buffett with students from the University of Michigan.

The SEC lawsuit alleges that IRH raised at least $485,000 from unsuspecting investors. In fact, the SEC claims that the total may be more than $700,000 from at least 15 investors from six different states.

The SEC says that much of the money from investors had been wired into bank accounts into the Philippines. At this time, the SEC is seeking to have the funds returned to the U.S., which should help to bring some relief to the defrauded investors.

It is hoped, for the sake of the investors, that they can recover at least a portion of their investment made in reliance on IRH's allegedly fake endorsements.

 

With the state of the market as it is, individuals are more desperate making them more susceptible to fraudulent schemes. Investment fraud scammers are looking to take advantage of trusting individuals and will have no problem scamming folks out of their entire life savings.  Therefore it is critical for people to be on the look out for common investment schemes.  The Better Business Bureau (BBB) has created a list of common scams that consumers need to look out for, which include the following schemes/scams:

1)  Ponzi or Pyramid Schemes:  In this type of scheme, the fraudster will promise unrealistic returns to lure investors to invest.  The money from new investors will then be used to pay off earlier investors to prevent earlier investors from becoming skeptical.  Unfortunately, this scam will continue so long as new investors are providing funds.  However, eventually, as in the Madoff Ponzi Scheme, the scam will collapse leaving all investors looking for their money.

2) Boiler Rooms: Here, scammers call from "boiler rooms" or call centers pitching worthless investments to consumers.  Often these cold calls are promoting investments like penny stocks which may be worthless or being offered at inflated prices.

3) "Pump-and-Dump" Penny Stocks: In this scam, the fraudster buys up a number of penny stocks and then will fraudulently promote the stocks to unknowing investors through sending out fake "hot tips" in emails, calls, and other forms of communications.  The stock price, as a result of the promotion will be driving up (the "pump") and then the promoter will sell his own shares (the "dump") for a large profit. Then the stock price will plummet and the investors will be left with worthless stocks.

4) Exotic or Off-Shore Foreign Investments:  Often individuals fall prey to this scam, investing in oil and gas ventures, precious metals, ostrich farms, and unregistered foreign investments.  Fraudsters entice individuals to invest in the above by suggesting that they can avoid certain taxes.  Of course, in this case as in the other schemes, investors lose their money with no real method of recovering loss.

5) Promissory Notes: These are often promoted as high yield fixed returns on investor's money with little risk. Although some may be legitimate, some are not and leave an investor with nothing.

6) Fraudulent Bank or Currency Investments.  Here, fraudsters will promise very high returns for investing in bank or currency investments.  Many times the bank doesn't exist and investors end up losing their investment as a result of the fraud.

7) Advance Fee Stock Purchase Scams: In this scam, the investor is offered an unrealistically high price for an investment or stock that the investor already owns.  Prior to the sale, however, the investor is asked to pay a large sum of money as a deposit or transaction fee.  The fraudster collects the fee and then the purchase does not occur.

8) Fake Promises of Initial Public Offerings (IPOs): Investors often seek to purchase stock when it is first being offered to the public.  However, be on the watch for individuals trying to get advanced fees in return for an alleged right to buy the stock earlier as an insider. Again, beware and avoid the temptation to accept such an offer.

9) "IRA or IRS Approved" Investments: Some investors are tempted to roll over an IRA investment into more profitable investments. Often they find security in the fact that their promoter promised that such investment is "IRA or IRS approved."  Where this promise is made, the investment is a fraud.

10) Investments in Fraudulent Businesses: Often folks are looking for additional household income, and are wooed by business scams which offer high returns for little time or effort. Again, beware! Avoid such offers that seem too good to be true. These business often suggest you can work at home or make money through purchasing vending machines, pay phones or ATMs.

Of course, not all investments are scams. But all investments should be researched VERY carefully and one should never become involved in investing in something on a whim. You do not want to be the investor who loses their entire life savings or even a portion in a scam like the above. Often there is no way to recover losses. However, if you have fallen victim to such a scam, it might be beneficial to contact a lawyer to determine if there is a method of recovery and to contact a tax professional to determine if there are tax implications with regard to the loss.

According to the Associated Press, Morgan Stanley has agreed to pay more than $7 million to settle regulatory claims of misconduct, arising from the actions of two former brokers, Michael J. Kazacos and David M. Isabella. These brokers were employees of Morgan Stanley's Rochester branch office.

It is said that the settlement resolves claims that Morgan Stanley failed to appropriately supervise these brokers, which allowed the brokers to allegedly mislead employees of Eastman Kodak Co. and Xerox Corp. into taking early retirement and investing retirement funds with them. The Financial Industry Regulatory Authority (FINRA) says that $3 million will serve as a fine for the alleged misconduct and the remaining $4.2 million will provide restitution to the 90 individuals who took early retirement in reliance on Morgan Stanley's brokers' advice.

A FINRA regulator says that in total at least 184 people were affected financially by the misconduct.  The regulator also stated that Morgan Stanley has settled with 101 individuals, besides the 90 mentioned above who will receive restitution.

According to WHEC-TV News 10, of Rochester, NY, one of the victims was Richard Patrick, who had worked at Kodak for 32 years before retiring early and accepting a retirement package.  Patrick says that he trusted Kazacos with $380,000 in 1998.  Kazacos had told Patrick that he would never lose the initial investment and that he could, in fact, draw 10% of his investment a year without invading the principal, Patrick says. However, by 2003, Patrick's account held only $7000.

According to FINRA, Kazacos and Isabella made approximately $15.4 million in gross commissions during the time which the misconduct occurred. FINRA says that Kazacos has been permanently barred from the securities industry, pursuant to a settlement made by Kazacos with FINRA. As for Isabella, he has not settled with FINRA and a disciplinary complaint will be heard before a FINRA hearing panel. 

 

According to the Atlanta Journal Constitution (AJC), Frederick Barton pled guilty today to defrauding a 90-year-old woman, who has Alzheimer's disease, of almost her entire life savings.  Barton will be sentenced for wire fraud on June 23rd.

Barton was fired in 2002 from a national brokerage firm. Thereafter, he began his own investment firms, Barton Asset Management and Twinspan Capital.  U.S. Attorney David Nahmias says that during the next five years Barton fraudulently diverted investors money to himself. In total, it is alleged by federal authorities that Barton defrauded investors of at least $2 million.

It is said by authorities that when Barton learned that one of his clients had Alzheimer's he took $1 million dollars of her assets, placing it into his own personal account. Unfortunately, according to U.S. Attorney Nahmias, the woman's bank accounts fell from around $1.3 million to less than $100 over a period of 5 years.

It is the hope of U.S. Attorney Nahmias that the guilty plea will send a message to other financial predators.  However, this situation should also serve as a warning to investors.  I wonder how many of Barton's clients researched his background.  Would they have trusted him had they learned of his firing or the reasons behind his termination? Was there other red flags that would have concerned investors and maybe caused them to find another investment manager? Investor beware!

The Financial Industry Regulatory Authority (FINRA) has issued an alert warning investors to look out for several red flags of fraud. To avoid becoming a victim of investment fraud be on the lookout for the following red flags:

1) Guarantees: Always remember that all investments have a certain degree of risk. Beware of anyone who guarantees performance of an investment.

2) Unregistered Products: Often investment scams will involve "unlicensed individuals selling unregistered securities-ranging from stocks, bonds, notes, hedge funds, oil or gas deals, or fictitious instruments, such as prime bank investments." Ask questions and know your investment.

3) Overly Consistent Returns: Investors should be suspicious when an investment consistently goes up every month or where the investment provides steady returns despite market conditions. Keep in mind that even the most stable investments experience "hiccups" sometimes.

4) Complex Strategies: Beware of individuals who have a complex investing strategy which they claim yields great success.  You must understand what you are investing in, which includes being fully aware of the risks associated with the investment and how the investment will make money.

5) Missing Documentation: Do not accept missing or minimal documentation relating to a potential investment. Again, you must research your investments thoroughly and if someone is unwilling or unable to provide you with a prospectus relating to a stock or mutual fund or a circular regarding a bond then that person may be seeking to sell you an unregistered security. 

6) Account Discrepancies: Make sure to review your account statements thoroughly.  Missing information, unauthorized trades, or other problems with your account may indicate churning or fraudulent activity. Know who is holding your assets.  Fraud occurs easier in situations when an advisor is both the custodian of the assets as well as the keeper of the accounts. 

7) Pushy Salesperson: You should never be pushed into making an immediate decision regarding an investment.  You do not have to act right now and acting under pressure may result in problems later on.  If a person is pushing you into an investment and doesn't give you time to reflect on the decision, stop and find someone who will give you adequate information and time to make such important decisions.

Of course, there may be other red flags to look out for, but the key is to be on the lookout for them. Do not ignore such red flags! Do your research on those who are offering investments and on the investments themselves. Do not make rash decisions and make sure you remember that all investors are potential targets of fraud.  

According to the Atlanta Journal Constitution, Wendell Ray Spell, of Gainesville, Georgia, pled guilty Tuesday to federal charges relating to a Ponzi scheme. Authorities say that the scheme defrauded investors out of more than $60 million dollars. It was alleged by authorities that Spell, who ran a construction equipment company, lured more than 50 individuals to invest their money with him.  Authorities say that Spell told investors that that he would purchase construction equipment with their money and then sell the equipment for a large profit. However, like any ponzi scheme, it has been alleged that Spell was paying investors "profits" by giving them money that had been invested by newer investors.

According to the U.S. Attorney's office, Spell faces a maximum sentence of 20 years in prison and a fine of up to $250,000. Sentencing has not yet been schedule for Spell.

Investors must be very careful as to who they trust with their money. Furthermore, although they may consider someone a friend, they should still conduct appropriate background checks on the person, checking whether they are licensed or registered and investigating their experience and employment history. Additionally, investors should be very diligent in researching any investments they make and should be wary of guaranteed promises of high returns. Remember investing always involves a certain amount of risk. 

For the sake of Spell's investors, it is hoped that federal authorities seized funds from Spell that can be distributed to his alleged victims. Unfortunately, however, recovery may be minimal at best. 

In a telephone conference today, Bart Chilton, the commissioner of the Washington-based Commodity Futures Trading Commission (CFTC) referred to the recent discovery of unprecedented numbers of ponzi schemes as "rampant Ponzimonium." According to a Reuters article published today, Mr. Childers was making a play on the word "Lollapalooza," a popular music festival.

In that article, Mr. Chilton was also quoted as saying, "Because of the economy, people are seeking redemptions more than they ever have and that's making a lot of these scams go belly up."

Mr. Chilton should have made another play on words and said that "a lot of these scams go 'pork-belly' up."  That is because many of the recently discovered ponzi schemes involve commodities futures trading.  Mr. Chilton admitted that so far this year, the agency has uncovered 19 ponzi schemes, up from 13 for all of 2008.

While the SEC has certainly received its fair share of criticism recently, the CFTC has not received much negative press. It deserves some though.

What many investors do not know is that the CFTC along with the National Futures Association (NFA) regulate the commodities industry, not the SEC.  Investors often are unaware that the rules and regulations of the NFA have the practical effect of being less stringent on its members than those imposed on brokerage firms that sell securities.  Risk disclosure requirements are more relaxed and less effective because the rules shift much of the burdens of risk disclosure to the commodities trading advisors and away from the brokerage firms.  As a result, it is more difficult to hold the brokerage firms actually making the trades liable for unsuitable recommendations.

In addition, because much of the commodities trading is done through online forex trading platforms, it is not difficult for criminals to open accounts in his or her name and trade (without a license) on behalf of groups of investors. Because of lax regulations, commodities brokerage firms called Futures Commodities Merchants (FCM) disregard their due diligence duties and do nothing to stop ponzi schemes from forming.  As a result, the scams are not discovered until it is too late and rampant ponzimonium takes effect. 

It is no wonder, therefore, that crooks looking to rip off consumers view the commodities industry as their Afganistan of the scam artist criminal landscape.  

    

 

It is no secret that the financial markets are down and investors are looking for safe investments.  It is also no secret that interest rates on CDs and money market account are very low.  The combination of volatile markets and a low interest rate environments create a perfect storm for sales pitches related to deferred variable annuities and equity-indexed annuities.

On the surface, these annuities appear to be the perfect solution.  However, you need to know that these products in general are very complex, extremely expensive, and not appropriate for most investors, especially those in retirement. Because these investments so complex, most people who are in them did so at the recommendation of a trusted financial provider.  Before purchasing one of these products, it would be wise to educate yourself using unbiased educational information without the sales pitch.

Self-education is the most effective way to avoid becoming a victim of bad investment advice.  One thing you need to know off the bat is that these products pay extremely high commissions to the brokers who sell them,  Variable annuities typically pay an upfront commission of 5-7%.  Equity-indexed annuities are even worse, paying commissions of 9-11%.  Compare that with the commission paid on the average mutual fund of 2%.

It is no wonder that annuities are the investment of choice for many brokers. When it comes to these types of investments, it really pays to do your own research just to make sure that the broker is not recommending the annuity solely for his or her own benefit. 

 

On March 19^th, Bloomberg published an article entitled, Ponzi Scheme Victims All Missed an Easy Clue: Bogus Auditors.  The article discussed how victims could have easily discovered that they were investing in ponzi schemes simply by calling the accounting firms that purported audited the financial of the bogus investments sold by Bernie Madoff, Allen Stanford and James Nicholson.  According to the article, had victims done this, investors would have learned that no one answered the phone at Stanford's auditing firm in Antigua; Madoff's auditing firm was a sole proprietor of Friehling & Horowitz, an accounting firm run from a 13-by-18-foot storefront in the New York City suburb of New City.

 

These examples were followed by a quote from an accounting professor at Ohio State University in Columbus which stated, "Due Diligence 101 should demand that you check out the auditing firm and find out if it exists" [...] "Then, you have to find out if they are qualified."

 

The implications from this article are disturbing because it suggests that investors should have known better than to invest with people who turned out to be crooks.  The truth is that "due diligence 101" should require accounting firms who "audit" books of investment entities to make sure that the Bernie Madoffs of the world are accurately reporting the scope and nature of the audit.

 

A subtle but disturbing undertone of this article is that investors should have known better.  This mindset is dangerous to the integrity of the laws designed to protect investors.  For example, a common claim brought by victims of ponzi schemes is common law fraud and section 10b-5 securities fraud claims.  Both of these claims require investors to prove that they justifiably relied on the misrepresentations contained in the prospectus or other sales literature.  Whether reliance is justifiable is a defense commonly raised to defend these actions.

 

It is disturbing to think that investors could lose a lawsuit because they failed call the accounting firm who conducted the audit of the books just to make sure that the work was done properly.  This goes against the heart of the securities laws.  These laws were meant to abolish the "buyer beware" mindset and shift the burden to the seller of securities and other parties involved in the sales process (including accounting firms) to make sure that the information contained in the prospectus is accurate and truthful. 
 
While it is true that it is be a good idea for investors to call those firms to verify that the representations made in any prospectus or investment sales document are accurate, investors who do not should not be penalized.

Thousands of U.S. taxpayers have fallen victim to investment fraud schemes, often losing their entire life savings, and now the Internal Revenue Service (IRS) wants to assist taxpayers by articulating  how to handle the complex issues facing these taxpayers when filing their taxes. 

On March 17, 2009, the Commissioner of the IRS, Doug Shulman, testified before the Senate Finance Committee on Tax Issues that affect victims of ponzi schemes.  In particular, the IRS issued two guidance items, a revenue ruling and a revenue procedure, to aid taxpayers who have fallen victim to investment schemes. 

According to the IRS website, the IRS's revenue ruling states that (1) "The investor is entitled to a theft loss, which is not a capital loss"; (2)" 'Investment' theft losses are not subject to limitations that are applicable to 'personal' casualty and theft losses," meaning the loss, although an itemized dediction, is "not subject to the 10 percent of AGI reduction or the $100 reduction that applies to many casualty and theft loss deductions;" (3) "The theft loss is deductible in the year the fraud is discovered, except to the extent there is a claim with a reasonable prospect of recovery;" (4) "The amount of the theft loss includes the investor's unrecovered investment including income as reported in past years;" and (5) "A theft loss deduction that creates a net operating loss for the taxpayer can be carried back and forward according to the time frames prescribed by law to generate a refund of taxes paid in other taxable years."

The revenue procedure was issued by the IRS in an effort to provide victims of investment schemes a uniform approach to dealing with investment losses due to fraudulent schemes.The IRS's revenue procedure, outlined on the IRS website, allows taxpayers to assume two things when reporting their losses.  First, the IRS will deem the loss to be resulting from theft if (1) the fraudster was charged under federal or state law for the commission of fraud, embezzlement or a similar crime that would be defined as theft; (2) the fraudster was the subject of a federal or state criminal complaint which alleges that they have committed such a crime; and (3) either there was some evidence of an admission of guilt asserted by the fraudster or a trustee was appointed to freeze the assets associated with the scheme. Second, taxpayers will be generally allowed to "deduct in the year of discovery 95 percent of their net investment less the amount of any actual recovery in the year of discovery and the amount of any recovery expected from private or other insurance."  Should the victim of the scheme sue someone other than the fraudster, however, they would compute the deduction by substituting 75 percent for the 95 percent in the above formula.

If you have fallen victim to an investment scheme, as you can see, there may be tax implications with regard to the losses sustained.  A tax professional should be consulted in an effort to best manage the economic fallout from such losses. Additionally, it is imperative that you consult an attorney to determine what, if any, legal action may be taken to assist in the potential recovery of financial losses. Remember there may be a time limitation on when you may file an action so do not delay. 

 

One of the most infamous Wall Street swindlers in history, Bernie Madoff, pled guilty to to 11 criminal counts and was ordered to go straight to jail this week.  During his last court hearing, Madoff stated, "I operated a Ponzi scheme."

What exactly is a Ponzi scheme? How do you spot one? More importantly, how do you avoid becoming a victim?

According to Wikipedia, a ponzi scheme is a fraudulent investment operation that pays returns to investors from their own money or money paid by subsequent investors rather than from any actual profit earned.  The scheme is named after Charles Ponzi, who became notorious for using the technique after emigrating from Italy to the United States in 1903.

Investment operations typically do not start out as Ponzi schemes.  Instead, legitimate investment operations evolve into criminal schemes due to a number of reasons. For example, a broker may lose a significant amount of investors' money through risky investments or bad decisions and is not willing to face the consequences from his clients.  As a result, the broker entices new investors into the investment operations so that he can pay off prior investors with the hopes that he can make the money back through subsequent investment activity. 

Continue reading "Madoff's Ponzi Scheme Is Not The First (And Will Not Be The Last) " »

When looking for a broker or an investment advisor, of course, the idea is to find someone that you trust who will work with you to meet you financial goals. However, often individuals are lured by flashy advertisements and promises of great return on their money.  People trust what they hear and often fail to research brokers, investment advisors, and/or their firms.  Unfortunately, researching an individual and asking tough questions may go a long way in avoiding become a victim of an investment scam.

Investors should know that federal or state securities laws require that brokers, investment advisors and their firms to be licensed or registered. Additionally these groups are required to make particular information publically available.  The U.S. Securities and Exchange Commission (SEC) suggests that prior to investing or paying for investment advice you should check to see whether the individuals you are consulting are registered or licensed and whether they have been disciplined in the past.  The Central Registration Depository (CRD),which is accessible through the Financial Industry Regulatory Authority (FINRA), is the place to do this.  Further, the CRD will provide information about the brokers' education and employment history.

Do not be afraid to ask questions of potential brokers or investment advisors.  Interview them and do it thoroughly.  Also, interview more than one, preferably more than two. Remember these are the folks who will be assisting you in reaching your financial goals and who will make recommendations to you that will affect your financial wellbeing.  

Ask these individuals how they are paid and what benefit they get from investments that you make.  Often they receive commissions from your investments, which could dictate which investments they propose to you.

Do not be fooled by guaranteed promises of big returns. Ask about risk and if someone tells you there is no risk then you need to do more research. Investing involves risk to some degree.

At the end of the day, treat the process of finding a broker or investment advisor as you would hiring an employee. Ask questions and interview more than one applicant.

The Securities and Exchange Commission (SEC) has issued a warning to investors and financial service firms that there are con-artists claiming to be SEC employees seeking sensitive information to use to defraud. These fraudsters have tricked individuals into revealing private information and, in some cases, into sending money and other assets to the fraudster. Further, these con-artists have impersonated SEC examiners to obtain confidential information from broker-dealers and investment advisors. Often, the fraudster claims that they are conducting an "emergency" investigation.

It should be remembered that the SEC never makes or endorses investments nor do they participate in money transfers. The SEC wants folks to also know that they do not send emails asking from detailed personal information or other sensitive financial information.

The SEC advises that if you are contacted by someone claiming to be an SEC employee you can verify their employment by asking for the caller's name, the SEC office where they are employed, and their telephone number. With this information you can then call the SEC's personnel locator at (202) 551-6000 and ask to speak directly with that SEC employee. Also, if you are contacted by someone claiming to be an SEC employee you can report the call to the SEC by calling (800) 732-0330 or emailing them at help@sec.gov.

In summary, if someone purporting to work for the SEC calls you, make sure to verify their employment first and do not give out any information without verification from the SEC of their employment. Further, remember the SEC does not ask for money transfers or personal information via email.

It is always a good rule of thumb to NEVER give out personal or financially sensitive information over the phone or email without first verifying who the caller is and why they need such information. Often, if you question a caller, who is seeking to defraud you, of their identity and purpose behind the need for the information, the caller will hang up.  Additionally, if a person is legitimate then they will understand your need to verify who they are and why they need personal or sensitive information. Finally, it is also a good practice to tell the caller you will call them back at their place of employment to give them any information. If they refuse to give a call back number, do not give them any information.  

As outlined in The Retirement Challenge: Will you Sink or Swim?, co-authored by Jason Doss, You may find yourself in need to transfer assets from one qualified account (i.e. a 401(k)) into another qualified account (i.e. an IRA). When transferring assets from one qualified account to another, make sure that you elect a "trustee-to-trustee" transfer. In order to accomplish this, you will need to ask for the appropriate paperwork from the financial institution that is the custodian of the IRA into which you want to rollover money. The trustee-to-trustee transfer will ensure that the money will be transferred directly from one financial institution to the other.

If you receive the money, rather than electing a trustee-to-trustee transfer, then you should keep in mind that the IRS will consider it to be a distribution.  This distribution is subject to be taxed and penalties may be imposed, unless the money is rolled over into another IRA within 60 days. If you decide to roll the funds over into another IRA yourself, make sure that you deposit the money with a trustworthy bank or financial institution. Furthermore, upon deposit of the money ensure that you are provided with a receipt.

It is recommended that you do not rely on a third-party to deposit the money on your behalf. You may become a victim of fraud this way. The third-party may elect to endorse the check and deposit it into their own account rather than into an IRA.  It may be very difficult to recover the money when this happens.

However, if you have become a victim, there may be another party that could be held liable in this situation. Therefore, you should contact an attorney to consider your legal remedies.