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Charles Givens was another, but he appears to be out of business now -- at least he isn't on the Web, although his books are still around. The books have some very useful information, but when he moved into the seminar business -- charging $2000 for essentially the same information that was in his books -- he went over the line. I have to give him credit for one of the great book titles of all time, though: Wealth Without Risk.
What a great hook! Isn't that what we all want? You know, con men say they would be out of business if people weren't greedy. Most cons exploit not just the naivete of their victims, but on their greed. The scam is all dressed up, of course, often in very altruistic clothes. Wade Cook talks about providing for your family and throws a cloak of religion over his efforts to separate Christians from their cash. It makes my skin crawl.
But it can be worse. Here's another story that makes me want to resign from the human race. This scheme was sent in by Paul Rerucha of Seattle.
"I have some friends who unfortunately have become involved with this group: http://www.worldcommunityedu.org/, and also www.privateassets.com. [My friends] have been led to believe that the $25,000 they put up last year will grow to $1,000,000 in three or four more years through the miracle of compound interest (at a rate of 115%, I believe). They've been led to believe that through currency transactions (offshore even) they will make this much, even received a 'statement' after one year showing them doubling their money. When I asked about due diligence, they get into mumbo jumbo about how trust is the ultimate due diligence, and since it's a private company they don't have to produce financials, etc.
"The worst of it is now that they stuck that much into it (which they couldn't afford, really), they have to believe it's true and what I tell them about pyramids and Ponzi schemes isn't true. The hardest part about making investment mistakes is admitting them."
Great last line, Paul. Wish I'd thought of it. This habit we have of denying the possibility of a mistake is what keeps these schemes going. I took a look at http://www.worldcommunityedu.org/ and was utterly fascinated. Of course, I was fascinated the first time I watched a boa constrictor swallow a rat, too.
The World Community Educational Society (WCES) is one of those far right-wing fringe sites that purports to tell Americans "the truth" about our society. For example, the "truth" that Madalyn Murray O'Hair has called a hearing before the U.S. government to have "Touched by an Angel" dropped because the program uses the word God. Never mind that Ms. O'Hair disappeared and hasn't been seen or heard from for several years. Or the "truth" about the U.S. tax code -- which is that income tax is illegal and you don't have to pay it. They seem to have a rather loose definition of truth.
But everyone's entitled to their beliefs. What you aren't entitled to is your neighbor's money. The guys running this website are under investigation for running a pyramid investing scheme. This link has the story, or you can go to the website for both sides.
Again, I'm not writing an indictment on this particular site. Maybe the missing $40 million will show up in a bank in American Samoa next week, all perfectly accounted for. Or maybe it won't. You've got to hand it to these guys. They've done a masterful job of covering their assets. When investors ask for their money back, the WCES can tell them the U.S. government took it in the "raid" and that all of the allegations are the guv'ment's attempt to suppress the "truth," which the victims are predisposed to believe. Therefore, no complainants. Beautiful.
The point is that almost everyone has a button that, if pushed in the right way, makes them disgorge cash like a hacked ATM. I talk a lot about the power of compounding, but 115% a year? It takes more than greed to get people to believe that one. It was the antigovernment bait that really hooked these investors, that made them want to believe. Which brings us back to yesterday's advice: Listen to your head whenever your emotions start telling you to write a check.
What's your button? If you don't know what it is, I suspect you are vulnerable to someone who does.
Next week we will look at the gray areas of investing advice using InvestorAdvice.com as our example. Have a good weekend.
Fool on and prosper!