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Ponzi schemes, seniors and an ounce of prevention

After murderers, terrorists and child molesters, is there any more loathsome human being than someone who would steal an elderly person's life savings?

It's a rhetorical question.

That thought came to mind after spending most of the afternoon in a Clinton Township courtroom hearing the details of the latest in a long list of metro Detroit Ponzi schemes.

The story line changes little. More than a million dollars in extremely hard earned money was stolen from a 91-year-old man, his now deceased wife and two other close relatives. [One was incapacitated.]

The man accused has known these people his entire life, they trusted him. The Macomb County Prosecutor's office says he was not and never has been an investment manager. Yet, the family showed Local 4 Photoshopped paper work to make it look like he was on the up and up.

You may scratch your head and wonder how this can happen. The fact of the matter is it's sadly quite simple and all too common.

Very few people know what to look out for. Fewer still are willing to ask the tough questions in advance to begin to know whether the person being entrusted with your life savings is a licensed professional operating within the law. Instead, these scammers use trust as a wedge and plunder hard earned savings accounts with the grace and ease of a hog at the proverbial trough; never once considering the life threatening damage they are doing to a person who was smart enough to save for a rainy day, but too trusting to and even too old to know whether the person holding their umbrella is cutting a hole in its roof!

Here are the courthouse particulars of this case: Brian Marsack, 44, of Chesterfield Township, is charged with a laundry list of fraud.

He faces three counts of larceny by false pretences over $20,000 (a ten year felony) and one count of racketeering under the RICO statute (a 20 year felony).

Marsack pleaded not guilty and waived a preliminary exam; was given $150,000 bond and at the time of this writing remains in the Macomb County Jail because he could not raise the cash to get out. Still he had $100,000 kicking around and gave that to his defense attorney to pay back to the defrauded family, as if that will make much difference for three people nearing age 100!

Here is the back story: Ninety-one-year-old Edward Mancini is a resourceful man who has lived a very full life. More than spry at his age, he spent nearly a half hour telling his tale on camera. He was an entrepreneur having run his own tool and die shop when there was one on every corner during the auto industry's hay day. He also owned a large tract of land in Chesterfield Township, an old farm where he operated a golf driving range. On that land sat a farm house.

In the early 1980s Marsack's family moved into that farm house when Brian was 5-year-old. Mancini says Marsack's father could not afford to pay rent so he never charged any; allowing the family to live there for 17 years. Mancini claimed he watched Brian grow up in that farm house.

Later, Brian, one of many children, had a knack with cars. Mancini says he even lent Brian money to begin buying old junkers, repairing and then selling them. Mancini was impressed with his industry and took a liking to him. Years later, Mancini says, Marsack went into auto sales and apparently did very well. Mancini went to Marsack's wedding, was impressed at the groom who cried during the ceremony. His children came along and Marsack and his wife home schooled. They attended the same Christian church with the Mancinis. They were family.

Mancini says a few years ago Marsack went to work on his wife trying to get her to invest with him. It started out small, and Marsack was able to show sizable returns on paper. So, they kept investing with him. Over time Mancini gave over all of his life's savings, more than $450,000. Marsack apparently was able to talk Mancini's wife into giving him hundreds of thousands of dollars from an incapacitated sister whose estate she was in charge of and talked another sister-in-law into jumping in too. The final total invested with Marsack is $1,180,000. Where did it go? We will have to wait for the trial to find out.

This whole scheme could have gone on for years but Mancini's wife passed away this past September. After the burial, he went to his trust attorney to make sure his estate plan was properly funded. It's was when they started checking accounts that the trust attorney realized something was amiss. Mancini invited Marsack to his home, and Mancini claims Marsack confessed to the fraud; that most if not all of the money was gone and pleaded not to have him sent to prison. Ironically it was Halloween, a night of horror for Mancini. He decided he'd given enough. He went to the police.

The sad, tragic and most cold hearted corners of this story really drive that horror point home. Consider what Mancini's daughter told us on camera today. She claims Marsack went her step mother's funeral in September and was soliciting more investment cash from family members while at the funeral! Shame has become extinct!

There were things that should have tipped Mancini to Marsack's apparent game. In his interview, Mancini said Marsack started out telling him he was a "day trader."

Day traders are losers! Day traders are dangerous.

If you ever hear anyone tell you they are a day trader you may not want to walk, but run away from them. Never look back and never ever get involved with them!

Mancini says Marsack promised returns of 6 and 7 percent on certificates of deposit. Another alarm bell should have gone off considering interest rates are near zero. If you've invested in CD's lately you are lucky if they return 2 percent. If anyone is promising any kinds of returns, again run away. Investment advisors can not legally promise specific returns.

Another major tip off is when Mancini asked for dividends to help fund college for one of his grand children he received checks from Marsack's personal account. This is what is commonly known as commingling of funds, and this too is illegal. Yet, unless you have a finely tuned ear to these kinds of things you can miss the canary in the coal mine. If the person selling you on their brand of financial services uses enough jargon even a business savvy person can get overwhelmed, confused or otherwise sidetracked. This is how this kind of fraud is born.

As a Certified Financial Planner myself, I have a great understanding of the dangers, the fear, the leap of faith required in handing over your life's savings to someone you barely know. Trust is everything. Broken trust is everywhere.

How do you protect yourself? One of the best pieces I have ever seen on the subject comes from a place near and dear to my heart. The Board of Certified Financial Planners put out this booklet:

-Consumer Guide to Financial Self Defense

I could not recommend anything more highly when it comes to knowing what to do before you invest. Read it carefully. Be prepared to ask your potential advisor questions you might not otherwise be comfortable asking anyone. In the end it is your money, it is your future and you deserve the right to demand accountability at any time. Getting tough on a financial advisor early on [not abusive mind you!] is a way to show him or her you are serious, you will be watching and you might just ward off anyone who might look to do you harm.

If you have family members with investment accounts who may be failing or getting older, who might not totally understand the process anymore, or get easily confused, it is vital family members take a strong role in protecting those family members and their assets. You do not want to end up as the Mancini family did, penniless and a cautionary tale for others.

An ounce of prevention here is worth a whole lot more than a pound of cure.

 

Rod Meloni CFP®


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