Protecting Yourself from the Unintended Scam: The Story of $75,000,000 in Gold That Wasn't There
By John Hemingway (pseudonym)
Editor's Note: Today, and again this Thursday, we will depart from our normal in order to offer you some good and useful information with exactly one goal in mind...to help you Keep What's Yours! And, we will continue this series of articles roughly every other month to help you hold onto your hard-earned wealth.
We have asked two long-time and trusted friends to guest-write these articles for us...for you.
Thursday's article will come from a person with whom you are most likely already familiar – Michael Chatzky. Michael is an attorney with many years' of experience in legal asset protection, both offshore and domestic. His role is make you think about the different threats to your wealth and how you can protect your assets using legal structures.
Today's article comes from John Hemingway. And, although we know him well for decades, that is not his real name.
You see, 'John Hemingway' is a very successful private investigator by trade. And, although he has much to offer you in terms of practical methods of holding onto your wealth, we cannot expose his true identity without jeopardizing his ability to continue to work in his field without fear of being discovered by those he is trying to expose.
Both Michael and 'John' are here to help you because we asked them to help you in a general way. If you need specific assistance, call us at 877-340-0790 or send us an email, and we can connect you with them in such a way where you can use their professional services for your particular situation for a fee.
Now, enjoy 'John's' pearls of wisdom...
--- Rich Checkan
I've been busting conmen around the world for two decades. Now, ASI has asked me to write a series of articles for you on how to avoid being scammed so you can Keep What's Yours.
Over the coming months, I will discuss the variety of scams out there, and I will give you my 10 simple, but powerful, rules with the hopes we can keep you from being a victim. In addition, I will share my 5 specific rules to avoid being scammed which are specific to investing in precious metals.
Think you are too smart to get scammed? Think again.
An estimated thirty million American consumers lose an estimated $40 billion a year on investment scams. If we include internet scams, the figure is a whopping $190 billion.
Investment fraud victims tend to be more 'financially literate' and score higher (58% avg.) over non-victims (41% avg.) on intelligence tests.
The Unintended Scam
We will start with the rather infamous Alderdice brothers' scam, International Gold Bullion Exchange (IGBE), because it constitutes the most common of all deceptions, and one of the most difficult to detect: the 'unintended deception' or 'unintended scam.'
I estimate 80% of all scams are 'unintended deceptions.' That is, the perpetrators set out on some money-making scheme with the intentions of actually making money for their clients. But, because the scammers are both inevitably charismatic and so psychologically and professionally dysfunctional - the 'business venture' inevitably fails.
Always. Not sometimes. Always.
The most important thing to realize about the 'unintended scam' is - because the perpetrators actually believe what they are offering is not a scam - it doesn't look like a scam, and they do not 'leak' information that would tip you off to the fact they are deceiving you.
The IGBE scam was a clever scam. Gold had reached an all-time high in 1980 of $850 an ounce, before prices fell dramatically. While all legitimate gold brokers would sell at the spot price plus a small commission, IGBE offered to sell gold at an unbelievable discount of 4% below spot, if, and this is the catch, the buyer would agree to postpone taking delivery. What a deal, when any other dealer in the world will buy bullion all day long at the spot price or the spot price plus a point or two. Basically, you could buy it at 4% below spot and get 'free' storage.
As long as you didn't take delivery of the gold, IGBE could rake in the money, feed the marketing machine, and postpone fulfilling on any sale. Gold dropped an average of 2% per month over the next couple of years. So when the time came to provide product, they could ostensibly purchase the gold for the client at a price that had already dropped more than the 4% discount they promised.
Problem was - all that sweet money was just too good to let go of, so they started postponing delivery...indefinitely.
Meanwhile, IGBE hired hundreds of salespersons, rented expensive offices in three cities, took out full-page ads in Barron's and the Wall Street Journal, and raked in more and more millions.
Charles Ponzi reborn.
Of course, the next part of the story isn't too difficult to guess. All that money was just too tempting. So, they started spending it. Yachts, mansions, parties, vacations for the staff, and of course the inevitable huge overhead of looking 'reputable.' According to court records, over 13,000 investors lost over $75 million dollars.
How did it happen? And better yet - how to avoid it happening to you?
Pilots know when they are flying in clouds that perception is distorted. As a result, they must always trust their instruments. The same applies here.
Rule #1 - The 'Only 2 Ways to make money without risk, no exceptions' rule.
You either work hard or have privileged information. Otherwise, profit is directly related to risk. There is no third option.
This replaces the worn out saying, "Too good be true," which is too easy to wiggle around because it is unspecific. And being unspecific, it's easy for our little greed monster to win an argument. After all, we all know about opportunities where people can earn 100+%, or even 1,000+%. Make the rule black and white and stick to it. This keeps our natural greed monster in its cage.
So, when the IGBE sales machine with full page Wall Street Journal ads, calls up and tells you what a great 'NO RISK' deal it has for you on gold at a 4% discount, you know...
1. it's not work, and
2. it's not privileged information.
Therefore, the guy is either lying or he doesn't understand what he is offering. Either way, hang up.
Rule #2 - Remember the 'unintended scam' rule.
Like all the sales people selling the IGBE scam, the guy sounds so sincere (and maybe he is just a parrot), and it sounds so good (you have not figured out the scam yet). But, it failed the "Only 2 ways...rule," so now you have a conflict. It's probably an 'unintended scam' that's throwing off your otherwise good judgment.
Here is how it works: People have a natural ability to detect deception. It's an inherent part of the human experience (I will talk about this in depth in future ASI articles, along with how to detect psychopaths who do not give off any deception signals). With an 'unintended scam,' we don't detect the verbal and non-verbal deception clues because the scammer is not giving off any such signals. Why? Because he actually believes what he is telling you. The 'unintended scam' rule resolves your conflict and restores your common sense.
Rule #3 - 'Good business makes sense' rule.
If someone is offering you something that doesn't make sense, it's a 99% likelihood it's a scam, intended or unintended. IGBE could not or would not run a business with a million dollar a month operational overhead requirement, selling gold at 4% under spot, when every other company in the industry is selling at spot plus. If they had some clever way of getting gold cheaply, they would still sell it at market price. There is no reason to make it 'too good to be true' and sell it to you for 4%.
Rule #4 - 'The deal will still be there tomorrow' rule.
If you do not yet know the basics of the investment class being offered, i.e., gold bullion - thank him for the call, jump off and invest an hour to learn, before you throw away thousands of dollars. (Or, go to a trusted company that's been around for 30 years and is not selling pipe dreams.) The deal will still be there tomorrow. If not, it's a scam. If a firm you have never heard of before calls you out of the blue and offers you a special deal if you buy now, politely excuse yourself and hang up.
At this point, you are at clear and level flight, above the clouds of the scams that took down 30 million of your fellow Americans. When we get done with this series, I will put together a 'Cheat the Cheater Cheat Sheet' you can use as a ready reference. Think of it as a 'pre-flight checklist.' Don't jump at that next big opportunity until you checked off the list. You can put it by your phone or computer, so even if a caller is very persuasive, you will have the defense mechanism in place to Keep What's Yours!
As for Jim and Bill Alderdice - well, Bill got stabbed to death while out on bail by James Doyle whom he and his brother met while doing time in prison. Doyle lived and worked with the brothers, and they got into an argument after a coke party at their mansion.
Jim went to prison for ten years, because the court saw Bill as the mastermind and Jim the faithful follower. Jim got out in five years. After finding religion in prison, he became an Evangelist in the only church in Arizona history to go bankrupt. They were legally denied the right to call themselves "The Church of God" by the regional governing body.
I guess the writing was on the wall the whole time. This article would have saved those investors turned victims $75,000,000!
Be on the lookout for my next, more current scam case study. And, if you have any reservations about a 'too good to be true' precious metals opportunity in the meantime, please call the good folks at ASI...before you commit to buy.