Could you spot the fraud? 

(part 2)

By Peter E. Grosskopf 

This is the second in a series of articles asking:  would you be able to spot the fraud?  As I indicated in the last article, fraud, especially by investment managers, is much more far reaching than most people think.  It is estimated that about 90,000 Americans lost money to investment fraud in 2021, with losses totaling almost $1.6 Billion.  Unfortunately, fraud and scams seem to be more prevalent during the Holiday season, which is why we are doing this series of articles now.  The articles are based in part on a local financial planner who took advantage of his clients, by creating fictious statements, reporting that he had purchased investments that he did not, over stating the return on investments, and in some cases outright theft.

In the present article, I want to focus on a different type of fraud.  Again, this was by the same financial planner.  The other type of fraud that he engaged in was the unauthorized practice of law.  Specifically, he would prepare legal documents, such as Powers of Attorney, Trusts, Wills, Limited Liability Companies, and the like, while representing to the clients that they had been prepared by one or more local attorneys.  In fact, it was the financial planner who did it himself.  No attorney had drafted the documents at all. 

So how could you spot the fraud? 

First of all, in most cases, the client never met with an attorney.  That should be a red flag.  Most reputable attorneys will not draft documents unless they have met with the client personally and obtained information directly from the client (in addition to getting information from such sources such as financial planners and investment advisors). 

Second, for the documents to be signed, they again did not meet with the attorney or anyone at any law office; rather, the documents were signed and witnessed and notarized by the financial planner and his office staff.

Third, and this is nearly unbelievable, but in some cases, the documents were prepared by using legal software from the internet, such as Legal Zoom, Rocket, and other internet software; again, no reputable attorney is likely to use those kinds of legal software to prepare his or her legal documents. 

Finally, what is the harm?  It begins with the fact that the individual misrepresented the nature of the documents, as well as the supposed drafter of the documents.  In addition, the clients got inferior products, without knowing that they got inferior products.  Third, in many of the cases, the documents did not do what the financial advisor claimed they would do.  These are the ways that you can, hopefully, spot the fraud, and protect yourself from these kinds of scams. 

We hope that this article helps educate some of you, and we here at Grosskopf Law Office, LLC, wish you a very happy holiday.