NEWS RELEASE

Stamford Man Cited for Affinity Fraud

State Banking Commissioner John P. Burke has ordered Anthony Brooks, of Stamford, to cease and desist from violations of the Connecticut Uniform Securities Act in connection with the illegal sale of securities in two bogus investment funds. Brooks also faces up to $30,000 in fines for his failure to register as an agent and for his involvement in the sale of the illegal securities.

According to Burke, from at least 1998 to 2001, while claiming to be an agent of Integrated Financial Solutions (IFS), Brooks solicited 24 clients from Connecticut, New York, New Jersey and Pennsylvania into putting more than $646,000 into non-existent shares of Venture Investments – Aggressive Growth A and Decatur Daniels Investments. IFS was never registered to do securities business in the state nor was Brooks registered as having an affiliation with IFS. Brooks was at one time registered with the banking department as a broker-dealer agent for Guardian Investor Services Corporation and for John Hancock Distributors, Inc.

Burke said an investigation by members of the banking department’s Securities Division indicated that Brooks was enticing his clients into making the investments by taking advantage of their shared minority ethnic background. This kind of scam has become so prevalent that securities regulators have given it a name – affinity fraud.

"A shared ancestry, race or religious denomination with someone is not reason enough to automatically trust that person with your money," said Burke. "African-Americans, Hispanics and Asians, along with other groups, are being targeted every day by financial swindlers who, despite having the same ethnicity, culture or religious beliefs, are really motivated by only one thing – and that’s greed."

Although Connecticut has not seen the volume of affinity cases that other states have, state securities officials continue to remain vigilant and have cooperated with their state securities counterparts in finding ways to protect investors from these kinds of scams.

Today, in a combined effort to combat affinity fraud, the North American Securities Administrators Association held a press conference in Washington, D.C. to release information about members of religious or spiritual groups who have been victims of such scams. Over the past three years, securities regulators in 26 states have taken actions against hundreds of companies and individuals that used religious or spiritual beliefs to gain the trust of investors – over 90,000 nationwide – before swindling many of them out of their life savings.

Burke believes fraudsters use their supposed commonality with the investors as a shield to avoid complaints.

"They play the affinity angle for all it’s worth and the investors who are scammed are then too embarrassed to come forward," reasoned Burke as to why there haven’t been more complaints in Connecticut. Instead of notifying the authorities, investors try to solve the problem themselves. In most cases, the end result for playing the waiting game is the loss of all, or most, of the money, they invested. Unfortunately, this is the case with nearly all of the people who trusted Brooks. Little did they know that their investments would be used on personal items for Brooks and his wife.

A Connecticut couple, for instance, introduced to Brooks through a relative, invested their entire life’s savings, more than $25,000, with IFS. Although they received phony statements prepared by Brooks, their attempts to later withdraw the funds or transfer the monies elsewhere were ignored. When Brooks finally issued them a personal check to cover the investment amount, the check bounced. The same thing happened to several others who invested funds and then wanted to cash out. For some investors, those insufficient checks were later made good, although the amount returned didn’t equal the amount they initially invested. A Philadelphia woman who invested $65,000 with IFS says she was lucky enough to recover all but a few thousand dollars of her investment. Her daughter, however, invested nearly $25,000 but has only recouped $10,000. Based on the findings of the banking department’s investigation, only two of the 24 identified investors were fully reimbursed.

Burke said even though Brooks has the right to request an administrative hearing to refute the allegations the banking department has made, he was so disturbed by Brooks’ activities that the case has also been referred to the Chief State’s Attorney’s Office for possible criminal prosecution.

Burke concluded that while not everyone with an affinity angle is phony, consumers should check out who they are doing business with.

"When you invest you shouldn’t let your guard down merely because someone is appealing to your cultural, ethnic or religious background," Burke said. "Always do your homework. Be as skeptical and careful when you invest with someone who shares a common interest with you as you would with anyone else."

He suggested these tips to guard against affinity fraud:

• Beware of testimonials from other group members. Scam artists frequently pay out high returns to early investors using money from later arrivals.
• Obtain a prospectus or other form of written information that details the risks in the investment and procedures to get your money out. Ask for professional advice from an outside expert not associated with the salesperson or financial adviser -- an accountant, attorney or other financial planner -- to evaluate the investment.
• Call the Securities Division to learn more about the salesperson and firm. The simplest inquiry is to ask if they are registered to do business in Connecticut and if the investment is allowed to be sold. Don’t take the word of a salesperson! Check out the investment yourself.

The Securities Division can be reached at (860) 240-8230, or toll-free at (800) 831-7225. The banking department also provides investor education tips on its Web site.

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