Getting snared in the fraudster’s net

I often have wondered how so many people got caught up in Madoff’s $50 billion ponzi scheme. I would never be that nieve I thought to myself…..I mean those Madoff guys were just lazy fools who didn’t do their homework….Investors didn’t do their homework and wanted to believe in something that wasn’t real. Madoff had a knack of knowing how to appeal to people’s greed and “I’m not greedy.” Uh- huh, sure. Here is how it almost happened to me…

The Setup

A coaching student approaches me with a list of properties where I can buy homes that are worth $300k for about $100k each. Most of them need $10-30k in work. I know the area’s these homes are located in and they are great deals! The person who gave him this amazing lead was a lawyer who worked directly with asset managers at several different banks. Since the lawyer had the inside scoop, he was going to “hook us up” with some great deals. Fair enough. No Earnest Money was required, we just needed to close extremely fast and had to show proof of funds. He claimed that the properties were all being routed through TARP funds and that the FDIC was involved, this is why they were selling so cheap.

The Purchase Agreement

So we sign a purchase agreement on a Friday and he says we will have the signed P/A from the seller by Monday, but doesn’t happen. Tuesday he said, “this will be done today”….still nothing. On Wed, he says we will have it by 3:30 P.M. but that we should be ready to close very quickly and that we would also have “free and clear title” that day. The title company was somebody I have never heard of but was being underwritten by First American. Well, this guy started to lose a lot of credibility in my eyes so I wanted to see what was up. This lawyer said that all the properties were running through a small local bank that had been taken over by the FDIC (that was true) BUT I knew somebody that was pretty chummy with the head of the bank. So, I got this cell phone number and made a call….

The Phone Call

I left a vm for the CEO and managed to talk to his head assistant. I said, “there is this lawyer who is claiming to be selling some properties that somehow ran through your bank and I’m just verifying that his not bogus. I told her they was about 15-16 of them located in Oakland County, MI. She says, “is the lawyers name so and so” and I said yes. She said, its a complete scam, this guy has a warrant out for his arrest, we have nothing to do with these properties and the local Sheriff is looking for him!!! Come to find out, this guy has been giving the same pitch to several other people and acting a little fishy and they got all the way to closing before they made a call to the same head assistant and CEO of the local bank and then they brought in the sheriff!

The Sheriff

We talk with the Sheriff a couple minutes later and learn that he has multiple cases against this guy! We answered questions for about 30 minutes and then we were done. The lawyer wasn’t a lawyer. He never my student at an office, Starbucks instead….we started putting two and two together and realized how quickly we had gotten sucked into a huge scam.

Lessons learned

1. Just because they say the right thing, do the right thing, look the right way, doesn’t mean that its right! Beware of lists!

2. Also, whenever a lawyer meets you at Starbucks….that’s a deal killer

3. Big scams are easier to pull off than small scams!

4. Don’t think it can’t happen to you.

P.S. This all happened at the end of last week. I couldn’t use names because this guy is still being pursued. Its an open case!

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