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3 Bogus Scams on the Rise

Financial aid, health insurance and Ponzi schemes are the latest focus of three growing cons and investment frauds, according to regulators and investor-protection agencies.

The Better Business Bureau recently issued a warning to families and college students about Web sites, seminars and other schemes that promise to find scholarships, grants or financial aid packages in exchange for an upfront fee. Some companies promise a money-back guarantee, but set so many conditions that it’s almost impossible to get a refund. Others tell students they’ve been selected as finalists for a grant or scholarship but must first pay a fee to be eligible for the award.

Last week, the Federal Trade Commission halted a telemarketing scam that allegedly tricked consumers who were looking for affordable health insurance into buying worthless medical discount plans.

Health Care One LLC and three affiliated companies – Americans4Healthcare Inc., Elite Business Solutions, Mile High Enterprise – agreed to settlements that will bar them from any healthcare-related enterprise and from selling goods or services related to healthcare. The settlements also prohibit the defendants from violating the Telemarketing Sales Rule and require them to turn over their ill-gotten gains.

Finally, on June 12, the Securities and Exchange Commission (SEC) charged 14 sales agents who misled investors and illegally sold securities for a Long Island-based investment firm at the center of a $415 million Ponzi scheme.

According to the SEC’s complaint, the sales agents – which include four sets of siblings – falsely promised investor returns as high as 14% in several weeks when they sold investments offered by Agape World, Inc. The agents also misled investors into believing that only 1% of their principal would be at risk.

The Agape securities being peddled were actually non-existent. Instead, investors were simply lured into a classic Ponzi scheme in which earlier investors are paid with new investor funds. The sales agents turned a blind eye to red flags of fraud and sold the investments without hesitation, receiving more than $52 million in commissions and payments out of the investors’ funds. None of the sales agents were registered with the SEC to sell securities, nor were they associated with a registered broker or dealer. Agape also was not registered with the SEC.

“This Ponzi scheme spread like wildfire throughLong Island’s middle-class communities because this small group of individuals blindly promoted the offerings as particularly safe and profitable,” said Andrew M. Calamari, Acting Regional Director for the SEC’s New York Regional Office. “These sales agents raked in commissions without regard for investors or any apparent concern for Agape’s financial distress and inability to meet investor redemptions.”

The SEC says that more than 5,000 investors nationwide were affected by the scheme, which lasted from 2005 to January 2009, when Agape’s president and organizer of the scheme Nicholas J. Cosmo was arrested. He was later sentenced to 300 months in prison and ordered to pay more than $179 million in restitution.


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