Charitable Gift Annuity Scam

While elder fraud, breach of fiduciary duty and other types of financial abuse can take on many forms, there are a number of investments which increasingly have been used in illegitimate schemes to defraud older investors. Elder or retired investors should exercise appropriate scrutiny before investing in these types of products.

In this type of scheme a fraudster will pose as a charitable organization offering monthly annuity payments in exchange for payments which purportedly will be invested to both pay an annuity to the investor and to benefit charitable organizations. Unbeknownst to the investor, a significant portion of the monies are not being invested for charitable purposes, but go directly to the fraudsters’ personal account. The charitable organization is merely a front. When investing in charitable annuities, investors should make sure that the salesperson is representing a legitimate charitable organization and that the organization is fully aware of the salesperson’s activities.

For example, the SEC found one fraudster that raised at least $52.9 million through the sale of charitable gift annuities. He represented to investors that their funds would go into stocks, bonds and money market accounts, but $19.2 million of the monies raised were diverted to a hidden account that afforded him a luxurious lifestyle. To keep the Ponzi scheme running, he used $7.9 million of investors’ money to pay earlier investors and spent $3 million in commissions to sales agents. When the plan collapsed, he told investors that Mid-American Financial Group had “disbanded due to inadequate assets.” [See Securities and Exchange Commission v. Robert R. Dillie and Mid-American Foundation, Inc., Defendants, and Mid-American Financial Group, Inc., Relief Defendant (U.S.D.C., District of Arizona, Phoenix Division, Civil Action No. CV-01-2493-PHX-JAT)].

With extensive courtroom, arbitration and mediation experience and an in-depth understanding of financial elder abuse and securities law, our firm provides all of our clients with the personal service they deserve. Handling cases worth $25,000 or more, we represent clients throughout Florida and across the United States, as well as for foreign individuals that invested in U.S. banks or brokerage firms. Contact us to arrange your free initial consultation.