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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.Sale and Leaseback Contracts
In an attempt to avoid the investor protection of the securities law, some investments are structured to resemble the sale of a piece of equipment such as a payphone, ATM machine or internet booth located at a remote venue where the investor cannot service and maintain the equipment and must enter into a servicing agreement. In order to make the deal more attractive, investors are told that after a given period the equipment can be sold back to the seller at the investor’s original purchase price. The investor is also promised a specific rate of return. In a variant of this scheme, a real estate interest such as a long-term lease in a resort community is sold instead of physical equipment. Frequently the equipment or property does not exist, and the seller lacks the financial capacity to keep the promise of repurchase. Investors should be wary of any sale and leaseback contract and should seek the advice of an objective third party when in doubt. For example, the SEC found fraudsters that engaged in a fraud to offer and sell unregistered investment contracts in a scheme involving pay telephone leasebacks. The fraudsters promoted the massive scheme through the use of insurance agents and over the internet, in which they raised more than $74 million from more than 2,000 mostly elderly investors. [See SEC v. Phoenix Telecom, L.L.C., et al., Civil Action File No. 1:00-CV-1970-JTC (N.D. Ga.)]
Many times the initial contact with the investor is generated through a “cold call” from a boiler-room telemarketing firm that will tell the investor anything to complete the sale. If you believe that you, a family member or other elder individual that you know has been victimized by a sale and leaseback scam, contact us for your initial free consultation.