Watching out for financial fraudsters

TEXAS - With the nation's economy in a recession, high-profile financiers under investigation for fraud, joblessness on the rise and home foreclosures increasing, Texans are understandably nervous about the nation's economy. And hard times always raise new questions for Texans who are looking for the best way to protect their hard-earned money.

Generally, a well-balanced financial strategy combines insurance and investment options, but it can be difficult to understand all of the options available in the current marketplace. So it is imperative that Texans educate themselves about their financial opportunities and make sure they are dealing with reputable companies and sales agents.

The Office of the Attorney General works with the Texas Department of Insurance (TDI) and the Texas State Securities Board to help protect investors from fraud and deception in the financial services industry. Specifically, the OAG monitors how insurance companies market their products and pay benefits. Under the Texas Insurance Code and the Texas Deceptive Trade Practices Act, the OAG is authorized to pursue anyone in the "business of insurance" who seeks to defraud their Texas customers.

The State Securities Board, which is the state's primary securities regulator, is authorized to investigate when Texans complain about the sale of securities, notes, limited partnership interests, commercial paper, oil and gas investments, and investment contracts. The board is responsible for detecting and preventing violations of the Texas Securities Act, including the illegal sale of unregistered or non-exempt securities, securities sales by unregistered dealers, and fraud committed in connection with the sale of securities and investments.

When the State Securities Board refers a case to the OAG, assistant attorneys general are empowered to take immediate and appropriate enforcement action. If a complaint indicates a criminal violation occurred, the board may refer the case to a local district attorney or U.S. attorney for prosecution.

For example, just last month Texas Attorney General Greg Abbott charged the owners of two investment plans with orchestrating a fraudulent scheme that targeted retirees and teachers. According to the state's enforcement action, Howard G. Judah Jr. of Houston and Gregory F. Jablonski of Castle Rock, Colo., falsely guaranteed lucrative investment returns, misrepresented their "life settlement" policy investment offerings, failed to disclose material information to investors, and committed multiple violations of the Texas Securities Act.

The district court judge overseeing the case granted the OAG's request for receivership and issued an order seizing more than $19 million from several bank accounts under the defendants' control. Those investor resources will remain safely out of the defendants' control until the case is resolved.

So what can Texans do to avoid investment scams? First, investors should do their research. For example, Texans seeking information about an insurance product should check with the TDI to make sure the sales agent and insurance company are in good standing with authorities. For information about stocks, bonds and other securities, investors should request a Central Registration Depository report from the State Securities Board at (512) 305-8300 or e-mail at It is also helpful to check with the Better Business Bureau and conduct an Internet search, which will often reveal what other investors have to say.

Potential red flags:

  • An agent with guaranteed results. No legitimate investment adviser or seller will guarantee positive results. Though they can offer past performance data, honest advisors should freely admit that the past is not a predictor of the future. There is always risk. As a result, it is always possible that an investment will fail and money will be lost.
  • Agents in a hurry to close the deal. Tell-tale signs of a scam are high-pressure sales and demands for secrecy. Real investment opportunities rarely require instant decision-making. Serious investors almost always take time to research their decisions.
  • Offers from unsolicited telephone call, postcard or e-mail. Texans should be skeptical of unsolicited offers for services from unknown companies. Though some legitimate brokerage firms will contact potential investors, an online search can help distinguish between small-time operators and established firms.
  • Phony companies that promise huge crude oil profits. In Texas, especially when the price of oil is high, investors complain about bogus oil and gas investment opportunities. The State Securities Board oversees oil and gas investments, so Texans who are considering an oil and gas investment should contact the board and request information about the producer. Also, the Texas Railroad Commission can tell investors whether the seller is registered as a producer in Texas and the commission can also provide information about the leases the producer has operated in the past.

Texans should also be particularly cautious about investment offers that involve friends of friends, or even friends of family members - rather than professional, registered securities dealers.

Investors should consider consulting with an independent financial advisor to learn about the types of investments and insurance that fit their goals and risk tolerance. It is critical that Texans learn as much as possible about their financial investments, including past performance.

No matter how Texans choose to invest their money, there will always be a degree of risk involved. But education and due diligence can help to make the odds more favorable for investors.

Texans who believe they are victims of financial fraud can file a complaint with the Texas attorney general's office at (800) 252-8011 or online at

Other Resources:

Texas Department of Insurance
(800) 252-3439
(888) 327-8818 to report fraud

Office of Public Insurance Counsel
(512) 322-4143

Texas State Securities Board
(512) 305-8300

Securities and Exchange Commission
(888) SEC-6585

Federal Trade Commission
(877) FTC-HELP

Better Business Bureau