By Dylan Donley, Spring 2014 Graduate Research Assistant
To kick off Military Saves Week 2014, this post will focus on recent fraud schemes committed against the military in the hopes of raising awareness and providing information on how to avoid being scammed. Stop me if you’ve heard this one before:
On January 31, 2014, Vernon Matthews was sentenced to 4 years in prison for his role in defrauding military personnel and their dependents and stealing more than $200,000 through an investment scheme. Matthews also pleaded guilty to mail fraud committed against a military investor in September 2013. Matthews admitted to operating First Capital Group (FCG), a phony investment company, which solicited US military personnel and their dependents to make investments but instead took their money. In these solicitations, Matthews made many misrepresentations about how the investment funds would be used, the security of the investments, and the promised amount of returns, which ranged from 4% to 300%. Matthews also claimed to have affiliations with reputable investment companies and funds, such as HB Group and American Funds, despite not having any such affiliation.
After receiving money to invest from military personnel and their dependents, Matthews pocketed the money and walked away, using it for his own personal use. In this particular scam, Matthews promised a wide range of returns to his victims. While a promised 300% should definitely raise some eyebrows, 4% may not seem like a particularly high amount of return. However, any absolute guarantee of a return on an investment should raise red flags as investments are inherently risky and nothing is ever guaranteed. If an investment professional guarantees you any particular return, it should give you pause to do a bit more due diligence on the professional as well as the actual investment.
Matthews also committed mail fraud against one US Naval Academy graduate, where he misrepresented that he would transfer her investment monies into a mutual fund with a guaranteed rate of 7.27% of return; he later stated that the return would be even higher at 10 – 12% if she would agree to invest more money with him. The investor agreed to invest an additional $29,500. Even with this additional investment, Matthews never placed any of her money in the promised investment fund. The investor later attempted to withdraw her investment funds, which were not actually invested in the promised fund, and Matthews later mailed her a fraudulent refund check in the amount of $32,328.55, which bounced, after a series of delays.
Visit our blog tomorrow to learn about how to avoid becoming a victim to these types of schemes.