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Monthly Archive

 

MONTHY NEWSLETTER - August / September 2010

Here we go again. In New York 1,200 investors and more than $190 million was lost in just 3 years. It all began as market turmoil gained momentum in the run-up to the great recession, and investors were searching for a safe haven for their savings. Minnesota money manager Trevor Cook and radio show host Pat Kiley said they had the answer, with the promise of solid returns and a no-loss guarantee. The Securities and Exchange Commission, however, called it a "scheme to defraud perpetrated by Cook and Kiley." Cook, 38, was head of Oxford Global Advisors and Oxford Global Partners, and touted risk-free returns of 10% to 12% through a foreign currency investment program that government regulators say he started in 2006. "There's no risk. So we do not lose our client's money," Cook told investors in a promotional DVD. Kiley, 72, used the airwaves to get the word out on his weekly Christian radio program, "Follow the Money." Kiley called his listeners "truth seekers" and appealed to their distrust of Wall Street and the government.

Cook said that he could trade currencies with little risk by exploiting small price differences among currencies, and rapid trading…"Our technology can move billions and billions of dollars in a millisecond," Cook bragged to potential investors.

Cook and Kiley told investors that they could withdraw their money at any time. Now almost all the money is gone, and investors are out of luck. According to a complaint filed by the SEC in November 2009, Cook lost about $48 million of the $190 million collected when his currency bets went bad. Cook, according to the SEC, used $51 million collected from investors in later years to pay off early investors which is a classic Ponzi scheme structure similar to the one orchestrated by Bernie Madoff. As with Madoff, Cook's investors were given phony account statements that "falsely reported substantial, continuing gains," according to the SEC. In its complaint, the SEC says that Cook and Kiley diverted nearly $43 million, "of their victims' money to their own personal purposes and for other illegal purposes."

In a lawsuit filed by Kiley on July 19, 2010, Kiley claims he didn't participate in any criminal wrongdoing, and says he believed investor accounts were liquid at all times. Kiley also denies squandering money or mismanaging investors' funds. "Pat Kiley never expected there was anything wrong with these investments. He continued to believe he was doing good for all his clients," Kiley's attorney told CNNMoney. The fraud case that the SEC filed last November is still pending.

Meanwhile, as for criminal charges, in April, Cook pleaded guilty to one count of mail fraud and one count of tax evasion brought by the U.S. Department of Justice. He is currently an inmate in the Sherburne County Jail in Elk River, Minn., and is expected to be sentenced in August. Cook's plea deal holds a maximum 25 year prison sentence.

"I lied to investors about many things," Cook told a federal judge at his plea hearing.

"People did not invest in this out of greed. They invested in it because they thought it was safe," said Kyle Garman who used to work for Cook as a salesman and whose family lost nearly $4 million in the fraud. Some investors were drawn in through Kiley's radio show. In fact, in the lawsuit filed by Kiley earlier this month, Kiley claims his radio program brought in 75% of the funds raised in the foreign currency program. Others investors, though, were wowed by Cook's "office" a century-old mansion in Minneapolis that became known as "The Castle." Cook transformed it to look like a high-tech trading operation, and hosted seminars there for potential investors.

Investors are expected to just get pennies for the lost investments.

Bottom line…unless you have complete transparency and overall decision control you can lose all your money. It is also important to have an independent financial statement prepared by a CPA to validate and certify that your funds are where there supposed to be and that they are being invested for the purposes they are supposed to be invested. And the most important advice as well, spread your investments around realizing that in today’s investment market of fraud, greed or simply bad economics your funds are always at risk…even at a bank. Never keep all your eggs in one basket.

 

So wishing you the best in safety,

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