Be on the lookout for red flags

COLUMBIA -- Tough economic times bring out all sorts of pitches to make easy money.

But the Nov. 20 conviction of the Midlands men who called themselves the 3 Hebrew Boys should remind folks of an adage: If an offer seems too good to be true, it probably is.

Claiming to be a ministry, Joseph Brunson, Timothy McQueen and Tony Pough helped convince 7,000 people to invest $82 million by offering debt relief for pennies on the dollar and lifetime monthly annuities.

Some investors got checks, but the 3 Hebrew Boys also helped themselves with $25 million in purchases, including a jet, a motor coach and homes.

The trio had $1 billion in upcoming payments, but just $17 million in the bank when they were arrested in 2007. They now face up to 30 years in prison for mail fraud, money laundering and transporting stolen goods.

FBI special agent Ron Grosse investigated the Columbia-based Ponzi scheme for two years and has spent nearly 20 years working on white-collar crime. He spoke to The State Nov. 23 about how the 3 Hebrew Boys case can teach lessons on avoiding investment scams.

How did the 3 Hebrew Boys attract potential investors?

They used what's known in legal circles as an affinity fraud, in which scammers win over victims with common background or interests, Grosse said.

The 3 Hebrew Boys used religion, recruiting in churches, including a slide that said "Give God All The Glory" in their presentations, he said. But some salesmen with military backgrounds made pitches at bases. "It makes it easier to convince people," he said.

What also made for easy convincing: "When somebody waves their mortgage satisfaction certificate, that was a big hook," Grosse said. "When you see your buddies getting paid, you want to get paid too."

What are some of the warning signs investors should have spotted?

The 3 Hebrew Boys required people attending their information sessions to sign nondisclosure forms, Grosse said.

Potential investors couldn't be connected to law enforcement, the media, Postal Service or the IRS. Blabbing about the deals would cost you $1 million. Plus, they said they were making money using a secret only banks knew.

"Anything like that -- private, exclusive, secret -- is not going to be a good deal," Grosse said.

Also, salesmen guaranteed returns and promised no risk.

"That is a big 'no,' " he said. "Anyone guaranteeing a big return is lying to you. And no risk? Everything has a risk."

How could people have avoided being scammed?

Only invest in things you understand, Grosse said.

The 3 Hebrew Boys said they were making money from the foreign-currency exchange market -- a legitimate investment but not easily understood by novice traders.

Investors trusted the trio, but less than $100,000 was ever traded on the foreign currency exchange. And the 3 Hebrew Boys lost that.

Also, some investors appear to have joined because they were pitched by their bosses, including military superiors. Don't invest just because the boss recommends it, Grosse said.

What is some of your other advice to avoid investment scams?

--Check your greed before examining an offer. "Common sense should prevail, especially when you're going to let loose hard-earned funds," Grosse said.

--Avoid anything that sends your money overseas. (Ironically, even the 3 Hebrew Boys lost $70,000 to a Malaysian-based investment firm that later ran into legal problems in the states, Grosse said.)

--Look for a legitimate physical address -- not a post office box. (Still, the 3 Hebrew Boys did have an office that some prospective investors visited.)

--Don't be pressured into an offer that is for "just a limited time" so you don't get a chance to investigate it. "Don't get bullied," Grosse said. "If you have to get into a deal now, that should be a red flag."

--Check investment firms with state and federal regulators (S.C. attorney general's office and the Securities and Exchange Commission) and with consumer watchdogs including the Better Business Bureau. Also check with the Federal Trade Commission and the FBI.

At a minimum, ask a friend or relative what they think, Grosse said.

"Everybody knows someone who knows about finances."