Democratic Fundraiser Pleads Guilty to Investment Fraud Charges
A former fundraiser for the Democratic Party pled guilty to running an investment fraud scheme. Norman Hsu operated a Ponzi scheme in which he used new investor money to make payments to older investors.
Hsu has been charged with falsely representing to investors that their investments were being used to extend short term loans to companies. He operated the fraud between 1997 and 2007, and lured investors to part with at least $60 million in all. He pled guilty to five counts each of mail fraud and wire fraud. In his own words he knew what he was doing “was illegal”.
According to authorities, the investment fraud affected investors across the country. Next week, Hsu faces another trial for campaign finance fraud. According to prosecutors, his contributions to politicians allowed him access into influential political circles, and he used these connections to impress potential investors. At least one of his fraud victims is due to testify that Hsu played a voice mail message by a political candidate to impress her into investing with him. Hsu is facing charges that he had “straw donors“ contribute to federal candidates. These donors were then reimbursed.
Straw Donations
Making "straw donations" or fake donations by people who do not exist is a violation of federal law. Hillary Clinton’s run for the White House last year was mired in allegations that the campaign was heavily funded by straw donors, several of who made a living as cooks and dishwashers, but were apparently able to cough up $1,000 donations. The straw donors in that case either had bogus addresses or, considering their profession, were unlikely to have donated those amounts. The campaign finance charges Hsu faces allege that he reimbursed straw donors who contributed $25,000 a year to political campaigns.
Investment Fraud Prevention
While that trial is yet to begin, it is not surprising that Hsu made use of his political connections to lure investors. Like the Alabama pastor we recently reported on, Stanford COO Jim Davis who founded a church, and Shawn Merriman who was not averse to soliciting investments from members of the Church of Jesus Christ and Latter Day Saints, fraudsters frequently use respectability and religion to bolster investor confidence. That is not to say that you should look at every investment planner who wears a nice suit and goes to church with suspicious eyes, but you must keep these investment fraud prevention tips in mind. Research, monitor, and exercise caution throughout the investment process. Security attorneys will tell you it is highly likely there are many more investment frauds still going on and investors must be vigilant.
