Alabama's top 5 investor traps

Lora Dozier received this check in the mail.
Lora Dozier received this check in the mail.
Alabama Securities Commissioner Joe Borg
Alabama Securities Commissioner Joe Borg

Posted by: Mark Bullock - bio | email

PRATTVILLE, AL (WSFA) - Prattville resident Lora Dozier recently received a suspicious check in the mail.

"They had randomly selected my name," she explained. "And it looked real!"

The accompanying letter from High Country Financial promised Lora $4,000 if she would cash the check and send some of it back as a processing fee. The problem is -- the check was no good.

"If you have that amount of money in your bank account, they will actually cash the check for you, then when it comes back, it says you don't have the money there!"

Fortunately, something prompted Lora to check it out first.

According to the Alabama Securities Commission, that's just one of many scams going on in Alabama. Many of them target would be investors.

WSFA 12 News sat down with Securities Commissioner Joe Borg to learn the top five investor traps.

At the top of the list are Ponzi Schemes -- a scam Bernie Madoff made famous.

"We've had our own mini-Madoffs in Alabama," Borg said.

In a ponzi scheme, someone promises you big returns on your investment when in fact, they're just paying you back small portions of your money.

"This is the most common scam we see in Alabama, usually associated with affinity groups like a church or a club," Borg said.

Trap #2 involves Short Term Commercial Promisary Notes. That's when someone starting up a new business guarantees you higher-than normal rates of return.

"What people forget to ask is, why would they pay me twice the going rate that they could get from the bank? The reason is, the bank thinks it's too high a risk," Borg said.

Trap #3 -- Real Estate Investment Schemes. They often come in the wake of natural disasters like hurricanes.

"The idea is, we're gonna pool your money and buy all this distressed property at the beach," Borg explained.

But these types of investments are not always legit.

Entertainment Investments are trap #4. We've seen some great movies filmed in Alabama in recent years, but Borg warns that not all movie investments are on the up and up.

"If you're getting a prospectus that says this is guaranteed to be a success because we're hiring George Clooney, you may want to make sure George Clooney knows about it before they say he's going to be the star!" Borg joked.

Finally, Gold Scams are trap #5. Gold prices are at their highest levels in years and gold may be a good investment. Just watch out who you're dealing with.

"It's just that there's a lot of fraudulent activity out there where's there's just not enough gold to back it up," Borg said.

Lora's glad she didn't get taken. She says her experience taught her how true the saying is -- if it sounds too good to be true, it probably is.

"There's no such thing as easy money nowadays," she said. "People need to really be careful."

Check before you invest:

So how do you know if something is legitimate or not? Anyone who sells investment products in the state must be licensed by the Alabama Securities Commission.

So if you think it's a good deal, checking it out is as easy as a phone call. You can reach the commission at 1-800-222-1253.

For more scams and traps recorded recently in Alabama, click here. And for more information about the Alabama Securities Commision, check out its web site.

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