In tough economic times fraud will rise! And with government funds flooding the markets to stimulate the economy, there is no doubt that some will see this as an opportunity to – well take advantage of an unregulated environment. That seems to the be case with Gordon Grigg of Nashville and his firm, ProTrust Management Inc.
According to the Associated Press – “Federal regulators on Wednesday charged an investment adviser with securities fraud, saying he bilked clients of at least $6.5 million in the first scheme using the government’s $700 billion financial bailout program as a front to lure investments.”
Need, opportunity and rationalization – these are the three components of fraud – white collar crime. And while a person is considered innocent until proven innocent, it would seem that there is enough evidence to cause the Securities and Exchange Commission to obtain a court order freezing the assets of Gordon Grigg of Nashville and his firm, ProTrust Management Inc.
It would seem that based on the information thus far that Grigg could be called “Mini Madoff.” No he might not have yet created a Ponzi scheme, but it does seem it was headed in that direction.
The Associated Press reports:
Grigg represents himself as a financial planner and investment adviser, but neither he nor his firm is registered with the SEC or a state regulator, the agency said in its civil lawsuit filed in federal court in Nashville. The SEC said that Grigg, who obtained control over funds of at least 27 clients, falsely claimed to have invested their money in securities described as “private placements,” creating phony account statements.
One of the first indications of fraud is when the investment advisor says – he/she has something that is “private” something that no one else has – something that is special. Madoff had something special – and now it seems so did Grigg. Only in both cases it appears that neither was true.
According to the SEC, Grigg began falsely claiming that his firm could invest client funds in government-guaranteed commercial paper and bank debt as part of the federal TARP program. His claims also included that he had partnerships and other business relationships with several leading U.S. investment firms.
Grigg and his firm “preyed upon investors’ desire for safety by claiming associations with reputable investment firms and the government’s TARP program,” Katherine Addleman, regional director of the SEC’s Atlanta office, said in a statement. “Investors should carefully check any purported affiliations. In this case, not only were such claims false, but there is in fact no program in which investors can buy debt guaranteed by the TARP program.”
As reported in the Charolotte Observer – “Davidson resident Steve Wieland has prayed with Gordon Grigg, invited the former Charlotte resident into his home and trusted him enough to let Grigg’s company invest his life savings. Wieland, 59, a disabled former pilot who flew for US Airways for 25 years, said he lost $252,000, the bulk of his life savings.
“You read about this happening in the newspaper. But when it happens to you, you go, ‘Oh my God, how do I recover,’” Wieland said. “I can’t. I’m done.”
Grigg’s alleged fraud started in 2003 and according to reports – ProTrust also was subject to a cease and desist order in North Dakota in 2006 for allegedly selling nonexistent securities, records show.
THE PIT – THAT HOLE THAT INVESTORS FALL INTO (AND DON’T RECOVER FROM):
As a fraud prevention expert and business ethics speaker, I am often asked how is it that people get suckered into investments like this? I wish I could say it was difficult. But from experience that cost me time in prison – I have to admit it is easy. More times that not the scammed investors fall into what I have referred to as the PIT.
But here is what Mr. Wieland had to say, “I gave my money to a ‘friend’ instead of doing my research,” Wieland said. “Never do that. I don’t want anybody else to lose any more money.”
P – first there is the “promise” that the investor can get something that is special – something that the average person can’t get. That “something special” is the allure of a better return – or something that gives one a chance at the gold at the end of the rainbow. The fraudster plays on that emotional need.
I – second there is the “illusion.” In Grigg’s case – he claimed to have “private placements.” That was supported by false and fraudulent account statements reflecting client ownership of the non-existent securities. The false information is part of the illusion. When you see it on paper or on the web in a fake account, you are lulled into believing it’s truth.
T – the final part is the all important aspect of “trust.” As stated in the Charlotte Observer article – “Steve Wieland has prayed with Gordon Grigg, invited the former Charlotte resident into his home and trusted him enough to let Grigg’s company invest his life savings.” Ah…there’s that word – TRUST. Bernie Madoff had it, Gordon Grigg had it and so did I. And in each case the abuse of trust was a key factor in a fraud taking place.
THIS STORY ISN’T OVER:
There is more to this story and likely many more victims. I feel for them and hope that this writing might alert others to the importance of due diligence when investing. Grigg, if convicted, will spend time in Federal Prison where he’ll have ample opportunity to think about this choices and the consequences that follow. As I speak nationwide on ethics and fraud prevention – the first words out of my mouth are – “Every choice has a consequence.”
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