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'Are you sure it's not a scam'

MIAMI — Riguad Dieudonne of Lauderdale Lakes insists he is careful about how he invests, but promises from a friend that he could double his money within 90 days were irresistible.

Before Dieudonne poured his life savings into investment clubs that federal authorities now say were part of a massive Ponzi scheme, he visited the Lake Worth office of Creative Capital Consortium to check it out.

"I even questioned this thing and said, 'Are you sure it's not a scam?' " the Haitian-born photographer recalled.

Dieudonne, 42, fell into an alleged affinity fraud, investment swindles like business-opportunity, mortgage and real estate scams where con artists target members of the same ethnic, religious or community-based group.

Dropping their guard

Many are Ponzi schemes, in which early investors are paid with money put in by later arrivals. The most prominent ever alleged was uncovered this year: Money manager Bernard Madoff stands accused of defrauding thousands of investors out of tens of billions of dollars.

As for Creative Capital Consortium's principal, George L. Theodule, he "preyed on the Haitian-American community," said Teresa J. Verges, assistant regional director for the Security and Exchange Commission's Miami office. Theodule is a self-proclaimed evangelical minister from Haiti.

The frauds occur because people let their guard down around people they trust, said Mark Mathosian, a financial administrator with the Florida Office of Financial Regulation.

Many of Madoff's clients were Jewish.

"They assume that because they are being told by someone they trust that it's automatically good," Mathosian said. "That's the first step in being defrauded."

But greed plays a role as well. Often, investors are enticed by assurances that they will get a "guaranteed return" or that they won't lose their principal. Other times it's the promise of exceptional returns.

"When you're making money, everybody wants to tell their friend, and that's how the trap is set," said Lewis B. Freeman, a Miami forensic accountant who has served as a receiver in affinity-fraud cases.

And when early investors report how well their investments performed, word spreads quickly. Another factor may be the economy. People are nervous about investing in the stock market and real estate.

"The current economic environment is the perfect breeding ground for affinity frauds," said David A. Rothstein, a Miami lawyer representing investors suing Theodule and his companies.

Ground zero for fraud

Affinity frauds are successful for another reason, said Glenn S. Gordon, associate regional director for the SEC in Miami: "The people running them are skilled at knowing how to manipulate (investors) into trusting and believing them."

Creative Capital Consortium investor Dieudonne even had a friend accompany him when he visited the firm's office. The friend, familiar with an investment scam that snared 600 Haitian-American investors a few years ago, urged him not to invest — to no avail.

Dieudonne now wishes he had listened and is fighting to recoup his money, an amount he didn't want disclosed.

"Florida is ground zero for this," said Michael I. Goldberg, a Fort Lauderdale lawyer who was the receiver for A.B. Financing and Investments, a South Florida affinity scam. "It happens elsewhere, but it's a cottage industry — these Ponzi schemes — down here."

'Are you sure it's not a scam' 01/04/09 [Last modified: Monday, January 5, 2009 4:11pm]
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