Fraud from a friend

Copyright © 2008
Gallup Independent
By Elizabeth Hardin-Burrola
Staff writer

GALLUP — Everyone’s heard of identity theft, but what about affinity fraud?

Sometimes referred to as “fraud among friends,” affinity fraud involves financial scams that exploit the trust that exists in groups of people who share something in common, like faith communities, ethnic groups, civic organizations, professional clubs, or the elderly.

It commonly involves perpetrators victimizing family, friends, and fellow group members by issuing worthless promissory notes for business ventures, setting up gifting pyramid schemes, and promoting phony real estate deals. In other cases, outsiders can gain access to group members by setting up prominent members of the group to profit from investment schemes.

The topic of affinity fraud in New Mexico, particularly how it can affect church communities, was the subject of a free workshop in Gallup on Saturday. “Preying on Those Who Pray/How to Protect Your Community from Affinity Fraud” was presented by Gena Wilimitis, an investor education coordinator for the Securities Division of the New Mexico Regulation and Licensing Department.

The workshop was hosted by the Rev. Layloni Drake of the First United Methodist Church, who said she sponsored the workshop to raise local awareness of the problem.
“I want to help protect our community,” said Drake, who said she believes “some of the best medicine” is preventative.

According to Wilimitis, people should “run fast and run far” if they encounter any of the following common warning signs in financial investment scams: the proposed investment is a secret deal, it involves inside information, it uses breakthrough technology or secret methods, it’s risk free, it has guaranteed results, and the investor should act quickly because the investment is only available for a limited time.

Although such warning signs might seem like obvious red flags, Wilimitis said affinity fraud frequently is successful because people are more likely to trust a fellow member of their group, someone who seems similar to themselves.

According to Wilimitis, Henry Rivera, a former Taos insurance agent, was one such successful New Mexico con artist. Authorities believe Rivera stole millions of dollars from victims around the state — many of whom he met in church — through fraudulent real estate deals. He is currently incarcerated in a New Mexico prison, but it took years for authorities to indict him and then finally capture and prosecute him after he fled to Mexico.

The difficulty in investigating and prosecuting affinity fraud is tied to the close relationship many perpetrators have established with their victims. A brochure published by the New Mexico Securities Division states many victims experience embarrassment over being conned and have a reluctance to report “one of their own.”

Wilimitis was joined by Ralph and Maxine Zotigh, who performed a brief skit about affinity fraud that targets Native Americans, and Gene and Karen Young, Wilimitis’ parents who volunteer their time with the presentations. In a number of Native American communities where people have come into money, Gene Young said, they too have become victims of affinity fraud.

Although not directly related to affinity fraud, Wilimitis also emphasized the warning against providing any personal or financial information to a phone caller or in response to an e-mail. “Phishing,” or using e-mail to “fish” and fraudulently obtain another person’s confidential information, has been a common Internet scam. “Pharming,” a newer Internet scam, redirects a person’s Internet browser to a bogus site to collect that confidential information.

The Securities Division licenses all broker-dealers and investment advisers doing business in the state and maintains public disciplinary records of such firms and individuals. Wilimitis encouraged community members to call the division’s toll-free number, 800-704-5533, to check whether an individual is a licensed financial professional.

She said concerns and complaints can also be directed to the New Mexico Attorney General’s offices in Albuquerque at (505) 222-9000 or in Santa Fe at (505) 827-6000.

In addition to the brochures, the Securities Division is producing a documentary on affinity fraud, which Wilimitis said should be ready for release in early 2009. Focused primarily on faith communities in the state, it features interviews with representatives of the Archdiocese of Santa Fe and the New Mexico Conference of Methodist Churches.

Wilimitis is also available to present workshops on affinity fraud to interested organizations around New Mexico.

Information: Wilimitis (505) 383-2325 or gena.wilimitis@state.nm.us; New Mexico Securities Division at www.rld.state.nm.us/securities