Tuesday, July 7, 1998

DON'T BANK ON IT

On June 4, the Idaho Department of Finance shut down the operations of Dean C. Earl of Boise. According to Idaho authorities, Earl told consumers that he was connected with an international investment bank that offered "arbitrage contracts," "bank debenture contracts," and other currency trading contracts. He allegedly promised investors a guaranteed return of up to five times the original investment in two months but failed to disclose that neither he nor the securities were registered in Idaho.

"International trading schemes are on the rise and may pose a significant threat to unwary investors," said Department of Finance Director Gavin Gee. These schemes take several forms. In most, crooks promise investors a guaranteed return on their investment principal and access to international traders that conduct riskless arbitrage -- international paper transactions that supposedly generate huge profits. Investors are often told that they will be gaining access to a secret investment market that used to only be open to the extremely rich. In the case of Dean Earl, he allegedly told investors that a Saudi Arabian oil sheik and the Onassis family were interested in investing in his plan. These schemes are variously known as bank debenture trading programs, high yield investment programs, prime bank/SLC (standby letter of credit) investment programs and medium-term note programs. And the crooks usually promise huge profits. But it's the crooks that make huge profits because there were no such investments.

Before you invest, remember these simple points.