Ruth and Len Mitchell
Source Credibility/Social Consensus
Retirees Are Targets of Scams
Ruth and Len Mitchell were defrauded out of their retirement savings by their accountant, Barry Korcan—someone they socialized with and trusted to handle their finances. Korcan was their neighbor, kept the books for Len’s business and did the Mitchell’s’ personal taxes. So when Korcan—who also ran an investment company—offered to help the retirees invest $100,000 in real estate bonds, the Mitchells wrote him a check.
Over time, many of their friends and business associates began investing with Korcan, too. Although they received statements from Korcan detailing their earnings, there was no investment company and there were no real estate bonds. And after the IRS uncovered Korcan’s $11 million Ponzi scheme, he was convicted for mail fraud and tax evasion. The Mitchells lost all of their money.
How did Korcan do it? First, he spent time getting to know his victims to understand what motivated them and when they would be most susceptible to the fraud. Then, he applied several tactics commonly used by fraudsters to gain their trust and take their money. He used his status in the community to set himself up as a financial expert—a tactic known as "source credibility." He then used his relationship with the Mitchells to gain access to other friends and acquaintances. This is referred to as "social consensus." Since the Mitchells were investing, their friends thought it must be a good opportunity.
The Mitchells and their friends were victims of investment fraud, but you don’t have to be. You can avoid this by researching potential investment opportunities in two easy steps:
- First, ask if the person is registered with FINRA or your state securities division.
- Second, follow through and check their answers.
Remember, don’t just take their word—check the information you receive and protect yourself from investment fraud.
See more stories of investment fraud.