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February 13, 2012 in Fraud College IN THE NEWS

Unfriendly theft: Educating against affinity fraud

By Jasen Lee, Deseret News

  • Published in the Deseret News : Monday, Feb. 13 2012 8:43 p.m. MST

Affinity fraud refers to scams in which the perpetrator uses personal contacts to swindle a specific group, such as a church congregation, a Rotary club, a professional circle or an ethnic community. Most affinity frauds are Ponzi schemes, in which money from new investors is used to repay old ones, or is siphoned off by the promoters.

Baker said that in 2011, the number of reported affinity fraud cases climbed 30 percent to 40 percent from the prior year with reported losses totaling approximately $250 million.

The message of the conference is clear — be cautious about where and with whom you invest your money or share personal information, Baker said.

“The problem is really a trust problem,” he said. “Affinity fraud is especially insidious because it’s a breach of this special relationship of trust.”

The issue has become a significant concern for leaders of the state’s predominant faith. Among the featured speakers at the event will be Michael Otterson, managing director of public affairs for The Church of Jesus Christ of Latter-day Saints.

“The value of this kind of event is that it draws attention to a problem in our community which is often underrated and misunderstood,” he said. Otterson said his address would include remarks on raising awareness about affinity fraud, particularly among members of the LDS faith.

One Utah County resident said she lost $35,000 to an affinity fraudster she met at church. She said stiffer penalties are needed for criminals who take advantage of those who are vulnerable.

“He used religious (ideals) against me,” said Kaylene, who did not want her last name used. “He told me that he was guided by the spirit and said he was the financial rescuer of people.”

Her story is a common one in Utah, where more than half the cases of investment fraud that are investigated by the state Division of Securities involve affinity fraud, said agency director Keith Woodwell.

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