Securities complaints on the rise

The tiny staff of investigators in the Nevada Secretary of State's office increasingly finds itself swamped with complaints about potential securities fraud cases.

"We're overwhelmed," says Secretary of State Ross Miller. "We simply do not have the capacity to deal with the complaints that are coming in."

The frauds, Miller says, range from phony real estate investments to leveraged exchange-traded funds to old-fashioned mining scams and Ponzi schemes.

Late last week, for instance, investigators ordered Scott Tischler, managing member of Henderson-based Heritage Capital Partners, to stop selling unregistered and possibly fraudulent investments in a Wyoming oil well and diamond ventures in Africa. Investigators believe investors may have put at least $60,000 into the Wyoming drilling project.

Nevadans are targeted with phony entertainment investments ranging from Internet gambling to infomercials. Another common fraud in the state involves promises by scam artists to buy and hold gold bullion in the name of investors. Often, the bullion doesn't exist.

The recession may be causing an upsurge in securities fraud complaints because schemes that went undisclosed when markets were rising often crater along with the economy.

And Miller says that retirement-age investors in Nevada may have become more aggressive and willing to take on more risk as they seek to make up the ground they lost in their retirement funds when the real estate and stock markets plunged.

That leaves them susceptible to promoters who promise high returns.

"Nevada has become a haven for con artists who come to the state to prey on our aging population," Miller says.

But don't think that fraudulent investments are peddled only to naive retirees. Sophisticated investors in the state also are targets.

A Lake Tahoe retiree, for instance, invested more than $92,000 with a company that claimed to provide financing for Nevada real estate deals. Instead, the promoter of the company deposited the money into a bank account he controlled and used the money to make personal investments in his own name.

Another set of investors was wooed by a promoter who claimed to have a patent on vending machines to dispense baby products such as diapers. The promoter told investors his company was about to be purchased by Procter & Gamble for $45 million and dropped the name of a respected Las Vegas attorney who was to be an officer of the corporation.

There was no patent. No deal with P&G. And the attorney said a letter that the promoter was flashing was a forgery.

Common elements of the frauds, Miller says, are promises of unusually high returns, little disclosure of the risks and aggressive marketing by a high-commission sales force.

A staff of six in Miller's office investigates securities fraud. But they're sometimes pulled away to investigate election fraud allegations as the secretary of state also supervises elections.

In many instances, the state agency undertakes a preliminary investigation of a fraud complaint. If investigators believe the complaint is warranted, they'll seek the assistance of local police agencies or federal securities regulators to build a criminal case.

Miller stakes some hope on educational campaigns that urge investors to use caution.

"When it comes to investing, verify everything and everyone before you part with your money," the secretary of state says. "Education and information are an investor's best defense." (The secretary of state's Web site, sos.state.nv.us, includes educational materials as well as information on how to file a complaint.)

Miller says his office is stepping up its efforts as securities complaints increase.

"We need to be very aggressive in our mission," he says. Along with investor education and enforcement of state securities law, he says the office seeks tough prosecution of investment frauds as a deterrent to other potential lawbreakers.