Recurring themes in investment frauds

Over the years several duped investor files have passed my deck. Recently I have been going over some old journals and notes and I found several characteristics coming back as well let's say recurring themes.

• One person at the top and apparently in control of everything.
  Some of the cases passing my desk here in New Zealand, are more obvious as there are in general many more SME and the investment scene is not an exception. There was this family owned business, where father ran the show, beyond control of any of his sons, who just did as father ordered. Separation of duties? Yes, but not for father. On a larger scale, look at Nick Leeson's Barings Bank case and a similar pattern is evident, he controlled front and back office.
• Unusually high returns
  If you may not be sold on the person directly, than if anything will pull people over the bridge it is the promise of a higher than normal return. In some instances, people even see these high returns but in order to keep the scheme going they are lured into re-investing these schemes instead of taking a payout or - as is the case in Ponzi-schemes - the substantial payouts come in but at one point the scheme collapses when fresh money is drying up.
• Lack of independent proof of profitability
  What do I mean with that? Well you will get all these fantastic figures, predictions and other tantalizing material, all produced to convince you that this is an opportunity of a lifetime. But what is it they are actually giving you?
  Well whatever it is it will look luxurious and flash. Glossy presented prospectusses to support the incredible income prognosis. But you need to ask yourself: were these figures ever audited and by whom? They may very well be an unaudited audit report, preferably presented as a copy of a Dun & Bradstreet report or something similar to give it that extra air of credibility.
• Diversion tactics
  You are being flooded with information, however it is not necessarily relevant material! Recently I posted an article and that illustrated this tactic just perfectly. I was referred to website reports with all fantastic graphs but was it really about the opportunity I was invited to? NO! Conmen are besides that a master in drawing big conclusions from little or no evidence.
  Or otherwise the attention of victims is diverted from the investment opportunity, or business opportunity, to things that are of no relevance, such as incredble headquarters in tropical paradises, mansions that will make you stand back in awe (and who asks or checks whether it is actually owned) and impressive looking materials all around that make it look even more impressive or lifestyles funded by other victims to create this incredible air of success. If you can't sell the "opportunity", sell the person offering it! In Madoff’s case, it was reported that some people were simply begging him to be allowed to become an investor. He was the man, the go-to- guy.
• An impressive list of references and endorsements
  Have you ever tried to verify the credibility of these references: tried to chase down one or the other extremely busy business person. As this is part of my job, I can assure you it is time consuming and often times a frustrating and job. Is such a reference really worth anything if you can't get a hold of him or her? It is very easy to provide fake references once you are aware if this reality. And even if you do get hold of these people, they may very well either not be aware of the fact that they are being defrauded or they could be fraudsters themselves!