Consider the following companies are just some of the major companies involved in either accounting fraud or corporate fraud of various kinds: Adelphia,AES, Duke Energy, El Paso, Merrill Lynch, Reliant Energy, Rite Aid, Parmalat, AOL Time Warner, Dollar General, PNC Bank, Cendant, Citigroup, Computer Associates, General Electric, ImClone, Peregrin, Xerox, Bristol Myers, HPL, JP Morgan Chase, Kmart, Lucent, MicroStrategy, Network Associates, Tyco, Enron, Global Crossing, Halliburton, Omnimedia, Merck, Qwest, Sunbeam, and there are many more, including major accounting firms and major stock brokerage houses. The losses associated with these companies is in the billions. These are losses suffered by millions of hard working Americans. These losses have nothing to do with a market that turned down. These losses have nothing to do with our economy or investing principles. These are losses people have suffered because of corporate and accounting fraud. How good does the stock market look now? Dell lost $50 billion dollars in market value in a single day, because quarterly profits did not make expectations. In the same dayâ€™s news, KPMG was in court for the largest accounting fraud in U.S. history. How safe is your retirement fund?
Almost daily I see articles in newspapers around the country about more scandals, another stock brokerage, financial services provider, or mutual fund paying some extraordinary penalty or huge settlement for fraud, misrepresentation, or some other criminal violations. The Wall Street Journal reported on August 29, 2006 serious problems at Ameriprise, formerly known as American Express Financial Advisors. Securities America, an arm of Ameriprise, settled for $22 million dollars. The story is that David McFadden, a hot shot broker for Securities America was lying to Exxon employees about their retirement funds. Under McFaddenâ€™s management, Bradley Simonâ€™s retirement fund dwindled from $700,000 to $267,000. Or take another of McFaddenâ€™s clients, 73-year old Pat Salatich, a nurse for 25 years at Exxon. She deposited $565,383 with McFadden in 2001, and after only withdrawing $189,000, she learned there was only $73,000 in the account before she stopped the bleeding. She now lives on about $1,500 a month in social security.
Ron and Pam Yandell of Mansfield, Texas, turned over their $1.4 million retirement fund to a stockbroker who invested in risky tech stocks without their approval. They lost $230,000 in the tech crash. After a five year legal battle and lots of costs and stress, they won an award of $990,000 against their stockbroker, but no one can find him to collect it. Heâ€™s disappeared. These kinds of cases are a dime a dozen.
While real estate is subject to dramatic down turns in the real estate market (which means the economy has tanked and most likely stocks too), that happens rarely compared to the down turns in the stock market and all the corporate fraud. Real estate does not have the wild roller coaster rides that stocks have almost daily. More significantly in this day and age, it does not have to suffer the fraud and scandal of someone managing (and loosing) it for you.Look around. Real estate is everywhere, and someone owns each parcel. It cannot disappear like the value of a stock certificate. While there can be disasters and acts of God that could cause you losses in your real estate, you can insure yourself against such things with very small insurance premiums. Does your stock broker personally guarantee you will not lose your stock value, or does he offer insurance to cover you against losses?
Last Updated on April 3, 2010 by Chuck Marunde
I’m a nurse and real estate is not my area of knowledge, so I especially appreciate your real estate blog. I’ve read dozens of your articles, and they’re very helpful. Your Sequim real estate blog is like an encyclopedia of real estate for the area. I often read your articles out loud to my husband. Thanks for the effort you put into all this.
Love this article.