Types of Scams

by | Apr 24, 2001 | Archives

Here are four types of scams I run across often.

The first type of active scam is the Ponzi scheme we have been reviewing often in our messages. They offer huge returns for investors, sometimes as high as 10% to 20% per month. Watch out for anyone who offers this type of return.

Another type I come across again and again is the financing rip off. In this case con artists offer to arrange financing usually for an inventor or businessman trying to start or expand a business. The finance gets delayed for one reason or another and eventually a fee or bribe becomes required to get things going. The loan of course is never “funded”.

There are legitimate ways to obtain overseas finance. One reason to do so is outlined by eClub advisor Leslie Share who writes

“The US government imposes a 30% US gross withholding tax that is generally imposed upon interest payments (not of course the principal payments) to foreign persons who make loans in the U.S.

However, if the loan is set up, maintained and documented properly, and the facts and circumstances of the loan so qualify, the withholding rate under these circumstances is reduced to -0-, either under (here) the US-Germany income tax treaty or as a “portfolio interest exemption” loan. In either case, it can be a good deal for the lender (depending upon local tax consequences), and another reason why the US is itself a “tax haven” in certain cases (such as through tax-free interest on foreigners' US bank accounts).”

It is hypocritical for the US to support the OECD's attack on tax havens and act as a tax haven for non U.S. residents itself , so members of Congress and business leaders have started to openly question such support. However for now this can be a good loophole if you are dealing direct with a good bank. One example of a good international lender is Jyske bank who make collateral loans in many different currencies. You can get details from eClub advisor teddy Christiansen at the bank. His email address is TEDDY@JYSKEBANK.DK Jyske bank charges a fee of one percent on the land value (for a five year loan) but the fee is deducted from the loan never in advance. Always beware of any loan scheme that charges in advance.

The third scam is the accomplice con. In this case a person is contacted by someone who claims they have a way to rip off some third party. One big perpetrator of this scheme is from Nigeria. Police reckon they have stolen billions from unsuspecting people. The story is that someone in Nigeria is about to fill some big government contract and they have figured out how to dupe the Nigerian government into overpaying millions of dollars. All they need is an invoice and a bank account to receive the money. The sucker is asked to send an invoice on their letterhead and give a bank account number and offered a share of the booty for their help. As soon as the invoice is sent the con artists send the letterhead (with a forged signature) to the bank account and clean it out. What are you going to do? Call the police and tell them you lost money while in the process of trying to cheat a government? This has been going on for years and I have been approached myself numerous times from Nigeria.

The final type is the tax avoidance scams such as pure trusts, etc. where promoters offer ways to avoid tax. There are only two legitimate ways for small businesses to use overseas structures to defer tax that I know of left. One is through the use of overseas life insurance policies. (For more details contact Club advisors Joe Cox at jcox@coxnici.comor Colin Bowen at colinb.ioma@ioma.co.im ).

The other way is to gain tax advantages is through a genuine overseas business. This is why our course “Self Fulfilled-How to Have you Own Publishing Business” is so timely now. Publishing is a great way to expand your existing business, to have a new full or part time business at home and publishing is one of the easiest ways to have a genuine tax deferred global business.

Until next message, good global investing!