Click here to subscribe today or Login.
By TERRIE MORGAN-BESECKER tmorgan@leader.net
Monday, March 17, 2003 Page: 1C
Robert Tommassello appeared to be everything Robert and Dora Jean Dunn of
Berwick could want in a financial adviser.
An experienced, licensed securities broker, Tommassello had been selling
insurance in the Hazleton area for 20 years, and, by all accounts, he had an
unblemished record.
They’re precisely the qualities consumer advocates say people like the
Dunns should consider when choosing a broker.
But in this case, those traits proved the perfect disguise for Tommassello
to pilfer as much as $1.5 million from at least 10 clients over a three-year
period ending in June 1998, federal prosecutors say.
The 64-year-old Mountain Top man is scheduled to turn himself in today to
begin serving a 37-month federal prison sentence for mail fraud and tax
evasion charges connected to the scam.
He leaves behind financially devastated victims like the now widowed Dora
Jean Dunn, who are left to ponder a difficult question: What more could they
have done to protect themselves?
It’s a difficult question to answer, several investment experts said,
because Tommassello’s scheme was so well-executed. But there were certain red
flags in his case that are common to many financial scams, they said.
Two of the most common mistakes investors make: They don’t monitor their
investments, and they write checks out to the adviser, rather than the
security being purchased.
The experts said it’s also important to check an adviser’s history through
several agencies that offer information on disciplinary actions, education and
background of registered financial advisers.
That would not have helped the early victims in Tommassello’s fraud.
Federal prosecutors didn’t build enough evidence to charge him until 1998,
some three years after he began embezzling money.
But a check with the Securities and Exchange Commission would have shown
that Tommassello, while licensed, was not the “registered investment
adviser” he claimed to be, said Catherine Pappas, an SEC attorney who worked
on Tommassello’s case.
“That might have been a flag. If someone is holding (himself) out to be a
registered adviser and they’re not, that’s a lie, ” Pappas said.
“Would that have been enough to tell anyone not to invest? I don’t know. A
lot of time these people prey on older people who have used them as an
insurance agent for years and trusted them for years. That’s something we see
over and over again in frauds, especially frauds against older people.”
In Tommassello’s case, federal prosecutors said he targeted longtime
customers, including several women like Dunn and Patricia Sempko of Kulpmont,
both of whom had been recently widowed.
At Tommassello’s sentencing on March 3, Sempko, 54, said Tommassello bilked
her out of a total of $218,000, which included life insurance benefits from
her husband, who died in 1996 at age 51.
Dunn, 63, recounted how Tommassello met with her and her husband four
months before he died of cancer in 1999 and convinced them to turn over tens
of thousands of dollars to him under the guise he would reinvest the money.
“That’s the kind of man he was. It did not matter that my husband was in
such a terrible state and was suffering so much,” Dunn said. “My husband had
dealt with him for more than 20 years. We trusted him 100 percent.”
Tommassello continued to solicit Dunn after her husband died. All told,
Dunn says she lost $211,000.
Prosecutors hope to recoup some of the victims’ money. Tommassello has
admitted to stealing about $922,000, but another $614,000 is in dispute. A
restitution hearing is expected to be scheduled within three months.
Prosecutors said a key part of Tommassello’s scam involved using money
obtained from some investors to pay fake dividends or purchase securities for
other investors. The fraud, known as a “Ponzi scheme,” is a “tried-and-true
approach” used by many scammers, said Barbara Roper, director of investor
protection for the Consumer Federation of America.
“They pay the initial investors with money being brought in from other
investors to create an air of legitimacy, but the bulk of the money is being
siphoned off,” Roper said.
Tommassello obtained the money by persuading some clients to cash in
investments with the promise he would re-invest the proceeds and obtain a
better return.
But the clients made the checks out directly to him, or signed over to him
checks from the securities companies. That allowed him to deposit the cash
into his personal bank accounts.
“Do not make checks payable to a broker. That’s a big mistake,” said John
Gannon, of the National Association of Securities Dealers, a private
regulatory agency for the brokerage industry.
Gannon also stresses consumers must maintain control over their
investments, requiring their adviser to get their permission before making any
purchases or trades of securities.
“In many cases where the broker deceives the investor, the one thing
that’s in common is they trusted the broker to such an extent that they did
not check up on their investment. They just left it up to the broker,” Gannon
said. “It’s important to get the message out that investors need to keep
track of their investments and be an active participant.”
Tommassello initially was able to conceal his fraud by sending investors
fictitious financial statements he had created. That technique has become
increasingly popular among scammers, who, thanks to computers, can make
authentic looking documents.
The best defense, Gannon said, is to do independent checks of your account
with the companies that hold the securities. Gannon said most brokerage firms
provide online access to investor accounts – providing quick and easy access.
“Even if you don’t trade online, you can view your account. It’s a double
check,” Gannon said. “It doesn’t take that much time and it’s not something
you have to do every day or week.”
The bottom line, experts say, is to be diligent. But they concede nothing
is foolproof.
“When you do all the right things you don’t eliminate the possibility you
will be a victim of fraud, you just reduce the likelihood,” Roper said.
“Every con artist has a first victim, and that could be you.”
Terrie Morgan-Besecker, a Times Leader staff writer, may be reached at
829-7179.