Retirees Lose Millions on 'Safe' Investment Scams

May 18, 2010 — -- It took 27 years for Linda Aleknus to save $200,000 for her retirement ... and just a few months to lose it all.

Aleknus was one of more than 120 investors who, the Securities and Exchange Commission says, fell victim to an alleged $20 million Ponzi scheme targeting retirees in California and Illinois.

"It destroyed me physically, emotionally, financially," said Aleknus, 59, a former U.S. Postal Service worker from Melrose Park, Illinois. "Now I don't have have the money to go on with my life."

Financial fraud watchers say that retirement investment scams targeting retirees and soon-to-be retirees seem to be on the rise. One reason, they say, is simply because scammers now have more people to target: the nation's 78 million Baby Boomers -- the generation born between 1946 and 1964 -- are starting to retire.

Many Boomers saw their savings pummeled by the financial crisis and swings in the stock market. That's giving scammers a fresh "in," experts say.

"When the market did its significant decline, it had a serious impact on retirees who were depending on their retirement savings to last a lifetime," said Sally Hurme, an attorney with AARP. "We have certainly noticed some aggressive marketing of some financial products as a sort of solution to the market downturn and promising a sort of instant recovery of all your savings -- promises that obviously cannot be fulfilled."

Pat Huddleston, the founder and CEO of Investor's Watchdog, a private investigation firm focusing on investments, said some scammers attempt to lure victims by promising safe, stable returns.

"These days with the volatility of the market, what people need to hear is they've got safety," said Huddleston, a former enforcement chief for the SEC's Atlanta office.

Today's scammers, he said, follow the lead of infamous convicted Ponzi scammer Bernie Madoff, who delivered "solid" annual returns of 10 to 15 percent to his clients before law enforcement caught up with him in 2008.

Scammers today offer returns of 6 to 8 percent, he said.

"That, on its face, is not ludicrous," he said, "but you have to be careful of that guarantee -- how can someone possibly give that to you?"