HARTFORD, Conn. (AP) -- With investment fraud cases piling up in the weak economy, the U.S. Justice Department is holding summits around the nation to warn investors about the scams, which are often carried out by people with personal ties to the victims.
The first regional conference is set for Oct. 1 in Connecticut, where federal prosecutors have announced a flurry of fraud cases this month including that of a man who cheated clients from his church. Summits are also planned for later in the month in Cleveland, Nashville, Miami, Denver and San Francisco.
"We see it as a growing problem. We see it as a serious problem," Connecticut U.S. Attorney David Fein said in an interview.
Nationwide, federal prosecutors looking at investment cases from the last two years identified 500 prosecutions that targeted 800 defendants and involved more than $20 billion in fraud, Fein said.
The Northeastern summit, hosted by the Justice Department as well as the Securities and Exchange Commission, will bring together officials from agencies including the FBI as well as top federal prosecutors from neighboring states at the Stamford campus of the University of Connecticut. Topics to be addressed include case studies and the perspective of fraud victims.
Investors can protect themselves by knowing the scam artists' persuasion tactics, said Jackie MacKnight, director of social marketing for Connecticut's Better Business Bureau. She said one question to ask is whether investment products are registered.
"They use psychology to try to get money from you, and a lot of time you don't recognize it because of the way they go about it," said MacKnight, who is participating in a panel discussion on investor vigilance at the conference.
For victims, the crimes can be devastating. They are typically middle-class Americans, often elderly, and in many cases they lose all of their retirement savings. Particularly in cases where victims have a relationship with the fraudster through their community, they sometimes hesitate to report the crime, Fein said.
"We're finding this is a remarkably unreported situation," Fein said. "Victims are sometimes very reluctant to acknowledge it has happened."
Falling victim to a scam artist can be extremely embarrassing, but it can happen to anybody, according to Daylian Cain, an assistant professor at the Yale School of Management who has done research examining why smart people make bad decisions.
"It is surprisingly easy to believe what we want to be true and it is surprisingly hard to say no to an adviser," said Cain, who is an invited speaker at the summit.
In 2010 Fein established the Connecticut Securities, Commodities and Investor Fraud Task Force and focused on fraud in Fairfield County. As more investment fraud cases have been reported over the last 18 months, Fein said they have been receiving more attention from investigators assigned to that task force.
One sign that the bad economy may be driving at least some of the fraud is that many perpetrators are accused of using proceeds for personal expenses such as mortgage payments, home furnishings and school tuition bills.
That was the case for a Danbury-based investment adviser, Stephen Blankenship, who pleaded guilty to fraud charges this month in a scam that cheated clients including members of his church out of half a million dollars. Authorities say that rather than investing the money, he used it for personal expenses including groceries.