Clark Behind The Headlines
From HLN's Money Expert Clark Howard
This is a just terribly sad story and there's no way to sugarcoat this one.
A big group of retirees that worked for the government were ripped off by a company called the Federal Employee Benefits Group. It was based in Jacksonville, Florida, and after operating for 22 years, the thing collapsed. Some of the people who had trusted this organization with their retirement money are now broke.
Here's what happened: the retirees were promised that this group had a technique of investing their money in ultra-safe investments within a tax-free bond fund. They were promised they would earn a guaranteed eight to ten percent a year, 100% safe.
Well, it turned out there never were any bonds. There never was any safe fund. The money was just a part of a classic ponzi scheme. That's where money taken from later participants is used to fulfill promises to earlier ones, and it can go on for a while, like with Bernie Madoff.
The perpetrator behind this new scheme was found dead as investigators closed in on him. The local sheriff’s department called it an apparently self-inflicted gunshot wound.
But before the house of cards collapsed, he lived a very lavish lifestyle, attending the Super Bowl and all kinds of glitzy events with the hard-earned money of these retirees. He concocted phony statements he'd send to people showing that they were getting their eight to ten percent guaranteed, completely safe return, year after year. And people bought it hook line and sinker. Why?
Because everybody else out there who wanted to earn that kind of money had to take the full risk of the stock market. If they put the money in banks or credit unions, they'd earn two or three percent. But this group was earning so much money, or so they thought.
Know this: you cannot be told you are going to earn double or triple the safe return you can earn from a bank or credit union and have something truly safe and guaranteed. It is not possible. Everybody looks for the easy, safe answer. But easy and safe are two entirely different things. And it's something that I want you to learn in my school, not the School of Hard Knocks.