The Vigilant Investor: 40 Scam Stories

Video Transcript

Kelly Kesner: I’m Kelly Kesner with Investor’s Watchdog University and welcome to the second meeting of Investor’s Watchdog. I’m here with Pat Huddleston, who’s the author of the book we’re going to be talking about today called The Vigilant Investor. Hi, Pat.
Pat Huddleston: Hey, Kelly. Thanks for having me.
Kelly Kesner: This is what you would consider this book, The Vigilant Investor, I guess the textbook for the series of classes that we’re doing, but you’re not going to hear references to this book all throughout the classes. This is more of an educational effort rather than a marketing effort. But, I do want to go into it a little bit and let Pat tell you a bit about his work.
Pat Huddleston: Yeah. Well, the book came about, Kelly, it’s sort of the next natural extension of what we were doing at Investor’s Watchdog University. As I shared in the first episode, I felt like I got a calling or a passion to get out there and spread the word. I feel like the astronomer who knows there’s an asteroid on the collision course with Earth needs to tell people and there really is incredible danger out there. So, we started with Investor’s Watchdog. Our next step was the blog, which was being well-followed. But, I started thinking how can we reach even more people and so The Vigilant Investor is what came out of that.
Kelly Kesner: And the Wall Street Journal called this a very fascinating invaluable read.
Pat Huddleston: Yeah, I got that around Christmastime, so I thought that was a wonderful Christmas gift.
Kelly Kesner: Nice Christmas gift.
Pat Huddleston: I was very, very happy to get it. Yeah.
Kelly Kesner: Well, you talk like this is something you have a passion for and you enjoy educating people. What are your credentials so people know to listen to you?
Pat Huddleston: Sure. Well, I started out working for the Securities and Exchange Commission as an enforcement attorney doing insider trading cases, market manipulation, Ponzi schemes. After a couple years I took a promotion to enforcement branch chief, which essentially just meant I got to supervise a lot of very impressive enforcement attorneys doing the same thing. Left the commission in 1996 to come back in a private practice to represent investors one on one directly to help them recover from the kinds of things I had seen at the commission.

And then in 2006 I became a court appointed receiver in an FCC fraud case, so I’m the guy who shows up at the fraudulent business, knocks on the door, hands over the court order and says, “Party’s over, pal. I’m taking over.” And so I get to sit in the chair of the guy who used to be running this worldwide scheme and read his e-mail and see how it came about. So, I’ve seen this from a lot of different vantage points. And, of course, since 2007 been blogging every single weekday on another investment scam, so I feel like I’ve been swimming in this for quite a while.

Kelly Kesner: And I’m sure you share these stories throughout the book.
Pat Huddleston: I do and I think that’s what’s gotten some good reviews. It’s really not your average book. It’s 40 separate stories of actual cases that we tell in order to get the message across. Bottom line is people learn best through storytelling and so we base the knowledge that we pass along on actual stories.
Kelly Kesner: How is the book organized? Is it just story by story or is there a specific breakdown?
Pat Huddleston: Broadly in two parts. The first part is about what we call “the wide world of fraud” and you take a look at the scam artist playbook there, things that you never would have anticipated. But, part two is about the securities industry because let’s face it, that is the way that most people in the U.S. are going to interact with the investment world through the investment industry. So, what people are going to find out in part two are some things they never would have expected were true about the investment industry. I tell people all the time that the FCC – I got to see in the dark corners of that industry and let me tell you, there’s some very scary things in there.
Kelly Kesner: And due to your experience and seeing into those dark corners you’re asking people to start thinking about the securities industry in a completely new way, aren’t you?
Pat Huddleston: I really am and it’s never been more important that they do so. The statistics are really, really telling and that is that baby boomers turn 65 years old at the rate of 10, 000 of them every single day. And so they’re approaching retirement, and their parents are already in retirement, and for reasons that we’ll discuss when we get to that segment of the class are more vulnerable that you can even imagine.

And so it has never been more important that people step up and realize that they can do something. And let me close with that. They can do something. There really is a solution to this problem. And we’re going to be talking about at the end a way that ordinary, individual investors, if they band together, can actually turn the tide, kick the scam artists off the landscape, insist that brokers be ethical, and really do something that no regulator will ever be able to do on its own.

Kelly Kesner: Well, it sounds very important, Pat, and stay tuned. That’s all we have for today, but we’ll be sharing more of his information and highlights with you in future classes. Until then class dismissed.

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