Website tackles global share fraud

A New Zealand website is outing unregistered and unlicensed brokerage firms worldwide in an attempt to hit back at fraudulent share sales.

The founder of Securities Investigation Research Society (SIRS), James Wallis Martin, decided to expose firms involved in securities fraud after his software development company, Berten USA, was targeted.

Martin said his name was forged on US$35 million ($48.3 million) of stock certificates issued in 2000 by a company calling itself Berten USA Holdings.

Many of the investors who were duped came from Australia and New Zealand.

In 2001, Martin travelled to Australia to help victims recover some of their losses.

In some cases he found himself dealing with the bereaved families of investors unable to face the reality of being defrauded.

"When you get calls every week ... what are you going to say - 'Sorry, better luck next time'?

"It didn't matter if you lost $5000 or $500,000 - what we all lost was our trust.

Martin helped to provide evidence to authorities that the shares were indeed fraudulent, enabling some victims to claim back losses through tax relief.

He said victims of fraud had trouble getting tax relief because, although companies could be delisted for not posting company reports, the shares issued might still be considered valid.

This could leave victims open to a second attack - a so-called recovery scam. Bogus brokers contacted the holders of fraudulent shares explaining that they had found a buyer, but that the victim must pay a 10 per cent security deposit.

"They jump at it because they're desperate," said Martin.

"It's only putting in another $5000 and they can finally recover the $50,000 they've already lost."

After receiving the deposit, the fake broker disappeared.

"Securities agencies are doing their best ... but they're underfunded to really be able to go after international fraud."

Martin said agents from the US Securities and Exchange Commission would only act on a complaint from American shareholders and already had trillions of dollars worth of stockmarket deals to examine each year.

Determined to fight back, Martin set up SIRS to target unlicensed and unregistered brokers worldwide.

In 2001, he provided evidence to support the raiding and prosecution of 35 fraudulent operators worldwide.

Unfortunately, prosecutions in some countries failed because of insufficient evidence, although he believes the judges were unduly lenient in some cases.

Martin met his Kiwi wife while in Australia and they moved to New Zealand last year.

He now concentrates on publicising the existence of fraudsters rather than pushing for prosecution.

"Exposure is the best way to warn people because lots of people now have internet access ... and they say, 'Thank goodness I went on the web and I was able to see that company name listed'."

Martin believes the SIRS website prevents US$120,000 ($165,490) of fraud every day.

Ironically, some tip-offs come from those he is trying to catch.

"They love money more than they love trying to stop this [SIRS].

"For them if they can provide the hints or the clues that something's fake, then they're getting rid of the opposition."

Martin said investors should research companies thoroughly, get advice from a reputable broker and always be on guard.

"There are going to be one or two deals of the century, but is it going to be someone cold-calling you on the phone who doesn't know you from Adam?"