Bills would crack down on 'affinity fraud' in Utah

Published: Monday, Jan. 31 2011 12:59 a.m. MST

SALT LAKE CITY — Some of the things that define Utahns may also be their Achilles' heel, according to a state senator who has drafted a bill designed to help them.

Sen. Ben McAdams, D-Salt Lake City, aims to remedy that with SB101, which would protect Utahns from being defrauded by those closest to them, who hold the highest levels of trust.

"This is an instance where one of our greatest strengths, which is we see the best in others and we're entrepreneurial, that we want to succeed and that is one of the strengths of the people of Utah, but is also one of the things that makes us … peculiarly gullible," he said.

The bill, which would modify the Utah Uniform Securities Act, would exact harsher penalties on those who use "undue influence" to "exploit the trust, dependence or fear of another person or gain their confidence" and "deceptively" influence their decisions. Harsher penalties would apply, as well, if the fraud victim is a "vulnerable adult." The bill would enable prosecutors to file second-degree felony charges in such cases.

McAdams said they want to target those who abuse their positions of trust to attract investors.

"We want to give that an additional criminal penalty," he said. "We should crack down harder on that because they are abusing that status in the community."

Utah has been a hotbed for such schemes. An FBI analysis found that more than 4,000 Utahns have been victimized by fraud in the past year and bilked out of more than $1.5 billion. Many of those who have been charged in connection with fraud-related crimes targeted victims in their church congregations.

Former U.S. Attorney for Utah Brett Tolman, who now works in private practice, said people should be wary of situations where an individual wants to hold a meeting similar to a church meeting and speaks about their plans in religious language, which he said can make it difficult to distinguish what is actually being proposed.

But both McAdams and Tolman pointed out that so-called affinity fraud is a broad issue that affects all types of groups and communities from members of The Church of Jesus Christ of Latter-day Saints to illegal immigrants to those who are deaf.

"Really, any instance involving trust in that community," McAdams said. "Affinity fraud is not unique to the LDS community, and it is not unique to Utah."

McAdams has also worked on a companion bill that would reward those to report questionable investment schemes. He said they often don't want to betray someone they believe they can trust or worry they will lose money if they cooperate with investigations.

"There can be an economic incentive for people who may have information to clam up and stay silent and so what we're doing with this is to overcome the economic incentive to stay quiet with an economic incentive to come forward," he said.

Tolman said there are some warning signs that can alert individuals to potential scams, such as proposals involving promissory notes, lack of security and promises of high interest returns.

"The reality about wealth is you build it slowly," he said.

McAdams reiterated that the more Utahns learn to protect themselves, the better.

"There needs to be an education component," he said. "The public needs to know if it seems too good to be true, it probably isn't true."

That said, his proposed bill will provide law enforcement agencies with "additional tools" to go after those who manipulate and take advantage of those who trust them.

McAdams said the bill should be put before the Utah Senate this week and has already been garnering positive feedback.

"I'm optimistic," he said.

e-mail: emorgan@desnews.com

Twitter: DNewsCrimeTeam

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