Utah may get more serious about affinity fraud

Utah has had more than it's share of affinity fraud cases over the years. Authorities say that in the past year alone, more than 4,000 Utahns have lost over $1.5 billion due to fraud. In many cases, the fraudsters engage in what is known as "affinity fraud" which refers to any type of fraud involving the exploitation of a relationship of trust. We naturally trust those we go to church with or those who are like us in some way including ethnicity. If exploits that trust to commit fraud, it is referred to using this phrase.

In Utah, the religious community provides an easy target for someone who wants to commit fraud. As such, fraud perpetrators build trust among a group of individuals in a social setting such as at church and then they exploit those relationships by getting people to invest in bogus business opportunities. Affinity fraud was involved in many fraud cases including Bernie Madoff's famous $50 billion Ponzi scheme. In that case, the Jewish community was exploited by Bernie.

Affinity fraud has been found in every religious community but also exists in other communities such as racial or ethnic groups. A large Ponzi scheme in Florida involved affinity fraud among the Haitian community. The deaf community also has been exploited by fraud perpetrators who developed relationships of trust and then exploited them to commit fraud.

Today's Deseret News reports that one Utah State Senator is sponsoring legislation to increase the penalties for any Utahn who is found to exploit relationships of trust. The article summarizes the proposed bill as follows:

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.

The article also explains that, in addition to this bill, Sen. Ben McAdams is proposing other legislation to provide incentives for people to "whistle blow" by bringing forth information about questionable business deals. The article doesn't go into detail about the incentives but, if it resembles federal legislation, it may provide whistle blowers with some percentage of penalties that are collected by the state when a fraud case is uncovered.

I'm all for both of these bills. I have had people come to me and tell me their story about how they lost their life savings because a trusted friend exploited that relationship. It's not uncommon for these individuals to be near or in their retirement years and then to find they have lost much or all of their assets. These are tragic stories that tear your heart out to hear about.

I personally hope this legislation will help lock some of these perpetrators up for a long time!