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Clients Learn the Truth About the ‘Money Doctor’ and His Ponzi Scheme

Members of William Gallagher's Dallas community were deceived by his promises

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William Neil Gallagher has made a name for himself as a financial wizard, publishing several financial self-help books and hosting a radio show. Known as the “Money Doctor,” Gallagher handles investments for members of his close-knit Christian community in Dallas. Many of his clients are seniors, lured in by Gallagher’s prestige and promises that he cares not just about their money, but about them, too. Little do his clients know that Gallagher not only does not have the license required to offer investment advice, he also has not been investing their money at all. Gallagher is perpetuating a Ponzi scheme. 

Episode 72 quote graphic

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(MUSIC SEGUE)

[00:00:01] Michelle: This week on The Perfect Scam.

[00:00:03] Well he wrapped religion around his neck, and he used it to get Christian, good Christian, God-fearing Christians to, to trust him. That is a, a very disgusting thing, but unfortunately, it's not uncommon.

(MUSIC SEGUE)

[00:00:17] Michelle: Welcome back to AARP's The Perfect Scam. I'm your host, Michelle Kosinski. This week we delve deeper into a scam we started to explore last week. If you haven't listened yet, you'll want to. It involves a well-known, larger than life, Dallas personality, especially among the older Christian set who billed himself as a financial guru called The Money Doctor. Doc Gallagher seemed to be the most attentive, God-fearing personalized financial advisor around. But where we left off, people who invested with him were starting to feel some darkness afoot about what Doc was telling them about what he was doing with their money. Now, let's meet some new characters and see where this all ends up. Starting with Larry Burdine.

[00:01:08] Larry Burdine: I'm a native Texan, grew up in the uh Dallas area, uh, graduated from the University of Texas and recently uh retired, uh, spent my entire career in the electronics industry, Texas Instruments, right out of college. The last job I had was with a multi-national telecom company called Alcatel/Lucent.

[00:01:40] Michelle: It doesn't get much more Texan than you, I think, Larry.

[00:01:43] Larry Burdine: (chuckles)

[00:01:45] Michelle: Are you wearing a big ten-gallon hat and boots right now?

[00:01:50] Larry Burdine: Oh no, but I, but I do have a big longhorn uh, over my, door here.

[00:01:57] Michelle: Perfect. (chuckles) That helps set the scene. So, I guess let's get started by telling me how you first came to know good 'ol Doc Gallagher.

[00:02:09] Larry Burdine: My first impression of him is he was sort of a blowhard, you know, he was one of these rah, rah, rah type guys, and he also, and always has presented himself as a man of God.

[00:02:22] (clip) So a lot of folks come in and they say, "Well, Doc, I've had this annuity for some time and the broker never explained to me what it is, or the life insurance...

[00:02:29] Michelle: That's 79-year-old Doc Gallagher on one of his Dallas area radio shows, but like many of his clients, Larry and his wife, a former beauty queen, met Doc at a big local song and dance show, all with people over 55 called "The Spectacular Senior Follies."

[00:02:47] (clip of Senior Follies)

[00:02:53] Michelle: It's for charity. Doc Gallagher MC'd it for years, and it was also a very effective way for him to meet new potential clients.

[00:03:02] Larry Burdine: Of course, I was intrigued. One of the cornerstones of his presentation was a um, a guarantee if you invested with him, that you would not lose your money. That was somewhat intriguing since I'd seen, we'd just gone through the 2008, whereby most everybody, including myself, lost about 30% of their net worth.

[00:03:25] Michelle: Yeah. Exactly. Did it worry you at all that he was offering a guarantee that nobody else seemed to be able to do?

[00:03:35] Larry Burdine: Yeah, uh I was very hesitant. Annuities are very similar to that. You can get a--, annuities that, that basically ensure that you don't lose money, uh, and I had, and in fact, I, I was in uh, an Allianz Annuity, uh, very similar to that.

[00:03:56] Michelle: He first heard about Doc's products about three years ago. Larry and his wife, they already had their money invested elsewhere, and just as we've heard now with every single couple we've interviewed...

[00:04:07] Michelle: Did your wife like him?

[00:04:09] Larry Burdine: She really uh wasn't very warm toward his uh, BS.

[00:04:16] Michelle: The guys are okay enough with Doc, but the ladies seem universally suspicious. I think we're onto something here about the female intuition. Larry's mother-in-law also couldn't stand the guy, but because money talks and Doc Gallagher talked about money a lot, even sending Larry letters saying money is a sacred trust. People are more important than profits. Larry finds that others in his circle all have only positive things to say about Doc's investment skills.

[00:04:48] Michelle: So your mother-in-law actually was the first to invest with him in your family. How did that happen? Or did you use her as the test case? You're like, well, I'm not sure, how about the mother-in-law? Let's let her try him out first.

[00:05:01] Larry Burdine: Laugh as you wish. That's exactly what we did.

[00:05:05] Michelle: Oh, no.

[00:05:06] Larry Burdine: We convinced her to put some money with him, and then we sort of watched what happened.

[00:05:10] Michelle: Oh.

[00:05:11] Michelle: She invested $50,000 that she had to play around with, and soon enough, she was getting quarterly bonus checks, just like Doc's other clients. It was great.

[00:05:21] Michelle: It's hard to imagine a better advertisement than hearing through word of mouth that people are getting bonuses and returns. I mean that's, that's pretty powerful.

[00:05:32] Larry Burdine: Oh yeah, basically you got a warmer feeling for uh, his business acumen.

[00:05:38] Michelle: Yeah. Money definitely helps with that.

[00:05:43] Larry Burdine: Yeah, yeah, I, I didn't really change my mind about him being a blowhard.

[00:05:48] Michelle: Yeah. But he was a blowhard who knew how to invest, I guess.

[00:05:52] Larry Burdine: Yeah, yeah.

[00:05:54] Michelle: Larry, though, still wants to do a little more looking into Doc. He sets up meetings with him at two of Doc's offices just to see his situation, to make sure he had a real company and people really working for him. It seems to check out.

[00:06:09] Michelle: No red flags or anything?

[00:06:11] Larry Burdine: Nope.

[00:06:12] Michelle: Then one day, about two years ago, Larry starts experiencing heart problems. He goes to the hospital and it's worse than he expected. He needs surgery. He's there for days for tests and then waiting for a surgeon, and who appears in his hospital room?

[00:06:30] Larry Burdine: Doc shows up, sort of unexpected. And uh...

[00:06:34] Michelle: Not the Doc you were hoping for.

[00:06:37] Larry Burdine: Yeah, right. And uh, we, the wife and I and Doc... (pause-chokes up) we...

[00:06:48] Michelle: I'm so sorry.

[00:06:54] Larry Burdine: We uh, we got down on our, on our knees and held hands, and Doc prayed for my recovery. Uh, then he left. And, you know, about two weeks later I moved my IRA over to him. So if I was sitting on the fence, I think that, that meeting convinced me that he was a, a good man, you know.

[00:07:23] Michelle: Yeah. So that was a real turning point.

[00:07:26] Larry Burdine: Yeah.

[00:07:27] Michelle: So Larry, his wife, his mother-in-law, and his brother-in-law all now invest about a quarter of a million dollars with Doc. Immediately they get a 6½ percent bonus for acting so quickly. There was just one thing nagging at Larry.

[00:07:42] Larry Burdine: The only thing that was really weird, and it hit me when it happened, is that in my hospital room, when we got up off of our knees and prayed, I went to hug Doc, and he just sort of shook me off, 'cause he was leaving. He didn't take the time to hug me. He, he sort of brushed me off, 'cause he was having to meet with another person in the hospital.

[00:08:16] Michelle: Huh.

[00:08:16] Larry Burdine: Yeah, my gut says, you know, that, that doesn't feel right.

[00:08:19] Michelle: Now, across town there in Dallas, let's check in on Charles who first came across Doc more than 15 years ago. He and his wife were invited to a lunch seminar that some of Charles' trusted former colleagues put together. Doc was one of the speakers.

[00:08:34] Charles: He liked being the center of attention, I'll put it that way. That was obvious. Liked to be noticed.

[00:08:41] Michelle: Way back in 2004, Charles and his wife decided to rollover some annuities to one of Doc's recommended investments with another financial institution. All is fine. They don't hear from him again for another decade, when that investment matures and it's time to do something else with that money. Charles gets a letter from Doc.

[00:09:01] Charles: He had written across the face of it, "There is a better way."

[00:09:07] Michelle: Uh-oh.

[00:09:08] Charles: Yep.

(chuckling)

[00:09:12] Michelle: And let me, let me guess, the better way was his way.

[00:09:17] Charles: Yeah, was his way.

[00:09:19] Michelle: This is a time of great transition for Charles who had retired from a long career in law enforcement. His wife had been diagnosed with Alzheimer's Disease a few years earlier.

[00:09:29] Charles: We were always savers, and we lived a pretty simple lifestyle. She took care of her parents for years. And uh, we had one, one son who lived to be about, well almost 41, so it was just the two of us. We, we were comfortable.

[00:09:50] Michelle: They had a six-figure savings they never expected to spend. They couldn't travel, but knew Charles's wife might need nursing home care. They just wanted someone to help them manage finances for this next stage. And maybe that ultimately donate their savings to charity. So they went with Doc's plan that claimed to invest in five different things, including stocks and mutual funds. Sadly, a year later, Charles's wife dies, and Doc starts persuading Charles to invest more, to take advantage of a special rate of return, all guaranteed, of course, Doc said. But when it came time for getting statements and details...

[00:10:30] Charles: I mentioned, "Hey, the last quarterly report didn't show that $20,000 I sent." And "Oh, well I'll, yeah, you’re right, I'll, I'll take care of it." Well, right then I, I knew I wasn't going to send any more money.

[00:10:51] Michelle: You were kind of like, okay. That's it for this guy.

[00:10:55] Charles: Yeah.

[00:10:57] Michelle: By now, Charles had around $400,000 invested, and all this time, Doc would send him little cards or gifts, books he wrote like "Jesus Christ - Money Master."

[00:11:10] Michelle: Those are four words that you don't always hear together, Jesus Christ and Money Master.

[00:11:17] Charles: Yeah. (chuckles) He was not a writer.

(chuckling)

[00:11:24] Michelle: I think there were a lot of things he wasn't.

[00:11:27] Michelle: So just as Charles has finally had it with Doc, and only days after Larry and his family invest a quarter of a million dollars, this is March of last year, a day of reckoning rocks this Dallas community. It finds Larry and his wife across the ocean where they had been enjoying the fruits of their supposed investments on a vacation in Italy. They had just spent a beautiful day. This was the time of their lives. A frantic phone call comes at night from his mother-in-law.

[00:12:00] Larry Burdine: She was okay until the Feds showed up.

[00:12:02] Michelle: Doc Gallagher was in jail, accused of fraud.

[00:12:07] Larry Burdine: She was upset.

[00:12:09] Michelle: Yeah.

[00:12:10] Larry Burdine: She basically said, "You know, I never did, I never did trust that SOB."

[00:12:15] Michelle: Oh... gosh.

[00:12:18] Larry Burdine: Just unbelievable, you know, jaw drop, just, I can't believe this. I mean, to do what he did to me prior to, to my uh, having a heart operation, it takes somebody that's a cold-blooded (bleep) to do something like that.

[00:12:43] Michelle: This was Doc, after all. The guy everybody knew, who'd come to your house, send you a birthday card. The guy who would quote scripture and say that God sent him to help. It's sickening to the families he's affected, like Allen and Margaret who days earlier had tried to get Doc to send them some information about what was going on with their investment.

[00:13:06] Allen: I mean, at first, we couldn't believe, there's got to be a mistake. There's got to be a mistake.

[00:13:10] Margaret: It was a terrible day. And uh, we experienced all the different emotions of grief for quite some time after. Disbelief, sadness, anger, questioning ourselves.

[00:13:28] Michelle: Or Harold and Anne in their 80s who were just about to take their money out of Doc's investments, they were just waiting till they got back from vacation, literally days after his arrest.

[00:13:39] Harold: If I live 30 more years, then I can, I can depreciate it all.

[00:13:45] Michelle: Yeah.

[00:13:46] Harold: Doc wanted, uh, he wanted attention. And he was uh, smooth enough to uh, get it in nefarious ways is what it boils down to.

[00:14:00] Michelle: Dallas prosecutors charged Doc with securities fraud and money laundering. But there's also a federal complaint against him, and more charges still pending outside Dallas. So far, around 200 victims have been identified. Authorities say Doc took at least $55 million, but that those numbers are likely to keep climbing to well over $100 million. The Feds call Doc's investment strategy none other than a Ponzi scheme, like a mini-Bernie Madoff for the Texas Christian set.

[00:14:36] This is something that, you know, happened over a period of years. He woke up every single morning and made a decision on whether he was going to scam somebody or not. There's some people who were at the end of their life, um, trying to figure out how they're going to get their next meal, or how they're, they're going to pay their rent. Then you also have people who are, you know, just barely into their retirement age, and they still have so many years ahead of them.

[00:14:59] Michelle: That's Assistant DA, Alexis Goldate, who has worked with many of the victims. She's particularly disgusted by this.

[00:15:07] Alexis Goldate: He had a, a way of exploiting people's vulnerabilities, and the biggest one, I think, was loneliness, the fear of being alone or the fear of, of not being able to take care of yourself. These were people that were wanting to prepare, who were trying to do the right thing, but you know, even his books, he would target them and say things like, "The Money Doctor's Guide to Taking Care of Yourself When No One Else Will." He would tell people, you know, you need to ask your broker, if I don't have any money, would you still care about me? And that's what, and so he gave these people the impression that, you know, it's not about your money. I am here for you. I am more than your financial advisor. I'm going to take care of you. Or I'm going to take care of your spouse if something happens to you, or I'm going to take care of your mother or your children.

[00:16:00] Michelle: Yet, as out there, in the spotlight and in your face, in your living room as Doc was, he's still something of an enigmatic character. No one we spoke to had any idea that Doc had no investor's license, which is illegal. No credentials at all as a financial advisor, even though in marketing materials, he claimed to be a fully licensed wealth manager and advisor.

[00:16:28] (clip) I've been doing this for 20 years, been on the radio for about 12.

[00:16:31] Michelle: Doc was licensed to sell insurance, so he could sell annuities which are like agreements with insurance companies, but not the kinds of securities he claimed he was investing people's money in. The Securities and Exchange Commission, looking at one four-year period, showed that Doc made only one legitimate investment that entire time for $75,000. All those other tens and tens of millions of dollars investigators say none of it was ever invested in anything. It all went to the Ponzi scheme itself, paying out returns and bonuses, paying his staff, his personal expenses, and, of course, his radio time. Just in January of last year alone, he raised a half a million dollars from victims. When he was arrested, the total cash he had in the bank was just over 800,000.

[00:17:26] Alexis Goldate: He wasn't super flashy. And it was the thrill of the taking, the, you know, it fed his ego. I think he enjoyed the fact that people called him Doc Gallagher or Doc, and that people looked up to him and people trusted him, and that, you know, he kind of put himself up on this pedestal and as being somebody. And he was exactly the opposite of what he said he was.

[00:17:46] Michelle: Doc put himself out there as first and foremost a Christian, a Bible-quoting, scripture toting family man. He would officiate people's weddings. He was married to a woman named Gail, described by everyone we spoke to as attractive and silent. She's listed as a Director of Doc's company. He has a daughter whose two children he had adopted along with another boy from Asia who worked with Doc. And there's another foreign born young man that acquaintances say was almost like a son to Doc whom he had taken under his wing. William Neil Gallagher, as Doc was born, is indeed smart. He claims to have come from hard scrabble New York City beginnings. He really had, it turns out, served in the Peace Corps back in the '60s in Thailand. He really did get a PhD in Philosophy from Brown University. His dissertation was titled, "The Concept of Blame." He really did work on Wall Street at two different firms for five years in the '80s. He claims he left in disgust because of the high commissions people were charging investors, and he wanted to, in his words, "put people first." He worked in insurance for a while, and in 1999, Texas cited him for doing investments without a license. He did pass three securities exams according to the SEC and was associated with Real Financial Brokers up to 2001. After that, he was associated with an investment advisor, but again, he himself was not licensed. Authorities trace his Ponzi scheme back to at least pre-2013. No one seems to know what set him on that path. Not long before his arrest, he started warning his clients about government regulators, saying people shouldn't trust them, and if they started asking questions, don't answer, which is something he had even written about in his books.

[00:19:43] Alexis Goldate: He talks about a regulator, if they don't find a bad guy, they'll create one. And so he, he had already kind of started grooming his, even from day one, some of his investors with this idea that, you know, to them, he said, I'm a big fish. And they don't like my style, they don't like what I'm doing.

[00:20:01] Well I started a file on him, and when I start a file on you, that's not a good sign...

[00:20:07] Michelle: That is Dallas based, veteran investigative journalist Dave Lieber, known as The Watchdog. He's one of those rare, hard-nosed, old-school style reporters with the Dallas Morning News and has a column that doggedly pursues greed and corruption. He always felt there was something rotting inside The Money Doctor's bag of tricks.

[00:20:28] Dave Lieber: I started to collect uh string as they say in the newspaper business so that I knew that one day I'd be writing a story about him. I just wasn't sure how I would get it, because I, at the time I didn't have any victims.

[00:20:39] Michelle: What was it?

[00:20:39] Dave Lieber: I just had suspicion. He was a master marketer, and he was doing things that no other financial advisor was doing. And I mean it was just all too good to be true. He, if you were sick, he would show up at your house, fill your room with flowers. He, he'd send you gift cards, uh to his clients. Um, he had dances in hotels, he had a movie night, and, you know, most people who are in the financial in--, investment business, they don't go through all that trouble to hook their clients. But he was the opposite.

[00:21:09] Michelle: Doc's heavy on the self-promotion radio shows, peaked Dave's interest enough to check out his seminars and slick marketing material.

[00:21:17] Dave Lieber: This headline, "Why are these leaders talking to Doc Gallagher?" And it has, then Governor Rick Perry, former Governor Mike Huckabee, the late Zig Ziglar, the late Ebby Halliday, who's the First Lady of Real Estate. Joel Osteen and Nolan Ryan, I mean these are the superstars of Texas, and they were all photographed with him on his one sheet.

[00:21:38] Michelle: All part of Doc's big Texas persona.

[00:21:42] Dave Lieber: You know, he was an extremely handsome man, too, with a gorgeous head of hair. He had great eyes, he had a great smile, he had a great voice. He was just one of the most charismatic people you'd ever, you'd ever meet.

[00:21:53] Michelle: Kind of the perfect, the perfect storm of attributes to be a swindler ultimately.

[00:21:59] Dave Lieber: That's right.

[00:22:00] Michelle: Dave Lieber had actually found out through his state regulatory contacts, that Doc, in fact, had no investment license.

[00:22:08] Michelle: So if the guy had been cited before for practicing without a license, and he was still doing it years later, like a decade later, why weren't they stopping him a lot earlier?

[00:22:23] Dave Lieber: Well that's what I asked them, and you know, they don't really have a good answer. It was really a failure of the regulators here. Because they were onto him, and they just didn't go after him until, you know, it was all over.

[00:22:36] Michelle: Yeah.

[00:22:37] Dave Lieber: Millions and millions of dollars later. As smart as he is, he had one fatal flaw; he liked to brag, and in one of his books, he bragged about sending money, all your money offshore, and saying there's no, they don't go after you in the Bahamas. And I think that's one reason why he, after he was arrested, why he never, ever got out of jail, 'cause he had already basically telegraphed in his book that he was going to, he could flee the country, and his assets were hidden.

[00:23:04] Michelle: Exactly, I mean, that is a huge red flag telling potential investors that the best thing to do is to hide your money offshore. I mean, that's, that's crazy.

[00:23:15] Dave Lieber: In a book.

[00:23:17] Michelle: Exactly.

[00:23:19] Dave Lieber: One of the most interesting things that I saw about his life was, oh the uh, the storage room where he kept the files on all his clients. And it was just a, a complete wreck, and it was totally disorganized, with files stacked up to the walls and things, and I posted a picture on one of my stories, and it showed me that he was disorganized when it came to paperwork, and he didn't keep good records. 'Cause nobody in their right mind dealing with multi-million dollar accounts for investors would ever had had a file room like that.

[00:23:49] Michelle: Lieber says Doc Gallagher, stocky, feisty, and nearly 80 years old may be the most disturbing scam artist he's ever come across in three decades of reporting.

[00:24:01] Dave Lieber: He targeted the sick. One of the victims that I profiled, her name was Susan Pippy, and she had lymphoma, and he knew that she was sick. He knew she was in the hospital, and he, he knew that she could even be dying, but he kept his, you know, he took $675,000 from Susan and her husband, AJ. And, you know, he didn't, he had no conscience because, you know, now she's living on Social Security. It's terrible, because I remember when I interviewed her, you know, she cried. Her whole world just collapsed, and she said it was worse than being sick with lymphoma, because she just didn't know how that could be treated with, by anybody in a way that would ever make that, would ever heal that. It's left a trail of devastation the way a tornado would.

[00:24:43] Michelle: One big question, how could someone do this to his own neighbors, families he had gotten to know, even prayed with? In reality, he had preyed on them.

[00:24:55] Dave Lieber: He wrapped religion around his neck, and he used it to uh, to get Christian, good Christian, good fearing, God-fearing Christians to, to trust him. That, that is a, a very disgusting thing but unfortunately, it's not uncommon. Another thing I learned about him, was, you know, he wrote a letter to Susan Pippy.

[00:25:11] Michelle: Yeah.

[00:25:11] Dave Lieber: You know, denying, denying responsibility, and he was adamant in there that "If I could get out of here, I would gladly visit you face-to-face and give you the details of what happened, and the way it's being characterized in the media is false. I look forward to seeing you -- Doc."

[00:25:25] Michelle: Today, Doc Gallagher has this to contemplate in state prison. He pled guilty, got 25 years. He'll be eligible for parole in less than 6, aged 85 or so. His assets have been seized, properties sold, the receiver handling the case says his victims may get back around 8 cents on the dollar of their investments, payments that are expected to start going out very soon. The receiver is also going after radio stations that sold airtime to Doc without either checking his credentials or telling his listeners that he had none. So many lives turned upside down by one man's vast fraud. Let's hear from some of our characters.

[00:26:11] What I had to do, Michelle, was put off my retirement and work an extra year. I just took every cent that I could for weeks and months of working, we didn't even take any salary. I just put it all in a 401k and that's living frugally, like that's basically eating peanut butter sandwiches, you know. And Michelle, he knew his audience, and he spoke their language and played into their comfort zone.

[00:26:41] After this happened, I would wake up in the night and I had a jigsaw puzzle upstairs and I would, I would go up and I'd work on it, and I would talk to God about it, and I'd say, what on earth happened? I mean I literally hugged that man a couple times. I did. And I, and I'm not a person that even hugs my own family. We're not huggers.

[00:27:01] I'm not in the frame of mind to let something like this ruin the rest of the time I have left to live. I, I, uh, I see the sun come up every day and, and I want my days to be good ones.

[00:27:16] Michelle: Many, though, find it very hard to reach a state of peace just yet, struggling with finances, faith, reeling from being stone-cold deceived.

[00:27:27] He took part of my future. He took, a, a portion of what I had looked forward to doing in retirement, so I really haven't uh forgiven him. I don't know whether I will ever forgive him. I don't, I don't feel the least bit like forgiving him. I feel really sorry for some of the people whose lives he absolutely ruined, who are not going to ever be fine again.

[00:27:57] For a very warm-hearted person that he appeared, he's just ice cold. Fortunately, I didn't invest everything. I didn't invest money that I ever intended to spend.

[00:28:08] Michelle: Well, good for you. I'm happy to hear that. And I'm also very sad to hear that Jesus is like the worst money manager ever.

[00:28:16] (laugh) Yeah. And uh, you know, I tried to adopt a forgiving nature toward Doc. I, that's what the, that's what we're supposed to give, forgive folks. If I had anything specific to add that might help avoid the situation, but uh, I guess men ought to just listen to their wives, that's all I can say.

[00:28:41] Michelle: I love it. I think that's the best advice I've heard, Charles.

(laugh)

[00:28:48] Michelle: I think that attitude is going to keep you going and strong for a long time. So...

[00:28:54] Charles: Yeah, I hope so.

[00:28:54] Michelle: Thank you so much.

[00:28:55] Michelle: A mystery in so many crimes is, what sets someone on this path? How do they think it'll ever be worth it? Doc Gallagher spent most of his time self-promoting, and none of his time actually investing. It was all a very colorful, cleverly painted shell. The best advice from experts to protect yourself is to check out state and federal databases, regulatory boards, and sites like Broker Check to see if your advisor has credentials or any past complaints. Many of Doc's victims tell us, they simply wish they had left their money with well-established firms, and avoided the smaller, local guy with big claims and guarantees. Let's bring in a very knowledgeable expert now. Gerri Walsh is Senior Vice President of Investor Education with FINRA, which is the Financial Industry Regulatory Authority. So, Gerri, we're so happy to have you with us to help us sort this all out. And we know that investment fraud in American costs people billions, billions of dollars every year. And the old fashioned Ponzi scheme isn't really going away anytime soon, is it?

[00:30:02] Gerri Walsh: The old-fashioned Ponzi scheme is alive and well, and it can be extraordinarily difficult to detect.

[00:30:09] Michelle: What makes it hard to see?

[00:30:12] Gerri Walsh: Well, often the scams that are the most insidious are the ones that are not necessarily promising outsized returns. Instead, they're promising something a little bit more steady, something that's close to the average market returns over a long period of time. And because it's not necessarily an outsized return, it can them seem like it's likely to be real.

[00:30:41] Michelle: Got it.

[00:30:42] Gerri Walsh: One of the things that we find with Ponzi schemes, in particular, is that often the individual, is not actually licensed to sell securities to you and to me or to give investment advice, but we offer a tool at FINRA called Broker Check, and it's really easy to find. FINRA.org/brokercheck. And you can look up and find out whether the investment professional that you’re trusting your hard-earned money to is actually licensed either to sell securities or to give advice or both. It is critical that every investor use broker check to check up on their investment professional, and don't just do it once. Do it on a regular basis. One of the things that a lot of investors don't realize, and that I hope through your podcast they're able to learn is that in order to give investment advice, to be managing someone's money, you have to be registered, either with FINRA as a broker or with the SEC or with a state securities regulator as what's called and investment advisor. If they're not in Broker Check, that's a big red flag, and if you look at their record and see that they have a history of disciplinary actions that have been taken against them, customer complaints, that's another red flag.

[00:32:08] Michelle: In our story that we're focused on this time, um, there, there was something I found extraordinary, and it was that even when people did have a couple of thoughts, like, oh, maybe I should look a little deeper, it was all of their friends, their trusted friends, long-time friends who vouched for the guy and said, "Oh, well my investments have been with him forever. He's great. Everything's been fine with me." How powerful is the power of your peers when you might be about to check something out, but everything seems okay in your friend's bank account.

[00:32:40] Gerri Walsh: The power of your friends is immense. It is immense, and you cannot underestimate it. It's actually called the social consensus tactic. Um, that leads you to believe that if other people are doing this, whatever this is, it must be good to do. It must be okay. I'm not going to check out this person, because my pastor uses this person. But you have to remember that whatever's right for someone else, might not be right for you. It's always a good idea to check out somebody and make sure that you've independently researched them. It's hard to go against that tide.

[00:33:23] Michelle: So what would you say, in your experience, are sometimes the subtler red flags that maybe you should have your radar up for?

[00:33:33] Gerri Walsh: Well the fact that somebody is advertising themselves as an expert doesn't mean that they are. That's actually another tactic that cons use, it's called the source credibility tactic. They'll tap into something and you, you know, it might be that they, they share your faith or that they share your profession or they share your ethnic background, whatever it is, but they try to build this credibility with you as holding themselves out as an expert, but guess what, the fraudsters lie.

[00:34:03] Michelle: And in our story, the scammer, Doc Gallagher, seemed to try really hard to gain people's friendship first.

[00:34:10] Gerri Walsh: You know, somebody gives you a gift, you think, oh, I need to give them a gift. They sent me a card, I need to send them a card, and it can be a very effective technique. I hope a seminar on how to maximize your retirement savings, and I might give you a meal, or I might give you a book, and the idea is that you create this kind of obligation, you give your money to manage.

[00:34:37] Michelle: Yeah, and this was using the friendship circle, it was using religion, a lot. You might never think that that's a red flag.

[00:34:47] Gerri Walsh: Especially if you’re a person of faith, it's really hard to accept that somebody might defraud you in the name of God. Might say, "Let's get on our knees together and pray," while they're picking your pocket, but that's exactly what savvy con men will do to extraordinarily savvy investors. There tends to be this tendency of blaming the victim, well why couldn't they have seen that this person was a fraud? It's because the fraudster spent an enormous amount of time and energy making their scheme look real. The reality is, if something is too good to be true, you’re probably dealing with an amateur. And especially when the scammers appeal to who you fundamentally are, whether it's your religion, or your ethnicity, or your gender, or your profession, it's really hard to accept that, that somebody who's in that tribe, right, is using that connection to take advantage of you.

[00:35:45] Michelle: This is excellent advice, and you tell it so well, so thanks so much, Gerri, for doing this.

[00:35:51] Gerri Walsh: Thanks for having me.

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[00:35:54] Michelle: If you or someone you know has been the victim of a fraud or scam, call AARP's free Fraud Watch Network Helpline at 877-908-3360. Their trained fraud specialists can help you know what to do next and how to avoid scams in the future. Thank you to our team of scambusters; Executive Producer, Julie Getz; Producer, Brook Ellis; Associate Producer and Researcher, Megan DeMagnus; our Audio Engineer, Julio Gonzalez; and of course, Fraud Expert, Frank Abagnale. Be sure to find us on Apple Podcasts, Spotify, or wherever you listen to podcasts. For AARP's The Perfect Scam, I'm Michelle Kosinski.

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AARP’s Fraud Watch Network can help you spot and avoid scams. Sign up for free Watchdog Alerts, review our scam-tracking map, or call our toll-free fraud helpline at 877-908-3360 if you or a loved one suspect you’ve been a victim.

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