A Michigan man was recently indicted in a white collar crime. The man, a dual citizen of the United States and Iraq, mostly targeted local residents of Middle Eastern descent for his alleged Ponzi scheme.

In a typical Ponzi scheme, returns are paid to existing investors out of new investment principal, rather than from profits. This pyramid structure can survive only as long as the flow of incoming cash from new investors isn't overwhelmed by withdrawals by old investors. Investors are usually recruited with promises of high short-term returns. New investor money may also be used to make payments to older investors to give the illusion that the investment is successful.

In this case, the Michigan man personally solicited investors, claiming the investment principal would be used to help rebuild Iraq, fulfill contracts with the United Nations and engage in an export/import business. He promised high returns and no risk of loss. However, he failed to pay the returns or return the principal. Prosecutors believe he has defrauded investors out of approximately $2.5 million. His case is awaiting trial.

The U.S. Department of Justice has made white collar crimes one of its priorities, creating the Interagency Financial Fraud Enforcement Task Force in 2009 to better coordinate federal enforcement and regulatory efforts. Locally, the U.S. Attorney's Office for the Eastern District of Michigan seeks to combat investment fraud not only through prosecution of cases, but also by raising public awareness. In particular, the local office cautions investors that if a fund sounds too good to be true, it probably is.

The flipside of that effort, however, is overzealous prosecution. Aggressive prosecutors may attempt to bring charges against any business or individual connected to an alleged fraudulent scheme. In such event, you need an attorney to protect your rights -- and your presumption of innocence -- until prosecutors have met their burden of proof under applicable law.

Source: Dearborn Press and Guide, "Feds cracking down on fraud: Dearborn man indicted for operating Ponzi scheme," June 25, 2012