May 7, 2001
Contact: Lucas Hamilton
Fort Benton man recovers $100,000 investment
Note: The news release is followed by a list of tips for investors to help them avoid the type of scam that nearly cost a local investor his life savings.
A Fort Benton investor recovered a $100,000 investment from a Nevada-based company after viewing first hand, a crudely painted, wooden model of a baby monitor the company was developing.
Montana State Auditor John Morrison reached an agreement with Medtrak Electronics, whereby the company agreed to return the investments of Montana investors with interest, paid a $5,000 fine to the state and agreed not to sell unregistered securities in Montana.
"This is a good cautionary story to Montanans with a happy ending," said Morrison, Montana's securities commissioner. "Don't make investments with people who contact you over the phone without thoroughly checking out the investment and making sure the salesperson is registered in Montana."
In its findings of fact, the securities department alleged, among other things, that Medtrak Electronics had failed to disclose pertinent information to potential investors, including the fact that various officers of Medtrak had disciplinary proceedings against them in other states. The department said Medtrak securities were not registered in Montana, and that none of Medtrak's broker-dealers or sales associates were registered in Montana.
The Fort Benton investor bought 40,000 shares of Medtrak stock in 1999, but received a letter shortly thereafter from a disgruntled salesman who had quit selling Medtrak stock, informing him of problems at Medtrak. The salesman encouraged the Fort Benton investor to send a letter to Medtrak, demanding the company buy back his stock for the full $100,000.
Medtrak flew the investor and his local stockbroker (who did not sell him the Medtrak stock) to its corporate headquarters in California. The investor said a teenager greeted them at the airport and drove them to Medtrak's headquarters above a gym where the makeshift monitor prototype was displayed.
He demanded the company return his investment, which it did.
At least 16 offers of Medtrak securities were made to Montana residents during 1998 and 1999. At least six sales were made to three Montana residents, totaling $115,000 for 46,000 units.
Morrison's office recovered a $10,000 investment for a Billings resident and interest for all Montana investments during the time they were held by Medtrak.
"Happy endings such as this, with investors receiving full compensation are the exception to the rule," Morrison said. "I caution consumers to be wary of salespeople who promise dramatic profits or guarantee returns. Those types of statements should serve as warning signals."
Morrison said consumers can call his office to find out if a security or a salesperson is registered in Montana at 1-800-332-6148.
Investing in securities is risky enough without worrying about whether your salesperson is out to scam you. Some of the warning signs to look for include:
High-pressure telephone pitches.
Offers of a "low-risk, high-return" investment.
Promoters who urge you to keep the offer secret.
Pressure to invest immediately.
Refusal to give specifics in writing about how the money will be used.
Additional tips for investors include:
Never send money to purchase an investment based solely on a telephone sales pitch.
Do not give out personal information such as your social security, bank or credit card numbers or any other financial information over the telephone.
Never make a check payable to an investment representative.
Never send checks to an address different from that of your brokerage firm or a designated address listed in the company's prospectus.
Have your transaction confirmations delivered or mailed directly to you, not to your investment representative.
Any good investment will weather careful investigation. If you have questions or concerns about an investment or an investment representative, contact the Securities Department in the State Auditor's office at 1-800-332-6148.
<Back to Headlines of Year 2001>