Affinity Theft: Preying on Kinship

Seng Tan impressed many struggling Cambodian immigrants in the United States. To them, she represented wealth and success. She drove a shiny black Mercedes, dressed in expensive clothes, and claimed to be a  millionaire. Yet she was also like them. She too had fled Cambodia during the brutal regime of the Khmer Rouge. She also spoke their native language (Khmer), making an important connection with many of the newer immigrants who spoke little English. She knelt in their temples to pray and cried and laughed over their shared experiences.

Tan said she and her spouse, James Bunchan, had been sent by the “gods” to make “the Cambodian people” millionaires too. The immigrant families, who often had little money, scraped together money from relatives, cashed out retirement accounts, and took out equity loans on their homes to invest with Tan and Bunchan. Instead of seeing riches, the victims lost approximately $30 million in a pyramid scheme. Money from new investors was used to repay old ones and was siphoned off by the fraudsters. Tan and Bunch were found guilty of fraud. Tan was sentenced to 20 years in prison. Bunchan was also convicted in a murder-for-hire plot in which he had discussed targeting 12 of the Ponzi scheme victims and a Massachusetts federal prosecutor. He was sentenced to 60 years in prison. Their prison sentences did little to help those betrayed victims who lost their savings though. Immigrant groups are especially vulnerable to affinity theft because they may be isolated from the larger community and their flow of information may be limited by language and other barriers.

Building and Breaching Trust

 Tan and Bunchan infiltrated the Cambodian community by playing on their ethnic heritage and common experiences as fellow Cambodian immigrants. These types of schemes are known as “affinity theft”. The practice relies on building trust with victims based on shared characteristics, such as age, race, religion, ethnicity, or affiliation with professional groups, for financial gain. According to Gary Herbert, former governor of Utah:

“Affinity fraud is the worst type of white collar crime, because it preys on, and betrays, personal relationships.”

Affinity fraud is particularly prevalent in Utah among members of The Church of Jesus Christ of Latter-day Saints. During his term, Herbert signed three bills into law aimed at protecting people from affinity scammers.

The savvy fraudsters often build trust by duping respected leaders in the targeted community or organization. Because the investment opportunity is endorsed by trusted leaders, people tend to fall victim more easily. According to Jenice Malecki, a New York securities lawyer who specializes in affinity fraud case:

“People want to trust. Especially in affinity situations, where people feel more comfortable for one reason or another, be it a church or an ethnic community, they tend to not look as hard as they should at what’s in front of them.”

Avoiding the Scam

The New York State Office of the Attorney General offers these tips to help from falling prey to an affinity scam.

  1. Beware of name dropping or testimonials from other group members. These fraudsters often pay out high returns to early investors, using money from later investors. These early investors may be enthusiastic about a scheme that may collapse completely by the time you have invested.
  2. Obtain a prospectus or other form of written information that details the risks and the procedures to withdraw your monies.
  3. Ask for professional advice from a neutral outside expert who is not within the group. Outside expertise from an accountant or financial planner or attorney can help to evaluate the investment opportunity.
  4. Call the Attorney General’s Office before investing to learn more about the salesperson and company. If the salesperson or firm is not registered in the state, it is a warning to inquire further.

Affinity theft causes millions of dollars of loss every year. Experts estimate a significant number of these scams go unreported. As a forensic accounting firm, well versed in seeing a variety of fraud schemes, SDC suggests individuals practice caution and educate themselves about affinity theft. Be wary of anything that seems too good to be true. It often is.

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