This is an archived article that was published on sltrib.com in 2010, and information in the article may be outdated. It is provided only for personal research purposes and may not be reprinted.
Utah is renowned for the Latter-day Saints, spectacular landscapes and the 2002 Winter Olympics. Unfortunately, it also is known for affinity fraud, the crime that occurs when friends, relatives or church members steal from each other through deceptive investment schemes.
Sen. Ben McAdams, D-Salt Lake City, thinks Utah can do more to end its reputation as a fraud capital of the United States. We think there's lots of competition for that title, beginning with Wall Street and Bernie Madoff, but we agree with McAdams that it's worth the effort for Utah to discourage affinity fraud by strengthening the laws against it.
McAdams, a securities lawyer, is working on a package of bills for the upcoming legislative session. They still are in the drafting stage, but he presented his ideas to a Utah Senate committee the other day and we liked what we heard.
The proposal that deals most directly with affinity fraud would enhance the civil and criminal penalties that could apply to scam artists who prey on their victims by abusing a relationship of special trust. These enhancements would apply to family members (by blood or marriage), persons who live together, caregivers, people entrusted to manage another person's money, assets or property, people having a fiduciary or a confidential relationship, or a person who occupies a position of authority and so is able to exercise undue influence. Examples of that last category would include a religious leader, doctor or employer.
There also would be a category for people who perpetrate a fraud against a vulnerable adult, such as a person with dementia.
Another of McAdams' proposals would pay whistle-blowers to provide information to the state Division of Securities that is used in successful enforcement actions. The amount would be a fixed percentage of monetary sanctions, awarded at the discretion of the division.
Other provisions would add $150,000 to the division's Investor Education Fund (it currently receives $100,000) to warn Utahns about affinity fraud.
Finally, McAdams would hire more attorneys and investigators to pursue Medicaid fraud. Last year, according to McAdams, the legislative auditor general estimated that the state lost $5.8 million to fraudulent claims against this health insurance program for the poor.
McAdams noted that the FBI is investigating $1.4 billion in fraud cases in Utah alone. He quipped that "our fraud industry is double the size of our ski industry." That's funny, but on second thought, it's infuriating.