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DAVID MUNRO and DREW MACONACHY : How Not to Be a Fraud Victim : 2 White-Collar Crime Investigators Provide a Few Tips

August 28, 1989|Gregory Crouch | Times staff writer

\o7 Federal and local law enforcement authorities say a day rarely goes by in Orange County when an individual or corporation doesn't become a victim of white-collar crime.

Southern California is considered the center of financial fraud, home to more con men than any other region of the United States.

The perpetrators range from corporate executives pilfering company funds to small-time thieves who steal investors' money simply by promising them sky-high returns. No one has a precise estimate of how much all of this costs Orange County businesses and residents, but regulators conservatively put the damage at more than $1 billion a year.

Drew P. Maconachy and David J. Munro are private investigators with the Santa Ana firm of Murphy & Maconachy, which specializes in white-collar crime cases.

Maconachy, 39, joined the FBI in 1976 fresh out of graduate school. He was the agent in charge of the W. Patrick Moriarty case, one of the biggest local investigations this decade,conducted by the FBI, the Orange County district attorney's office and the Internal Revenue Service. Moriarty, former president of the Anaheim-based fireworks manufacturer Pyrotechnics, pleaded guilty in 1985 to mail fraud violations in connection with the bribery of local elected officials. Maconachy left the FBI in 1984.

Munro, 43, has worked in law enforcement for 23 years, beginning with a three-year stint in the U.S. Marine Corps' criminal investigation division. He spent the next decade working for the San Clemente Police Department as an investigator. In June he retired from the Orange County district attorney's office, where he had worked for 10 years. He most recently was the supervisor in charge of the district attorney's major fraud unit, which primarily investigates white-collar crime.

Maconachy and Munro recently spoke with Times staff writer Gregory Crouch about how businesses and individuals can avoid becoming victims of white-collar crime.

Q. How extensive is white-collar crime in Orange County?

A. Maconachy: I think it's fairly well known among the law enforcement community that Los Angeles and Orange County are considered the white-collar crime capitals of the world. And every major white-collar scheme can be found in Orange County, from an advanced fee scheme to a Ponzi scheme to fraudulent tax shelters to boiler room operations that are frequently involved in precious metal schemes or other types of investment opportunities that we refer to as get-rich-quick opportunities.

Munro: The only thing I could add would be large-scale real estate investment fraud and bank fraud.

Q. How big are the losses to corporations and investors?

A. Munro: At the time of my retirement in June, I was responsible for the investigation of about $670 million in white-collar fraud cases. Those were Orange County jurisdiction cases only. In one respect or another, victims of those losses either lived in or had businesses in Orange County. It's epidemic. My estimate based upon what I had seen in the three years I was in charge of that division was that figure represents about 40% of the white-collar fraud that exists in Orange County.

Maconachy: You have to remember that Dave's office was not handling all of the white-collar crime cases in Orange County. They had certain jurisdictions over certain violations, but there are also other local agencies and federal agencies that are very much involved in white-collar crime investigations.

Q. How do these con artists find their victims?

A. Maconachy: Take a boiler room operation, for example. Regardless of where one lives, you are going to have a ZIP code assigned to your principal residence, and those ZIP codes will be gathered and stored and analyzed so the purchasers of those lists will be able to determine the relative household incomes or net worth of the people living in those communities. I can randomly call people in Newport Beach and know they are generally going to have a higher average per-capita income than, say, someone residing in Twentynine Palms or in Riverside or in Garden Grove. So from a standpoint of individual investors and precautions that can be taken by them, if the individual is called out of the blue and approached by a broker of some type or an investment counselor or financial adviser whom they don't know and who is offering a very attractive investment, bells, whistles, sirens, alarms should be going off in that person's head. Because that is the typical way these boiler rooms operate. And if you are offered an investment opportunity that sounds too good to be true, it probably is too good to be true.

Q. Are investors and companies that are victimized just naive, stupid or greedy?

A. Munro: By and large, most investors generally are sophisticated. And they are motivated by greed. On a number of occasions at the D.A.'s office, we found the same victims would appear in different cases.

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