BOSTON - While con artists have long seized upon on major disasters to exploit the greed and goodness of Americans, the speed at which they pounced in the wake of Hurricane Katrina is unprecedented.
Within hours of Katrina's rabid rampage across the Gulf Coast, investors across the country were inundated by fake investment opportunities and appeals for donations from bogus charities. Spam e-mails and "blast faxes" were the main conduit for many of the hoaxes.
"We weren't surprised to see the scams," said Susan Wyderko, director of investor education for the Securities and Exchange Commission. "But we were very surprised by how quickly they began."
While there are no hard numbers, scammers are getting more aggressive in their efforts to capitalize on calamity, said industry observers.
"We're seeing about four times the level of activity we saw with the tsunami" relief efforts, said Audri Lanford, co-director of scambusters.org, a Boone, N.C.-based website that monitors Internet-related fraud. "And that was double the amount of activity we saw after 9/11."
As a result, financial advisers across the country are warning clients to beware of telephone calls, e-mails, faxes and letters soliciting donations for hurricane relief efforts.
On the wrong side
"It just goes to show that there are a lot of very smart people working for the wrong side," said Mario Yngerto, a financial adviser at Navigation Financial Group in Dallas. "What I am telling people is to simply work with what they know, whether it's through their church or local Red Cross."
Some advisers are reaching out to their clients through e-mails or telephone calls. Others are addressing the issue through newsletters, which will be mailed out in the weeks and months ahead.
Then there are those who are going one step further.
At Meara King & Co. PC, clients are encouraged to drop off checks made out to the Washington-based American Red Cross at the accounting firm's headquarters in Kansas City, Mo. From there, a representative of the accounting firm will hand-deliver the checks to a local chapter of the relief organization.
So far, the firm has raised more than $60,000 for survivors of last month's devastating storm.
"We wanted people to feel comfortable that their money is going to a valid organization," said Julie Welch, a planner and director of the firm's tax department.
It's easy to see why some clients are feeling anxious.
As of last Tuesday, there were more than 4,000 websites advertising Hurricane Katrina relief services, about 60% of which are domiciled overseas, according to the FBI.
While being based overseas doesn't necessarily mean a website is fraudulent, it's a good reason to be cautious, experts say.
"Just like these natural disasters bring out the best in people, they also bring out some of the worst elements of the criminal element out there, who are willing to take advantage of those who are willing to give and those who so desperately need the relief," said Chris Swecker, assistant director of the FBI's criminal-investigation division.
To uncover, stop and prosecute hurricane-related fraud, the U.S. attorney general's office recently created the Hurricane Katrina Fraud Task Force.
Meanwhile, the SEC is taking matters into its own hands. In an unusual move, the commission is warning investors to be dubious of hurricane-related investment opportunities.
Among other concerns, the SEC is worried about the proliferation of trading programs that guarantee high returns and promise to direct a portion of those returns to relief efforts.
It is also seeing an explosion of "pump and dump" schemes, in which thinly traded stocks are manipulated via spam e-mails, and "blast faxes," which promise that the stock will rise in a post-Katrina market.
"What really concerns us is the fact that many investors are forwarding these [solicitations] to us, not because they want us to take an enforcement action but because they want to know whether these are legitimate investment opportunities, said the SEC's Ms. Wyderko.
By putting investors on alert, the commission hopes to reduce the pool of potential victims.
"That would make it far less profitable for them," Ms. Wyderko said of the fraudsters.
In the meantime, some advisers are scrambling to make sure their clients don't get duped.
At Evensky & Katz Wealth Management, a letter went out to clients last week on Katrina's likely effect on the economy and stock market.
"So far, we haven't heard anything from our clients in terms of problems or investment opportunities around the hurricane," said Matt McGrath, a senior vice president at the Coral Gables, Fla., firm, which has about $500 million under management.