State near top of pyramid for financial fraud?

Is it just me, or does the Front Range have more than its share of financial fraud, investor losses and other shenanigans?

Recently, the Colorado State Grand Jury indicted an Erie man in a $10 million Ponzi scheme. Jason Trevor Brooks faces 24 counts of securities fraud and theft. The case reminds me of a handful of other cases of financial losses or outright fraud in recent years:

• Mile High Capital Group LLC founder Fredric "Rick" Dyer in February was sentenced to 132 years in prison for securities fraud, theft and other crimes resulting from a Ponzi-type scheme that cost investors some $35 million.

• Factoring company Blue Bear Funding LLC of Windsor went bankrupt in 2005, with more than $20 million owed to creditors and investors, according to the Northern Colorado Business Report.

• Fort Collins businessman Gene Little last summer was convicted of 35 counts of securities fraud involving a Ponzi scheme run through his company, Managed Cash Flow. Prosecutors said Little collected about $11 million from 300 investors, promising a 15 percent return on investment.

• The U.S. Securities and Exchange Commission in February accused a Lone Tree resident of bilking at least 80 investors of $16.8 million.

• The SEC also has charged Aurora investment manager Shawn Merriman with defrauding 38 investors of $17 million to $20 million. Investigators say it was another Ponzi scheme.

And don't forget Bernie Madoff, who allegedly used "feeder" funds in what investigators say was a massive, $65 billion fraud. One of those feeder funds was apparently Boulder-based Agile Group, which had invested heavily with Madoff. Headed by Boulder resident Neil Greenberg, Agile's ill-fated investments with Madoff cost many investors much of their life-savings, including Denver talk-radio host Mike Rosen and former U.S. Rep. Tom Tancredo.

What do these cases say about Colorado and the regulatory or investment environment? Are we experiencing a higher percentage of financial fraud than other states?

Colorado does rank among the worst states for mortgage fraud, but rankings for Ponzi schemes and other financial shenanigans are hard to come by. An admittedly unscientific review of some of the nation's largest states, using searches on Google News as a barometer, finds that Colorado had 138 articles using "Colorado" and "Ponzi" as the search terms. That amounts to one article per 35,793 residents.

Some states, such as New York and Texas, have a disproportionately high number of Google News references, due to the Madoff scandal in New York and the R. Allen Stanford case in Texas.

Colorado references are far higher than those of much-larger states such as Pennsylvania, Ohio, Michigan and Illinois, and it certainly seems that we're seeing financial fraud in state headlines more and more.

A sour economy tends to bring these cases to light. As the economy worsens, Ponzi perpetrators are unable to reel in new investors, and existing investors attempt to withdraw their funds to meet expenses or other financial obligations. So the entire house of cards comes tumbling down.

In Colorado, a lot of cards are lying on the ground.

Christopher Wood can be reached at 303-440-4950 or via e-mail at cwood@bcbr.com.