Retirement Savings Tip: Kidnapping & Ransom not Advised

Four wealthy German retirees took a decidedly wrong turn in their effort to recoup $3.4 million ($U.S.) in lost retirement savings they blamed on their U.S. investment adviser.

In June 2009 the dynamic geriatric quartet -- ages 61 to 80 -- kidnapped the investment advisor (in Germany) and then demanded a ransom to restock their depleted retirement savings. The adviser, James Amburn, set his rescue in motion four days later when -- at the demand of the posse -- he faxed a withdrawal request to his Zurich bank. His trade order read: "Sell 100 Call Pol.ICE."
Three of the four retirees-turned-kidnappers, along with a former Amburn employee who was an accomplice, were sentenced this week to jail terms of up to six years. The fifth kidnapper was spared a sentence due to illness.

Madoff Memories? Like victims of Bernie Madoff's massive fraud scheme, the German retirees seem to have been lured by the promise of steady (read: impossible) returns. To be clear, Amburn has never been accused of fraud; he seemingly had a legit investment firm that was focused on Florida real estate. But, like Madoff, he apparently made promises of steady payouts. According to reports, Amburn promised a 12 percent annual payout. Sound familiar? He managed to deliver that 12 percent for the first four years of the deal, starting in the late 1990s. But when the real estate bubble popped, the payouts stopped. And it seems that the retirees' original investments were lost as well.

Beyond the obvious point that crime does not pay for retirement, this extreme tale of clients-gone-bad is a reminder of how dumb it is to listen to anyone who promises you a steady return that exceeds the yield on a U.S. Treasury bond. For the record, the 12 percent return Amburn allegedly guaranteed was more than double the yield on the 10-year Treasury through the late 90s and early '00s.
In addition to my lack of sympathy for anyone who resorts to violent crime -- the retirees allegedly beat Amburn and broke two ribs -- I keep circling back to my T-bond rule: If you fall for a promised return that greatly exceeds the yield on the 10-year Treasury you are an accomplice to any future disappointments. The kidnapping was the retirees' second crime. Their first crime was not questioning how someone could promise them a steady payout that was more than double the yield of risk-free Treasuries.

Related MoneyWatch Articles: Madoff Victims Not Blameless Can You Trust Your Financial Planner? Who Manages Your Money?

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