Investors looking for high yields should use
caution
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| By Laura Bruce
• Bankrate.com |
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People from across the nation who responded to the
Federal Savings LLC Web site offer for 8.85 percent yield on a fixed-rate
"term certificate" shortly before the company was ordered
by Washington state authorities to stop advertising are, apparently,
the first investors to get their money back.
Those who sent money earlier -- prior to the state's
March 8, 2007, cease-and-desist order -- may have to wait until
late summer before finding out if authorities will be able to recover
their funds.
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| Federal Savings was 'the unbank' when
we encountered it |
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Investigators with the securities division at the
Washington State Department of Financial Institutions have identified
and frozen more than $2 million held in at least four Seattle-area
bank accounts, said Tyler Letey, chief of enforcement. "We
got a temporary restraining order because we believed there were
funds in local bank accounts and we wanted to make sure those funds
stayed in those accounts."
Although Letey would not divulge the total amount,
he says he has a good idea how much money Seattle-based Federal
Savings received from individuals who invested in the company's
advertised term certificates. A stipulation filed in King County
Superior Court calls for Jeremy M. Stamper, a principal of Federal
Savings, to identify all investors and account for all investor
funds by Aug. 15. If he fails to do that, a receiver will be appointed
to complete the task.
"My understanding is that the people who have
been reimbursed were people who invested late," says Letey.
"In essence, their checks hadn't been negotiated yet and were
sent back to the investor after the address had been confirmed.
That was a decision I think (the company) decided to make in good
faith and because they didn't want to accept any more investors'
money after the cease-and-desist order."
Indeed, a woman named Jane said she sent an application
and a cashier's check to Federal Savings on March 11 and grew concerned
two weeks later when she hadn't received a certificate and was unable
to reach the company by phone or e-mail. Jane contacted Bankrate.com
after reading one of Bankrate's previous
articles on Federal Savings. She then called authorities in
Washington state and has since received her check.
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| The Federal Savings LLC story |
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Early this year, investors flocked to the three Federal
Savings Web sites, drawn by higher yields and the site's similarity
to scores of legitimate bank Web sites, even though Federal Savings
was not a bank and its investments were not insured by the Federal
Deposit Insurance Corp. Although Federal Savings did not claim to
be a bank, investigators said the Web site was misleading.
Stamper, who has never responded to Bankrate.com's
phone calls or e-mails, reportedly has claimed he never intended
to mislead anyone.
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