Death Row gifting club scam prevalent in Oregon

Salem – The pyramid scheme has a new look and the Oregon Division of Financial Regulation is warning consumers to steer clear. Gifting clubs, such as Death Row, are illegal pyramid schemes that are scamming several Oregonians.

The Death Row gifting club, not associated with Death Row Records, was operating in Oregon last year. It advertised on social media and in online forums as a community wealth share group. More than 20 Oregonians lost their initial $1,400 investments. 

The Death Row gifting scheme promised financial returns of at least $9,000. The division was alerted to the scheme when an Oregonian reported not receiving anything in return for their $1,400 investment. The investment was not registered with the division and no one was licensed to sell investments in Death Row. Victims invested their money using a cloud-based payment platform and communicated with others about the investment during online forums for the Death Row program.

The division is still investigating the Death Row gift club. Anyone who has information about the scheme or was a victim of it are asked to contact the Division of Financial Regulation Advocacy team at 888-877-4894 (toll-free).

“If someone invites you to join a gifting club, just say no to their high-pressure tactics and stories of high earnings,” said TK Keen, Division of Financial Regulation administrator. “The simple reality is that only a few people profit from these schemes at the expense of everyone else who ultimately lose their investments.” 

Gifting club schemes are similar to pyramid schemes because no new money is created. Members of the scheme encourage friends, family, and co-workers to give gifts of cash to higher ranking members. The only way for a person to recover the initial investment is to bring new members into the scheme.


The division has three tips to spot an illegal gifting scheme:

•      Promises of cash, gifts, or electronic payments via mail, email, or social media
  
•      The primary focus is to recruit new investors – no goods or services are being sold
  
•      No written agreements and the promoters boast about high earnings of a few people
  

Contact the Division of Financial Regulation’s consumer advocacy team if you spot a gifting scheme or believe you are a victim of one. Advocates can be reached at 888-877-4894 (toll-free), email dfr.financialserviceshelp@oregon.gov, or by visiting dfr.oregon.gov.  



Do not become a victim of an illegal gifting scheme. Be skeptical about investment opportunities, avoid giving your personal information to strangers, and remember – if it seems too good to be true, it probably is.
For more information about investments and protecting yourself from investment fraud, visit the division’s avoid investment fraud page.


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About DCBS: The Department of Consumer and Business Services is Oregon's largest business regulatory and consumer protection agency. For more information, visit www.dcbs.oregon.gov.  


About Oregon DFR: The Division of Financial Regulation is part of the Department of Consumer and Business Services, Oregon’s largest business regulatory and consumer protection agency. Visit www.dcbs.oregon.gov and http://dfr.oregon.gov/Pages/index.aspx.

SUBJ: Warning: Transfer-on-Death (TOD) Deeds and Insurance Gaps
 
As you may recall, a TOD deed is helpful as an estate planning tool because it is a revocable deed that you record before your death that only takes effect at your death, and it passes the property to the persons you named as grantees on the deed. For many people, a house is the only asset that would require a probate, as all their financial assets are in accounts that have beneficiary assignments. A TOD deed is much like a beneficiary assignment for a financial account.
 
Recently, I have learned about a case that now makes me very reluctant to use a TOD deed, and I am writing to make you aware of the issue. Although the case occurred outside Oregon, I believe the results would be the same here.

In that recent case, an uncle used a TOD deed to leave his house to his niece. When the uncle died, his niece was unaware of the need to get the house insured in her name immediately. And, as luck would have it, the house burned down a few days later.
 
The uncle’s insurance company got out of paying for loss of the house because their policy ended the minute title to the house transferred from the uncle to the niece – which is to say, the minute the uncle died.
 
Thus, the uncle’s insurance policy lapsed as soon as the TOD deed took effect, and the house was instantly uninsured. The niece didn’t know to get insurance in effect immediately and so when the house burned down, the niece got ashes instead of a nice check from the insurance company that was collecting premiums until the uncle’s death.
 
[The actual case opinion from Minnesota is below if you care to read it.]

Although this was in the Midwest, I have done a little reading, and I now think all insurance companies would act the same way everywhere. Thus, when you die with a TOD deed recorded, your homeowner’s policy on that house will lapse.

In short, I understand it, if you use a TOD deed, you are at risk for this loss of insurance coverage if the person who gets your property under the TOD deed doesn’t immediately (a) know of your death, and (b) get a new policy in place.
 
Now, in most cases, the people you leave your house to probably will know when you’ve passed on – but it’s not a sure thing, for many possible reasons. None of us know when we will die, or where our grantees will be, or how long it will be from the time of our death until word spreads. The people we left our property to might die before us, or at the same time or be overseas or otherwise out of touch for a long time. We can’t foresee all the ways that this insurance gap could arise, especially with people living longer and longer, sometimes with failing memories.
 
Regardless of the many ways this gap in insurance could occur, it is a big risk. So I have decided to avoid writing new TOD deeds for clients until I find some way to protect against this risk. Although I really liked the simplicity and low cost of TOD deeds, I don’t like them enough to keep using them until we find a way around this problem.
 
If you too are concerned about this (as I think you should be), you should revisit your estate planning and reconsider the decision to use a TOD deed as part of your estate planning. You should consider whether the ease of the TOD deed is worth the risk that a gap in insurance coverage would occur at your death, leaving you uninsured against what can be a catastrophic loss.
 
Remember that probate is nothing to fear, especially if you have used beneficiary assignments for your other assets. A one-asset probate for a house or land is usually not too complex or too costly.

For some people, revising their will and revoking the TOD deed might be appropriate. For others, putting the real property into a trust might be appropriate. (Or selling the property and banking the money.) There are many options.

The important thing is that you take some action to ensure that your property doesn’t fall into this coverage gap. Unoccupied houses have a greater risk of loss than occupied houses, so the risk of a coverage loss with a TOD deed increases just when you need the coverage the most.
 
If you want to discuss this issue with me further, please contact my office to arrange a phone appointment.                                      
                                                                                 s/ John Gear