2 Investigators

CHICAGO (CBS) ― Families say they have lost their life savings after falling under the spell of a smooth-talking, self-proclaimed investment guru.

At least 350 people are out a total of about $10 million. They're asking why the alleged Ponzi player is not in jail.

CBS 2 Investigator Pam Zekman reports on one devastated victim.

We'll call her Judy. She says Kevin Carney claimed to have developed a day trading program that pre-empted big stock market investors. He told her it gave him a three-minute edge over everyone else as to when he could buy and sell.

And he guaranteed clients a 20 percent return on their investments. Impressed, Judy invested $30,000 at first. Then, she invested more. She cashed in her retirement savings and an IRA to increase her interest income and quickly made $270,000 -- on paper.

Her purported fortune climbed to more than $4 million dollars in a year. Carney emailed her a welcome to what he called the "millionaire club."

"I believed in him at this point. I was elated that I actually was a millionaire," Judy says.

Then, last October Carney's office in Elk Grove Village was shut down by the Illinois Secretary of State's securities division. In an administrative complaint, the state said Carney committed "fraud in the sale of securities" because "significant amounts (of the investors' money) were used to pay interest to earlier investors, a classic Ponzi scheme."

Judy and other investors were stunned.

Since all this happened a year before the Bernie Madoff scandal, they were not alert to the signs of a Ponzi scheme. One clear sign that should have alerted her: Carney never gave her documentation of the trades he made, just account summaries he created showing her rising assets and income.

A year ago, the state seized cash in Carney's bank accounts, but the more than 350 investors will only get 5 cents back for every dollar they put in.

"I think the guy deserves to be behind bars," said David Kane, an attorney representing some of the investors.

Kane filed a federal case against Carney in hopes of retrieving even more money.

"Even though it's not the size of the nationally publicized Madoff-type scheme, it's still very significant to the people who lost money," he said.

And those people are angry that a year later, Carney has not yet been charged with a crime.

"How about we charge him with a crime?" Judy, the victim, says. "That would be nice. Nobody is doing anything"

In total, she says she and her family members lost $500,000.

"He stole my life savings, and he defrauded me. It's my pension and it's my 401k, it's everything," she said.

Last week, Zekman tried to ask Carney where all the money is, but he had no time to talk.

"I'll call you back for an appointment," he said as he drove away.

He never did call, and his attorneys declined to comment.

A spokeswoman for the attorney general's office confirmed that a criminal investigation is underway. She said that because the case is complex and involves so many victims and transactions it has taken investigators time to document the fraud.


How do you avoid becoming a victim of an investment fraud?

Check to be sure the person you are dealing with is a licensed investment advisor or salesperson, if they will be buying and selling stock for you. You can do that by calling the Securities Division of the Secretary of State's office at 217-782-2256 or look it up online here. You can also find out if the person has a disciplinary history.

Beware of someone who promises high rates of return that are above what the market is currently offering. Make sure you have a written copy of the offering or investment plan. It should disclose the risks.

And if even one promised payment is missed, report it promptly.

(© MMIX, CBS Broadcasting Inc. All Rights Reserved.)

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