Stamford man creates anti-Ponzi scheme software

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Stamford man creates anti-Ponzi scheme software
By Michael C. Juliano
STAFF WRITER
Posted: 02/11/2009 09:58:41 PM EST

A Stamford estate planner and non-lawyer has come up with a software module that he said will help prevent investors from falling victim to Ponzi schemes.

The software, called the Non-Lawyer Estate Planning System, was developed in 2007 to analyze 70 criteria for a safe investment and stop people from making unwise bets, said Israel Lustig, chief executive officer of Intergenerational Wealth Preservation, a New York City-based firm that serves victims of Ponzi schemes.

He said his product helps investors steer clear of bogus investments such as those at center of the Madoff scandal and other scams by helping them ask the right questions, such as whether all estate-planning investment tools had been availed to them.

"A lot of these clients would not be in this situation if their advisers had given them a full menu of tools," he said, adding his product ensures investments are safeguarded, or hedged, against failure. "Most Madoff investment tools were not hedged."

Bernard L. Madoff

Investment Securities Inc., a

Manhattan-based firm, recently bilked investors out of $50 billion in an alleged Ponzi scheme, authorities said. Madoff, 70, the firm's founder and principal, was charged in December with securities fraud and is under house arrest in his Manhattan penthouse.

Court filings revealed that some Madoff victims invested in estate-planning instruments that were unsuitable for them and should have avoided, Lustig said. It is a

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tool primarily for use by CPAs, law firms and other wealth-planning services. The software can be used by the victims' lawyers to recover funds by uncovering culpability from an array of finance professionals associated with the failure of a client's investment, Lustig said.
"Ponzi scheme victims are looking to expand the scope of culpability and are looking for deeper pockets to sue," said Lustig, whose firm is using the software to help clients' lawyers determine where advisers are at fault and how. "It helps the litigators ask the right questions."

Lustig, a former adjunct professor at New York University and Pace University and lecturer at Brooklyn Law School, is a certified financial planner and a chartered life underwriter. He has a bachelor's degree in economics from Adelphi University and is a member of the American Society of Pension Professionals and Actuaries and the National Association of Insurance and Financial Advisors.

Lustig's software module is similar to a due-diligence questionnaire, said Brett Dougherty, director of the Stamford Chartered Financial Analysts Society.

"It has no power beyond the intelligence of the person using it," he said.

An investor should not need a computer program to detect fraud, said Walter Dolde, an economics professor at theUniversity of Connecticut's Stamford campus.

"People should be practicing their due diligence," he said. "Sunlight is the best disinfectant."

-- Staff Writer Michael C. Juliano can be reached at michael.juliano@scni.com or 964-2417.