Telemarketing Fraud: What You Need To Know

If you’re like me, you probably receive dozens of unsolicited telephone calls. Prompted by a near-zero cost for a phone call, many authentic businesses use the telephone to market their product or service. As annoying as these calls are (they seem to know just when I’m sitting down to dinner), this article will focus on the millions of dollars that consumers lose each year to telemarketing and Internet fraud. (According to published data, Internet fraud may have already exceeded telephone marketing fraud.)

If you get a call asking you to contribute to a police or fire department benevolent association, or for disabled children or similar supposedly worthy causes, stop and think. In many cases very little of your donation will end up with the charity. The soliciting organization (or individual) may end up pocketing most of the money.

Be suspicious of solicitations that claim to be for police or firefighters. According to government reports, swindlers habitually fabricate names of official-sounding police or fire associations. And even those who call on behalf of genuine police or fire departments often keep an inordinate percentage of the receipts for themselves, with very little going to the police or fire department organizations. Ask the solicitor for the name, address and phone number of the police or fire department on whose behalf he?s working, and call to verify the facts. A better bet is to call your local police or fire department. They may be able to advise you on the reputation of the solicitor.

Swindlers are good at what they do. They concoct phony charities to rob you of your money. They will use any pretext. Too often they are successful in convincing the gullible that the money will be used for an anti-drug campaign, to educate the public against drunk driving, or for numerous other good causes. The reality is that the fraudulent charity will in no meaningful way help achieve any worthwhile objective.

A con artist plays on your sympathies and emotions. His skills have been sharpened over the years. His prime target is the bleeding heart. But almost any unwary human being is prey, especially a senior citizen. We are a compassionate people and are too often gullible to a finely-honed plea for help.

Telemarketing swindles are, more often than not, business-oriented rather than charity-oriented. The elderly are most often prime targets of telemarketing fraud. Con artists know that many seniors have accumulated money and property. Their savings and investments are ‘ripe for the picking.’

Stock Swindlers by definition are dishonest and use all sorts of ruses, facades and ploys to create the impression in your mind that they represent legitimate enterprises when in fact they are sophisticated rip-off artists whose one aim is to separate you from your money. Protect yourself from these deceptions.

Imaginative corporate names are often created by these swindlers to make an impression on the gullible. Persuasive salesmen, operating out of what is called a “boiler shop,” use deceptive and high-pressure sales schemes to convince investors to buy speculative stocks which include reputable-sounding names.

Don’t be misled. Anyone can set up a fancy-sounding corporation for under $500. Unscrupulous fleecers know the ropes and keep setting up new corporations as pressure builds up by law enforcement agencies. When forced to, the corporation – but not the individual(s) behind it – go bankrupt. The scammer(s) rarely get more than a slap on the wrist. They then proceed to create a new corporate entity ready to scavenge suckers by telephone.

In order to skirt consumer protection requirements of state and federal securities laws, swindlers set up a “general partnership” or “limited liability company.” These packaged deals focus on high-tech, bio-technology, real estate, miracle drugs and exotic livestock. Although some may be legitimate, too many of them are phony set-ups designed to elude state and federal laws which require promoters to disclose all pertinent facts about themselves and the investment. A dishonest promoter may thus cover up his personal business history which might include bankruptcies, previous securities law violations, and risks to customers (including lack of expertise and competing technologies). 

A legitimate offering requires the promoter to spell out the projected marketing costs. In too many of these unsavory deals, commissions of up to 40-60% are paid to the salespeople who sign you up. Obviously what’s left after marketing and administrative costs leaves virtually nothing for the actual project. Never assume the Federal or State government will protect you from these deceptive schemes. Use sound judgment and discuss any potential investment solicitation with your family, friends, accountant and lawyer.

Some swindlers give you the name of a bank as reference and encourage you to call and check up on them. Beware – such calls, invariably made to overseas banks (with an international toll-free number) are routed back to the swindlers who deliver a superlative report.

Scammers increasingly operate from foreign countries. They set up offices in major cities that are usually nothing more than a mail forwarding/phone answering service.

Scammers using the mail (or the mail in conjunction with the telephone) may send you a letter printed on fine paper. The letter may display an impressive address in a key financial district. The letterhead may even feature an engraved image of a skyscraper to create an illusion of stability (and a suggestion of profitability). Little do you realize that the address is a virtual nonentity, perhaps a mail drop or forwarding service from a mail box rental service.

Be wary of illicit schemes based on hot topics of the day. Swindlers often will quote from (and agree to mail to you copies of ) The Wall Street Journal, Business Week, Forbes and other business publications. Their aim is to clothe themselves with the legitimacy associated with these financial publications. Information on emerging technologies, tips about hot stock trends, glowing reports concerning a particular industry – none of this will guarantee that the company they are promoting has any chance of success. Ask them specifically whether the article in question names the company they are promoting. If not, hang up as quickly as possible.

Keep in mind that a “hot” industry does not necessarily translate into a “hot” company. Just because a lot of headlines are being generated about the prospects for a new or emerging high-tech industry does not mean that a specific company is going to be part of any possible windfall.

And don’t be impressed by a nice website. Anyone can have an elaborate (and possibly misleading) website created for his or her purposes. These fraudulent scammers will refer you to their sites, where their investment firms may take on the appearance of a successful Wall Street company. Don’t let glib words, fancy images (still and video) or persuasive audio mislead you into making a poor investment decision.

The advent of the Internet has enabled professional boiler rooms to harvest millions of e-mail addresses, extending their reach from a few hundred telemarketing calls to tens of thousands of contacts per day. Bulletin board messages touting hot investment opportunities reach thousands. Beware of shady operators who offer free gifts, free vacations, etc. Too many of them are out to fleece you with online e-mails that can reach hundreds of thousands of people with a single message. They can make it appear that many people are posting on many different systems, all talking up a stock.

Never submit any personal financial information online, no matter how enticing the pitch might sound. Never give for your income level, bank account information, Social Security number and other personal information.

Governmental and law-enforcement authorities have been largely unsuccessful in their attempts to curb deceptive investment information sites or boiler shop operations. Telephone and Internet scamming is rising exponentially. Even if the necessary laws are passed, enforcement will require major funding. And nothing can really stop those operating from outside the United States.

Remember: If it’s too good to be true, it’s probably not worth the risk.