Back in my college days (which are now embarrassingly long ago), my knowledge of con artists was limited to the three-card monte dealer a few blocks off campus who for some reason, always seemed to find a few marks among our students. Being a paranoid native New Yorker trained since my toddler days not to make eye contact with anyone, not even my stuffed toys, I never actually saw the guy, I only heard the stories. Despite the university’s warnings and despite the fact that the con itself was older than dirt, a fair number of students blew their beer money in search of the red card. At 19, that kind of loss is a life lesson, a reminder to keep your wits about you at all times. It’s also mockery ammunition for your friends for well into the next decade.
These days, working at a financial institution (and having a slightly unsettling fascination with illegalities), my knowledge of frauds and cons has grown to the point where I’m just one big knot of suspiciousness. I’m going to make myself useful by sharing my paranoia in the form of information about the recent spike in “tech” cons (cons committed using the telephone or Internet). With these types of frauds, there’s much more than beer money at stake. When it becomes common for someone to lose thousands in a phony online auction or their savings in a phony stock scheme, life lessons like these are way overpriced.
Internet and Telephone Frauds (including telemarketing fraud) are unique for a number of reasons. In face to face cons, the con artist typically needs time with the victims to establish rapport and build trust. They’re literally building your confidence in them (which is where the term comes from). For some would-be victims, this is sufficient time for their own intuition or common sense to kick in and tell them to pull out of whatever schemes the fraudster has planned. Of course, not everyone does. Moreover, people who have been conned in person usually have a description, paper trail, or other lead for authorities to handle whereas many “tech” con artists are impossible to trace. Finally, our three-card monte dealer and his accomplice, the $20 Rolex salesman, have nothing on telemarketers and online scammers when it comes to volume. Good telemarketers can make hundreds of calls per day and online scammers are limited only by their own bandwidth and imaginations. Anyone see a problem here?
The National Consumers League, the Consumers Union (the folks who publish Consumer Reports) and the FCC are just a few of the people who see a problem. They’ve started tracking telemarketing and Internet fraud more carefully in recent years. The National Consumers League, a hundred-year-old consumer advocacy group, published a report last year, which placed online fraud losses at well over $3,500,000. (Of course, they didn’t count the NASDAQ because for some reason, getting people to invest in online pet retailing is actually legal). Tops on the list of Internet fraud were online auctions, though work-at-home schemes and multilevel marketing cons have found a home online as well. Even the tried and true Nigerian Advance Fee Fraud is alive and kicking around online. The Internet is still relatively new, and as more people move online, the number and variety of online crimes will surely increase.
Telemarketers, on the other hand, have been at the fraud game for years, honing their skills. Many are nearly impossible to differentiate from legitimate salespeople (not that anyone who calls you during dinner should really be called legitimate). A study by the NCL puts losses to telemarketing fraud in the area of $40 billion per year. The FBI estimates that there are 15,000 illegal telephone sales companies at work in this country. While they may not all operate in boiler rooms, they’re all out to separate consumers from their money selling phony investments, goods, and services.
Here are just a few examples of the telemarketing scams that have worked for many years, courtesy of www.crimes-of-persuasion.com:
You may have already won — Scammers have used “advance fee sweepstakes” for years with tremendous success. They call of thousands upon thousands of winning “entrants” (not that the people called ever remember entering anything) to tell them that they’ve “won” a large sum of money or other “valuable” prize. To collect, all the need to do is send in a check or money order (or give them a credit card number) to cover the taxes, release fees, subscription costs, etc. Companies like these target the elderly; 80% of the scam victims are over the age of 65. In one case, a pair of telemarketers impersonated federal tax officials to bilk elderly victims out of $20,000 or more each.
You may have already been scammed — If you’ve been scammed once, beware of helping hands, at least those not attached to recognized law enforcement agencies. The bottom-dwellers of the telemarketing world are those who prey on the victimized. (They actually buy “sucker lists” with names of previous scam victims). They promise to help you recover your lost money – for a small fee. Many of these scammers operate under official sounding names such as the Fraudulent Action Network and charge anywhere from $200 to $1000 to “help” victims. At best, victims receive a list of organizations to contact about the crime which the victim could have easily gotten for free out of the phone book. At worst, the victim gets a double asterisk next to his or her name on the “sucker list.”
Boiler Room not starring Ben Affleck — Real life “boiler room” (they actually use rented space in reputable looking office buildings) telemarketing operations may have up to 50 reps each making 250 to 300 calls per day selling everything from penny stocks to gemstones to time shares. The best work much like three-card monte dealers, working to gain your trust with multiple phone calls. One ingenious operation called and gave victims stock forecasts until they bit. What the victims didn’t know was that the boiler room made 200 calls, they told one hundred people that the stock would rise, and the other 100 that the stock would fall. After watching what actually happened, they simply called the correct 100 and made another forecast, cutting the groups in half until they had a working pool of victims ready to invest.
Sure, knowing a handful of the methods that scammers use may help, but aren’t con men constantly coming up with new ideas, new methods? How are you supposed to protect yourself? Many consumer advocacy groups have free fraud prevention web sites on the Internet available for consumers who have been scammed or who just want to protect themselves. Many sites are updates regularly with the latest scams and the latest on criminal investigations. Visit the links I’ve included with the article for more information. You can also check with you local news organizations to see which frauds are popular in your area. Many scammers are methodical, especially if they’ve been successful in a given area.
The surest way to avoid being scammed is to not be afraid of paranoia. I’m serious. Ask questions. Press for more information. A legitimate salesperson should be happy to answer them. A scammer doesn’t want to give away too much. Here are some questions that will help you tell the difference:
How did you get my name?
Be very suspicious if they say “the phone book” or some other vague answer.
What is the risk involved?
If they try to convince you that it’s a guaranteed investment, hang up. Investments, particularly securities, always carry risks, by their nature.
Can you send me this information in writing?
If they tell you that you must “act now,” hang up.
Would you mind explaining this information to my lawyer?
Again, if they tell you that they can’t because you have to “act now,” hang up . . . loudly.
Can you give me any references?
This may not always be 100% effective in itself because they could just give you the number of the person sitting next to them in their boiler room, but if they can’t even give you that, it’s a big red flag.
New cons and frauds pop everyday and even with advocacy groups pushing for privacy legislation (itself a controversial subject), we can’t rely on the laws to stay ahead of the criminals. Each person needs to exercise their common sense, ingenuity, and self-restraint when dealing with con artists. They make big promises but in the end, they’re only looking out for themselves. Confidence crimes are aptly named. In the end, it’s your judgment and your trust in other human beings that is stolen. How much money is that worth?
Other Helpful Links:
Internet Fraud Watch
The Cagey Consumer