Crimes of Persuasion: Schemes, Scams, Frauds. How con artists will steal your savings and inheritance through telemarketing fraud, investment schemes and internet consumer scams.

by Les Henderson

Overview

In-depth fraud coverage of computer crimes such as pyramid schemes make this crime library of internet fraud the cybercrime location for the schemes and scams that con artists perpetrate.

White collar crimes such as prime bank fraud, pyramid scams, internet fraud, phone scams, chain letters, modeling agency and Nigerian scams, computer fraud as well as telemarketing fraud are fully explained.

This detailed but easy to read report on organized crime topics include credit card fraud, check kiting, tax fraud, money laundering, mail fraud, counterfeit money orders, check fraud and other who's who true crimes of persuasion.

Product Details

ISBN-13:	9780968713303
Publisher:	Coyote Ridge Publishing
Publication date:	05/01/2003
Pages:	438
Product dimensions:	5.50(w) x 8.50(h) x 0.89(d)

Read an Excerpt

The Gold Dust Corporation

To fully understand the scope and mechanics of the multitude of scams, telemarketing frauds, investment schemes and interrelated deceptions that affect millions of victims yearly it will perhaps help to fictionalize a single entity which will be entirely responsible for all of them, the Gold Dust Corporation.

This organization will have a Chief Executive Officer, a sales force, a marketing division, a telephone call centre, legal and accounting departments and foreign branches. The employee base requires over 120,000 people and generates revenues of over $45 billion dollars per year.

The outlandish and unrepentant mission statement of the organization is as follows:

The corporation, without attracting undue attention from law enforcement agencies, shall without physical violence and by the most economical and efficient methods possible, seek and attract customers who we will, through deceptive and unscrupulous means, induce to part with as much of their financial resources as possible based on their demographics and time available to do so.

The name of this organization is derived from the fact that while gold has always been an indicator of wealth and value, it is also so malleable that the tiniest amount can be pounded so thin and wide as to contain no significant value. Imagine then, a worthless item covered in gold dust so fine that, while appearing lustrous, a simple puff of wind or breath reveals its true value.

That then is the goal of this organization. To offer items, services, investments and opportunities which appear valuable, but have little, if any, value at all, inexchange for as much or more money than an actual, substantial offering of the same items might attract.

Page 9

A swindler's driving force is greed and they have a talent for sniffing out the same vice in others who, in their desire to get rich quick, are all too eager to put their trust and their money in the hands of unscrupulous schemers. They justify their actions by assuming that victims deserve their fate.

Page 45

A Real Work of Art

Legendary Concepts' sales personnel called people who previously had responded to direct mail offerings, to persuade them to buy exorbitantly overpriced products, such as cosmetics, cleaning supplies, fire safety kits, Fisher "space" pens, and "Say no to drugs" promotional goods.

The price of these goods far exceeded what they paid for them. For example, the "Say no to drugs" product package, which included such low-cost items as Frisbees, baseball caps, rulers, calculators, and desk clocks, was sold to victims for between $1,299 and $3,999.

The Fisher "space" pens, which they had acquired for just $7.70 each, sold for $159.95. Over a thirteen month period they took in a total of $13.1 million but spent only $53,000 on prizes for their "contest winners".

In one promotion the "guaranteed" and "valuable" prizes included $3,000 in cash, a Whirlpool appliance package, a "limited edition artwork," $5,000 in cash, and a brand new Ford Taurus.

They told each customer that the prize would be selected randomly by a computer. In reality, the customers would always "win" the least valuable award, or "gimmie gift." In this promotion it was the "limited edition artwork," a framed lithograph by J.W. Scott for which they had paid less than $75 apiece.

The telemarketers would not disclose that it was a mass-produced lithograph. Even when asked specifically about the value of the prizes, they refused, citing the company's policy against such disclosures.

One of the most accomplished salespeople trained other sales staff and was a takeover man who joined the phone calls of less experienced staff to consummate sales. A master of deception, he would suggest that the "valuable" piece of artwork might be worth "somewhere in the ball park " of $50,000.

Once a year, they would award to certain customers the "real" prizes, such as the cash awards or the Ford Taurus, but not by random computer selection. Instead, either an employee of the company or the owners themselves picked the winner, which was always a customer who had purchased a substantial amount from the company.

Although the sales pitch included an initial disclaimer notifying customers that they were "under no obligation to make a purchase," a number of victims testified that sales personnel had told them, or had led them to believe, that they had to buy products to win a prize, or that their odds of winning a prize would improve if they made a purchase.

Page 92

The Infallible Forecaster

One ingenious setup involves a person phoning you and quickly assuring you that, "No", they didn't want you to invest a single cent. "Never invest with someone you don't know," they say.

But he says he would like to demonstrate his firm's "research skill" by sharing with you the forecast that a certain stock or commodity is about to experience a significant price increase. Sure enough, the price soon goes up.

A second phone call doesn't solicit an investment either. He simply wants to share a prediction that the price of something else is about to go down. "Our forecasts will help you decide whether ours is the kind of firm you might someday want to invest with," he adds.

As predicted, the price subsequently declines. By the third call, you are a believer. You not only want to invest, but insist on it — with a big enough investment to make up for the opportunities you have already missed out on.

What you have no way of knowing is that the scammer began with a calling list of 200 people. In the first call, he told 100 that the price would go up and the other 100 were told it would go down.

When it went up, he made a second call to the 100 who had been given the "correct forecast." Of these, 50 were told the next price move would be up and 50 were told it would be down.

The end result: Once the predicted price decline occurred, he has a list of 50 persons eager to invest. After all, how could they go wrong with someone so obviously infallible in forecasting prices? But in this case they did go wrong, the moment they decided to send a half million dollars from their collective savings accounts.

Page 222

Grandma Bells' Cast-offs

AT&T PAYPHONE ROUTE 45 AT&T payphones at hi-traffic hotels, earns $13,500/mo. Will sell all or part 1-800-596-1875 24 hours

This company markets public pay phone franchises through newspaper ads and trade shows. They sell the franchises for between $12,756 and $41,320, depending upon the number of telephones that comprise a package. They say they offer high traffic through secured and established pay-phone routes.

They claim to be a manufacturer of pay telephones and will ship within seven days of receipt of your order. They promise you "guaranteed" minimum income levels from the telephones and assure you that profitable locations are plentiful. They also promise to find you "Ma Bell" takeover sites.

Having paid $14,500 for five payphones you are offered a zero percent financing program for additional units and are told that they will install them. They say you are guaranteed a minimum income of $200 per month per phone, or an annual income of $28,560.

The telephones you eventually receive are old, unusable and without the necessary circuitry to make them operable. They disclaim any obligation to find locations for the phones and refuse to give a refund. The glowing references, which you checked, came from employees who posed as successful investors in the pay-phone business.

Their phones can not generate anywhere near the guaranteed income represented by the company's ads, salespeople, promotional materials, or contract. Their income this year, however, is estimated at $4 million.

Page 269

God Sent Us

The Church of God-Houston targets towns where workers have been laid off in major plant closures by offering interest-free loans with no credit checks. As they condemn the sinfulness of bankers these missionary style visitors promise loans for cars, homes and unsecured credit.

"Just put down $300 for "character insurance" and you can get up to a $105,000 line of credit."

In this "take the money and run" scam, over 12,000 already burdened families in thirty states were taken in, while the cons continue to move on to the next needy area.

Page 339

You're a Bad Man Charlie Brown

Charles Thomas Brown, age 66, DBA Preferred Trust Company, was sentenced to 17 ½ years for operating a $23,000,000 Ponzi scheme that involved over 300 victims. He pled guilty to one count of Fraudulent Schemes and Artifices and one count of Theft, both class two felonies.

He issued six month promissory notes that were to earn a return of between 8% and 18%. At the end of a six month term, he simply sent a new promissory note that canceled the previous one which "rolled over" for another six month term. Unless the investor contacted him and requested that the investment be paid back he had full control of all deposits on which no interest was actually being generated.

Page 375

A Fraud By Any Name

One affinity fraud which targeted members of Christian churches in rural Kansas, Nebraska and Missouri towns raised $7.4 million in funds from at least 125 investors, supposedly to trade in high-yield foreign bank instruments in a secret "prime bank" trading market. They said investors would receive a monthly return of 20% for 12 to 18 months, and that the return of principal was fully guaranteed.

To establish credibility within the church communities, they gave the investments various names with Biblical connotations, such as Jubilee Trust Fund, Oracle Trust Fund and Elkosh Trust Fund. They also proclaimed their status as so-called "born-again" Christians and suggested that the investment would fulfill a religious "duty" or "prophecy." They even informally enlisted members of various church communities to praise and promote the investment funds.

Consequently, the churchgoers, most of whom were unsophisticated investors, invested in the trading programs on trust and faith, rather than adequate information. The prime bank trading program did not actually exist and all funds have been transferred to several offshore entities. By making principal and interest payments to early investors, with funds raised from later investors, they gave the false illusion that the investment was successful.

When confronted by authorities they attempted to persuade investors not to cooperate by requiring them to sign confidentiality agreements and by falsely telling them that cooperation with the government would forfeit any return on their investment.

Page 406

Better To Give

Organizers of another pyramid scam, uncovered in Texas, invited recruits to "Jubilee Celebration" meetings where they were asked to contribute $2,000 "in the name of God" in exchange for a chance to earn $16,000 if they recruited eight others.

The pitch was that it was "blessed to give", and apparently people believed it, for at a raided meeting deputies arrested eight people and confiscated nearly $700,000 from 80 people who had brought amounts ranging from $2,000 to $144,000.

Participants at the meeting carried driver's licenses from as far away as Washington state and Alaska. At the four meetings held in Texas it's estimated more than 1,000 people participated.

The meetings were held in private halls and hotels and were by invitation only, with participants passing through metal detectors before entering. Once inside people were told that they could "harvest" thousands of dollars in profits in exchange for "sowing" a $2,000 investment. Participants were instructed to make their contributions in $100 bills, cash only.

There was so much money being handled that they hired off-duty deputies to provide security. They would even lock down the buildings where they were 'gifting,' or exchanging money.

The District Attorney's Office, which was tipped off by the moonlighting deputies, said more than $2 million was exchanged during a meeting attended by more than 150 people.

Officials in Florida estimate as many as 4,000 people participated in similar meetings held throughout the Florida panhandle.

Table of Contents

The Gold Dust Corporation 5
Con Artists Revealed 9

Telemarketing Operations 22

Major Outbound Losses 22
Sweepstakes Related Scams 27
"One in Five" Prizes 31
Puzzles for Prizes 45
Advance Fee Sweepstakes 47
Reloading 54
Recovery Operations 58

Seniors as Predominant Victims 63

Providing Assistance to Senior Victims 66
Sale of Foreign Lottery Tickets 73

Investment Related Scams 77

Boiler Rooms 79
Deceptions Used to Appear Legitimate 81
Techniques Used in Investment Fraud 84
Abuses of Regulatory Codes 96
Gemstones as a Fraudulent Investment 97
Precious/Base Minerals & Oil and Gas 101
Films and Entertainment Based Fraud 105
Use of Viatical Settlements for Fraud 108
Real Estate Development Investment Fraud 115
Unbelievable Opportunities to Lose Money 117
Blind Pool Investment Offerings 124
High Tech Fraudulent Investments 126
Flogging Radio Frequency Licenses 128
Misuse of IRA and RRSP Investments 133
Commodities, Futures and Options Fraud 137
Fraud in Foreign Exchange 143
Role of Securities Regulators 145
Major Market Investing 158

Minor Outbound Losses 159

Credit Card Loss Protection Insurance 164
Telefunding for Charitable Donations 166
Fraudulent Magazine Subscription Sales 171
Travel Clubs and Vacation Packages 173

Major Inbound Telemarketing Frauds 180

Business Opportunity Fraud 180
Bulk E-mail and Autodial Systems192
Display Racks and Vending Machines 196
Medical Billings/Administrative Services 203

Scams Which Use Your Ego and Vanity 206

Vanity Press Publishing Fraud 206
Fraudulent Patent/Invention Promotion 210

Identity Theft and Its Role in Fraud 217

Minor Inbound Telemarketing Fraud 224

Scams For People with Money Problems 224
Fraudulent/Misleading Credit Card Offers 224
Loan Brokers 228
Credit Repair Agencies 233
Using Bankruptcy to Repair Credit 241
Using File Segregation to Repair Credit 241

How-to Manuals and Services 244

Government Auctions of Seized Property 248
Work- At- Home Schemes 254
Scholarship Fraud and Diploma Mills 263
Fraudulent Employment Opportunities 268
Fraudulent Green Card Lottery Services 271
Inheritance and Estate Locator Fraud 273
Offers To Locate Unclaimed Funds 274
Offers To Locate Missing Persons 276

Cramming Unauthorized Service Charges 277

Face-to-Face Frauds 285

Bubble and Ponzi Schemes 285
Examples of Ponzi Schemes 289
The Ponzi Scheme in Albania 306
Prime Bank Investments 308
Affinity Fraud 321
Financial Advisers Who Abuse Our Trust 328
Fraudulent T-Bills & Bonds 340
Seminars for Business Opportunities/Pyramids 345
Multilevel Marketing 351
Local Pyramid Clubs 353
Women Empowering Women 358
Elder Abuse of a Financial Nature 372
Home Equity and Renovation Scams 380
Sleight of Hand and Other Street Scams 389

Scams Delivered By Other Means 398

Pyramid Schemes 399
Internet Based Pyramid Schemes 418
Chain Letters 422
Fraudulent Diet Programs And Devices 425
Fraudulent Modeling Agencies / Talent Scouts 431
Fraudulent Use of Infomercials 436
Prison Pen Pals 441

Scams Targeting Businesses /Institutions 443

Nigerian Advance Fee Fraud 464
Fraudulent Business Loans 483
Bank and Banking Related Fraud 485
Factoring of Credit Card Transactions 489
Money Laundering & Hiding Proceeds 491

Victims of Fraud 500

Victim Assistance 506
Reporting Fraud to the Appropriate Authorities 511

Laws Available to Prosecute Fraud 521

Canadian Laws Dealing With Fraud 523
Canadian Agencies / Fraud Operations 528
Relevant Criminal Laws In The United States 530
Sentencing Guidelines and Enhancements 536
Criminal Appeals 540
Enforcement 542

Factors Allowing The Problem To Continue 546

Solutions 549