Telephone Scams--A Bad Connection

Question: We live (out of state) now, but used to live in California and always enjoyed reading your column. Last fall a firm in (a Los Angeles suburb) called to say we had been selected to receive a “marketing promotion premium worth $5,600 to consist of a wide-screen TV, VCR and complete stereo entertainment center.” They requested a “filing promotion fee rebate,” which was to be returned to us in 14 days. We sent our check for $499.88 and have not received anything that was promised for our money. Only the canceled check has been returned.

The only thing we had to do to get our $500 back was to sign a “rebate coupon slip” they were to send us and return it to them.

It took three months and a lot of phone calls from us to get the “slip” for us to sign. One other thing they required from us to receive our gifts was to send them $89 for freight. That we did not do, but wrote instead saying that I would send the $89 as soon as our rebate money was returned.

I have written the regional postal inspector and the state consumer fraud office, but all they can say is to continue correspondence with this company. I have no proof of anything. They put nothing in writing. They are clever and convincing and we are stupid. Can you help us?

Answer: Both Jerry Smilowitz, who handles criminal matters for the Los Angeles office of the California attorney general’s office, and Herschel Aron, supervising investigator here for the consumer fraud division of the Los Angeles County district attorney’s office, say they have “many, many complaints” about the company you mention, which is under investigation.

Unfortunately, the odds on getting your money back appear to range all the way from slim to nil.

You’ve gotten caught up in one of the real growth industries of the decade--the boiler-room telephone scam (“telescam”). And, understandably, it’s not going to make you feel a whit better knowing that there are hundreds of thousands of you out there.

Unreported Scams

The legitimate telemarketing business takes in about $100 billion a year, but the Federal Trade Commission has estimated that another $1 billion to $10 billion (no one knows precisely because so many scams go unreported) go to the telescam artists. And the pitch can cover almost every product or service known, from “investments”--such as precious metals, oil and gas leases, rare coins and diamonds--to the simple “you have won a fabulous prize” scam.

“Occasionally,” L.A. County fraud investigator Aron says, “we’ll get someone’s money back, but only if it’s early in the game, there aren’t yet many known victims and the scam artist hopes that by paying off a couple of early complaints he can keep operating.”

In your case, unfortunately, the scam has been active for quite some time, and the operator would make no Brownie points with the authorities by returning your or anyone else’s money.

In the “investment” type scam, Aron says, the current favorite is the “dirt mine” approach.

“The pitch here is that they have a gold mine and, because of new technology, it can now be reopened profitably. They need ‘start-up’ capital, however, for the new equipment, so they will sell you an ounce of gold for a flat $200--delivery to be made in about a year when the mine is operative. Because gold’s now selling at about $385, how can you lose? Particularly since they promise to make up the difference if the price falls below $200.

Specific ‘Mines’

“By the time your year rolls around, of course,” Aron continues, “they’re gone. The New Mexico State Bureau of Mines, incidentally, sent out geologists to look at some of these specific ‘mines.’ You guessed it--there’s not a trace of gold in any of them.”

But, on a less pricey level, the bait that the con artists dangle before their victims is frequently tied to purely local concerns. That is why, in the Los Angeles area right now, “water filtration” devices are the rage, and the con artists are capitalizing on recent public disclosures of widespread contamination of our drinking water.

The gimmick: A free diamond watch, mink coat or expensive car if the mark buys a $398 system that removes pollutants from the drinking water. This is generally a worthless contraption with a couple of charcoal pills in it that wouldn’t remove any foreign object smaller than a manhole cover from the water supply. And, oh yes, the diamond watch, mink coat or expensive car never shows up.

“Las Vegas,” Aron adds, “got so sensitive about how it was being used as a regional center for these telemarketing people that Clark County finally passed an anti-boiler-room ordinance with some real teeth in it. Both the employees and the independent contractor have to be bonded, and it’s pretty stiff--about $25,000--and then they have to get a sheriff’s work card with their picture and other ID on it, the same way casino employees do. If they’ve got a criminal record involving anything like telescam fraud, then they don’t get the card.”

Out-of-State Targets

Almost invariably, Aron says, the boiler-room operators concentrate their telemarketing on out-of-state targets.

“They don’t want to be based in Southern California, close enough for those whom they victimize to actually come after them with a baseball bat. What ‘address’ they do have is invariably a mail drop, though.”

But, in sheer volume, Aron said, the favorite telescam is the “you have won a fabulous prize” gimmick.

“Boats, expensive cars, big-screen TVs--you name it. They call up,” Aron says, “and say something like: ‘You remember sending in that green card when you bought our ballpoint pens (or office supplies, or whatever)? You don’t? Then someone did it for you, and are you ever lucky! We just drew your name!’ ” At this point, Aron adds, “the more imaginative ones cut in a brief tape of people laughing and cheering in the background, and then they say: ‘You’ve just won a brand-new Mercedes 300E absolutely free! On top of that we’re sending, also absolutely free, a $300 35-millimeter camera so that your wife can take a picture of you beside the Mercedes, which we can use in future promotions! Naturally, you keep the camera too! ‘ “

Of course, Aron adds, there are sales taxes, handling charges, dealer-preparation and destination charges amounting to $1,142, which has to be remitted at once.

And if you fall for even a modest $20 or $30 telescam, just once, your name becomes a valuable commodity in itself. You’re on the “mooch” list--names, addresses and telephone numbers of previous victims--and your name is sold over and over again to the telescammers.

“The theory, and it’s a good one, is that if you fell once, you’ll fall again,” Aron adds.

How do you keep from being fleeced? An old axiom is still the best, the L.A. County district attorney’s fraud expert says: “If it sounds too good to be true, it almost invariably is.”

Lot of Questons

But, in addition, Aron advises: “If it’s an investment-type deal, tell them you never invest without reading the material they have on the plan--it’s an automatic hang-up on the caller’s part. Other than that: Ask a lot of questions. If it’s a ‘free vacation certificate,’ ask if you have to redeem it and pay extra charges. Ask specifics about what it pays for, and what it doesn’t. Be particularly leery if the time element is critical and they insist on sending a courier to pick up your check.

“ Never give your credit card number over the phone to anyone except a local retail store that you’ve dealt with before. And,” Aron says, “be particularly cautious about calls coming from the states where the telescams are most active: Texas, Florida, California, Arizona, Utah and, in spite of the Clark County ordinance, Nevada.

“Before you send any money,” he continues, “check with your local district attorney’s consumer fraud office. We may not specifically tell you if such-and-such a company is on the list, but we can say something like: ‘Well, we’ve had quite a few problems with people operating like this.’ ”

Progress Being Made

In spite of the almost-tidal wave epidemic of telescams coming out of this are, however, progress is being made, according to David A. Katz, coordinator of the Southern California Fraud Task Force--a consortium of local, state and federal investigative agencies.

“In the three years we’ve been operating,” Katz adds, “we prosecuted about 300 fraud cases and, in the last 14 months alone, we’ve gotten sentences of five years or more in 22 of them--several of them running into double digits.”

But I’m sorry that there’s nothing really that can be done in your specific case. The only comfort I can give you is that the noose is tightening around these telescam operations, but it’s not going to get you your money back.

It’s a rotten shame because at least 95% to 99% of the telemarketing business is strictly on the level. And then there are these others. . . .