Hook, Take-Away, and Load fraud is called in such a way. (100 words)
TELEMARKETING SCAMS
The House Committee on Government Operations estimates that $ 15 billion a year is stolen by smooth-talking con artists who use the telephone as their weapon of choice to swindle thousands of unsuspecting victims out of their savings. Fraudulent telemarketing operations or boiler rooms hawk everything from substandard office supplies to investments in any business opportunities. It is the latter that generates enormous dollar losses.
Securities fraud usually involves the illegal sale of interests in supposed profit-making ventures. These interests will be buried in the mumbo jumbo of investment contracts, promissory notes, oil and gas partnerships, and leverage contracts for gems, precious metals, or strategic metals.
The Boiler Room. Boiler rooms, so named because of the high sales pressure they generate, often gross over $50 million before changing their product and location. The typical boiler room operator opens an office at a posh address, rents nice furniture, and installs banks of telephones. The physical layout is usually set up according to the rat-maze plan, with dozens of individual cubicles that are equipped only with a desk, chair, and telephone. The owner and his or her key assistants are usually housed in a different suite in order to maintain the secrecy of their operation.
The operator runs help-wanted ads, then hires three or four dozen salespeople from varied backgrounds, trains them in a script-driven sales pitch, and provides them with stacks of lead cards. Each card bears the name and phone number of a potential victim. The owner buys lead cards from companies that specialize in compiling lists of people with moderate to large net worth. It then becomes a numbers game. If the salesperson, armed with these lead cards, calls enough numbers with the phony pitch, a certain percentage of those called will turn over thousands of dollars without ever having seen the caller. The average investor puts in from $10,000 to $20,000, but some have turned over as much as $450,000.
A good salesperson can make over $200,000 a year; sales managers often make more than $500,000. Most have never worked in the legitimate securities industry. They are also quick to recognize a good thing when they see it.
Most boiler rooms are started by salespeople who have worked for other boiler rooms. They will often pilfer samples of pitch sheets, contracts, and various other forms before quitting to venture out on their own. They usually open their boiler room, get a new investment "product," rework their previous employer's forms, and instruct their salespeople to begin calling the numbers.
The products boiler rooms sell vary, but in the investment area, popular investments to pitch are oil and gas interests, precious metals, mining interests, wireless cable, strategic metals, foreign currency, gems, and such exotic offerings as interests in race horses, solar and wind energy, treasure expeditions, and so on. The intensity and popularity of the pitch is often guided by current affairs.
Hook, Take-Away, and Load. A dairy farmer in Wisconsin answers his phone and is given this popular pitch: "Good morning, Mr. Jones! My name is Harvey Fastback here in Gemstone Beach. I represent the XYZ Investment Company and we are international currency traders. Mr. Jones, if I could show you a way to make 30 percent on your money in 90 days, would you be interested?" This is the all-important hook, and salespeople are instructed to wait for an affirmative answer. "Well, I don't know," is good enough.
The salesperson's next task is to find out how much money the victim (sometimes referred to as the "mooch") has to invest. "Mr. Jones, are you liquid for say $25,000 to $50,000?" The salesperson knows the answer will probably be no, but it's a starting point; and when the victim names a lower figure, the salesperson confides the company could probably squeeze him in as a smaller investor. The salesperson follows with a pitch to Mr. Jones, as per the script, then ends by telling Mr. Jones that he has a contract in Japanese yen available and invites him to buy. Mr. Jones declines, and now the stage has been set for the next phase of the swindle — the take-away.
Within a day or so, Mr. Jones receives a package containing an impressive, full-color prospectus that has elaborate charts and graphs, each showing that profits are there for the taking. Copies of newspaper articles discussing fluctuations in the world currency markets are included. The sending of the brochure is the salesperson's entree to make a follow-up call.
A short tune later, Mr. Jones receives another call from Harvey Fastback. "Mr. Jones, did you get a chance to read the information I sent you?" The salesperson then launches into the take-away. "Mr. Jones, I'm sorry to tell you this, but I couldn't hold that contract for you and another client picked it up. Had you taken my advice and purchased that contract for yen, you would have made $2,800 on the transaction." This, of course, gets the attention of Mr. Jones, who inquires as to whether there are any similar "deals" available. The salesperson apologizes and says there are no more contracts available. This is the take-away; Mr. Jones is left to marinate in his own stupidity for not buying the contract.
Another few days pass before the dairyman gets another call. This time the salesperson tells him another client couldn't come up with the money at the last minute. There is urgency this time; the salesperson has several clients waiting but wants to offer it to Mr. Jones first, since he missed the last opportunity. The victim has only a narrow window of time in which to make his decision. This time Jones agrees to buy the contract. This is the "load," or sale. The salesperson tells Jones to expect a Federal Express pickup within a couple of hours; the telemarketer cannot afford to give Jones tune to change his mind.
The next call that Jones receives from the salesperson is full of good news; his investment is doing well, but now is not the right time to sell. Jones is invited to buy another contract, usually in another currency. He bites again.
By the tune Mr. Jones and hundreds like him realize they won't be cashing in on their investment, it's too late. The telemarketer is out of business. Chances are they have adopted a new name, a new product, and a new location.
Tips for Local Law Enforcement There are legitimate telemarketing companies; the trick is to spot the phonies. Here are a few things to look for.
· Reports of a new business installing an unusually large number of telephones are often the tip-off that a telemarketer is setting up shop — but the telemarketer may be legitimate
· Telemarketers need salespeople, so they run ads for help in local newspapers. Ads that appear to be investment-oriented or that promise huge annual earnings are good ones to check out. An undercover call to the listed number will often tell you what you want to know. Boiler room operations are the same as other criminal enterprises when it comes to generating informants. Competition, jealousy, and grudges will often prompt informants to give information to law enforcement.
· There can be complaints from victims — and they should be listened to. Unfortunately, victims are often turned away from local law enforcement agencies because the officers taking the report or the follow-up detectives misdiagnose the victims' complaints. The misdiagnosis occurs in most cases because the officers are looking for a provable theft, and when they can't find it, they write it off as a civil matter before determining whether any securities laws have been violated
Task 3:
Read the text “FREE PRIZE SCHEMES” and give your opinion of the material. Discuss it with your classmates.
