Gullibility and Greed Fuel Profits in Southland ‘Boiler Room’ Scams

The telephone rings in a home in River Forest, Ill., one April day in 1983. When he answers it the man is told the diamonds he bought years ago have skyrocketed in value and he should cash them in.

All he has to do is send the diamonds to the caller’s Los Angeles firm and the folks there will do the rest. His diamonds will be sold and the profits returned.

- The telephone rings at Duke’s Shell Station in Deer Park, Wash., on a December day in 1984. The proprietor is told he has won a promotion and can choose from a new Lincoln Continental, a Hobie Cat sailboat or $5,000 cash. But to offset the “gift tax� he has to buy an “executive� pen and pencil set for just $499.

- A man answers the telephone at his home in Raleigh, S.C., one day last February and is told he has won his choice of a Sony Betamax video-recorder, a color television, a trip to the Bahamas or Hawaii, or a 30-day cruise to the destination of his choice. When the gift certificate redeemable for the prize of his choice arrives, all he has to do is pay a c.o.d. fee of $58.

Too Good to Be True

The deals sounded too good to be true--and they were.

Neither the diamonds nor the proceeds from their sale ever made it back to Illinois. The $499 pen set was worth a couple of bucks and the great gift never arrived at Duke’s Shell Station. After paying the c.o.d. fee, the man in Raleigh didn’t get his gift, just an invoice for “shipping and handling fees� to be paid before the gift was sent.

These people who parted with their money or valuables joined the growing ranks of consumers across the country singing the blues to the tune of a half-billion dollars a year lost to fast-talking telephone sales pitches.

Federal and state investigators and prosecutors have joined forces to crack down on these so-called telephone “boiler room� operations and they have not had to go far to find them.

California Atty. Gen. John Van de Kamp recently said nearly a third of all the telephone frauds in the nation operate out of Los Angeles and Orange counties.

‘All Over the Place’

“They’re all over the place,� said Assistant U.S. Atty. Terree Bowers, who heads a multi-agency Investment Fraud Task Force, which has conducted a dozen prosecutions in the last several months and has more than 100 other cases under investigation.

Aaron Ward, a postal inspector who has spent four years tracking boiler rooms, said the concentration of telephone solicitors in the Southern California is due to nothing more sinister than the weather. He said Nevada and Florida are other favored locales.

Catching the telephone crooks is not easy. They typically call residents of other states and give phony names when they make the pitch, “to make it harder to track them,� Ward said. The operations themselves often consist of little more than desks and telephones that can be quickly left behind in rented office space.

Residents of smaller towns also are preferred, Ward said. Besides being generally less wary than big city residents, “These people are used to closing deals with a handshake. They’re honest and they figure the people they’re dealing with are honest, too.�

Solicitors Nomadic Lot

The solicitors were described by Ward as a nomadic lot who usually know each other and rarely spend more than three months at a given operation. “By then, some of the victims are realizing they are victims and law enforcement may be making inquiries.�

Ward said the con artists often give themselves time for the trail to go cold by telling the victim that the promised item will arrive in several weeks. “By the time the targeted person realizes he’s been victimized, the phone room has moved on,� Ward said.

Once a victim starts complaining, Ward said, canceled checks, business license records and other sources are available to start tracking down the con artists.

The best way to fight telephone fraud, however, is for the public not to be seduced in the first place. As Ward said, “Once you’re on the hook, the advantages are all with the solicitors.�

Greed Partly to Blame

Ward agreed to some degree that victims of phone schemes can blame their own greed. “As a general rule, if you don’t think you can get something for nothing, you won’t fall for these scams.�

But then he pointed to state lotteries and television game shows, which give people reason to think there can be manna from heaven.

“And these doggone telephone solicitors are just super at getting you to buy something,� he warned.

But hanging up on all solicitors is too extreme a precaution because not only are there plenty of legitimate telemarketing companies making calls, he said, but the person calling about a shady offer just might be a state or federal investigator.