Feeding Frenzy by Scam Artists Zeros In on Post-Riot Anxieties

The ashes of riot-torn South Los Angeles have become fertile ground for con artists, as unscrupulous loan brokers and fund-raisers are moving swiftly to cash in on the nation’s worst urban disaster this century.

Owners of burned-out businesses are being approached by brokers seeking upfront fees or claims on their property and making loans with nearly impossible repayment terms, consumer advocates said Thursday. Outside the devastated areas, telemarketers are staffing phones, raising money for bogus charities that claim to help riot victims or for firefighters injured in last week’s melee, city officials said.

Authorities fear that the frauds spotted so far are only the first of the many all-too-familiar schemes that typically flourish after earthquakes, fires, floods and other disasters. Officials say that as soldiers and police withdraw from the streets, a small army of phony contractors, fake insurance adjusters and bogus government workers will rise to take their places.

“It could get really ugly,” said Shirley Flucus, principal investigator for the Los Angeles City Social Service Department, referring to the expected proliferation of questionable charity solicitations.

The enterprising loan brokers are striking riot victims when they are most in need of cash, because any money available from government loans and insurance settlements may be weeks away. The charity frauds, meanwhile, are reaching potential donors while images of the riots are still emotional and fresh.

And, unfortunately for the victims, the frauds are getting under way at a time when law enforcement agencies--the Los Angeles Police Department in particular--are too strapped on riot-related investigations and emergency calls to take immediate action on any scam complaints received.

“Everyone is going to have to be real wary for the next couple of weeks,” said Sgt. Dennis Adams, supervising officer of the LAPD’s bunco squad.

Among the scams authorities expect to see in the coming days and weeks:

* Business or home repair scams. Presenting themselves as contractors, con artists may offer to perform repairs after receiving a large advance fee. Once these people get their money or documents, they’re gone. Consumers are advised to check with the Contractor State License Board at its special riot victim hot line, (800) 962-1125, to check whether a contractor is licensed before paying any money.

* Government aid scams. Con artists posing as government workers or paralegals may offer to help riot victims “cut through red tape” to obtain Small Business Administration loans or other government aid. Once the victims pay these impostors an upfront fee, they disappear. Pastor Herrera, director of the Los Angeles County Department of Consumer Affairs, said there are no government loan programs that require a fee in advance. In addition, he said, government agencies do not solicit door-to-door.

* Fake insurance adjusters. Thieves posing as insurance adjusters may say they need to get inside a victim’s home to assess the damage. But once inside, they’ll rob instead. In other cases, thieves pose as utility repair crews to gain entry. Before letting anyone in their homes, consumers should call the insurance company or utility to see whether they are doing work in the area.

* Security system scams. With a heightened concern about security in the wake of the riots, Herrera expects con artists to pose as salespeople for security alarm companies who will charge a big fee and then disappear. Consumers can call the Better Business Bureau of the Southland at (714) 527-0680 to check on the background of a company.

Though most of the schemes already under way are not new, authorities report a few twists.

In Glendale, residents are receiving mail from a security firm seeking to cash in on fears about safety. The firm reportedly claims a phony affiliation with the LAPD, Adams said.

In South Los Angeles, community groups, churches and business owners have received inquiries from non-minority construction firms located as far away as Oxnard seeking blacks to front for them so they can share in whatever redevelopment funds pour into the community. Community leaders say these firms are seeking an edge in bidding for construction contracts by creating the appearance of being black-owned.

“We told him we don’t do things that way,” said Craig Sasser, executive director of the Crenshaw Chamber of Commerce, one of three people who said they received such calls.

Other scams are sad revivals of age-old schemes.

City officials and law enforcement authorities say there is ample evidence that bogus charities are cropping up, with dozens of potential donors calling each day to ask if telephone solicitors and charitable groups are legitimate. Most of them are not, according to Flucus of the Social Service Department.

Flucus said she and her two assistants “have been bombarded with calls” this week about fraudulent organizing efforts. She said she expects the problem to get a lot worse as the relief efforts get under way--as is usually the case.

The phony charities are particularly insidious because they steer much-needed donations away from the riot victims into the pockets of greedy promoters, who pass on a tiny portion of their take at best.

“We’re talking tens of millions going toward riot relief . . . and we have a whole lot of victims out there who don’t know they’re being victimized,” said Robert Burns, general manager of the Social Service Department.

One such fund-raiser involves unauthorized solicitations for the Los Angeles Fire Department. Capt. Stephen Ruda said con artists are asking people for donations for the department, as well as for injured firefighter Scott Miller, 33, who was shot in the face last week while on his way to an arson fire. Ruda said he could offer few specifics, but that he wanted to warn the public.

“People, in their generosity, thinking they are giving to a worthy cause, are lining the pockets of scam artists,” Ruda said.

The city is taking steps against one Burbank-based fund-raiser who is licensed to raise money for disabled veterans, the blind and other causes but suddenly changed its donation pitch this week to seek money for riot victims under the auspices of a group called “South-Central Relief Fund,” said Flucus and one potential donor.

On Monday, the fund-raiser, Valley Fundraisers Inc., was ordered to stop raising money for riot victims without approval from the city or face criminal charges, according to Burns and Flucus. City and state records show that Valley Fundraisers generally gives only 20% of its total revenues to the charities to which it is contracted.

A spokesman for Valley Fundraisers denied any wrongdoing, saying his group has changed its tactics since it was warned, and that it is now raising money for blind people living in areas affected by the riots and fires.

“That’s not part of their contract,” responded Flucus. “They can’t say that. (Their license) does not say anything about helping blind victims of the L.A. riots. They are just playing on the public’s sympathy.”

City officials also received a call from a National Guardsman asking if the Universal Life Church was approved to be seeking donations outside stores in the South Bay. “Shirley (Flucus) and I are both ordained ministers at the Universal Life Church, so that’s a laugher,” Burns said, speculating that someone was trying to use the church’s name for bogus fund raising. The church offers mail-order ordinations for nominal fees.

Community activists say that perhaps one of the cruelest developments is one in which brokers offer loans with difficult payment terms to financially strapped riot victims--in effect, victimizing them twice.

Paul Lee, director of the Legal Aid Foundation of Los Angeles, said loan brokers have approached several business owners in South Los Angeles promising three-year loans at the remarkably low interest rate of 2%. The offer is tempting to financially stretched merchants--even though fees and payment terms can triple the cost of the loan.

To obtain the loan, the business owner is required to give the broker a lien, or claim, against the property. This means the property can be seized if the business owner is unable to make loan payments as, Lee said, is often the case.

Lee said he expects scams to blossom as the military presence in Los Angeles declines. “Right now, some of these people are afraid to come out.”

Post-Riot Scams Among the scams authorities expect to see in the coming days and weeks:

* Business or home-repair scams. Presenting themselves as contractors, con artists may offer to perform repairs after receiving a large advance fee. Once these people get their money or documents, they’re gone. Consumers are advised to check with the Contractor State License Board at its special riot victim hot line, (800) 962-1125, to check whether a contractor is licensed before paying any money.

* Government aid scams. Con artists posing as government workers or paralegals may offer to help riot victims “cut through red tape” to obtain Small Business Administration loans or other government aid. Once the victims pay these impostors an upfront fee, they disappear. Consumer affairs agencies say there are no government loan programs that require a fee in advance. In addition, government agencies do not solicit door-to-door.

* Fake insurance adjusters. Thieves posing as insurance adjusters may say they need to get inside a victim’s home to assess the damage. But once inside, they’ll rob instead. In other cases, thieves pose as utility repair crews to gain entry. Before letting anyone in their homes, consumers should call the insurance company or utility to see whether they are doing work in the area.

* Security system scams. With a heightened concern about security in the wake of the riots, con artists can be expected to pose as salespeople for security-alarm companies who will charge a big fee and then disappear. Consumers can call the Better Business Bureau of the Southland at (714) 527-0680 to check on the background of a company.