Other Scams and Frauds
"Bank inspector" cons
An unfamiliar person contacts you and claims that he or
she is a bank representative (or is working with the police) to investigate theft at your
bank. The "inspector" may produce identification, and claims that your assistance is
required to trap a dishonest bank employee. After you are asked to withdraw money from your
account, the swindler contacts you and takes possession of your money. You are assured that
the money will be returned to your account shortly. A reward may even be promised. There
are variations on this scheme, but be aware: banks, shopping centers, or police authorities
never use customers to check security. This should be an easy-to-spot swindle, but—because
victims want to be helpful or claim a reward—many people have lost their life savings to
this con.
"Boiler room" cons
A con operator hires numerous employees to work as telephone solicitors. They may sell
products or solicit donations for charitable organizations. The products are frequently of
questionable value and the charities are often fictitious. Real charity names may be used,
and the employees may not even be aware that they are participating in a scheme. These
schemes work well, because each victim is taken for only a small amount of money. Boiler
room victims do not usually pursue the issue. However these small amounts add up to
thousands of dollars for the boiler room operator. The innocent employees may go without
pay after the operator disappears with the money. The best way to avoid this scheme is to
verify the organization or product before making a commitment.
Land speculation
Many people who purchase vacation or retirement property have found themselves trapped in
land investment schemes. Promoters use slick advertising materials to seduce victims into
buying worthless property. If the price seems too good to be true, or is an anxious "once
in a lifetime opportunity," you may end up buying a worthless plot. People have bought
everything from public property to desert "get-aways" and swampland. Never purchase property
sight unseen. Visit the property, have it appraised, and conduct your title transfers
through an established company. Like all purchases, you should investigate before you buy.
"Pigeon drop" cons
The "pigeon drop" has many variations. Following is one set up. A stranger starts a
conversation with you. After you get to know that person, another stranger approaches you.
The second stranger finds a large amount of money in your shared vicinity. Discussion
occurs over what should be done with the money and whether all three of you should share
it. One of the strangers claims to work for a lawyer and calls to seek legal advice. The
lawyer advises that the money should be put into a trust fund account until the owner is
located. If unclaimed for 90 days, the money is to be shared among the group. However, to
ensure that all those in the group are legitimate, a specified amount of money is to be
deposited in the trust by each member of the group. The supposed lawyer may add that—for an
additional fee—the waiting period can be waived. Both strangers then urge you to come up
with your share. The stranger who claims to work for the lawyer then offers to take the
money to the lawyer, sign the papers and return with your share. The stranger then returns
and says the lawyer wants to see you personally. The stranger provides an address, which
proves to be fictitious, and you can’t find your two new "friends." This con, like most,
appeals to human nature—the desire to get something for nothing. Remember: never give cash
to a stranger.
"Pyramid" or chain schemes
Pyramid or chain referral schemes are often accompanied by testimonials of becoming rich
from part-time work. These schemes are often spread by people who think they’re in a
legitimate business. The "pyramid" is a marketing program, which convinces people to buy-in
and then sell others the rights to market a product or line of products. Promoters require
new "distributors" to start by buying a large "investment" inventory (often well above
market value). This new "distributor," is enticed with the promise of becoming rich when he
sells to sub-distributors. The investor is made to feel bad if he never sees any profits.
Supposedly, the investor is not "working hard enough" at enlisting new recruits (who should
enroll more recruits).
An easy way to spot the scheme is that there is little concern shown for selling an
actual product or service to the public. The attraction of the pyramid scheme is that it
promises an unusually high rate of return for a "modest" investment.
Promoters conceal the fact that only the people at the top—those who initiated the
scheme—will ever profit. Some pyramid schemes are now corporations, which enjoy the
benefit of household name-recognition. Similar pyramid schemes are starting to appear on
the Internet.
Chain letters are similar schemes where everyone supposedly gets rich by sending money
to the originator of a letter. The person who responds to the letter will get rich in turn
if she sends the letter to ten people (who will start a "chain" of money going to the new
letter writer). Chain letters involve small amounts of lost money, but they are completely
illegal (and mathematically unprofitable). When chain letters threaten "bad luck" or
mysterious "curses" for those who don’t send money, it would be more accurate to warn of
bad luck for those who throw away their money on chain letter schemes.
"Slamming" or involuntary phone service switches
Tens of thousands of consumers complained about this scam in 1998. "Slamming" is a fairly
new scheme some up-start long distance carriers have begun to use in order to add more
households to their billing lists. The long distance service provider simply tells your
local phone service that you have opted to switch to their long distance plan—this is, of
course, without your knowledge. Most phone customers may not even notice the change in
service. Such phony or semi-legal long distance companies can use this scam to simply
collect a switching fee (typically about $5.00 per phone line), or they may actually
provide long distance service at a steeper price. In some cases, a home may have more than
one long distance provider—each collecting monthly fees. Established and reputable long
distance phone companies never use this scheme. To avoid the scam, you simply need to check
your phone bill for unusual charges. Such charges may appear as the following: "switch LD
carrier," "service change," or as some company name you do not recognize. If you have any
questions about odd phone charges, immediately call your local phone company. Fraudulent
charges may be removed or recovered in most cases.