Slam that telephone scam

Mike Havertz started his career with the FBI investigating drug trafficking and terrorism. Now he focuses on telemarketing fraud, which zeroes in on and victimizes a lot of seniors.

It's a $20 billion-a-year empire that has become increasingly sophisticated since Mr. Havertz went to work in 1993 with the FBI's Boiler Room Task Force in San Diego.

Shady businesses often promise prizes such as cars or jewelry to people willing to pay fictitious taxes or fees. Once the payments are made, the prizes either fail to show or are almost worthless. Many of these operations have moved to Canada after authorities pretty well shut them down in the US.

"Now it's investment schemes," says Havertz. These scams can involve stock offerings of bogus high-tech enterprises that pull in a minimum of $10,000 from each victim. They're so sophisticated that Havertz, investigative coordinator of the task force, says retirement-plan trustees have been duped into signing over control of those accounts to people who quickly looted them.

"They're good," Havertz says of today's telephone crooks.

A Georgia telemarketer was convicted late last year of ripping off $83,000 from an Iowa farm couple in a Japanese yen currency-trading swindle. The salesman was pulling in commissions of up to $25,000 weekly giving people the tried-but-true pitch that he'd turn their piles of money into mountains of cash within weeks. While the telemarketer faces up to 15 years in prison, the Federal Trade Commission has just issued its second warning against foreign-currency trading schemes.

Taping calls

While telemarketers blend the old with the new, so have authorities. One of their best crime fighters has been the tape recorder, which they use to record pitches made by salespeople. A special library in San Diego houses 16,000 tapes made since the mid-1990s by state and federal investigators. Law enforcement officials from all over the country can tap into the library and retrieve tapes to see whether they match up with cases they're investigating, or to build conspiracy cases.

"It's a tremendously effective law enforcement tool," says Steve Peak, an assistant US Attorney in San Diego who's in charge of the task force and library. The taped conversations have helped to shut down hundreds of boiler rooms, since authorities don't have to rely solely upon the sometimes foggy recollections of victims.

Taping is also a very time consuming process, since crooks aren't calling every hour. So state and federal authorities have recruited retired FBI agents and volunteers from the American Association of Retired Persons (AARP) to tape record conversations. They typically answer telephone lines signed over to them by people who already have been victimized, since the crooks keep those numbers handy.

Agent Havertz says one of the better crime-busting tools comes from telemarketers themselves. Oftentimes employees who have left over pay disputes become disgruntled and contact authorities. These people know where the secrets lie and can greatly help an investigation.

Havertz says the power of a subpoena or "target" letter also helps collect evidence. While building a case against a telemarketer can take a year or more, the process can be shortened by subpoening records from individuals, or sending them letters notifying them that they are targets of the investigation.

Havertz says that is often enough to bring the workers in for a visit, where they'll offer evidence against their employer in exchange for leniency. And since telemarketers tend to hop from job to job, he says that cooperative witnesses often can provide information on three or four boiler rooms.

Preventative approach

At the AARP, the old line of defense was to tell members to "just hang up" on telemarketers. But senior program coordinator Les Norrgard said many older people are too polite to slam down the phone on someone. So the taping volunteer work is now supplemented with programs that focus on an ounce of prevention being worth a pound of cure.

Telemarketers can be smooth talkers, so AARP has tried to change that image. "They might not be just some nice guy. They're criminals," says Mr. Norrgard.

The yen trader from Georgia, for instance, has four prior felony convictions for everything from grand theft to possession of burglary tools.

AARP also is using the telemarketers' own data to help stamp out the crime. After a person falls for a scam several times, they win the dubious honor of being placed on a list that telemarketers pass around from firm to firm. These "mooch lists," as they're called, indicate that anyone on them is susceptible to more fraud.

When they get hold of a mooch list, Norrgard says officials from AARP often will call people on the roster and tell them they've been tagged as suckers. That can be a sobering moment.

The chase goes on

The FBI's Havertz says he feels like he's made a dent in telemarketing fraud. Still, the wealth that entrepreneurs and the stock market have created over the past decade has kept the bad guys on alert to every new moneymaking possibility. And so the chase goes on.

"I've been doing this since 1993," said assistant US Attorney Peak, "and I haven't had a slow day since."

Put tempting deals on hold

If it sounds too good to be true, it probably is. That adage holds as true today as ever. When a telemarketer promises to turn your $5,000 into $50,000 in a matter of weeks, it just isn't so. From the government and consumer advocates, here are some tips on spotting telemarketing fraud - and putting an end to it.

Be wary of:

Callers who say you "must act now" or forfeit your prize.

Free gifts that first require that you to send money or pay for taxes or shipping.

Advice that you can't afford to miss a "no-risk" opportunity.

To shield yourself from telemarketing fraud:

Wait and think over any offer. It's not rude, and legitimate businesses will understand.

Check a company's track record with the Better Business Bureau, state attorney general's consumer office, or the National Fraud Information Center (800-876-7060).

Don't respond if you don't fully understand the terms of what's being offered.

What to watch for, and where to turn

The following were the 10 most common telemarketing scams of 2000, according to the National Consumers League.

1. Sweepstakes prizes

2. Magazine renewals

3. Credit-card issuances (involving up-front fees)

4. Work-at-home plans

5. Advance-fee loans

6. Telephone slamming (switching carriers without permission)

7. Credit-card loss-protection plans

8. Buying clubs

9. Telephone cramming (charging for phone options without consent)

10. Travel vacations

For more information on detecting telemarketing fraud, or to lodge a complaint, here are some organizations worth contacting:

National Fraud Information Center. 800-876-7060. www.fraud.org

Federal Trade Commission. 877-382-4357. www.ftc.gov/bcp

Direct Marketing Association. www.the-dma.org/consumers/direct

(c) Copyright 2001. The Christian Science Publishing Society