Outsmarting the Scam Artists

How to Protect Yourself From the Most Clever Cons

D. Shadel

• Publisher: Wiley
• Year: 2012
• Print ISBN:
  9781118173640
• Edition: 1
• eBook ISBN:
  9781118240076
• Topic: Business
• Subtopic: Investments & Securities
• Index: Business

A practical guide to avoiding the most common scams, from a fraud-fighting expert

U.S. consumers lose billions of dollars each year to scam artists—and the next victim could be you. While anyone can be targeted, many victims are older. In AARP's Outsmarting the Scam Artists, renowned fraud-fighter Doug Shadel offers practical advice for consumers who want to protect their money as well as the financial assets of their parents and families.

Despite the rise of scams, many people are embarrassed to admit they've been victimized. The author helps break the cycle of shame by including accounts from the people who've been scammed as well as tips from a surprising source: convicted con artists who reveal how they've defrauded people like you.

• Get practical tips to combat all kinds of scams, from simple lottery tickets to non-existent oil and gas deals and religious ponzi schemes
• Learn how to protect yourself by securing your mailbox and fraud-proofing your trash
• Get inside the head of sophisticated scam artists to discover how you can become the type of individual they avoid

Scammers are everywhere. But with Outsmarting the Scam Artists in hand, you can protect yourself and your money.

PART I

THE SCAM ARTISTS’ PLAYBOOK

CHAPTER 1

Inside the Con Artist’s Mind

Pay phone/internet rtes

$150,000/yr possible

Call 1-800-888-8888

Have you ever seen an ad like this and wondered what they were offering? This ad appeared in the Baltimore Sun and in newspapers around the country in October 1999. It is known in the scam boiler room world as a “blind ad” because it is hard to tell from reading it what they are selling. Regardless of what is being sold, the “$150,000/yr possible” claim generates thousands of phone calls and in this case, all the calls were going to a south Florida business called All American Pay Phones (not its real name).

While pay phones have gone the way of the eight-track cassette and may seem dated, the techniques used to scam people have not changed over time. Our expert con artists tell us that swindlers are selling smartphone distributorships today the same way they sold pay phones in the 1990s.

All American was one of the many firms that con artists like Jimmy Edwards worked for during the 1990s, and he is going to take us on a behind-the-scenes tour of that company. But before we do that, let’s listen in on a call that came into All American in November 1999 while Edwards was working there. The call was handled by one of his good friends and colleagues, Joe Vertega.

Vertega: Good afternoon, this is Joe. Can I help you?

Swanson: My name is John Swanson and I saw your ad in the paper about pay phones and I was calling to get more information.

Vertega: Great. What city and state are you calling from?

Swanson: Rockville, Maryland.

Vertega: OK. And how close is Rockville to Washington D.C.?

Swanson: About 25 minutes.

Vertega: Great because it looks like most of the lucrative locations that are available now will be in a large urbanized market like D.C., okay?

Swanson: Okay.

Vertega: And there is no one up and operating there currently. I have no vendors in that market, John. We’re just moving into it, and it looks like it is up for grabs. Are you interested in starting a small business for yourself?

Swanson: I am. I really am interested.

Vertega: Do you have any background in the pay phone business?

Swanson: No, not really.

Vertega: Have you ever used a pay phone in the past?

Swanson: Yes.

Vertega: Well then, you’re qualified, okay?

This dialogue is typical of the first interaction one has with a business-opportunity firm like All American. The operator transfers callers to one of 8 to 10 salesmen who will then proceed to sell you on receiving a packet of information about pay phone distributorships.

The particular conversation you are “listening” to is a transcript of an undercover tape recording made by the Federal Trade Commission in 1999.1 John Swanson is really an undercover investigator setting up the company to gather evidence against them for suspected business-opportunity fraud. Joe Vertega is one of All American’s best salespeople. Let’s keep listening.

Vertega: Pay phones are a very simple business, you understand. They’ve been around over 80-something years, okay? It doesn’t take a rocket scientist to pull quarters out of a pay phone.

All American is the largest privately owned pay phone distributor in the United States today. We’ve got almost 4,000 active vendors on the rosters now all across the continental United States. I’m also moving into southwest Canada, I’m into Alaska, Hawaii, the U.S. Virgin Islands. I’m also into Puerto Rico now. And here I sit in our corporate offices in Miami.

From the description of the company offered by Mr. Vertega, one might get the impression that All American was a large corporation with hundreds of white collar workers bustling around the office servicing clients throughout the continental United States. And from the confident sound of his voice, one might also conclude that Mr. Vertega was a successful Miami businessman who was simply trying to expand his already thriving pay phone distributor business.

Both of these impressions would be wrong.

Miami, Florida, in the late 1990s looked like any other large U.S. city. But if you had the right tour guide and were able to look inside its many commercial office buildings, you would find every kind of fraudulent boiler room ever invented: oil and gas rooms, vending machine rooms, Internet kiosk rooms, prepaid cell phone rooms, prepaid legal rooms, prepaid pornography rooms, gold coin rooms, online casino gambling rooms. You name the scam, there was a room that operated that scam.

From 1996 until 2004, Jimmy Edwards worked in them all: more than 30 different fraudulent boiler rooms in Miami. It was the heyday of business-opportunity fraud, Edward’s personal specialty, but he would work in any room that paid well.

“I jumped from room to room during that time—cause hey you gotta put food on the table,” recalls Edwards. “There were a lot of characters running in and out of those rooms.” The room with the most characters was All American.

In 1999, Edwards had just gotten out of rehab for heroin addiction and was looking for a room that was a little loose in terms of the pressure they would put on him to perform right away. He was recruited to go to work for All American by its manager Jeremy when he was at a Narcotics Anonymous (N.A.) meeting. It turns out that boiler room owners regularly sent managers in to N.A. meetings to recruit addicts to work at their rooms. Why?

Who better to get on the phone than an addict? Nobody. Who’s a better talker than an addict? Nobody. Who has more motivation for money than an addict? Nobody. I was an addict from New York and I knew how to hustle. So they were falling all over themselves to get me on the phone when they were first introduced to me down there.

So while Mr. Vertega might have sounded authoritative in proclaiming All American to be the largest private pay phone distributor in the continental United States, the reality was quite different. Consider Edwards’ rundown of the All American staff roster:

All American was a room full of drug addicts. Jeremy the manager was a crack head. He’s the one who recruited me at the N.A. meeting. He could barely go a week without going on a run and smoking $2,000 to $3,000 worth of crack, winding up in a hotel room somewhere with us having to go find him or sending somebody out to pull him out of the hotel room, get him cleaned up, and get him back into his seat as a manager. So with him as our fearless leader, imagine what the room was like.

We had Rick. He was from Hoboken, New Jersey, and he was a crack head too. Same type of crack head as Jeremy. He knew the pay phone business and he had a little rhythm. He was a decent closer.

Then there was Dave. He was a helluva addict too. Dave was a Jewish kid, clean cut, lived with his mother. He was older than me so he was probably in his late 30s, early 40s back then. He was a loner.

Jack was another one. Big J would go out on a Friday with $10,000 and we’d have to go pick him up Monday morning and he had no shoes on in an open locker somewhere . . . broke, broke, broke, 10Gs gone, no shirt, no shoes, standing at a pay phone, 11 o’clock in the morning on Monday. Blown out—he smoked $10,000 worth of crack. Ten thousand dollars worth of crack and hookers and cabs and pipes and everything else that comes with what you are doing when you are smoking crack in a hotel room . . . he’d go through every penny.

Then there was Karl. Karl was a dope shooter like me. And he and I used to team up. You know with heroin, if you don’t have any when you wake up in the morning, you’re not in good shape. You need what’s called “a wake up.” Most heroin addicts will try to save something from the night before for when they wake up. But most heroin addicts can’t. So what happens is we would get to the office and try to get money together to go buy dope so we could get straight.

Jeremy, the manager, always had money and he knew what we needed, so he would spot me and Karl $100 for $150 back on Thursday. Karl would take that $100 and fly down to Overtown on his motorcycle and he’d buy 10 bags. Then when he came back, we would go into the bathroom and we would set up and shoot up, get straight, and go back in the room—reinvented, two completely new people. And then we would get on the phone, calling all our old paper and doing our thing.

Other guys would do the same thing with crack. They’d go into the bathroom and smoke crack. And they’d come back in and be all steamed up with their eyes bulging out of their heads. But they were able to get on the phone and pitch people on the phone deal.

And what about this guy Joe Vertega? Vertega, as it turns out, was the most interesting character of them all.

Joe was a nice guy but for sure a crack head. You gotta understand something. This is a guy who is about 240 to 245 pounds, 6 foot 3. As soon as he got a hit of crack in him, off came his clothes, on went a dress, high heels, and blue eye makeup and off to the boulevard he went, turning tricks. And this is a guy who had pockets full of money, because he was so good at closing deals. It was just what he did. Another aspect of his addiction, you know?

So evidently there was more to Mr. Vertega than his deep knowledge of the pay phone distributor business. Let’s hear some more of his presentation:

Vertega: Now John, you’ll be guaranteed to earn no less than $300 per phone. Per month. That is in writing. Now how is that for a safety net? So we expect you to recover your initial investment between the first seven to nine months. One hundred percent return. If I brought you in as an entry level with seven of the new generation smart phones, you’re looking at approximately a $15,000 overall investment. Are you capable of dealing with that?

Swanson: Yes I am.

Vertega: That’s not a problem for you? Okay. So we’re on the same page with one another and you understand I just have to be sure. We take 300 plus calls a week here, John. I hope you understand the number of flakes and nuts I talk to, sir.

What Vertega is doing in this part of the pitch is “qualifying the money”—making sure the potential victim has the $15,000 to spend before he goes any further with him. The irony is that Vertega was demanding that the customer prove to him that he was not one of the “flakes and nuts” who called All American every week . . . just before he went into the bathroom to smoke some crack and dress up in high heels, blue eye make-up, and a dress to go turn tricks on Biscayne Boulevard. We will check in on the rest of this presentation in Chapter 8.

Edwards says that not everyone in the boiler rooms he worked in had such severe drug addiction going on, but almost all of them had some kind of addiction. “I would say 80 to 90 percent of the people I worked with in these boiler rooms were addicted to something: alcohol, pot, barbiturates, coke, heroin. It just kind of came with the territory.”

Despite the prevalence of drug and alcohol addiction, most fraud boiler room salespeople came from...

Table of contents

• Cover
• Contents
• Title
• Copyright
• Dedication
• Acknowledgments
• Preface
• Part I: The Scam Artists’ Playbook
• Part II: Con Artists in Action
• Part III: How to Fight Fraud
• Appendix A
• Appendix B
• About the Author
• Index