March 22, 2006

Project COLT’s Top 10 Telemarketing Scams

1. Lottery or Sweepstakes Scams. Con artists telephone innocent victims to tell them they have won a lottery jackpot or other substantial prize. The caller tells the person that in order for the prize money to be released, they must first pay a Customs duty, a tax, or a fee. Typically, the fee is several thousand dollars. The so-called winners are then asked to send a check or wire the fee to a bank account or foreign mailbox. The con artist assures the victim that, once the fee has been received, the prize money will be released. Con artists often pressure their victims by telling them they only have a limited amount of time to send in the fee. If they miss the deadline, the winnings will be returned to the “jackpot.” Often, the victims are given a phony award number and telephone number to contact lottery officials. Inevitably, the prize money never arrives. There are a number of variations of this scam. Some of these include, “You are guaranteed to have won one of five top awards;” the Magazines for Life scam; and the Mystery Prize scam.
   
   
2. Recovery Operations. In these scams, the con artists target people who have previously been victimized by telemarketers. The caller claims to be a lawyer, judge, police officer, U.S. or Canadian Customs officer, or an IRS or Canadian income tax official. They tell victims that they are aware of their past experience with telemarketers. They then claim there has been a recent settlement from a court case against telemarketers and that the person is entitled to part of the award. But before the victims can collect their share, they must first send a fee or pay duties and taxes. To lend credibility to this fraud, the con artist will supply details about the person's past experience, such as the amounts of money sent and the companies involved.
   
   
3. Advanced Loan Fees. Con artists advertise (usually in newspapers or financial publications) that they can loan money to people who have had difficulties obtaining loans elsewhere. The con artist gives the caller loan approval over the phone, but tells them that they must pay a fee in order to receive the loan. Once the check is in the mail, the caller disappears. There are numerous variations of this scam. In some cases, fraud artists offer venture capital loans to entrepreneurs. The con artist tells victims that, in order to qualify for the money at a competitive rate, the victims must first put up a percentage. Sometimes this fee can be tens of thousands of dollars, depending on the amount the investor wants to borrow. The con artist takes the fee and then disappears. In some cases, the con artist will go back to the investor for more money, saying that additional funds are required to convince their board that the loan is a good risk.
   
   
4. Counterfeit Checks. This scheme is a particularly insidious variation of the lottery or sweepstakes scam. The fraud artist informs victims that they have won a foreign lottery and solicits a fee up front in order to release the winnings. Upon receiving their fee, the telemarketer issues counterfeit checks to the victims in the amount of the bogus lottery prize. The victims then attempt to cash or deposit the check, which eventually comes back counterfeit. The bank then goes after the victim and demands the money back. The victim essentially gets "stung" twice, while the telemarketer walks away with the money.
   
   
5. Fraudulent Charitable Donations. Many fraudulent telemarketers call claiming to represent charitable organizations, often using well-known, legitimate charities. They often use variations of the real name of a charity. For instance, they may say they represent the American Kidney Foundation, instead of the legitimate National Kidney Foundation. They also call claiming to represent police or firefighter organizations. They typically ask victims for donations to help police officers buy equipment or to assist families of officers disabled or killed in the line of duty. Other solicitations ask victims to help veterans, sick children; or the homeless.
   
   
6. Fraudulent Magazine Subscription Sales. In this scam, con artists call claiming to be from a magazine publisher. They ask victims to renew a magazine subscription. In most cases, the victim never receives the magazine or receives it at an inflated cost. Victims may end up with a bill for several hundred dollars and magazine subscriptions for years.
   
   
7. Advance Fee Sweepstakes Fraud. This scam combines elements from the "advance loan fee" scheme and the lottery/sweepstakes scam. Victims receive a card in the mail or a phone call informing them that they have won a prize. In order to collect the prize, they must send in a down payment. Sometimes con artists say that this fee is actually federal income tax. In other instances, the caller poses as a government official and demands that appropriate taxes or customs fees are paid before the money can be released.
   
   
8. "Reloading" of Fraud Victims. This scheme involves more aggressive con artists who contact prior victims of telemarketing fraud. The reloader will try to convince victims that they are eligible for even greater prizes under the company's "executive" prize promotion, provided that more purchases are made. This scam is particularly hurtful to senior citizens. Faced with the loss of their savings, some seniors will go along with another scheme in the hope that the con artist will "make good" on the original funds that were lost. The con artists ratchet up the pressure as they demand more money, often asking for credit card numbers. Some have even told victims to take out a loan to cover the fee.
   
   
9. Precious Metals and Gems. This scam was very popular in the mid-1990s. In this scheme, Canadian telemarketers purchase cheap gems and sell them to victims for much more than they are worth. Once the victims receive the stone, they are told not to open the break the seal on the container. Over a period of time, the telemarketer calls the victims to tell them that their stone has increased in value on the global market and that they should buy more. When the victim eventually opens the package and has the stone appraised, they find out that the stone is worth no more than one hundred dollars. A U.S.-Canadian investigation recently led to charges against 48 people accused of operating a cross-border scam involving gem sales. The suspects, based in Canada, allegedly defrauded several thousand investors out of more than $52 million. A church minister in York, Pa., reported that he lost more than $1 million dollars in the scam.
   
   
10. Investment Scams. Con artists claiming to be legitimate investors collect millions of dollars each year from innocent victims. In this scheme, they collect funds from victims claiming the money will be invested in lucrative banking and real estate programs. Often, con artists promise huge returns with little or no risk. Frequently, the con artists use the money from legitimate investors for personal expenses.

U.S. Immigration and Customs Enforcement (ICE) was established in March 2003 as the largest investigative arm of the Department of Homeland Security. ICE is comprised of five integrated divisions that form a 21st century law enforcement agency with broad responsibilities for a number of key homeland security priorities.