Seniors Join FBI to Stem Phone Scams

Today, a short quiz:

The telephone rings. You pick up the receiver.

An excited voice on the line says: "Congratulations, you have just won a fabulous all-expenses-paid vacation to the sunny Caribbean! But in order to claim your prize you must pay a registration fee right now to hold your spot and cover other costs and taxes."

What do you do next?

A. Get out your checkbook.

B. Mentally start to pack your bags.

C. Hang up.

Every day, hundreds of Americans face a similar choice, and a surprisingly large number choose A and B, rather than C. Soon enough they learn the truth, that there never was a vacation. All they receive from the experience is an expensive lesson on not trusting high-pressure telephone sales pitches.

By some estimates, telephone scams earn as much as $40 billion a year for fast-talking con artists. Most target senior citizens, and particularly homebound widows who are apt to enjoy telephone contact with someone who sounds like a friend on the other end of the phone. But it is money, rather than friendship, that the con men seek.

"A man called me up from Las Vegas and offered me a trip to Nassau [in the Bahamas]. I've never traveled around a lot, and it sounded real good," says Betty Malburg of Ottawa, Kan. "He said this will be free to you, but you just have to pay me $2,500."

Mrs. Malburg thought about it, but she didn't have that much in her checking account. "I said, 'I can't pay you $2,500.' "

The man on the phone was understanding and flexible. " 'I'll take your credit card,' he says," Malburg recalls.

"I gave him my credit card number and he charged it that day," she says.

If this was supposed to be a free trip, why should she have to pay $2,500? "That's what I wondered," Malburg says. But she adds, "I was having a good time. I thought I was just going to get a trip, and for me since I never traveled it just sounded wonderful."

When the packet of information arrived in the mail for her dream vacation, she realized immediately that she'd been scammed. It turned out to be an all-expenses-paid trip that didn't include any hotel accommodations or meals. Both of those items tend to be the two most expensive costs of such a trip.

Malburg's experience is typical, experts say.

Thrill of victory

For many victims it is a combination of the excitement of believing they've won a big prize and the thrill of being involved in an adventure with a new friend over the telephone that blinds them to the reality that someone is trying to steal their money.

One illegal telemarketer tried to justify his actions to a federal judge in California, saying what he had done wasn't all that bad because he was providing a form of recreation for seniors who were bored and sitting home alone. "We targeted people who were homebound," he explained. "It was kind of like entertainment for the homebound."

Today, seniors are fighting back. Some are volunteering to telephone prospective victims whose names were found on call lists seized during FBI raids of illicit telemarketing offices. The volunteers use the same calling techniques employed by the scam artists, but they use them to warn possible victims that they are being targeted by crooks.

Sometimes they are too late. "We had one woman here who the FBI agent talked to who had been taken for $85,000," says Al Weintraub, a volunteer in Los Angeles.

The nationwide project, sponsored in part by the American Association of Retired Persons (AARP), has involved 670 senior volunteers during the past year who have made 23,700 telephone calls and warned 8,600 older folks whose names were on lists identifying them as easy marks for telephone scams.

A second program, also sponsored by the AARP, trains seniors throughout the country to conduct FBI sting operations to identify and prosecute illicit telemarketers.

The seniors are equipped with telephone surveillance devices that enable them to record illegal sales pitches as they are being made. The recordings help investigators and prosecutors identify and lock up the most unscrupulous telemarketers before they victimize other retirees.

Since 1995, some 2,000 hours of telephone telemarketing pitches have been recorded and more than 1,400 individuals have been charged or indicted. Scam kingpins who have been convicted are receiving jail terms of 10 to 14 years in prison.

"I think we've caused some serious damage to telemarketing fraud as a whole," says Jonathan Rusch, special counsel for fraud prevention at the US Justice Department in Washington. "But the fight is not over. We have every intention of keeping up the pressure."

"We have it on the run, but I don't think we've beaten it," adds Sarah Reznek, a lawyer with the Federal Trade Commission who specializes in telemarketing law enforcement. "Civil remedies [fines] are a cost of doing business. We must put them out of commission and to do that we must put them in jail."

It isn't just phony sweepstakes and prizes like the scam that targeted Betty Malburg. There are also telephone scams selling advance fee loans to credit-starved seniors, bogus work-at-home proposals, exploitive magazine-sales promotions, fake credit-card offers, and fraudulent home repair operations.

Some scammers say they are selling sure-fire chances to win a foreign lottery, but end up distributing losing tickets while pocketing most of the cash. Increasingly, scammers are trying to persuade seniors to invest their life savings in highly speculative or nonexistent investments. By the time the victims realize what is happening, their hard-earned nest eggs are gone.

Perhaps the most inventive scam involves crooks who identify themselves on the telephone as FBI agents or other law-enforcement personnel. They say they have recovered money lost by the victim in earlier scams, but they can't return it until the victim pays taxes owed on the recovered funds.

Repeat customers

The scam often works because seniors assume that only law enforcement would be able to find out that they'd been scammed earlier. In reality, the same criminals who scammed the seniors the first time are returning to take them again.

Mr. Rusch says any financial solicitation by someone who claims to be a law-enforcement official working to recover stolen money should be an instant tipoff of an ongoing scam. "No law-enforcement officer who is doing his or her job will ever ask you for money," he says.

The AARP says individuals who believe they are being victimized should report the solicitations to the National Fraud Information Center at 800-876-7060. The center is a national clearinghouse for fraud tips. The reports will be routed to appropriate investigators, including the FBI.