They’re Back!

It would seem that the wheel has turned full circle again. People are now getting phone calls out of the blue with fortunes being promised for a minimum of investment. Yes folks, the Boiler-room boys are back.

These guys are nothing if not perseverant and persistent. Some are targeted to make 10,000 (yes, ten thousand!) calls a month – that is 500 a day. Now most will last no more than 30 seconds, if that, as it is expected that at least 9,990 people will tell them where they can put their offer. However, the ten or less innocents are the ones they are after. All they need is one person to make the month worth it. Please do not let it be you.

There are reports from some private client investment managers who say, “There is an increased professionalism in the boiler-room’s approach.” They seem to be cleverer than ever these days with new scams that sound more than plausible.

The UK Daily Telegraph reported that one manager at Brewin Dolphin said, “We experienced a 30 percent increase in reports of scams by our clients in 2011 compared with 2010.” Also, the Financial Services Authority have reported that boiler-rooms rip people off in the UK to the tune of GBP200 million per annum.

In the boiler-room tactics of old, the ‘salesmen’ just played the numbers game and used what is politely called ‘high-pressure sales’, or what I call lying, to persuade the poor sod at the end of the phone to part with his/her hard earned money. I am sure you have all heard the stories but just in case someone has been living on Mars for the last few years, this is how it goes:

– Salesman calls target and promises them shares that will make the owner a fortune in no time at all.

– Target buys shares and suddenly finds these shares to be either well over-priced, non-existent, illiquid or just plain worthless.

In reality, the salesmen were just very friendly and persistent. They wore down their target until they capitulated.

This is no longer the case, the new breed of criminal, er sorry sales person, has a much better idea of what is going on in the market-place and uses it to their advantage. They will flatter any prospective buyer by agreeing with whatever they say – this is their way of finding out how much the person knows and adjusting their patter accordingly. Basically, they are a lot more professional in their approach. They are also a lot more patient and will emphasise they only want to send through information for the potential buyer to read and that action does not have to be taken immediately.

One manager at a UK Advisory tells a horrifying story about how one of his clients got suckered in by this more sophisticated ‘attack’.

“My client owned shares in ABC company, and knew that there had been some boardroom upheaval. So when someone called out of the blue speaking for a group planning a hostile bid, it sounded plausible.

“The caller went on to say that my client didn’t need to take any action at that point.”

Then, a fortnight later, the client received another phone call. He was informed that the hostile bid was still going forward but there was still no need to do anything.

The story continues, “Then he had a third call. The caller said the hostile bid would value ABC company shares at three to four times their current price. The message was still that ‘no action is needed’ but this time the investor was asked whether the ‘bidders’ could count on his support.”

These are clever tactics. It was only after this that the criminals went for the throat, “They said the bid was definitely going ahead, but that because of possible regulatory problems it had been underwritten. This, they said, meant my client would still quadruple his money by selling his shares to the bidders, even if the bid ultimately failed. But to get the benefit, he would have to pay his share of the premium charged by the ‘underwriters’, which was GBP5,000.”

This all seems very plausible and, understandably, the poor target fell for it. However, he heard nothing back for more than a month so he called the ‘salesman’ responsible. Now, this is where the new boiler-room generation has got really clever. Instead of back-tracking or ignoring the phone call, they went straight for the jugular so as to get even more money out of the client:

“They said they were ready to send him the proceeds of the share sale, but because the deal had taken place in America the authorities had imposed a ‘withholding tax’. If he paid this tax – GBP20,000 – he would get his GBP80,000 profit.” Again, it all sounded real so the client sent the money. It was only when he had heard, yet again, nothing that he went to see the financial advisory who had to tell him the bad news that, “he had been duped and wouldn’t see the money again. It wasn’t a pleasant conversation.”

So, how was this done? It is almost certain that the fraudsters got in touch with the person mentioned above due to the fact he was on ABC company’s share register as it is public information. Fortunately, many companies are now catching on to this and are warning people via websites and other forms of social media.

However, the boiler-rooms people are also using other, even more underhand methods. They stop at nothing if they think they will make money. They will go through waste-bins and hack computers – anything to get an edge on a potential ‘mark’.

False identity is also something which is not beyond them. They will claim to be from a firm of stockbrokers or even merchant banks. They may even say they are from the Asset Management arm of a High Street bank or building society.

It does not stop there. Some of the more ‘adventurous’ scammers will say they are actually from a real company and even quote references. They may clone a company’s website and just change the contact details and switch .com to .net etc. These guys will do almost anything to take your money from you.

So, what to do? Well use your common sense. If it sounds too good to be true then it usually is. Do not trust anyone you do not know.

Look out for new ideas that are more difficult to check up on. For example, gems, whisky and brandy and even land are not unusual ‘promotions’. Also, in a report on BBC in April of this year, it was reported that, “It is thought more than 50 UK-based vintage wine investment firms have collapsed in that period (over the last four years).” With regards to land sales, one common theme is to offer the same piece of land to many people so everyone thinks they own something but in fact there are, for example, fifty twenty-five percent shareholders. Another is to offer what is called green-belt but is, in fact, completely useless for a variety of reasons and cannot be used for anything and so is basically worthless.

Never take anyone’s word for anything. Do your own background checks and research. Go to public domains to confirm contact details.

However, the easiest way to avoid being ‘stung’ is just to hang up the phone after telling the person to go forth and multiply. You may also want to put your stocks and shares into a nominee account. This means your name will not appear on any shareholder registers. Finally, even though it appears to be obvious, physically destroy all financial documents and make sure your computer is well protected against hackers. Hopefully, this will enable you to enjoy peace of mind and allow you to enjoy your money and not anyone else.