Text 5. Techniques used to sell fraudulent investments

The "Three-Call" Technique

Some swindlers wait before turning up the heat. In their first call, the "warm-up", they'll try to build your trust by describing their firm's past success and the high quality of its research. They might ask your permission to send a brochure and call again without pressure to buy anything. Having sent a brochure, they will ask you to watch the paper for the stocks price and they'll call you back. Soon you will be rejected if you appear to be a professional or an official who might ask too many questions.

In their second call, they'll whet your appetite, telling you about a fabulous deal they "think" they can get you into. In their third call, you will be passed on to an "opener" who will set the hook with an initial sale of stock by appealing to your ego and desire to make money. They'll urge you to buy now or miss out.

A technique, often used, is to give two strokes, then to ask for a monetary commitment while avoiding money-related terms such as "buy", substituting instead, "grab" or "take" some stock.

The Infallible Forecaster

One ingenious setup involves a person phoning you and quickly assuring you that, "No", they didn't want you to invest a single cent. "Never invest with anyone you don't know," they say. But he says he would like to demonstrate his firm's "research skill" by sharing with you the forecast that a certain stock or commodity is about to experience a significant price increase. Of course, the price soon goes up.

A second phone call doesn't solicit an investment either. He simply wants to share a prediction that the price of something else is about to go down. "Our forecasts will help you decide if it’s really profitable to work with us.

As predicted, the price subsequently declines. By the third call, you are a believer. You not only want to invest, but insist on it – with a big investment to make up for the opportunities you have already missed out.

You don’t know, that the swindler began with a calling list of 200 people. In the first call, he told 100 that the price would go up and the other 100 people were told it would go down.

When it went up, he made the second call to the first 100 who had been given the "correct forecast." Of these, 50 were told the next price move would be up and 50 were told it would be down.

The result: The swindler has a list of 50 persons eager to invest. After all, how could they go wrong with anyone so obviously infallible in forecasting prices? But in this case they were wrong, having decided to send a half million of dollars from their collective savings accounts.

The ways to Lure You In

Fraudulent investment promoters are glib and resourceful. In their sales pitch, they'll say that they have high-level financial connections; that they'll guarantee the investment; or that they'll got back the investment after a certain time. To close the deal, they give wrong statistics, misrepresent the significance of a current event, or stress the unique quality of their offering.

The story they tell must be believable but not perfect, and it must have some weak sides in order to encourage people to believe more. They will promote it as a terrific concept with superior potential, knowing that people focus on their emotions, not the facts.

Weak, greedy and foolish investors can be controlled and manipulated to tell others calculated lies, especially if they believe the information is confidential.

They will pump up the potential while assuring you that there is an expectation of near-term profits because:

• celebrities, major corporations or banks will be investing shortly;

• they are close to being on the shopping network or in a major catalogue;

• a favourable new geological report is coming out shortly;

• they are lining up a deal with a major distributor;

• they are negotiating with a major resource company or major pension fund;

• all trucks, cars, homes, computers etc. will be required to have the company's product;

• it has cutting edge technology that will cure all known illnesses;

• it will "change the world" by altering time and space.

Soon a vague but romanticized business concept is replaced in your mind with a vision of this company, producing only money in vast quantities.

For the most investors the stock market is the most exotic mystery in their business, so it's easy for cons to make a new venture, especially if the press is writing about successful legitimate companies in similar industries.

But while they claim to offer investments in exciting sounding businesses, they fall far short of what they promise.

Aspect of Risk

Investment schemes usually promise outrageously high rates of return with no risk. They will promise you the investment chance without giving you any meaningful written information on the product. Even if you are provided with a prospectus, they are so financially complex that the information is meaningless to many, if not all investors; though this holds equally true for any stock issue.

"If this doesn't perform as I’ve just said, we'll refund your money without any questions." "Your return is guaranteed." "We are absolutely sure, that you can’t loose!"

A con man may become impatient or even aggressive if the question of risk is raised.

"Look, I've got better things to do than waste time with people who lack the courage and foresight, necessary to make money! This is a wonderful opportunity to realize a better return on this investment compared to any other you're involved in."

With this kind of put-down, he hopes you won't bring up the subject again. To make his pitch more credible, he may acknowledge that there could be some risk – then quickly assure you it's minimal in relation to the profits you will certainly make.

"Of course there's a risk. There's a risk in everything."

"Perhaps a return of 100% in twenty minutes sounds a bit unrealistic, but that's exactly how all our initial public offerings trade. That's a fact! All I ask for is your vote of confidence this time. I won't let you down."

Avoidance of Questions

There is no way to determine whether a sales call is honest simply by talking with someone on the phone. No matter what questions you ask, or how many you ask, skilled swindlers have ready answers. Their persuasive scripts include retorts for your every objection. They typically brush aside questions or concerns with vague answers or assurances.

The more they talk, the less chance you have to ask questions. As long as you stay on the phone, they'll keep trying to sell you.

"I know you get offers everyday from people who tell you they're going to make you rich. I can make it easy for you to make your decision based on actual facts." "I can't be lying. There are laws against that."

They will continue to ask questions, using the Socratic method where the questions have rhetorical "yes" answers, such as:

"You would at least be interested in hearing about such a fantastic investment opportunity, wouldn't you?" or, "You would like to make a large amount of money in a short period of time with little or no risk, right?"

High-pressure Sales Tactics

Salesmen may even become abusive.

"Stop right there! You're a businessman and you make decisions every day. You didn't get where you are by being stupid ... Let's confirm the order right now. OK?"

Boiler room salesmen want fast action before you have a chance to develop second thoughts or consult with a professional for advice. There's usually lots of pressure and some compelling reason why they need your commitment to buy immediately.

"The opportunity can be offered only to a limited number of people".

"Delaying could mean missing out on a large profit as the "market is moving".

"I hate to disappoint you but your order can't exceed a certain limit, the demand is so great!"

"Only a few" shares of stock or partnership units are left."

"I'll hold it for you at this price so you can go to the bank".

"If you are short of money, just borrow the money and then pay it back out of your profits".

"I asked the broker not once but three times to send me some information. "Mr. Jones has been sending you information for years; he hasn't made you any money," was his reply."

They give you a virtual certainty of great profits within a shot period of time.

But if you give your money to a con artist, please, don’t expect to see it again.

After The Sale

Before you invest, con artists are very friendly. They take a personal interest in you and call several times. Each time, they tell you even more good things about the investment. In fact, the contacts may become so frequent that you may wish that your first contact had been your last.

Promoters of fraudulent investments often operate a particular scheme for a short time, quickly disperse the money they’ve taken and disappear before they can be detected.

Before that happens they will attempt to stall suspicious investors who might suspect that they have been defrauded. A "cooler", usually a woman, is trained to handle irate customers with soothing assurances and sincere diversions. This process may involve letters, in which the swindler blames the temporary delay of the promised high returns on various factors, including weather, union problems, delayed equipment delivery, labor problems and so on.

Such excuses may provide the con artist with valuable additional weeks or months in which they can swindle hundreds of additional victims. Often, after folding up one operation, they start another one, sometimes involving in it even the same victims.