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Will You Fall for One of These Telemarketing Investment Scams?

by Louis J. Wasser

You’ve just sat down to dinner with your family when the phone rings.  Your phone ID reveals a company name something like “Paramount Investment Associates,” so you assure your spouse you’ll make short work of the caller. After you pick up and the caller mentions your name, you interrupt to let him know he caught you at a very bad time.

As though armed for your rebuff, the caller very quickly tells you he doesn’t know whether a call back would even make sense. You become silent, because you want to hear more.

Your caller explains he’s part of an “exclusive team” appointed to raise money for a private placement opportunity for a medical company that has just manufactured a “revolutionary new device” to help make paraplegic invalids more independent in their own homes.

Once you write a check or send a wire — say goodbye to your money.

Carrot #1:  The company (continues the caller) is only $5 million away from going public under an SEC regulation D exemption, and now, during the final phase of its funding, the company is appealing to private accredited investors who stand to “triple their money” in an initial public offering during the next several months once the company is listed on Nasdaq.

Now your caller dangles Carrot #2: (After all, you haven’t hung up yet):

“I’d be happy to call back at a more convenient time, but frankly, I’m not sure this phone call is even right for you. I don’t want to waste any more of your time than I already have. Are you an accredited investor?”

You hesitate.  You give his question some brief thought.  And you answer your caller’s seemingly innocuous question with three little words:  “I believe so.”

Now… guess what? You’re hooked, my friend!

You whisper to your spouse to please put your dinner on a hot plate so that it’ll stay warm, because this call “sounds like an intriguing opportunity.”

Your caller now spins an enchanting yarn.  He’s got an answer for every question you think you’re sharp enough to ask.  Every last one of them:  “How did you get my name?” “What is the background of the people manufacturing this device?” “What is your background?” “On what date will the company be going public?” “Has the device been tested with clinical trials?”  “Are medical professionals investing in this company?” “Does the company have any other new products on the horizon if this device sells as well as you expect?”  “Why do you need me to invest in the product?”

Finally you ask your caller:  “What is the minimum investment?”

The minimum?  Funny you should ask.  During a sales meeting with his cronies last night, your caller’s sales manager told the team that once an investor asks that question, you’ve hit his or her “sweet spot.”

Now your caller can blithely mention that the minimum is $25,000.  But he also lets you know that most investors are so thrilled with the opportunity that they’re coming in with numbers like $150,000, $250,000, and $400,000. Just last night your caller closed a deal for $950,000, because the investor was thrilled at the prospect at a device that might help his brother, who has been wheel-chair bound for years with muscular dystrophy.

Your caller asks how much you’d like to “start” with.  You are an accredited investor… well… aren’t you? (According to SEC regulations, an accredited investor is “a natural person with income exceeding $200,000 in each of the two most recent years, or joint income with a spouse exceeding $300,000 for those years, and a reasonable expectation of the same income level in the current year.”)

Once you write a check or send a wire — say goodbye to your money. Your return on your “investment” will be nothing… zilch… zero.  Ninety-five percent of phone calls like the one I’ve just profiled are scams. Your caller was more than likely calling from a “boiler room,” and just the week before, the entire team had just moved from another boiler room that was about to be raided by the SEC. Even though caller ID systems and the SEC have made life difficult for telemarketing investment scams, they still flourish.

While a very small percentage of these calls might be on the up-and-up, don’t put yourself in the position of searching for a rare flower among weeds.  You’ve worked too hard for your money to throw it at phone hucksters.

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