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Who’s getting swindled?

Marketplace Staff Oct 31, 2006

KAI RYSSDAL: Identity theft is one the scariest things we can think of. A week doesn’t go by without some company losing a laptop jammed with personal information. But it can be good to remember that old-fashioned stings do still happen. A study commissioned by the National Association of Securities Dealers revealed who’s getting most spooked by con artists. Apryl Lundsten listened in to one sales pitch.

CON ARTIST CALL 1: Now John, back in 1860 from the Philadelphia Mint there were 22,675 of these coins minted. Of those 22,000 only four have survived — only four!

APRYL LUNDSTEN: That’s called the scarcity con. There’s only four left so you better buy now. If you don’t think you’d fall for that one, how about this tactic?

CON ARTIST CALL 2: Don’t worry about all that. I’ll give you that information later cuz it’s obviously getting too confusing now.

It’s not confusing for Doug Shadel. He’s state director for AARP in Washington and part of the study’s research team. He knows exactly what types of persuasion tactics con artists use. The most common is called the phantom fixation.

DOUG SHADEL: This is where the con artist will dangle out there some wonderful phantom, something that you want. You know, a million dollars, or a never-ending vacation.

He says another persuasion tactic is social consensus. That’s the idea that if everybody’s doing it, it must be good. Elise Walter is senior executive vice president of the National Association of Securities Dealers, or NASD. She says seniors lose about $40 billion a year to these types of scams. So who’s getting conned?

ELISE WALTER: The study found that victims tend to be well-educated, financially literate, predominantly male, people who tend not to live alone and who have higher incomes than non-victims.

Walter also says victims are more likely to have had some sort of negative life event in the past three years. It’s like kicking people when they’re down. Melody Klineman is president and CEO for the National Telemarketing Victim Call Center. She’s working on a current investment fraud case that shows similar results.

MELODY KLINEMAN: We’re guessing that 9 out of 10 are males. It looks like they were small business owners — auto repair shops, doctors, a dentist . . .

For some con artists these folks are easy prey. Steve Simon was a con man for 10 years. And he spent time in jail. He says all his victims were wealthy CEOs and CFOs.

STEVE SIMON: You know the scam is easier with someone who’s much more savvy. It just plays on someone’s avarice, quick-money thing — and that is the formula.

The formula for Simon was millionaires who wanted in on what they thought was a sure deal, like fixed horse races. He says there were many reasons these guys fell for his scam.

SIMON: A tendency toward greed, make quick money, you know and a lot of them was the excitement of the fraud — being part of that.

But sometimes you’re getting scammed and you don’t even know it. Melody Klineman of the National Telemarketing Victim Call Center has a different opinion. She says the majority of fraud victims aren’t as high-profile. Ordinary people need to watch out.

KLINEMAN: They are very talented at what they do and people haven’t met a con artist that’s gotten to them yet.

What’s worse, Klineman says many male victims won’t admit they’ve been conned. And that makes fraud cases harder to investigate.

In Los Angeles, I’m Apryl Lundsten for Marketplace.

RYSSDAL: Full disclosure: The NASD Investor Education Fund is an underwriter of this program.

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