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Who’s getting swindled?

Marketplace Staff Dec 1, 2006


KAI RYSSDAL: We started off this week with what’s called Cyber Monday. Online shoppers bought roughly $610 million worth of …stuff. That’s the highest ever e-commerce total for a single day. And with lots of sales come lots of opportunities for online fraud. Most of us know to be on the lookout for Internet scams, you know e-mails that promise free prizes, all they need is your credit card number. Or better yet your Social Security number to verify your identity. But we seem to forget that con artists often use old-fashioned ways to swindle people. The National Association of Securities Dealers commissioned a study not too long ago. It revealed the not so merry news of who thieves are going after. Apryl Lundsten reports.

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 an actual recording of a phone con. It’s called the scarcity con. Only four left so you better act now!

Doug Shadel is the state director for AARP in Washington and part of the study’s research team.

DOUG SHADEL: The most common sort of persuasion tactic was something called phantom fixation and 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 includes social consensusk, the idea that if everybody is doing it, it must be good. One of the ways con artists encourage victims is by using the “expert snare.”

SHADEL: This is where they say things like, “You know, I don’t have to tell you Mr. Prospect anything about the markets, you’re already an expert.”

So who’s getting conned? Elise Walter is Senior Executive Vice President of NASD. She says you’d be surprised.

ELISE WALTER: The study found that the 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 sort of like kicking people when they’re down.

Melody Klineman is President and CEO for the National Telemarketing Victim Call Center. She says a current investment fraud case she’s working on concurs with NASD findings about victims.

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

These people seem savvy, but for some con artists these folks are fertile ground. Steve Simon used to be a con artist.

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

Simon says all of his victims were wealthy businessmen, CEOs and CFOs. Millionaires who wanted in on what they thought was a sure deal: fixed horse races. He says there were a lot of reasons his victims 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 Melody Klineman says the majority of fraud victims aren’t as high-profile. She says ordinary people need to watch out. Sometimes you’re getting scammed and you don’t even know it. Klineman spends a lot of time breaking the bad news.

First they ask victims if they get a lot of telemarketing calls. Most people say no. Then they follow-up with another question:

KLINEMAN: Do you get very many calls for investment opportunities? And we’re discovering that these lead lists are getting 2 to 5 calls a day…so they didn’t consider these people con artists.

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

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

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