Classic Scams

Pyramid or Chain Referral Schemes

A pyramid or chain referral scheme is a marketing program based on convincing people to buy the right to sell others the right to market a particular product or product line. Promoters select a product and sell large or over priced inventories to "distributors", with the added incentive of allowing the distributors to sell sub-distributorships. The profit is earned primarily through investors enlisting new recruits who in turn enroll more recruits. In order to recoup the initial investment, new recruits are encouraged to sell new distributorships and there is little real concern given to selling the actual product or service to the public.

The attraction of the pyramid scheme is that it offers an unusually high rate of return on the initial investment. Investors are typically advised that they can get a full return on their money by getting two or more "new" investors to make an investment. The new investors must then get two or more new investors and so it goes, on and on....

Promoters fail to tell or deliberately conceal that profit from this system becomes mathematically impossible for other than the initiators of the scheme. Similar pyramid schemes are also appearing on the Internet.

Phony Bank Inspector

An unknown person implies that he/she is a bank representative or working with the police to investigate the misappropriation of money at your bank. Your assistance is required to trap a dishonest bank employee. You are asked to visit your bank and withdraw money from your account. The con artist contacts you after the withdrawal, produces phony identification and takes possession of your money. You are assured that the money will be deposited to your account within a couple of days...The phony bank inspector and your money then disappear. Your entire savings can be wiped out within minutes.

Boiler Room Operations

Numerous employees are hired by a con-artist as telephone solicitors to sell products or solicit donations for charitable organizations. The products are frequently of questionable value and the charities are fictitious or, they receive little or nothing. These schemes work well, as each victim consumer is taken for only a moderate amount and they do not usually pursue the issue. However the small-to-moderate individual amounts add up to thousands of dollars for the boiler room operator.

Be prudent and verify the organization or product before making a commitment.

The Pigeon Drop Scheme

The pigeon drop scheme has many variations and the following is but one possible scenario. A stranger approaches you on the street and starts up a conversation. As you are conversing another stranger nearby claims to having just found a large amount of money. The discussion turns to what should be done with the money. Stranger number two claims to work for a lawyer and leaves to seek legal advice. The finder returns to say that the lawyer advises to say that the money should be put into a trust for a certain amount of time, until the owner is located. If unclaimed at the end of the time period, the money is to be shared among those in the group. However, to ensure that all those in the group are legitimate, a specified amount of money is to be deposited in the trust by each member of the group.

The con-artist then adds that once the lawyer has all the money, for an additional fee, the waiting period can be waived. Both strangers then advise you to withdraw the amount of money required.

The stranger who claims to work for the lawyer then offers to take the money to the lawyer, sign the papers and return with your share. The stranger then returns and advises that the lawyer wants to speak to you personally, and gives you directions to the office. Your search for the office is fruitless and you soon realize that you have been conned.

This con, like many, appeals to a weakness in human nature... the desire to get something for nothing.


Land Speculation

People wishing to purchase a vacation or retirement property often find themselves trapped in land investment schemes. Through the use of slick advertising, unscrupulous promoters seduce potential victims into buying worthless property. If the price seems too good to be true or it is "an urgent once in a lifetime opportunity" you may be buying a desert bed miles from civilization or swamp land that remains under water even during a drought. Never purchase property sight unseen. Visit the area, view the property, and have it properly appraised.


Home Improvement Schemes

Most home improvement contractors are legitimate and provide a useful service. A small percentage of these contractors are not so honest. Con artists practicing home improvement schemes often solicit contracts from home owners by misrepresenting the necessity for repairs or the value of the home improvements. These operators will ask to be paid in cash, often in advance or with large deposits in advance. The contractual work is then often poorly done or not performed at all.

Before making a commitment:
  • Check with the Better Business Bureau regarding the honesty and reputation of the contractor;
  • Obtain other estimates from reputable contractors;
  • Never pay for the work in advance; pay after it has been completed and examined;
  • If the person represents a utility company ask for proper identification;
  • Carefully read all forms and contracts before signing;
  • Never let anyone rush you into signing a contract or handing over cash;
  • Always verify proof of County or State licensure when using a contractor.

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