The High-Tech Age Spawns High-Tech Fraud States, Ftc Crack Down On ‘90s-Style Investment Scams That Operate Via Telemarketing And Internet

In a high-tech age, investment scam artists are getting more sophisticated - and creative - at stealing people’s money, regulators say.

Struggling to keep up, the regulators announced a campaign Wednesday to stub out telemarketing schemes involving Internet “shopping malls,” movie production and snail-ranching as well as old standbys such as pyramid schemes.

Consumers lose an estimated $40 billion each year to telemarketing fraud of all kinds, the group of federal and state regulators say.

The glossy brochures touting partnerships in cybershopping networks looked legitimate to Paul and Eloise Wood, an elderly couple living near Akron, Ohio, who lost $15,000.

He is nearly deaf and she is legally blind, and they needed help from people involved in the scam to fill out the paperwork, according to David Kidd, a family friend.

The telephone solicitors who called the Woods beginning in December 1995 were “very cordial and convincing,” Kidd told a news conference.

Paul Wood had had a stroke earlier that year and he “wasn’t thinking straight” when he got the call, his wife said in a telephone interview.

In the state of Washington, officials have issued a cease and desist order against two Los Angeles-based companies and one individual accused of selling units in an Internet link that apparently does not exist.

In return for $6,500, said Deborah Bortner, head of the Department of Financial Institutions’ Securities Division, investors are promised a monthly check of $500.

Neither the investments or the sellers are registered in the state, she said.

The law enforcement effort, led by the Federal Trade Commission and securities regulators from 21 states and two Canadian provinces, has been under way for six months. It involves 61 separate cases, some of which likely will be referred for criminal prosecution, officials said.

Mark Griffin, president of the North American Securities Administrators Association, had this advice for consumers if they get calls promoting similar deals: “Keep one hand on your wallet and hang up the phone.”

Some examples of what Griffin called “a contemptible array of investment scams” - most offered through unsolicited phone calls: allegedly worthless oil and gas drilling in Kentucky; digital fingerprint technology in Indiana; ostrich-farming in Idaho; snail-ranching in Nebraska; retirement investments for the clergy in Maryland; interests in frozen embryos from an Ohio cow named Missy Cool; and $25,000 “commercial promissory notes” to build medical clinics in Hungary, a water treatment plant in Congo and roads in Bosnia.

“These frauds have become epidemic,” said Teresa Schwartz, deputy director of the FTC’s Bureau of Consumer Protection. “They are increasing in number and type. … All these schemes are alike in one very important way: The only ones to profit are the scam artists.”

In the nine civil cases filed in federal court by her agency, investors may have lost more than $150 million, Ms. Schwartz noted. Violations of the agency’s telemarketing sales rule carry penalties of as much as $11,000 a violation.

Examples of the alleged fraudulent schemes:

A company promised returns of up to 600 percent a year on investments in a partnership that was said to be ready to unveil a “virtual shopping mall” on the Internet.

A film production company offered small investors a stake in family films produced by what it said was an award-winning producer and director.

A company that says it produces a basketball training machine used by athletes has fraudulently taken investors’ money.

, DataTimes