Fraud From The Boiler Room

This week a police operation in Great Britain and the EU resulted in arrests of more than 100 people who allegedly were involved in “boiler room” operations, where callers solicit investments in fraudulent financial schemes or sell stock that doesn’t exist. The SEC, too, routinely prosecutes people who are determined to be involved in boiler room schemes to swindle investors. Often these schemes bilk hapless seniors of their retirement funds.

I’ve received “boiler room” type calls. Typically the caller talks very fast with a New York accent (I’ve always assumed the accent is part of the job training, just like being an airline pilot requires that you speak with a certain folksiness), explains they are with an investment outfit you’ve never heard of, and then says they’ve got just one opportunity they want you to consider. There’s always some hook that makes the investment sound plausible and can be described in 30 seconds — development of oil sands, a company that’s about to be awarded a development contract in Qatar — and then the ask that you give them this one chance to show that they can make a huge return for you.

I always listen politely, because I watched Glengarry Glen Ross and felt sorry for the Jack Lemmon character, and then decline. If they start to get especially pushy and belligerent — and that’s not unusual — I just hang up. They’re wasting their time with me, because I would never dream of giving any of my hard-earned money to a complete stranger who calls out of the blue. However, some people do invest, to their eventual regret, which is why boiler room operations have been a staple of the fraudster arsenal for decades.

Many of the victims are senior citizens. Why are so many older people easier to scam? Research suggests that the elderly are more likely to open junk mail about get-rich-quick schemes and interact with cold callers, and that the aging brain is less able to appreciate risk. In short, they put themselves in a position to be hoodwinked, react positively to the promises of outlandish returns on their money, and lack the filters that would allow them to recognize the downside risk and danger that they are being defrauded.

If you’ve ever known an anguished and humiliated senior citizen who was taken advantage of by a boiler room operation, you know that there is a special level of hell reserved for crooks who prey on the elderly, rob them of their life savings, and leave them facing an impoverished retirement.

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