Dialing for Dollars

...Instead, a half a dozen separate bureaucracies— the Federal Trade Commission, FBI, Securities and Exchange Commission (SEC), the Secret Service, the CFTC, as well as the Postal Inspectors and the Justice Department—split the jurisdiction up...

...But a telemarketing pitch is like a TV that turns itself on just to play a commercial...

...Commercial transactions were still done in person: consumers shopped at stores...

...Deferred delivery" commodity contracts, for instance, were popular ripoffs a few years ago because neither the SEC nor the CFTC was charged with regulating them...

...By the time the FBI and the Commodities Futures Trading Commission (CFTC) shut him down for good in August of 1984, Rose had set up a nationwide network of boiler rooms with offices in Florida, New York, California, and Louisiana...

...That's how you built up your business...

...Boiler rooms are a national problem," says Lawrence Fuchs, head of investigations for the Florida Comptroller...

...Only in the 1950s did legitimate companies in fields such as publishing begin to utilize inhouse phone sales staffs...

...This year telemarketing revenues are expected to be more than double that amount: $118 billion...

...As firms that do legitimate market research are discovering, this practice is becoming increasingly irritating to the public...

...At the same time, the direct mail business, having grown like kudzu in the late sixties and early seventies, was beginning to experience diminishing returns by the late seventies as consumers' mailboxes became crammed with junk mail...

...When a salesperson indiscriminately programs such computerized dialers and haphazardly calls tens of thousands of people only to arrive at a handful of viable sales prospects," writes Nadji Tehrani, the publisher of Telemarketing magazine, "he or she is committing an act that cannot be condoned by the telemarketing community...

...CLICK," goes the phone at the other end...

...Now, if you can't take all five cases right away, let me send you one and you can order the rest at the old price as you need it...

...facing rejection by uninterested, rude, and irate listeners In 1982, one Senate subcommittee estimated that investment phone scams took in $200 million...

...Please hold for the president of the United States," went the recorded voice, followed by a taped message from Ronald Reagan asking the listener to vote Republican...

...Since Representative Hollister uses polling in his own campaigns and elsewhere, we began to think twice about the legislation...

...Seeing the benefit in the expansion of these operations, in 1980 AT&T began operating training centers for customers interested in boning up on the latest telemarketing skills and technology...

...Calling the obstetricians The telemarketing industry awaits its historian, but as far as anyone knows, the crooks seem to have preceded more legitimate users...

...Because they do "scientific research," pollsters tend to look down on telemarketers, whom they say poison the public's attitude towards uninvited calls...

...Jack Rose is a legend in this field...

...It was never something the representative was wedded to!' Telemarketers complain about the cost of cross-checking their prospect lists against the lists of people who don't want unsolicited calls...

...There were 1,650 companies employing 4,500 people in telemarketing in 1980...

...As a legitimate industry, telemarketing cannot afford this situation to continue, any more than legislators can allow it to continue...

...Federal efforts to crack down on telefraud have been largely sporadic and uncoordinated...

...One operator indicted in Los Angeles last year ran six boiler rooms employing 250 people and grossing $18 million a year...

...Within a few days, Rose had set up a new firm, Atlantic Gold Coins, in his garage, using Universal's records, sales pitch, and victims list...

...The $5.8 million investors sent Universal in 18 months was never invested...

...Telemarketing also provides much-needed part-time work with flexible hours, and it is that rare industry in which the vast majority of managers and owners come from the ranks...

...Yet even consumer telemarketers have their scruples...

...If corporations and politicians want to use the phone system as an advertising medium, they should be made to conform to the same truth-in-advertising rules that govern the airwaves...

...Yakkers and mooches At least six times a year The Washington Monthly gets phone calls like this: "Hey, how you doin' today...

...Few of us will let a phone just ring...

...Jack Heinritz, vice president of TBS International, a manufacturer of telemarketing equipment, agrees that randomly-dialed taped messages do "abuse consumer's rights to privacy...

...the Justice Department is too busy with its war on drugs...

...companies hired salesmen to make rounds to customers and clients...

...So a lot of notices go out to people thanking them for memberships they didn't ask for and contributions they never agreed to make...

...Telemarketing really has become the lead method of marketing in the arts," Joanne Steller, director of marketing for Washington's National Symphony Orchestra, told The Washington Post recently...

...That beautiful operator from Time/Life who you see on TV, with her computer screen and her plush office...

...We're the parent company of the firm that has been supplying you with toner for your Minolta EP 450 Z copier:' "Hi Sharon, what can I do for you today," replies the person taking the call...

...Wiener recalled...

...It went from not being done to everybody doing it in the last four years...

...This affords boiler room operators the opportunity to work scams that fall between jurisdictional cracks...

...Travel packages, health spas, college scholarships, satellite dishes, investments, charities—if it can be sold over the phone, there's a good chance somebody is selling it fraudulently...

...The investment business is another field in which deceptive telemarketing has made large inroads...

...One reason legislators have allowed it to continue is that they are some of its biggest users...

...Dozens of bills have come before state legislatures in recent years that would make it illegal for businesses to call people who have told the phone company or a government regulatory body that they don't want to be called...

...International Supply Center is not the parent company of our regular toner supplier...

...Each works a yellow push-button phone...

...It is a key cause of rising "refusal rates"-the percentage of people who won't cooperate with pollsters...

...Television advertisers can deceive in their commercials, but they do so in front of millions of viewers simultaneously, among them competitors and government officials...

...Marvin Cetron, author of Jobs and the Future, puts telemarketing at the top of his list of fastest growing fields and predicts 8 million Americans will be employed in it by the year 2000...

...I spend my whole day on the phone...

...Usually operating out of low-rent offices called "boiler rooms" or "bucket shops," the con artists behind telephone frauds use the same kinds of carefully crafted scripts, the same phone call technology that honest telemarketers do...

...We're used to giving our credit card numbers to faceless voices over the phone...

...Toner-phoner fraud is big business...

...All the white tigers are in their breeding season, so we have to act fast,' or 'we need your pledge immediately to fight a bill in Congress Of course, we knew the money was mainly just going to fund the organization'' Lauri Burhler, spokeswoman for the American Telemarketing Association, says the public tends to be surprisingly credulous...

...it just amazes me...

...A 75-year-old widow living in a mobile home complained to the Federal Elections Commission that she lost $30,000, her life savings, in "loans" to a LaRouche affiliate organization...

...They "make the whole idea of charity look cheapened," complains Judith A. Maneval, president of the direct mail marketing firm of Sanky Perlowin Associates...

...So it's annoying to have to leave the dinner table and respond to some phone salesman trying to interest you in aluminum siding, lawn care, insurance, auto accessories, periodicals, credit cards, coupon books, investment ideas, or health and travel club memberships—especially when it's a computer-dialed call that plays you a recorded message...

...We used to be suspicious of people who tried to sell us things over the phone...

...The jobs created are nothing to scoff at either...

...DIALING FOR DOLLARS by Paul Glastris Telemarketing selling over the telephone—is becoming a huge industry and its sleazy underside has grown up right along with it...

...Telemarketing messages are less public, and virtually impossible to monitor...

...We've got a low overhead philosophy here," explains a 30-year-old in jeans and sneakers named Bill Taliaferro, one of the owners of Nevus Communications Group, the telemarketing firm...

...In particular," wrote the Justice Department in a brief before the U.S...

...Things began to change in 1967 when AT&T introduced the toll-free 800 number...

...So the company writes all kinds of false scenarios into the script to build a sense of urgency...

...David Hollister with a plan to have the phone company list the names of all Michigan residents who didn't want to receive unsolicited calls, and to make it illegal for companies to call them...

...others are calling those who have let their magazine subscriptions lapse...

...But what I've done is set aside five cases for you at the old price...

...The wife of a World War II veteran and stroke victim told Mintz that the LaRouchies got $5,000 from her husband by calling him as often as ten times a day and saying it was his patriotic duty to contribute...

...Banks, real estate firms, stock brokerages, insurance companies, sporting goods manufacturers, distributors—nearly every industry in America is "into telemarketing...

...Gulf American was censured by the Florida Land Sales Board for teaching salesmen to mislead investors...

...they look like this...

...Honest firms try to validate orders, but abuses happen nonetheless...

...Today they give a kid a list of obstetricians and say, 'Here, make 40 cold calls before lunch ' " "It's the scripted spiel and the special cold calling rooms...

...Telemarketing has turned what was once a private device—the telephone— into an advertising medium, and one that is uniquely intrusive...

...Hollister's bill would have restricted them, rendering their polls less accurate...

...219, the "old price," is about $50 more than we have been paying for toner...

...Sharon is a con artist—a "toner phoner...

...They work 4-to-6 hour shifts and make between $5 and $10 an hour...

...Today, 140,000 companies employ over 2 million telemarketers...

...A group of consumers recently approached Michigan State Rep...

...Business-to-business telemarketers would probably not oppose such measures, but their lobbyists do because they also represent companies that engage in the more intrusive business of consumer telemarketing...

...rare coins seem to be the favored scam these days for the same reason...

...With AT&T's introduction of the WATS line in 1961, a few companies began to specialize in contract phone sales work for other companies...

...Politicians, pollsters, corporations, non-profit organizations, phone companies and other groups reap the benefits of organized phone campaigns...

...The story of Richard J. Garden, president of Extravaganza, Inc., is a case in point...

...But those costs would disappear if the government would require phone companies to use technologies, most of them available now, that would give consumers the option of screening out certain kinds of calls just by pushing a few buttons on their phones...

...The scandals coming out are a problem for everyone in fundraising ." The main reason the federal government is not effectively putting most boiler rooms out of business is that no one agency has full responsibility for dealing with phone fraud the way that the Postal Inspection Service handles mail fraud...

...Telemarketing is very likely the fastest growPaul Glastris is an editor of The Washington Monthly...

...Before the elections in Pennsylvania last month, Republicans all over the state received computerdialed phone calls...

...There are dozens, perhaps hundreds of promoters like him...

...And, lo and behold, the broker tells you of this `very hot stock,' one of those 'four or five outstanding investment opportunities,' which is probably some stock that's been on ice in the firm's inventory for months...

...The very thing that makes telemarketing so successful, however, also makes it troublesome...

...she's in telemarketing, too," his partner, Paul Holland, explains...

...They said 'Do you realize what this will do to our ability to do polling...

...Officials, however, allege that Extravaganza has some bad habits: selling far more tickets than there are seats, failing to arrange for donated tickets to be given to disabled and disadvantaged kids, and allowing various expenses to eat revenues, leaving only a small fraction left for the sponsoring charity— which in some cases didn't even exist...

...State officials say, however, that the nature of boiler rooms—the ease with which they can set up to run nationwide swindles from one location—demands a stronger federal role...

...A common telemarketing trick is to pretend to do a poll or survey, only to shift into a sales pitch halfway into the interview...

...company that raises funds for charities, PACs, and other non-profit groups...

...This spring the Justice Department questioned AT&T regarding certain phone techniques it was using to get customers to make "the right choice" when picking their equalaccess long distance company...

...Some are fundraising for a local Kiwanis Club...

...Like the toner phoners, they hurt more than their victims...

...But believe me, most telemarketing firms don't look like that...

...Even more outraged, according to Hollister's administrative assistant David Wiener, were lobbyists for opinion polling and market survey companies...

...To gain extra attention, direct marketers began to print toll-free 800 numbers on their letters and to follow up with phone call campaigns...

...salaries for sales managers average $30,000 and can hit six figures...

...Rose specialized in a hard-sell tactic called the "take away": if the mooch backs away from buying into the scam, accuse him of being too stupid to see a great deal and refuse to let him in on it...

...The best estimates of telemarketing's size and growth are staggering...

...In 1983, cornpanies generated $56 billion in revenue through the systematic use of telephone sales and marketing...

...started high-pressure boiler rooms to sell the lots...

...Not everyone is pleased with the telemarketing revolution...

...If telemarketing abuses grow unchecked, these groups will have to make an ever greater number of calls to find people who aren't so annoyed at the intrusion or so suspicious of a fraud that they slam down the receiver...

...Prior to that, he says, a young broker just starting out would be told by his manager "to join the YMCA, the Rotary Club, teach adult education courses—anything to meet prospective clients...

...Instead, the competing interests of businesses and organizations that use the phone have created a classic case of political gridlock...

...ing industry in America...

...Though Washington has helped some states in their efforts to put boiler rooms out of business, few investigators think they have made more than a dent in the problem...

...Phone salesmen hired by Garden, pretending to represent police or civic organizations, would tell the listener that proceeds from the show will help further the organizations' charitable efforts, and that, if the listener wishes, he can even donate his tickets so that handicapped and underprivileged kids can go to the show in his place...

...No one knows for certain how many people telephone scammers defraud each year, but law enforcement officials agree that this kind of fraud is on the rise...

...If we run them out of Florida, they just set up shop in California or Nevada or wherever...

...This is Sharon, from International Supply Center...

...We're doing this as a courtesy for our good customers...

...Abuses could best be limited if the federal government put more money and manpower into investigating boiler rooms, prosecuting phone fraud, and regulating the small deceptions of legitimate telemarketers...

...In fact, telemarketing has grown by tapping a work force increasingly skilled in "communications" It is the service sector's safety net...

...There is something about telemarketing that seems to attract con artists...

...But the money can be excellent: annual salaries for phone sales reps average over $15,000 a year and, with commissions, can exceed $50,000...

...Telephone fraud has even slipped into politics: phone solicitation is the chief source of campaign contributions to the Lyndon LaRouche organization...

...The rise of the polling and market research industries were giving others experience managing "out-bound" phone surveying organizations...

...can tax the ego...

...A seasoned con man who spent time in prison for home improvement fraud, Rose discovered boiler rooms in 1980...

...How natural it is for us to turn the television down, or even move into another room to give the caller our undivided attention...

...By 1983, over 100 boiler rooms were operating out of Florida, swindling investors nationwide out of millions...

...the more responsible of them, at least, oppose random-dialed cold calling, especially the kind done with computers and recorded messages...

...The last thing I want to do is spend my free time at home on the phone listening to a sales pitch...

...You can throw out an unwanted piece of junk mail without opening it, or turn off the TV or radio...

...Political organizations are also on to the trend: telemarketing is eclipsing direct mail as a means of canvassing and fundraising...

...Two years later, it raised that to $1 billion...

...They may not be sought after by the graduates of Wharton or Radcliffe, but for those with lesser credentials and opportunities, careers in telemarketing aren't a bad choice...

...Beyond its special intrusiveness, telemarketing also opens up fresh possibilities for deception...

...Postal Service—all of whom have filed suit against Garden—his racket involved selling tickets to circuses and ice shows staged by companies he owned...

...Anyone who has sold both in person and over the phone, as I have, knows that the anonymity of telemarketing is an open invitation to deceive...

...Goodwill towards telemarketers is already falling, as Bill Taliaferro and Paul Holland of Nevus Communications Group are finding out...

...AT&T agreed to rewrite its phone scripts...

...The SEC would rather fight insider trading...

...Florida and a few other states have successfully shut down many crooked operations...

...Other swindlers play not on people's greed, but on their altruism...

...The best telemarketing sales representatives, say people in the business, are out-of-work actors...

...Officials believe Garden, despite all the suits against him, is still operating this scam...

...I'm in the telemarketing business...

...Such firms, however, were few and small, and telemarketing techniques and technology were still rough...

...The person answering cuts in and asks suspiciously, "Now, what company did you say you were from again...

...it is often the way we communicate with our family and friends...

...The temptation to cheat is always there if you're being paid by how many pledges you get over the phone," explains an exsales rep for a well-known Washington, D.C...

...Certain kinds of brokers have been making cold calls ever since they invented telephones," explains a stock broker at a big-name firm in Boston, "but it's only in recent years that the large, respected firms have gotten into the boiler room tactics...

...People's instinct on the phone is to say 'I'll think about it,' " explains another ex-phoner...

...So government crackdowns on boiler rooms usually take place at the state level...

...Then he'll talk about the `three or four outstanding investment opportunities our research department uncovers every year,' and 'can I send you some information?' Of course, the broker calls you back a week later, which is enough time that you've received the literature but haven't forgotten about the broker...

...Rose and his gang simply stole it...

...One night you're on the phone pretending to be on the staff of some liberal senator's leadership PAC," says the ex-phoner, "the next night you're vice president of an abortion rights group...

...People will buy land over the phone...

...Fundraising telemarketers employ other mild deceptions...

...An industry was born...

...Hollister happily drafted a bill and introduced it on the floor...

...In subdued, conversational tones like those of late night DJs, they work from scripted pitches, though most of them also ad lib...

...According to John Mintz of The Washington Post, LaRouche supporters have sold subscriptions to a LaRouche magazine over the phone, convinced people to pay for it with their credit card, and then made unauthorized withdrawals from their accounts...

...The tactics got more intense, the deceptions more flagrant...

...In 1982, the Senate permanent subcommittee on investigations estimated that investment phone scams alone took in $200 million...

...Most telemarketing firms pay sales reps on commission, thus setting up another incentive for phoners to write down "yes" when the person being called really meant "maybe" or even "no...

...The most popular pitch works like this: First, the broker will tell you 'one of the partners' asked him to call, when really they got your name from some list they bought...

...Such bills, however, have never passed...

...TWo years later the subcommittee raised that estimate to $1 billion...

...According to officials in five states, as well as the U.S...

...Many consumers simply don't like receiving telephone solicitations at home...

...Fifteen years ago, when developing South Florida's swampland was a booming business, companies like Gulf American Properties and Land Services Inc...

...That led airlines and other corporations to expand their phone reservation and consumer service departments, and gave managers experience organizing "in-bound" telephone staffs...

...Arts, charities, and other non-profit groups are, too...

...Boiler rooms date back to the 1920s, when the purveyors of worthless penny stocks first discovered that a few dozen phones set up in a basement gave them the power to cheat and deceive on a national scale...

...Eleven percent of the people we call these days will simply not listen to what we have to say, because they just don't like getting called at home," says Holland, whose own home phone number is unlisted...

...For lack of money, the Democratic Party went the traditional route and relied on volunteers to do most of its phone canvassing...

...And when the caller is a telemarketer, the result is a concentrated commercial message to which we have no other choice but to respond...

...Sales representatives may pretend to be members of the non-profit groups that have hired the for-profit direct-marketing firm...

...A number of states have considered legislation to restrict the practice, although industry lobbyists have blocked most attempts...

...Well," she continues, "we weren't able to contact you to let you know that the price of toner is going up tomorrow from $219 a case to $279...

...District Court for the District of Columbia, "AT&T was submitting pre-subscription orders for residential customers who had answered 'yes' to the question: 'May I continue to identify you as an AT&T customer?' " The AT&T manager who approved these scripts admitted to Justice that a "yes" response did not necessarily mean the customer wished to choose AT&T as its long distance carrier...

...they've created havoc for legitimate copier suppliers as well...

...We conservatively estimate that 20 percent to 30 percent of the market has been raped and pillaged by these guys," claims Jim Charles, former president of the Office Machine Dealers Association...

...Dante Cirilli, vice president of Grolier Communications, a pioneer telemarketing firm, explains it this way: "[W]e, the general public, have been conditioned to sit up and listen when the phone rings in our home...

...I can sympathize with people," agrees Taliaferro...

...No one agency, with the possible exception of the tiny CFTC, has made cracking down on boiler rooms a top priority...

...Only in recent years has the longstanding practice of doing business over the phone become an industry...

...In 1982, the company was raided by the FBI...

...Sure it's deceptive...

...I'm sorry about this, but, you know, we can't hold your order past today, so I'm going to put you down for one case, Okay...

...We got the same message from the Democratic Party," Wiener continued...

...Also, the growth of telemarketing has brought an explosion in telefraud...

...As executive sales manager of Universal Precious Metals in Fort Lauderdale, Rose coached a team of slick "yakkers" who defrauded hapless investors ("mooches") out of their life savings...

...Not suprisingly, an inordinate number of telemarketing firms (and fraudulent boiler-room operations) are located in California...

...Even the most respectable companies can't seem to resist using small deceptions in their telemarketing...

...Politicians who try to respond to consumer pressure to restrict the commercial use of their phones are quickly reminded of the perils of doing so...

...For $219, we would in all likelihood have received a case of useless, third-rate graphite that would gum up the copier...

...Telemarketers are quick to agree that something must be done to shut down fraudulent boiler rooms—they give legitimate telemarketers a bad name...

...Lobbyists from the telemarketing industry had a fit...

...Most will also admit that the smaller abuses—computer-dialed recorded messages, calling people at dinnertime—are also bad for the industry...

...Priscilla Witt provided research for this article...

...Businesses love telemarketing for the simple reason that selling over the phone is less costly than keeping armies of salesmen in the field...

...By the late 1970s, many of the salesmen for these companies were into investment scams involving precious metals, oil-and-gas lease-lotteries, commodity futures contracts, and the like...

...T he sign on the window of the shabby building in Silver Spring, Maryland reads "positions available: telephone solicitations ." In the basement office, three dozen people sit under flourescent lights at folding tables placed against the walls...

...that's what's new," agrees a Dallas broker who worked for a major Wall Street house before starting his own firm...

...Toner-phoners not only rip off buyers of copy supplies...

...For last month's midterm elections, the Republican party hired a private telemarketing firm to contact an estimated 11 million voters in what party officials describe as the largest telemarketing effort by a political party in history...

...Other well-known boiler room tricks Rose's yakkers used included clicking a stapler to sound like a teletype machine sending up-totheminute market information, and putting the phone and the phoner's head into a desk drawer to get an echo effect while claiming to be in the vault with the investor's precious metal...

...The tricks of phone fraud are easy to learn, and boiler rooms, with their dozens of callers, are like schools for scammers...

...Now there's almost a gullibility or trust...

...I'm sorry for this late warning...

...Dialing the phone and reading a scripted pitch hundreds of times a day can be mind-numbing work...