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Boiler Room Schemes
They may not actually use a boiler room but these direct marketing scams bilk people out of millions of dollars every year
Boiler Room is a term that describes a business operation set up as a direct marketing company that will usually use telephone to solicit sales.
Some boiler room operations are legitimate and sell a worthwhile and usable product. Whether you paid too much for it or were coerced into
buying it will not be addressed here.
These boiler room "employees" are usually sitting in one large building somewhere that was only rented for a few weeks and several and sometimes
hundreds of these "salespeople" are making cold calls all day trying to pressure people into purchasing the best stock investment to come along
in years.
Penny Stock Swindles
The stock is usually an over-the-counter (OTCBB) stock, sometimes referred to as penny stocks. These stocks are usually worthless but your
purchase of them will drive the price up a few pennies and they do this every day for weeks. They will talk the stock up on internet bulletin
boards, send out newsletter touting the stock and sell millions of shares for a few pennies each. Of course they own millions more shares and
will at one point dump all shares and poof they are gone in the night and so is your money.
Boiler room operations are also known to pressure consumers into purchasing wothless goods and services like:
- Advertising space in business directories that do not exist.
- "Bargain" vacation packages or trips that are never provided.
- Inferior office supplies, such as copy machine paper and toner.
- Advertising specialty items, such as pens and key chains, that turn out to be totally different from what you're told you'll get.
You can consider all of these a small sampling of what boiler room schemes will try to pressure people into purchasing. If you agree to purchase,
you will often be asked for your credit card number. Another way these telemarketing scam artists collect is to send an invoice in the mail.
When you pay, you are branded a "mooch," and this almost guarantees you will receive additional telephone pitches.
You can protect yourelf or your company by following a few simple rules:
- Don't buy from new suppliers without verifying their existence and reliability, particularly when contacted by telephone.
- Don't pay for advertising space in a business directory or other publication that is unknown to you. Be especially wary if the phone solicitor refuses to give you information about the publication and its advertisers that you can verify.
- Be wary of exaggerated claims for services, products, or prices. Con artists use come-ons such as "Free gift," "Customer in your area went out of business," and "Don't worry about overdue notice."
- Don't give out any information about your office machines over the phone unless you know who you're talking to. Otherwise, you'll be targeted to buy inferior quality supplies for your machines.
- Ask for samples of advertising specialty items before you buy.
- Never give your credit card number (or even just its expiration date) over the phone to a caller you are not familiar with and have not dealt with satisfactorily before.
- Establish effective internal controls, channel all bills and invoices through one department, and verify all billing authorizations.
- Don't pay until an invoice is verified against goods or services actually ordered and received.
If you have been bilked by a boiler room scheme where the U.S. Mail system was used, or if you know about a scheme which should be investigated, inform your local postmaster or the nearest postal inspector.
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