By Adrian Goldberg
Police say poor investment returns from banks have benefited boiler rooms.
“I think they did this completely without feeling for the hurt and the financial ruin that they were causing to people.
“These people are quite young I believe. They’ve got time to rebuild their lives; I don’t. I’m coming up to retirement. I’m 64 years of age.
“They have destroyed my latter years and quite frankly I hope they rot in hell.”
John (not his real name) speaks out angrily after falling victim to a so-called “boiler room” scam.
He was enticed into buying bogus shares after being cold-called by a salesman, and initially invested £10,000.
Little by little he was enticed into buying more fake stocks, and by the time the crooks had finished with him, he had squandered his life savings – around £97,000 – with nothing to show in return.
Now he wants to share his story to prevent others from falling victim to the same kind of con.
Lucrative con
Boiler Room fraud first emerged in the 1990s when it was operated by criminal gangs operating out of small, cramped offices – hence the name – although these days the conmen are altogether more sophisticated and operate on a global basis.
They sell fake or worthless shares, and also pretend to sell legitimate shares, which the purchaser never receives certificates for.
“The current economic climate has something to do with people looking for investment opportunities away from the usual sources, such as banks”
Det Ch Insp Paul Barnard City of London Police
According to the Financial Services Authority (FSA), which regulates investments, boiler room scams are worth an estimated £200m a year in the UK alone and they have published a watchlist of suspected boiler rooms to help people avoid falling prey to the scammers.
However, the City of London Police, who take the national lead on this issue, say it is worth significantly more than the official figures suggest and say many cases go unreported as victims are too embarrassed to come forward.
Ironically, the economic downturn has played into the crooks’ hands.
Investors, which includes an increasing number of people looking to make the most of large redundancy cheques, are finding that banks and building societies are offering negligible rates of interest on their investments.
They are the natural prey of the boiler room gangs who tempt them with the prospect of better returns on the stock market.
As a result, the average victim now loses £26,000 to these fraudsters compared to £16,000 two years ago. And according to the police, the gangs have started creaming off an extra £400,000 per month over the last year across the UK.
Increased losses
Det Ch Insp Paul Barnard of the City of London Police’s Economic Crime Directorate told the 5 live Investigates programme:
“At the moment we are very concerned because we are seeing an upturn in losses per victim throughout the year and also in the numbers that we are seeing reported and also numbers that we are actively working on as well.
The average sum lost by victims has risen from £16,000 to £26,000 in two years.
“I certainly think the current economic climate has something to do with people looking for investment opportunities away from the usual sources, such as banks.
“People want somewhere to put their money and are maybe willing to listen to opportunities that look too good to be true.”
Despite the threat of a lengthy spell behind bars for those found guilty of fraud, those who run the boiler rooms appear to have little difficulty attracting recruits.
Paul (not his real name) is one such former boiler room worker, who was based in Spain:
“I’ve worked for a fair few call centres so it was a very similar sort of atmosphere,” he explains.
“Once I got out there, I was little bit naive as I didn’t realise that the stock they were selling was worthless and what effect it would have on people that were ripped off.”
Paul worked as an “opener”, making the initial calls to prospective victims, who would then be contacted by another member of the team to close the deal.
He told 5 live Investigates that most of those working in the boiler room were men, mainly in their late teens and early 20s, with a few older, more experienced salesmen.
Paul says he didn’t make much money – £60 to £70 a week.
“I was stuck out there for a long period of time because I wasn’t earning enough to pay for my travel back home. The owner of the company was very volatile and regularly beat up staff. They’re unpredictable people.”
Boiler rooms often operate out of attractive locations such as Spain, the Caribbean and the Far East and for those running the operation it is a lifestyle of expensive cars, luxury apartments and high living.
Criminal morality
But what about the moral issue of taking money from hard-working people who have saved hard for their retirement?
“You don’t think of the people that you’re talking to and the consequences it has on them”
“Paul” Ex boiler room worker
Former boiler room worker Paul said: “Within the first month [of working in a boiler room] you realise what you’re doing is wrong, but you sort of get desensitised in a way, it’s just a voice on the phone.
“You don’t think of the people that you’re talking to and the consequences it has on them.
“I know of cases where there are guys who’ve never invested before, maybe they’ve been given some stock by their company that they work for and that’s how they’ve come on these boiler rooms’ radar, and they’ve been persuaded to invest £30-40,000, which is probably every penny that they’ve got,” he says.
“It’s really going to affect them and you do feel bad for them because you know that loss is really going to affect their lives, you know.”
That’s certainly the case for John, who lost nearly £100,000 after falling prey to boiler room brokers.
He told 5 live Investigates: “My marriage has been under great strain. I think my wife has been very good about it. She just thinks I’ve been a fool and in retrospect, I have been a fool.”
“I can point to the fact that I was suffering from cancer as a reason. At that time I’d just been diagnosed with cancer. I was unable to work and I was facing a major operation.”
Hard to catch
Keeping tabs on the crooks is difficult because they often operate across national borders, while using the internet to re-route calls to make it appear as though they are based in the UK.
The FSA was so concerned about boiler room scams that earlier this year, they wrote to 38,000 people on a so-called “suckers list” of potential targets believed to be circulating among the crooks.
Jonathan Phelan, head of the Unauthorised Business Department at the FSA commented: “If you’re contemplating buying shares, buy them off an authorised stock broker.
“You can ask the FSA, do some research, make sure you’re dealing with a legitimate authorised firm and not one that’s been cloned.
“Occasionally boiler rooms claim to be from authorised firms, and give names. But you don’t know who you’re talking to.”
Listen to the full report on 5 live Investigates on Sunday, 19 September at 2100 BST on BBC Radio 5 live.
You can also download the programme podcast or listen via the BBC iPlayer.
This article is from the BBC News website. © British Broadcasting Corporation, The BBC is not responsible for the content of external internet sites.
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