Thursday, November 22, 2012

Three Ways to Shut Down a Scam Pitched To You

Back in October 2012 Forbes published a short list of four tips where John Wasik, a frequent contributor, listed four ways to shut down an investment scam being pitched over the phone. (actual link at the end) They are:
  • Show me the your licensing info
  • Show me your firm's registration
  • Mail me the info as I don't conduct business over the phone
  • I need to have this reviewed by my accountant, lawyer, and financial adviser
This list concerns investments, because in investment industry, both the agents and the firms must be registered / licensed. In normal business, where the agents do not need to be licensed, you're left with just three things.

Do these three things then apply to regular scams, not merely investments? Very much so, but also some caveats as you need to know what's legal and what's not within the industry.

A) Show me your firm's registration

While most suspect companies are registered properly, many use any and all legal ways to make the information virtually useless, or outright misleading. Still, the fact that they choose to at least seem to be compliant would deter some of the simplest scammers. It's the more sophisticated scammers you need to worry about though.

Some companies hide their real owners by registering in states that does not require disclosure for the first year, or states that allow proxy officers. For example, Oregon does not require the company to reveal its officers until after a year, and Nevada allows proxy officers.

Furthermore, many company registrars offer "figurehead president" services, where they will let one of their own employees act as your company's president, and be legally listed, while the real owners and operators of the company remains hidden.

Then there are the offshore companies registered in some island off somewhere that are impossible to verify. Cyprus, Crete, Madagascar, and Hong Kong are frequently used.

Then there are the companies that are intentionally named to resemble an existing legitimate company. That's a big warning sign.

Another problem is often that the company only has the most basic registration, not any of the other registration required for the specific type of business.

For example, Zeekler penny auction, part of Zeek Rewards Ponzi scheme, started in 2010, but did not obtain an auctioneer's license from North Carolina until April 2012. Yet NOBODY had questioned them holding auctions for two full years without a license!  However, not all states require a license to hold auctions. If you did not do any research, you would not have known that Zeek had been operating illegally.

YTB, or "Your Travel Biz", was kicked out of California by then Attorney General Jerry Brown for operating in California without being a registered travel seller. Most of their California members simply did not know the relevant laws and simply ASSUMED the business is legitimate.

B) Mail me the info as I don't conduct business over the phone. 

This one is often useful if you are dealing with scammers directly over the phone, but often won't work with misguided enthusiasts and/or sheeple who "drank the koolaid" and believed the lies. Still, it gives you time for you to look over the information available and do your due diligence.

This tip is also very useful in obtaining real evidence from the potential scammer as it forces them to commit something to paper, or including more weasel legalese or fake evidence. Most scammers would not bother to mail anything. Any one that does so is somewhat less likely to be a scam, but only somewhat, as the more dedicated scammer may consider it a worthy investment.

The best part about this tip is not only this gives you an "out", but also frees you from the increasing emotional appeal and time pressure the scammer use against you to compel you to commit your money. If you can get away and study the material at your leisure with a critical eye, you will often spot danger signs that you will not hear over the phone.

Every often, you just want to get rid of the caller or visitor, and you'll say almost anything just to get rid of them. Coca-cola tried this once, and was stuck in a bad contract for decades.  By forcing the perps to go to regular mail, you can force them out without doing something stupid.

C) I need to have all this evaluated by my accountant, lawyer, and/or financial adviser. 

This one is bit more useful when the scammers managed to get into your face and is making a pitch in person. By performing tricks like NLP, empathy, and other persuasion techniques on you in person, you are more directly vulnerable to emotional appeals. They have succeeded in getting "foot in door".

By deflecting the plead you gain more time to evaluate it, both by yourself, and by your advisors, who hopefully may spot something you did not.

It is even more useful because like the previous tip, the potential scammer will need to leave quite a bit of material, such as prospective agreement, with you.

If the potential scammer didn't leave anything, then you can blow him or her off easily with justification.


All in all, if you know these three tricks, you can extricate yourself from a potential scam and gain time to evaluate the whole thing and get some second opinions. So learn them, and use them. 

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