Phone Swindlers Net $15 Billion a Year : Crime: Victims of telemarketing scams are usually the elderly. A congressional report blames unfocused law enforcement efforts.

Telephone marketing swindlers, based largely in Southern California, successfully cheat American consumers out of as much as $15 billion a year because federal and state law enforcement agencies are understaffed, poorly coordinated and often misdirected, according to a new congressional report released Saturday.

A two-year study of telemarketing fraud conducted by the House Committee on Government Operations concluded that the Department of Justice, and particularly the FBI, “have not given telemarketing fraud investigations and prosecutions the priority they deserve.”

The report said that 1,000 inactive telephone marketing fraud cases are languishing in the files of law enforcement agencies across the country. The FBI offices in Los Angeles, San Diego, Las Vegas and Miami alone reported 684 such cases in mid-1990.

Justice Department officials were not immediately available for comment on the report.

One of the most serious roadblocks to better enforcement is the federal government’s failure to establish a central clearinghouse for law enforcement information on telephone fraud cases, the report said.

While the Federal Trade Commission offers state prosecutors data on its own investigations of telemarketing fraud, other key federal agencies, including the FBI, the Securities and Exchange Commission and the Commodity Futures Trading Commission, refuse to participate in the program, the report said.

As a result, “a state prosecutor or a regional office of a federal agency receiving . . . complaints does not know the extent of the fraud . . . or whether there are any ongoing investigations . . . by other agencies,” the committee stated.

In addition, the report said that the Internal Revenue Service, which has substantial jurisdiction because most telephone swindlers evade income taxes, is unable to play a major role because its “investigative resources are severely strained, especially in large cities such as Los Angeles.”

“Telemarketing fraud has resulted in the transfer of probably tens of billions of dollars from . . . the elderly throughout the nation to young salesmen in Southern California,” said Rep. Doug Barnard Jr. (D-Ga.), chairman of the committee that conducted the study.

“It is an insane intergenerational transfer of money from people who need it desperately in their mature retiring years to a bunch of people who blow it up their nose or spend it on Porsches,” said former Assistant U.S. Atty. David Katz when he testified at committee hearings in July of last year.

Experts have pegged annual consumer losses to telephone swindlers at between $3 billion and $15 billion, the report said. Determining a precise figure is virtually impossible, the committee said, because almost all swindles go unreported, mainly because embarrassed victims are unwilling to admit to relatives and to authorities that they have been taken.

To better fight the problem, the committee said, Congress should create a federal telemarketing fraud clearinghouse, require all federal law enforcement agencies to cooperate and beef up the Federal Trade Commission’s budget for telemarketing investigations.

The committee also suggested that the Justice Department shift some prosecutors and investigators from savings and loan and bank fraud cases to telemarketing cases, encourage U.S. attorneys around the country to temporarily deputize state prosecutors to assist with federal cases and increase its efforts to secure longer prison sentences for those convicted of telemarketing crimes.

Legislation is pending in Congress that would create a clearinghouse and beef up the FTC’s efforts to shut down telephone swindles.

Broadly defined, the term telemarketing fraud can apply to any scheme that employs telephone communications to cheat victims out of their money. Usually, fraudulent telemarketers operate out of telephone “boiler rooms,” from which they call potential victims with a pitch to purchase goods, services or investments, or to pay a fee to receive a prize, ostensibly of great value.

The items being pitched can range from precious metals to oil and gas leases to partnership interests in motion picture productions.

“Often, the item . . . is never delivered or purchased or is substantially inferior to that which has been promised,” the report said. “And most fraud schemes are designed to closely resemble legitimate business transactions to make successful detection and prosecution more difficult.”

One convicted swindler who operated out of Orange County told the committee last year: “People virtually send away their life savings, in some cases mortgaging their homes, borrowing from friends, mortgaging businesses, mortgaging family farms to invest in . . . scams.”

The boiler rooms are concentrated in Southern California, particularly Orange and Los Angeles counties, and in Florida and other Sun Belt states, the report said. At the time of the committee hearings, officials estimated that between 200 and 300 boiler rooms were operating in Orange and Los Angeles counties alone.

However, the swindlers almost always prey on victims in other states, particularly in the Midwest, the report said, in part to avoid complaints to authorities in the states in which they are operating.