Reach Out and Con Someone : Scam artists are getting away with fraudulent telemarketing schemes

Southern California has the dubious distinction of being a major base of operation for telephone fraud schemes that cost unsuspecting American consumers billions of dollars a year.

A new report by the House Committee on Government Operations raises the roof over a lack of coordination and commitment of resources among various federal agencies trying to attack the problem. In following up on hearings it held last summer, the committee portrays in strong language the financial and human cost of this shadow industry. And it delivers tough criticism that merits remedial attention from some of the law enforcement organizations named in the report.

Officials earlier this year estimated that there were several hundred such scam operations up and running in Orange and Los Angeles counties alone. These are mostly boiler-room telephone operations that prey on the dreams of victims. One former U.S. attorney said these scams amounted to an “insane intergenerational transfer of money,” with retirees financing younger swindlers’ appetites for drugs and fancy cars.

Fronting as legitimate businesses, they seem to have been allowed operating room by the very lack of coordination cited in the report. There’s a backlog of inactive telephone marketing fraud cases languishing now in the files of law enforcement agencies around the nation.

To be sure, the familiar budgetary troubles of agencies trying to do more things with fewer resources are part of the problem. However, the report says more can be done to generate cooperation; for example, although the Federal Trade Commission shares data with state prosecutors, the FBI, the Securities and Exchange Commission and the Commodity Futures Trading Commission are cited as unwilling to do so. The committee’s suggestion that a clearinghouse be set up to exchange information is a sensible one.

The first line of defense against schemes that promise easy riches is a skeptical public. But more effective cooperation between law enforcement agencies can help protect unsuspecting consumers from being cheated out of precious savings.