Telemarketing Probe Nets $35,000 Settlement, Little Else

The phone rings. Opportunity beckons.

“Hello?”

“Good afternoon, Helen, how are you?”

“OK.”

“Good. Garner Jones here, Global Mining Consulting. . . . Just calling you back, letting you know that, hey, the position is still here for you. I expect you to come aboard today.”

“You think so, huh?”

“Yes, I do, because I know what’s best for you when it comes to your portfolio, ma’am, OK? And this is about as solid and secure as any other investment out there. And I’ll tell you why. Because this program gives you strong business practices, OK? Strong ones. The cards are stacked in your favor. Every investment has a risk. I’m not going to sit up here and lie to you about that.”

No, Jones didn’t lie about that. He said Global’s gold mining venture would be dicey.

As he made the pitch, however, he left out one key detail: The company had no evidence that its Small Hope Mine contained the $560-million worth of gold advertised in its prospectus.

Helen--not her real name--wasn’t completely forthcoming either. Court documents later showed that she was recording the conversation for the FBI.

Federal agents last summer raided the Encino office where Jones and a staff of 24 other telemarketers worked the phones. The government filed a lawsuit accusing Global of using deceptive sales tactics. A judge froze the company’s assets.

For investors, however, the government’s action has so far yielded little. At least five of the telemarketers are still working in the same Encino office, selling a new investment. The federal case against Global was settled in January for $35,000. The two principals admitted no wrongdoing.

The investors--mostly senior citizens who mailed in checks totaling $3.1 million--may never recover their money. The court-appointed receiver overseeing Global’s assets filed a lawsuit March 26 seeking up to $6.9 million in restitution from Jones and the other telemarketers.

No criminal charges have been filed against former Global employees. Federal officials say a civil injunction is a more efficient tool to combat telemarketing fraud because it requires less evidence and less time. But they concede that a civil action cannot always prevent the same people from moving on to a new scam.

“In a perfect world, we’d have enough law enforcement to bring charges against the owners and the salespeople,” said Connie Wagner, the Federal Trade Commission staff attorney who sued Global. “It’s not a perfect world.”

Dashed Dreams

State authorities also are scrambling to keep pace. Nearly 100 suspected “boiler rooms” have opened in California in the past year--at least 35 in the San Fernando Valley.

The Valley, said Bill McDonald, chief of enforcement for the state Department of Corporations, “is the new ground zero” for telemarketing fraud.

“You run a scam until the heat comes on, then you either move down the street and open up under a new name or you change the name on the door,” McDonald said.

Only victims remain behind, authorities say. At Global, the FTC alleged in its lawsuit, there were people such as Ross Stinger, who invested $52,000. A contractor for 44 years, he saved enough for him and his wife to enjoy their retirement years in Orem, Utah.

Now, at age 81, he must work odd jobs. “They made a believer out of me,” he said. “I feel like you can’t trust anybody anymore.”

Henry Andrews was a believer too. The Milledgeville, Ga., substitute teacher said he lost $35,000 in retirement savings. Weeks after he invested in the mines, he said, he overheard a telemarketer and a colleague laughing about him.

“I was kicking myself,” said Andrews, 52. “You don’t want something this bad to be true.”

Ellen Maddox, 78, is also facing the truth. The retired English teacher said she invested $16,500--about half of her life savings. She is too embarrassed to tell her family.

“I can see now how foolish it was,” said Maddox, of Greeley, Colo. “I saved what little I have a quarter at a time. To just send it out to someone who lied to me, it makes me a little hot under the collar.”

Interviews and court records show how Stinger, Maddox, Andrews and more than 100 other investors sank their money in a hole in the ground 30 miles from Durango, Colo.

Their dream of riches began with a chance meeting in a Nevada casino between a floor show soundman and a vacationing farmer. The farmer, Charlie Brown, was looking to mine his claim, named Tippecanoe. Colorado miners first patented the claim in 1884, more than two decades before U.S. land policy required that prospectors prove their claim contained valuable minerals in order to get a patent.

The soundman, Stephen Noell, leased the claim for $20,000 in 1996, and Global was born.

Brown, 52, would supervise work in Colorado. Mark P. Ford, a former car salesman and securities broker whom Noell knew from Saugus High School, would find investors from an Encino office.

The salespeople started working the phones in spring 1996, according to FBI and FTC transcripts:

“This is something you should be very excited about. . . . I’m not here to pressure you. . . . They’re sitting on about $1.2 billion in today’s prices. . . . Let’s get you started.”

If an investor expressed interest and had at least $15,000, Global Mining mailed a 47-page prospectus describing the Tippecanoe Mine. Government research, it said, showed that the mine contained “millions upon millions of dollars worth of ore.” In fact, no one from the government had assayed the mine, records show. Global was citing a 1949 U.S. Geological Survey report that included unconfirmed production figures from the 1880s.

Work at the Tippecanoe mine got off to a slow start. A crew hired by Brown could not do any excavation without a state mining permit.

Global’s Encino phone room, in contrast, was abuzz with business. In five months, telemarketers raised nearly $1 million from investors nationwide.

Salespeople promised quick returns, FBI and FTC transcripts show.

“You should be expecting your first dividends--they’re telling us October, November.”

It was true. Tippecanoe investors received a check that October, equal to 7.5% of their investment. But the money wasn’t from the gold mine: It came from the pockets of new investors, according to the court receiver.

Also included with the dividend was a prospectus hawking a new Global venture, a second mine in the same canyon as the Tippecanoe. The Small Hope Mine was patented in 1897, before federal authorities required evidence of valuable minerals.

Ford and one of Global’s telemarketers, Michael Engelhardt, had formed their own company and bought the Hope claim for $15,000.

The phones rang again.

“It doesn’t take a rocket scientist to figure this one out. . . . That whole region is saturated with gold and precious metals. . . . The government has gone in. . . . Yes, the gold is there. . . . Do not miss out on this one. . . . Believe me.”

The money poured in even faster. In the next 10 months, Global raised more than $2 million, much of it from Tippecanoe investors who believed that the mine was churning out ore.

One Global telemarketer, who spoke on condition of anonymity, said finding investors “was actually pretty easy, one of the easiest deals there was.”

Telemarketers drew in even more buyers with tales about how Exxon and Mitsubishi planned to buy the company, according to interviews and the FTC lawsuit.

Government Interest

It might have lasted longer if not for Lyn Z. The Charlottesville, Va., homemaker learned that her father had sent $15,000 to a telephone salesman and pleaded for him to stop payment on the check.

“I’m skeptical of anyone who calls you out of the blue and asks you to invest,” said Lyn, who asked that her last name not be used.

Her father agreed. But hours after he halted the payment, a Global salesman persuaded him to remove the stop order--and the $15,000 was gone.

When the Global salesman began calling her father about also investing in the Hope mine, Lyn Z. called Global’s toll-free number. Then she hit the “record” button on her tape recorder. Mark Ford, according to federal transcripts, came on the line: “It’s really an excellent program.”

She feigned interest. Ford offered to mail her the investor memorandum.

“That’s an important thing. . . . If we’re sending it out U.S. mail, if we didn’t do everything--100% of everything we said that we do, that’s a major federal, uh, offense. It’s, uh, mail fraud and all that kind of stuff. . . . That should really set you at total ease.”

It didn’t. Lyn filed a complaint with a national fraud hotline. A few weeks later, she received a phone call from the FTC. It turned out that others were recording their calls with Global as part of a federal sting. Two FTC investigators, masquerading as investors, also called the company and recorded their exchanges.

By the beginning of 1997, Global’s managers sensed that they were attracting unwanted attention. Authorities in two states--Wisconsin and South Dakota--reviewed the company’s prospectus and ordered the telemarketers to stop calling residents there.

The timing could hardly have been worse for Global. The federal investigation opened just as gold fever was striking potential investors in the Hope Mine.

In February 1997, investors received a letter--unsigned but with Noell’s name at the bottom. Someone claiming to represent the FBI or the FTC, the letter said, had called a local bank to inquire about Global’s mining venture.

“We feel that these phone calls were made by either a disgruntle [sic] employee or an unethical competitor,” the letter said. “Be assured that we are doing everything possible to find out the source of this false information, and we will take legal action to prevent any further misrepresentation.”

Noell denied writing the letter.

Now, a New Venture

In June, the FTC filed its lawsuit against Global. In seeking penalties against the company, Wagner, the FTC attorney, wrote: “The only profitable mining going on is [Global’s] drilling into investors’ wallets.” A federal judge in Los Angeles froze the company’s assets and appointed a receiver to take it over.

The next day, FTC investigators, U.S. Postal Service inspectors and the receiver fanned across Encino to halt the operation. At one of Global’s addresses, investigators found an abandoned office. Inside were hundreds of pictures of the Tippecanoe Mine and little else.

Federal agents also went to the phone room where Global’s salespeople had worked for more than a year. But when they arrived, Global was gone.

In its place was a telemarketing office for another company, a computer consulting and software business called Venture Tech 2000. Working the phones were several salespeople from Global. But there were no Global documents or any other evidence related to the mining operation.

Gone too was most of Global’s money. The receiver’s examination of the company’s accounts and records turned over by Global employees showed that more than 60% of the $3.1 million raised for the two mines was paid in commissions to telemarketers, leaving little money for excavation work.

“I made my money,” one salesman said. “The real losers in this are the investors.”

In a settlement with the FTC in January, Noell agreed to pay $8,500 for “consumer redress.” Ford agreed to pay $27,000. Neither man admitted to any wrongdoing.

About $570,000 was left in Global’s accounts, a portion of which will be used to pay the court receiver. Authorities say investors probably won’t recoup more than pennies on the dollar.

Noell, 31, said he was unaware of any lies told to sell Global investments. He was managing the company from his home in Henderson, Nev., while salespeople in Encino pitched the mining outfit.

“No way would I want someone to call my grandmother and ask her to invest $15,000,” he said. “Unfortunately, I couldn’t sit there and listen to every phone call. . . . I hope they can sleep at night.”

Ford, 32, said he was the company’s accountant so he did not supervise the sales staff. “I didn’t associate with them,” he said. “I don’t want to deal with those people ever again.”

But he and at least six of Global’s telephone salespeople now share the same employer: Venture Tech 2000. Ford was the company’s first investor, providing $130,000 last year, company officials said, although he has cut back his stake to about $25,000. He said he is not involved in telephone sales.

Engelhardt, Ford’s partner in the Hope mine, handles marketing for Venture Tech. Engelhardt, who met Ford while the two worked as car salesmen, did not return calls for comment.

Nearly two dozen Global investors contacted by The Times said they also had been called to invest in Venture Tech.

Lawrence A. Boose, Venture Tech’s president and chief executive, said the company is legitimate. “We do try to make sure we are operating within the letter of the law,” he said.

Authorities in Pennsylvania and South Dakota--after reviewing Venture Tech’s prospectus--have ordered the company not to solicit in those states. The company said it plans to challenge the orders.

Maddox, the Colorado teacher who lost half of her $40,000 life savings to Global, said she has invested the other half with Venture Tech: “It was just a sure-fire thing.”

Rodney C. Owen, a retired Menlo Park engineer, said he lost $15,000 in the mining investment. The same salesman who sold him on Global, Owen said, persuaded him to invest $10,000 in Venture Tech.

The 83-year-old now tutors children at his home. But he is often distracted by as many as 20 calls a day from telemarketers.

“I don’t answer the phone,” he said. “It just rings and rings.”