$425 Million Lost in Alleged Pay Phone Scheme

Associated Press

Thousands of people sank a total of $425 million into coin-operated telephones in an alleged pyramid scheme that promised 15% returns, said securities regulators in 25 states, including California. Most of the victims were elderly, said Deborah Bortner, securities director in the Washington state Financial Institutions Department. About 100 Washington residents were taken in by Georgia-based ETS Payphones Inc., which has filed for bankruptcy protection, she said. ETS' bankruptcy records list 13,500 investors who invested $425 million, said spokesman Ashley Baker with the Washington, D.C.-based North American Securities Administrators Assn., which is coordinating the enforcement action and for which Bortner serves as president. State regulators so far have brought actions on behalf of nearly 4,500 people who invested $76 million, Baker said. The figure could reach $100 million, he said. Bortner said investors paid about $7,000 each to buy pay phones on the promise that they would reap 15% returns, only to lose all or most of their money.

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