Phoenix Boiler Room Banned from Telemarketing, The Results Group
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The thesis showed that there was an expanded group of choice behaviour that could be thought of as rational, in the maximizing preference economic sense.
Since 1998, however, I have been largely interested in fraud as a parody of reason. I don't believe we understand the economic marketplace until we can place fraud in its proper perspective.
Fraud is the pursuit of something for nothing, yet very valuable bone fide real economic exchanges from one person's view is something for almost nothing. It is hard to tell, formally, whether you have found a great trade or you are being gently coaxed into a fraud.
The study of business opportunity frauds is theoretically important because of the behavioural switches employed by the con criminals. The mechanism of the fraud is transparent, being entirely devoid of anything but the pretense of beneficial trade.
Biz Op frauds lie bear the mechanisms that automatically persuade, some of the people some of the time.
Consider for example, The Results Group, which as reported by the FTC:
"The Results Group, L.L.C., and its co-owners are banned from telemarketing, and will give up thousands of dollars in cash, the proceeds from the sale of luxury sports cars, and the value of life insurance policies and a Las Vegas real estate deal, to settle Federal Trade Commission charges that they deceptively sold home-based Internet business opportunities to consumers throughout the United States.The Phoenix-based boiler room operation will return about $435,000 to consumers. The FTC and Arizona Attorney General's office cooperated extensively on this investigation; the Attorney General also is bringing a parallel case against the same schemers.
In its complaint, the FTC charged that the defendants misrepresented that consumers who purchased their business system were likely to earn a substantial income with little risk, and that they would receive substantial assistance from a staff of business experts.
They claimed that some of their purchasers were making over $50,000 per month in commissions. In fact, most consumers never earned any income.
The operation charged between $99 and $599 to build and host Web sites "affiliated" with the Web sites of Fortune 500 retail companies such as Amazon.com and Overstock.com.
Supposedly, consumers would make money when those retailers paid commissions for sales made through the consumers' Web sites. The defendants claimed that tens of thousands of Web users would be driven by advertisements to click on the Web sites."
On the face of it, this bland description can only lead one to conclude the idiots were involved - who can believe that a real business is available for $99 to $599.
But when the FTC's complaint is read against the telemarketers we see a little more complicated story.
"The purchasers are given a guarantee, in six months if you are not satisfied then your money will be returned."
What happens is that consumers used to guarantees signaling quality and reassurance for consumer goods automatically think that the guarantee in this case signals the same.
In fact, it is a huge warning signal as no legitimate business offer comes with a guarantee.
It is fairly easy to see that there is no economic value to the transaction being offered by the Results group, but until we see the role of the guarantee and how it bolsters the something for nothing offer, it remains a mystery as to how these scammers could have picked off $19.5 million from the credulous public.
This is a simple fraud to decode because there is not even the semblance of a real economic transaction. But where we suspect fraud hidden under the layers of seemingly genuine economic relations, we should look for these techniques.
