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Investment Con Artists "Paging" Victims
January 30, 1996
State Banking Commissioner John P. Burke today urged Connecticut residents to hang up the telephone on high pressure sales pitches which promise sky high returns with little or no risk in paging license and pay-per-call "900" number investment opportunities.
The Banking Department's Securities and Business Investments Division, with state securities regulators from around the country and the Federal Trade Commission (FTC), warned that the paging license and pay-per-call "900" number investments now being commonly hyped by con artists typically turn out to be costly wrong turns on the "information superhighway."
"Although we are not aware of any state residents experiencing problems related to such investments, paging license and pay-per-call "900" number schemes have accounted for nearly a quarter of the investment losses reported to the FTC in late 1995," Commissioner Burke said. "With so many people using pagers and "900" numbers today, on the surface investment opportunities in those technologies may sound attractive. We want residents to know that paging license and "900" number investments are in fact extremely speculative and unsuitable for average investors. Persons should not consider such investments unless they are prepared to lose every penny they invest."
Paging license scams begin when a salesperson offers to secure an Federal Communication Commission (FCC) license for an investor that covers a paging frequency for a portion of the country, such as a major city. High-pressure sales pitches seek from $1,000 to $12,000 per license from investors, with promises that the licenses can easily be resold or leased at enormous profits. In actuality, market experts say no company has ever used a paging license owned by someone else to build a customer base. Since major firms don't require individuals' licenses, the value of those licenses inevitably plummets.
In pay-per-call "900" number schemes, telemarketers try to sell investors interests in "information provider" partnerships. Instead of owning a "900" service outright, investors are pooled in limited partnerships similar to arrangements used regarding oil and gas wells and real estate. Typically, investors are not told that information providers are responsible for leasing special telephone lines and paying for national promotion and advertising costs. In an increasingly overcrowded marketplace, the large majority of information providers end up losing money.
"Residents should immediately become suspicious of typical telemarketers' claims that 'tomorrow will be too late' to invest in these get-rich-quick deals," Commissioner Burke said. "Any legitimate investment opportunity should allow investors adequate time to thoroughly investigate the opportunity before parting with any money. We encourage investors to contact the Banking Department's Securities Division if they believe they have been solicited for or victimized by such a scam."
To help educate the public about the threat posed by this new generation of "information superhighway" schemes, the Securities Division is releasing an Investor Bulletin explaining the scams, how to spot them, and what to do to protect yourself. Consumers may contact the Division at (860) 240-8230 or toll-free at 800-831-7225 to request a free bulletin or to report a problem.