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Sham On You!

Earn "big bucks" . . . work in "a nice air-conditioned office" . . . "have fun" selling photocopier supplies over the phone. Little wonder that a certain central Phoenix telemarketing firm promised new employees that they were about to embark on "THE GREATEST JOB IN THE WORLD!"

"It was more like the greatest con job in the world," counters Jill, a former employee who bailed out of the Central Corridor phone room after only one day. Far from being the dream job described in the classified ad, she claims the gig was actually less honorable than just shoving a gun in people's ribs and hollering, "Stick 'em up!"

"At least an armed robber is up-front about what he's doing," she says philosophically. "That place was just running a scam."

No dummy, Jill had sized up the situation at "Main Warehouse"--a clever name, as it turns out.

According to U.S. Postal Service Inspector Larry Johnson, the company, based in Santa Ana, California, is a classic example of an office-supply "boiler-room" operation--a reference to the days when phone hustlers operated out of the basements of office buildings. Johnson contends that Main Warehouse is one of at least 130 companies suspected by his agency of specializing in wrongful telephone sales of photocopier toner and related office supplies--a nationwide racket that currently rakes in more than $350 million annually. Main Warehouse closed its Phoenix office at 110 West Camelback Road in early June after more than a year in that location. The company, which until recently also had a Texas office, is described by Johnson as the nation's second- or third-largest office-supply boiler room.

But maybe not for long.
Johnson expects that Main Warehouse owner David Jenkins will soon sign a "consent agreement" with the government--a document in which Jenkins will agree to close up shop and steer clear of all forms of telemarketing for the next five years. Johnson adds, "If he [Jenkins] breaches this agreement, he still [would face] the possibility of prosecution for what he previously did." Pointing out that the agreement carries no outright admission of guilt, Johnson says, "If he thinks of himself as operating a legal enterprise, why in the world would he sign such an agreement?"

Jenkins would not return a reporter's phone calls. But his lawyer, Alan Pick, tells New Times that his client will sign the agreement.

"I'm clearly not going to tell you or anybody that there was any fraud involved," says Pick. "I will tell you that it appears the people in Arizona and Texas were not monitored as closely as they should have been."

Postal inspector Johnson says phone hustlers often blame their problems with the authorities on their out-of-state satellite offices.

"The Santa Ana location, where Mr. Jenkins is on-premises, has generally been run in a very businesslike manner," Pick contends. "Unfortunately, Mr. Jenkins has found out recently that the Arizona operation hasn't been run as tightly as it should have been. The Arizona operation has indeed been closed down. Mr. Jenkins has been thinking about getting out of the business anyway, so he closed down the Arizona office."

The lawyer for Main Warehouse insists that Jenkins' decision to shut the Arizona office "was done independent of any discussion with the postal authorities."

LOOKING BACK, JILL (she asked that her real name not be used) says it didn't take her long to suspect that her new employer was not a charter member of the Better Business Bureau. "The people seemed flaky, very unprofessional," she recalls. "I got the impression they'd hire just about anyone who walked in the door."

She herself landed a job just minutes after walking into the Main Warehouse cluttered office suite. "I told them I was interested in making lots of money," she smiles. "I figured that's what they wanted to hear--and I was right." (She says employees were paid small salaries with the promise of big commissions after a one-week training period.)

Showing up for work the next morning, Jill and another new employee were greeted by a hyperactive young sales manager who bounded into the room babbling about the joys of selling toner (the black powder that's the lifeblood of office photocopiers).

"He came in with this talk about how great--really great--it was to sell toner over the telephone. Then he told us he loved selling toner so much that he hadn't even taken a vacation in two-and-a-half years," Jill laughs. "Right off the bat, I knew something was wrong. Nobody who's on the level gets that jazzed about selling photocopier toner."

The pep talk was followed by a "briefing session"--in reality, a crash course in the finer points of telephone tyranny. Jill learned, for instance, how to sound more vocally imposing on the telephone--a tactic that involved holding the phone right up to her mouth and talking very loudly. There was instruction in the dynamics of telemarketing time-management. ("Time is money, don't ever put your phone down, don't ever hang your phone up, don't ever take your phone out of your hand.") And after scanning a variety of scripts used in different stages of the sales pitch, she was coached in the proper way to authoritatively deliver such immortal dialogue as "Why don't you grab a pen and let me explain what's happening?!"

 

By the end of the briefing session, Jill realized she had Main Warehouse's number. And judging from the hundreds of out-of-state Yellow Pages directories piled up around the place, Main Warehouse had just about everyone else's.

Rock music blared in the background as she joined ten fellow telemarketers in the phone room. "They wanted to keep everyone very up, very hyper," guesses Jill, who recalls that the walls of the room were adorned with posters of expensive cars and naked women--"someone's idea of the `good life.'" Finding an empty desk, Jill grabbed a phone and began dialing for dollars.

Here's how it worked: Using randomly selected numbers from a phone book, Jill placed blind calls to businesses around the country. Briskly identifying herself as a representative of "the Main Warehouse in L.A." she'd explain that because of a computer error, she needed to get the model number off that company's copy machine, as well as the name of the person responsible for purchasing photocopier supplies.

The data were turned over to a co-worker, who would use the model number to determine exactly what brand of copier a prospect was using. Armed with the make of copier, the name of the purchasing agent and another script (this one written flow-chart style, a format that provided deceptive answers to anything a prospect might say), the salesperson would call the company back several days later. He'd explain that "Main Warehouse" was about to raise the price of toner for "your copier." Not to worry, though. "To protect you against the increase, my supervisor will guarantee a shipment . . . at the current price. [The quantity won't be] much, but it will give you a chance to stock up and avoid paying any immediate increase." After telling customers to expect a "verification call" within the next few days, the salesperson would conclude this phase of the transaction by urging dupes to "have a nice day."

In a scenario outlined by postal inspector Johnson, the action then would shift to Main Warehouse headquarters in Santa Ana, where another person would make the verification call to the purchaser and tape it. Verification in hand, says Johnson, Main Warehouse would then ship overpriced product (generally a generic brand), often so heavily padded with phony taxes and other "chump charges" that some victims wound up being billed far more than they'd have paid their regular supplier for a name-brand product. Johnson explains that the tape could be used as leverage should someone later balk about paying.

Incredibly, says Johnson, many victims are duped again and again: Following the initial order, toner con men routinely bill customers for additional shipments (falsely identified as "back orders"). Threatened with loss of their credit rating, many customers simply pay up.

"IT WAS REALLY PRETTY clever," says Jill. "You never came right out and said you were with the main warehouse for Xerox or Canon or whatever. The idea was that they'd just naturally assume that you were." And in the event that they didn't, Jill needed to look no farther than her trusty "customer objection sheet," a two-page outline covering virtually every stumbling block that might arise during the course of the conversation.

Should a puzzled prospect come back with even the most routine of queries ("What company did you say you're with?"), Main Warehouse employees were instructed, according to Jill, to deftly dodge the issue with a barrage of scripted double talk: "This is Jill Smith, you know, the toner, the ink for the machine, it's the short digit number right on the front right next to the nameplate. I'll hold for ya." (Johnson says many suspected scamsters use virtually identical ploys to sell toner.)

Thanks to the script, Jill was seldom at a loss for words--even if those words were often less than meaningless. "Remember, it's not what you say, but how you say it that makes sales," advised a tip-sheet given to new employees. "Say it like you mean it . . . because if you don't, the customer won't either. Always speak with total authority." (Alan Pick, the lawyer for Main Warehouse's owner, says that if there were such scripts, they weren't sanctioned by the home office.)

 

According to Jill, a take-charge attitude was amazingly effective in getting a foot in the door--thanks in large part to the vast army of inexperienced receptionists who apparently stand sentry at the thresholds of many companies throughout the country.

"As far as I could tell, the whole scam was based on conning these young office girls who didn't have a clue what was going on," says Jill. "If any of them had questions--and it was amazing how many of them didn't--we'd have an answer for everything. I'd tell them I needed the model number on their copier because I was getting a `double read-out' on my computer. What a joke! I don't think there was a computer in that entire office."

If prospects remained hesitant about giving out information on their copiers, the boiler-room brigade had instructions to turn up the heat. "At that point," says Jill, "you'd ask, `How long have you worked there?'--sort of shake them up a little by insinuating they were supposed to know who you were. Then, no matter how long they'd been there, you'd say, `Oh, that explains it! You must be new!'"

Postal agent Johnson, who once worked undercover in a boiler room to crack a big case, says of salespeople like Jill: "These `front salesmen'--so known because they make the initial blind call to the prospect--are hired off the street almost daily. They are inexperienced, unskilled, transient and unemployed--sometimes college students, insurance agents, drifters or just between jobs. If conscience doesn't weed them out in short order, the sheer day-in-day-out tenacity decimates the complement in weeks."

As it turned out, Jill had so little tolerance and so much disgust that she simply pocketed all the model numbers she'd amassed that day instead of turning them over to her bosses. She says that she disliked browbeating prospective customers, but that some of her more aggressive cohorts were not nearly so sanguine. Several, she recalls, apparently relished the opportunity to verbally strong-arm an unseen secretary. "A couple of those guys really seemed to enjoy yelling at people," Jill says. "Every once in a while I'd hear them screaming into the phone, `WHAT DO YOU MEAN YOU CAN'T SEE THE COPIER FROM WHERE YOU'RE SITTING?! GET UP AND LOOK!'

"We never asked anyone to give us the information--we told them. It was total intimidation, most of it aimed at secretaries who hadn't been on the job too long."

Jill says one of the first lessons she learned was to forget everything she ever knew about traditional telephone etiquette.

"If anything went wrong, if someone started asking too many questions, we were told to hang up immediately," she recalls. "You didn't say `Excuse me,' `I'm sorry,' `Thank you'--anything. The second you encountered any negativity at all, BOOM!--you slammed 'em, then went on to the next name on the list. The thinking seemed to be that if you called enough numbers, you'd eventually find a sucker. And you did." (One of the handouts Jill received noted, "The secret to making over $500 a week selling toner is to dial a lot of numbers and hang up fast the moment you hear any negativity.")

Scamming and slamming her way through the Yellow Pages of a Florida coastal community, Jill managed to collect the desired data on fifteen different businesses during her six-hour shift. "It was amazingly easy," she explains. "If you act like you're in control, some people will tell you anything."

LARRY JOHNSON HAS A name for people who "will tell you anything." He calls them "toner-phoners." "These people are merciless," says Johnson, who's been a postal inspector working out of Burbank, California, for nearly twenty years. "They'll literally exploit people to the point of protest, then dump them and get another name from their file."

According to Johnson, office-supply telemarketing scamsters first reared their ugly heads in the Sixties. He claims this bamboozle has since become "epidemic." An estimated 130 such companies are headquartered in southern California, which Johnson calls "the boiler-room capital of America."

"We don't care if they're shipping top-grade product," explains Johnson. "The crime comes in when they misrepresent themselves. If you induce someone to part with their money based on misrepresentation, then there's a crime."

Pick, the attorney for Main Warehouse, says, "Any time you get a commissioned salesperson on the phone, there's an opportunity for abuse--even if it's AT&T. Very frankly, I believe that regulatory concern is very appropriate."

He defends Main Warehouse, but he acknowledges that "where the problems occurred were probably in the initial sales call" from the company's satellite offices. "Before [headquarters] ships anything out, it calls up the customer and reconfirms that, in fact, an order has been placed," Pick says. "To make sure there's absolutely no question, [headquarters] will ask for--and get the permission of--customers to tape record the verification or confirmation call."

 

"I'm not going to tell you there were no problems at all at Main Warehouse," adds Pick. But he denies that customers were billed for undisclosed shipping and other charges or were shipped unordered merchandise.

Postal agent Johnson says that, until three years ago, clamping down on phone hucksters was tough. On the rare occasions when suspected swindlers were forced to answer complaints, they nearly always produced tidy tape recordings of innocuous "verification" calls, which had none of the hard sell of the earlier calls. "If you couldn't get inside these places, there wasn't a whole lot you could do," Johnson admits. Since 1986, when California began requiring telemarketers to register with the state, prosecutions have been much more frequent. And if telemarketers don't register, they face a shutdown on the spot after even one complaint. (A similar bill was recently signed into Arizona law and goes into effect later this summer.)

Sometimes, says Johnson, prosecution is difficult because toner-phoners file sanitized scripts with the authorities that bear little similarity to what a victim eventually hears over the phone. "Registration isn't the answer, but it's a good place to start," Johnson says. "At least now we know where they're at and who's involved."

Three years ago, the magnitude of office-supply flimflam became apparent when Los Angeles-based boiler-room kingpin Sheldon Leonard Block pleaded guilty to 76 fraud-related charges stemming from his Park Distributing Inc., a toner-phoner outfit whose 200 employees made an estimated 10,000 calls a day.

Admitting that his company (which also operated in Phoenix, San Diego and suburban Denver) had taken in more than $35 million during the years 1981 to l985, Block received a fifteen-year prison sentence (later reduced because of illness) and was forced to surrender $2.2 million in real estate after authorities closed in on his three-state telemarketing empire.

Another measure of the scams' success? The numbers. Johnson reports that out of 100 contacts, only four will go beyond the initial call. Of the remaining four, two sales will typically fall through before the goods are shipped. Of the two that are shipped, one victim will refuse to pay. "That toner-phoners can operate profitably on this one sale," he says, "tells you all you need to know." "WHEN YOU'RE TALKING about a medium for fraud, you tend to think of something more sophisticated than photocopier toner," says Johnson. But the product's mundane nature takes on a distinctly sinister luster in the hands of experienced toner-phoners.

"Toner is a common consumable and is used by virtually every business," the postal agent says. "Unless they've been burned before, very few people have any reason to get suspicious when someone calls about the photocopier, especially when that person gives the impression that they've dealt with the company before. It's not like these people are selling office furniture or something that requires a high-level decision."

In the small- to medium-sized businesses that are favored feeding grounds of boiler-room barracudas, the task of ordering office supplies usually falls to an entry-level secretary or clerk. "There's a common belief that the people who are susceptible to this kind of thing are extraordinarily stupid or naive," says Johnson. "That's really not the case at all." Instead, he pays the scamsters a left-handed compliment, claiming that some toner-phoners are such maestros of verbal manipulation that more than a few victims later insist that the salesperson knew the make and model of the photocopier prior to the initial call and will swear they'd merely verified this information for a double check. "If these toner-phoners were to call up and say, `We're the Main Warehouse in California and we'd like to sell you a good product,' and everyone would tell them, `I'm sorry. We deal locally,' bang! That'd be the end of it." But they don't and it isn't.

Johnson's advice? If a toner-phoner calls, hang up.
And if you've already been victimized? "Don't pay 'em if you already haven't done so. Don't be intimidated if they threaten to turn you over to a collection agency. They don't--and they won't--affect your credit rating. They don't have time to take everyone to small-claims court. You've got to remember: You are not unique among their customers. You are the rule."


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