Some con artist tried to scam a Lutheran pastor in New Jersey out of his tickets to a concert. Fr. Anthony Iovine quotes the e-mail he received:
Dear Father Iovine,
I was searching the internet looking for people who have Billy Joel tickets and I came across your blog where you mentioned that you bought tickets for his July 18th concert at Shea Stadium. My girlfriend and I have tickets for the July 16th show, but we can’t make the concert because of a previously scheduled arrangement.
What I am proposing is swapping tickets. Our seats are in the upper deck down the right field line. You mentioned that your tickets are on the field. You can send your tickets to me at (address deleted by me). I will send my tickets to you when I receive yours.
Thank you very much.
The reason this grabbed my attention is twofold. First, I'm not sure I would have spotted that it is indeed a scam! Fr. Iovine would simply have lost his tickets and never received any in return. Second, I have a sort of personal vendetta against all con artists, stemming from when my then husband was totally taken in by one such crook, and we came very near to losing everything.
So when a dear friend from church came to me one day with the scheme that had been presented to her husband, which was severely tempting him, I put my all into unmasking the fraud. Trouble was, we could both see this program had to be a scam, but what puzzled us was to see just where the scam lay. Can you?
The deal went like this. It was billed as a Christian Ministry, helping Christian families by lending them money on extremely favorable terms. The first month, after your processing and entry fee of $300 was received, you would borrow $100. The interest was high, 10%, or $10, but never mind, because the next month you would get $200 and only owe 10% of the total outstanding balance, or $29. Every month after that the amount you would borrow would double, and you'd owe 10% of the total accumulated balance. Thus, on the following months you would receive and owe as follows:
Receive........Owe
400............57.10
800............114.29
1,600..........228.57
3,200..........457.14
6,400..........914.29
12,800........1,828.57
and so forth, until by the 15th month, you would borrow a million dollars in that month alone, and at the end of 2 years, you would have borrowed a cumulative total of over a 1.6 billion dollars, and would have paid back less than two hundred forty million of it.
In addition, from your interest payments, 1% was to be deducted, with which the ministry would buy a life insurance policy for you. That way, you wouldn't have to worry about your debt being inherited by your family; in the event of your death, the policy would pay it all off for you.
Obviously you would be on Easy Street forever, including when you figure in the tax implications. Except you could never get off this treadmill, but why would you want to?
So where's the fraud? How is anybody making any money off this, if you never pay off any principal, just interest? How are the providers of all this money getting any profit out of it? I even called the "ministry" and asked if I could get in not on the borrowing end of it, but as an investor, and I asked how that would work. The woman who spoke with me was totally confused by this question and after some hemming and hawing, said, "Well, we'd like you to be in the program for a while first and then we can consider your becoming an investor."
It took this thick head three days to figure out what ought to be obvious. Can you find it sooner? Scroll down if you need a hint.
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It's a variation of the same scam Fr. Iovine was smart enough to avoid.
6 comments:
Another hint: none of those big numbers is relevant. You do not need to do any number-crunching to figure out this scam.
sigh... I know sooo many evangelicals who have gotten into these kinds of pyramid and multi level schemes. It seems if you just put a "christian spin" on anything that promises basically something for next to nothing people line up for it. When I've been approached to sign up and pointed out that it is fundamentally an appeal to laziness and greed to someone and I'd rather earn my money by working for it, they get pretty defensive. oh well.
And the prize goes to s-p!
Yes, it's a pyramid scheme.
It's also called, "Advance fee lending," which is illegal.
I'll post the particulars in another comment, coming soon.
HOW THE SCAM WORKS
The answer to the puzzle
(Don’t read this if you’d rather figure it out yourself!)
The only thing these crooks were interested in was your $300.00 enrollment fee. Period. All those amounts, all those calculations, were eyewash, to appeal to greed. They only wanted to take your $300 and run. They were in this for that alone, having no intention to lend you a penny, ever.
Well, that’s not quite true. ..keep reading.
This sort of scheme obviously has a limited lifespan. That is, when enough people have forked over their enrollment fee and have gotten nothing for it, and start complaining and threatening, things get increasingly uncomfortable for the crooks. They begin running out of excuses. So they have a plan for prolonging their operation. And that is to lend you the first month’s sum of $100 out of the $300 you have paid them. This buys them at least another month, before you go to the FBI about them, to bilk many, many more people. So they occasionally do this, but they don’t want to do much of it because it’s a lot of work to keep track of it. If they wanted to work hard, they’d be in a legitimate business. That’s why you’ll probably never see a dime from them.
That’s all there is to it. It’s called advance fee lending, and it’s illegal. Legitimate loans earn their profit from charging interest, not from charging fees in advance.
Moral of the story: never, ever, send anything of value (a check, Superbowl tickets, anything) in the mail to somebody you had previously never heard of, who has solicited you.
A variant of this same scheme is, “You’ve won a free vacation!”
You get to choose, from our list, which cruise ship you’d like to sail on for free, which luxury hotel to stay in for free, which area restaurants you’d like to eat in for free, what free activities you like best -- horseback riding? sailing? snorkeling? golfing? tennis? caving? We just need a $200 processing fee to cover the cost of our getting it all set up for you.
If you send a check, you’ll never hear from the promoters again. Best of all, for them, you can travel any time in the next two years (except right away, while they are doing their "processing". This means it may be many months before you discover the fraud. The crooks have plenty of time to scam others in the meanwhile before they find it necessary to disappear.
Sounds like a typical Ponzi scheme. It doesn't look like they even added enough window dressing to mask the outlandish claims. Lazy.
For an interesting read, here is a history of the first "Ponzi Scheme:
http://en.wikipedia.org/wiki/Ponzi
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