Excerpts from a boiler-room telephone sales scam, taped by an undercover agent: ``Ed, Ed, we're giving you 15 percent per annum . . . profits are incredible . . . We anticipate big, big profits! . . . You're conservative. You work hard all your life, it's so hard! Why are you fighting me? I'm trying to give you shelter. . . . What are you going to do about it, Ed? I want some action from you! Some people talk, some people do . . . Ed. We're controlling 250 ounces of long June gold at a bid price of $450.90. What are you waiting for? Let me tell you something, out in Warsaw, Illinois, you're going to be the last one to know about it.''
How do you tell if it's a legitimate offer or a con?
Start by asking questions. For instance:
Has this chance-of-a-lifetime offer been registered with a state securities commission? If exempt from registration, why is it exempt?
What's the salesperson's name and business background? What address and phone number is he calling from? Can you visit the office? How much of a commission will the agent make on the sale?
Who are the company heads? Their experience in this industry? How long has the company been in business? What are its earnings, assets, and liabilities?
Promoters should be willing and ready to give all of this information in writing. If you don't get it or you're told that ``this deal's too complicated to explain in layman's terms,'' red flags should go up. If you do get written information, call the state securities division.
This office can verify if an investment contract has been registered with it -- or if it qualifies to be an unregistered security. If the salesperson or company principals have run afoul of securities laws before, this office should have a record of it. Check with the local Better Business Bureau to see if anyone has complained about the firm.
Be skeptical of an out-of-state or out-of-country investment, enforcement officials say. If you can't personally hold the gold you own, see the oil-drilling operation, or the ``secret, high-security'' silver recycling plant -- how do you know it exists?
Be wary of guaranteed high profits. That's the first tip-off fraud investigators look for. Last month, New York City officials shut down two telephone sales outfits doing art fraud which allegedly offered a buy-back guarantee if the ``signed Dali lithograph'' did not return a 15 percent profit in a year. The fake Dalis sold for $1,000 to $3,000. Actual worth was estimated at $10.
Remember that legal investments offering high returns always entail great risk. Get details on the risks involved. What are the expenses that may eat up the profits? What geologist verified the existence of oil?
``When someone offers you a 20, 30, 40 percent return on your money, a bell should ring in your head. Legitimate businesses rarely make more than 10 or 15 percent a year,'' says Matthew Zale of the Arizona Corporate Commission.
Don't reinvest until you see the profits. Most Ponzi schemes go on as long as they do because people don't claim their ``profits.'' Of course, reinvesting profits in a legitimate investment is wise. But a promoter who is especially reluctant to pay out profits could be covering up problems at the firm.
Finally, ``Never send money to a faceless person or firm that calls you on the phone,'' counsels Arthur Salzberg of the Commodity Futures Trading Commission, adding: ``The first line of defense is the customer's right to say `No.' ''
For more information, write for a free pamphlet entitled: ``Before you say yes -- 15 questions to turn off an investment swindler.'' National Futures Association, 200 West Madison Street, Suite 1600, Chicago, Ill. 60606.