The young man who telephoned Doris Link at her home in Toronto last April had good news to report: she and her husband, Jack, both in their 80s, had won $10,000 in a lottery. Although neither could remember entering the contest, the caller was emphatic. All they had to do to claim their prize was forward a certified cheque or money order for the tidy sum of $998 to the lottery’s Montreal headquarters to cover “administrative costs.” The Links mailed a cheque and a prize did arrive—but it was not $10,000.
Instead, the couple received a bronze coin purported to be of ancient Roman origin, with a framed certificate of authenticity. “They’re smart talkers,” declaies Jack Link, sounding more resigned than angry. “I hoped that there would be more than that.”
The Links were lucky in at least one sense: every year, hundreds of North Americans lost their entire savings to similar telemarketing frauds. Armed with lists of potential targets, smooth-talking con artists are busily devising twists on age-old scams and reeling hi their marks with the promise of easy money. Last year, an estimated 40,000 Canadians lost money in telemarketing scams-about twice the number in 1994. All told, says Ontario Provincial Police Staff Sgt. Barry Elliott, unwitting victims were bilked to the tune of $60 million. ‘There is still a hard c ore of bad guys out there,” says Elliott, who oversees Project Phonebusters, a national task force based in North Bay, Ont. “There: is so much money out there they are prepared to take the risks.” While telemarketing fraud has been widespread for at least two decades, the pitches keep changing. Stock investment swindles and gem sales—popular in the early 1990s— seem to be less prevalent now. “These guys are extremely good at marketing,” says Elliott. ‘They adapt to the environment and develop pitches that are effective at the time.” According to Phonebusters, the “prize pitch” is the telephone-swindle of the moment. Victims are usually told that they have won gifts such as money, diamond necklaces or even satellite dishes. In order to secure the prize, however, the recipient must pay a fee, forward taxes or buy a cheap trinket at a grossly inflated price.
Some cons simply call people at random from a phone directory, but most employ more sophisticated methods. A common ploy is to mail out thousands of phoney contest entry forms. Participants who fill them out not only lose the $20 it costs to enter a contest, but are later hit with a congratulatory phone call and a request for money to secure the winnings. ‘The bad guys take people as far as they can go,” says Elliott, “and then they keep the name and they use them for another pitch.”
More often than not, the pitch is directed at seniors. But only about 10 per cent of targeted people actually report the crime. “They don’t disclose it because it is too embarrassing,” says Jenny Shaw, head of Vancouver’s nonprofit West End Seniors’ Network. “But I know it happens because every time I mention it, I get questions. They say,
Would you describe that
to me again?’ Then I see the look on their faces.”
Another complicating factor is that telemarketing cons rarely carry out their business in the jurisdiction where they are based. Police say they know of 30 active prize scams in Canada, 29 located in Montreal. All 29 prey on people outside Quebec. “The Quebec position is unless there are victims in Quebec we won’t prosecute,” says RCMP Staff Sgt. Fred Pratt, an Ottawa-based fraud specialist. At the same time, the increasing number of international scams led U.S. and Canadian authorities to sign a joint commitment on Sept. 10 to crack down on deceptive marketing practices. ‘We are seeing more telemarketing on the international front,” says Rachel LarabieLeSieur, an Industry Canada official who helped to forge the agreement with the U.S. Federal Trade Commission. “The illegal telemarketers are in fact evading one jurisdiction by locating in another one.”
Whether tougher enforcement will actually eliminate telemarketing fraud is another matter entirely One former telemarketing con who
has served time in prison says he is
convinced that there will always be phone scams. “These guys are all psychopaths looking for their next mooch,” says the onetime criminal, who asked not to be named. He adds, however, that they are only successful “when they appeal to people’s greed and their sense of urgency.” If a crooked telemarketer called his house again, Jack Link knows what he would do: “I’d call them liars, and I’d hang up the phone on them.”
Plain and simple
It ranks with the phone book for sheer reading enjoyment: the much-maligned mutual-fund prospectus. With its acres of fine print and mind-paralyzing prose, the typical prospectus is ignored by most small investors. Under securities regulations, fund companies are supposed to provide customers with “full, true and plain” information about the fees they charge and the investment strategies they follow. “But on the plain part, fund companies have really dropped the ball,” says John Watkinson, president of Torontobased Simplified Communications Group Inc.
Who to blame? The lawyers, of course. Fund executives who fear being sued for incomplete disclosure have abandoned the process to legal eagles and their turgid writing. Watkinson and other crusaders for clarity are helping an increasing number of fund companies use clear language to make
prospectuses more readable. “You’ll see every fund company moving to much clearer documents over time,” says Harold Hands, chairman of the Investment Funds Institute of Canada.
Altamira Management Ltd. and Mackenzie Financial Corp. were among the leaders, coming out last year with new and improved “fund summaries,” as Hands calls them. In the United States, some fund companies are experimenting with the “profile prospectus,” a two-page summary. But that may be inadequate for investors, says Glorianne Stromberg, who last year completed a 300page report on the fund industry for the Ontario Securities Commission. If the document is too brief a summary, she adds, “It just puts a gloss on a gloss.”
To rent or to buy?
As borrowing costs fall, an increasing number of tenants are wondering whether it is time to plunge into the housing market. To help them decide, the federal government’s Canada Mortgage and Housing Corp. has developed a computer spreadsheet that lets people determine for themselves whether renting or buying is more advantageous given their individual financial circumstances. The software, which is compatible with Lotus 1-2-3 and Microsoft Excel, sells for $20. (For information, call 1-800-668-CMHC.) Users can enter an array of personal data, including the amount of money available for a down payment, monthly rental costs, maintenance expenses and personal taxes.
To show how the software works, CMHC market analyst David Dallaire created a fictional Ottawa couple—John and Jane—who put down $15,060 on a $150,600 home, then took out an eight-per-cent mortgage with monthly payments of $1,060. He also assumed that the market value of the house remained flat for five years, then rose by 1.5 per cent annually. Meanwhile, the renter in Dallaire’s example paid $1,375 a month, which also increased by 1.5 per cent annually. After five years, the tenant was ahead by $5,775. But after 15 years, the homeowners were ahead by $22,749; after 25 years their savings totalled $31,674. According to Dallaire, CMHC is making the program available because many analysts were generalizing about the advantages of renting over owning. For John and Jane, at least, owning was by far the better investment.
FORFf AÇT* H0TEL OCCUPANCY After a slump in the early 1990s, hotel ■ V/iVCwM^ I • occupancy rates continue to rise in most large Canadian cities. The Conference Board of Canada predicts an average one-per-cent increase next year, following growth of 2.5 per cent in 1995 and 1.6 per cent in the first half of 1996. With demand climbing, room charges will also increase, by an average of three to four per cent in 1997. Occupancy rates in major centres currently range from 72 per cent in Toronto to 61 per cent in Halifax and Quebec City.
Wheels of fortune
The high cost of driving is getting even higher. Canadians will pay an average of $7,353 to own and use a vehicle over the next year, according to the Canadian Automobile Association. That works out to about 41 cents a kilometre for a compact car driven 18,000 km a year, or 43.3 cents for a minivan. Financing costs increased 12 per cent—due to higher purchase prices—while maintenance rose 6.2 per cent and tire prices were up 5.5 per cent.
Fund ownership soars
Forty per cent of Canadian households have money invested in mutual funds, a new survey shows. Among households with income over $75,000, the rate was 70 per cent. Fund ownership was highest in Ontario, the Prairies and British Columbia and lowest among francophone Quebecers. The results are based on interviews with 8,300 Canadians by Toronto-based Marketing Solutions.
Percentage of Canadian households owning
Banking by braille
The Royal Bank is making some of its publications more accessible to people who are blind and deaf. The bank now offers a variety of brochures, employment applications and banking agreements on audio cassette and computer disk, as well as in braille and large print. The materials are being produced by T-Base Research & Development Inc. of Ottawa, whose president, Sharlyn Ayotte, is legally blind. The Royal says it was the first major bank to provide deposit account statements in braille five years ago.
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