Wednesday, January 2, 2008

Con Artists' Gold Scams: The Old Dirt Pile Con Game is Back

--The lure of gold hypnotizes ever on by way of this scam. A timeless pocket-liner for Con Artists

Magalia, California--Over many centuries man's fascination with gold has been (nearly) all-consuming. Why? The glitter? The everlastingness? The over-the-ages, proven store of value? It's real. People know it. Their friends know it. Investors everywhere know it. And, the con man knows it.

To illustrate how these scams work, Jack Payne, author of the legal thriller, Six Hours Past Thursday, puts it this way, in the form of a methodically unfolding, step-by-step scenario:

"So, you give in. You invest $10,000 to buy a stake in a quantity of newly mined, unprocessed dirt from a gold mine, "guaranteed" to contain enough gold to, at least, cover your investment. Goody, you think, I'm going to strike it rich because the independent assayer's report shows a much greater value.

"You then wait. You've been told this is a long-term investment, with many steps to be taken--transportation, storage, refining, processing--before you can cash-in. Approximately three years is the estimate.

"Two years later you grow impatient, because you've been told this type investment might be a scam. You call the sales office, located in another state from the mine. After several stalls, and ignored requests for return calls, you decide to check things out with corporate headquarters. You find these "offices" located in still another state.

"Quite antsy now, you decide to visit the site. You find a company "official" who assures you all is well. The reason the dirt hasn't been moved yet is due to either bad weather, labor force problems, equipment breakdown, environmental concerns slowing things down, or local authorities screwing things up (whatever excuse the "official" thinks you will buy). You are told to go home, and you will be kept informed, regularly, by mail, as to progress, which is about to step up now.

"You do. Over the next year you get regular letters with glowing reports of progress. (These are known as lull letters, designed to calm your anxiety, put you to sleep.) As reassurance, you're told to check back with the independent assayer's office. You do. And, sure enough, the report does just that: it reassures you.

"Now your three years are up. During these remaining days you've studied up on how dirt pile scams work, and you now realize that you have been had. You belatedly know how easy it is to file a mining claim, and salt an assayer's sample with a small amount of actual gold. You now know why the sales operation (read, boiler room) is in one state, the corporate "headquarters" in another, and the dirt pile itself in a third.
(To slow down and foul up law enforcement authorities, of course.) And, lastly, it now dawns on you: why three years? Because the statue of limitations on fraud prosecutions runs out in many legal jurisdictions in this time-span."

Payne concludes, "If forced to pick between two evils, choose the one you've never tired. That seems to be the quirk of human nature involved. Think of it, the nuttiness: multiple-state operations, a pile of dirt, no less. What more can be said about human gullibility?"


Anonymous said...

Last year I was getting these email alerts for penny stocks. I decided to track them and found they would trade at incredibly higher prices only a few days after the email alert. Somebody found a way to cash in on the OTC market. Basically buy something, anything for nothing, and then go on a wild email hype campaign. About a month after catching onto this scam I received a warning notice from the SEC – presumably because I was on the email list.


Anonymous said...

There is nothing that beats the allure of the 1 to 1000 potential of a mystery chest.


warren m said...

I actually made some money on one of these dirt pile scams fifteen years ago, just by watching what was going on over the price reports wires. I bought at one dollar, sold a week later at two and then watched the next couple of days as the price went to $4.50.
I thought I'd made a mistake in selling too soon, and then after another couple of days the price collapsed, it dropped all the way down to 10 cents a share. It was like the air being let out of a balloon.

Bern said...

This was big in the 19 century, even as far back as the great Forty Niner gold rush to California and the Yukon gold rush.

Jack Payne said...

That's right, Kevin. E mail alerts were widely used in the old "Pump" phase of this scam.

And, yes, Bern. This had to be about the King of all scams in the 19th century. And, more than 100 years later, it was hot as a pistol again in the 1990s, and still stirring today.

Gene Kranik said...

I like coming here because the comments are what I would call practicing logic. The logic of the comments is such that it could be put into useful practice. This is lively. Keep it up.

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Margaret said...

I appreciate your exposing these scams. Too many people believe what they read in print, be it email or otherwise, and fail to do the research. That is why your service is so valuable. Thank you.

Jack Payne said...

I appreciate the Pro Blog Review.

And, yes, Margaret, people, in general, fail to do the necessary research to protect themselves. I try to fill that gap here.

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Anonymous said...

I still say that the Master of the Con is Fred Brito. He is a genius at getting high profile jobs, and never stealing a cent. Now that is some con job. Most cons go after the cash.

I recently saw him on Dateline and Dr. Phil. He is amazing.

Check him out. I did. And love every minute of his story.

He is one amazing CON!

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