Hi E,
A MUST READ. Here's a great part from this story I posted.
Be skeptical of extraordinary claims, such as
"secret formulas" for
extracting otherwise unrecoverable precious
metals from dirt.
Dirt-Pile Scams: Mining for Gold --
Among the endless number of telephone investment frauds going on
around the country, one variety is called the "dirt-pile scam." With this, a
caller offers you the opportunity to invest in a gold mining operation.
What you would buy is a quantity of unprocessed dirt from the mine,
"guaranteed" to contain enough gold to more than cover your
investment. In reality, the mine contains little if any gold, and your
investment is nearly worthless.
Unfortunately, consumers from all walks of life have invested in these
dirt-pile scams and were cheated out of millions of dollars. This fact
sheet tells you how to recognize the scam, how to protect yourself, and
what to do if you become a victim.
How Dirt-Pile Scams Work
Although there are many versions of this scheme, most dirt-pile scams
have similar features. Typically, a promoter will either lease or buy a
mining claim (a tract of land that legally can be mined) in one state and
then set up "boiler room" sales operations in several other states.
The mining claim, company headquarters, and boiler rooms are
purposely located in different states to make it more difficult for
law-enforcement officials to locate and investigate the company's
activities.
Usually, a boiler room is a rented space filled with desks and telephones,
where experienced salespeople call hundreds of potential investors like
you. These callers use high pressure tactics to sell you unprocessed dirt,
also called "ore." Preying on most people's limited knowledge of "ore,"
they make false and exaggerated claims about the precious-metal
content.
A central feature of the dirt-pile scam is that you will be asked to invest
several thousand dollars upfront, but will not be entitled to a return on
your investment for at least one to three years. This gives the promoters
time to get money from many investors, before anyone suspects foul
play.
There are a number of twists to this scam. In one variation, you buy the
ore from the mining claim for one fee, then, for a second fee, you buy
the services of an "independent" mining contractor who will process the
ore and extract the precious metal. You will not be told, of course, that
the contractor is also part of the scam.
In another variation, you pay one fee for both mining and refining the
ore. Some investment schemes allow you to make monthly installment
payments to the mining company. The sales pitch may change slightly,
but the basic message is the same--pay now and receive a substantial
return later.
If you express interest in investing, the salesperson will follow up the
phone call with a prospectus or a company publication. It often is a
slick-looking brochure, which promoters hope will increase the
credibility of their offering. The brochure may contain photographs of
the mining site with mining equipment on it, a map of the area, pictures
and resumes of company officials, and references for you to call.
The brochure also may include a report from an assayist, one who
analyzes a sample of dirt from the mining claim to determine the
precious-metal content. Often the report will be from either a fraudulent
assayist who inflates the amount of precious metal found in the ore, or
from a legitimate assayist who is given a "salted" sample, one that
contains added amounts of the precious metal. The packet may include a
contract for you to sign and return, locking you into the investment.
If the caller senses any reluctance, you may be offered a "risk-free"
investment to clinch the deal. Your investment will be "guaranteed" to
contain a minimum quantity of precious metal per ton of ore, and, if
your claim does not produce the specified amount of precious metal, the
company will refine additional ore to satisfy the terms of the guarantee.
Some companies or salespersons even will promise to make up the
difference out of their own pocket.
Once you have invested money in a dirt-pile scam, you may receive
periodic progress reports or "lull letters." Their purpose is to keep you
up-to-date on the fictitious progress of the mining operation and to keep
you content with your investment.
Because the mines often are not located in the state where you live, it is
unlikely that you will visit the mine. If you do visit, you may recognize
the worthless value of your investment and demand a refund. Promoters
may willingly refund your money, possibly with newly invested money,
in order to avoid complaints to law-enforcement officials. In some cases,
promoters actually haul equipment out to the mining site and hire
temporary employees to make it look as if work is in progress.
Finally, when it is time for a return on your investment, if the promoters
are still around, they will conveniently blame faulty equipment, bad
weather, a labor shortage, or even the Government for any delay. They
will assure you that they will resolve all problems quickly. Since you
have already put considerable time and money into this investment, you
may be satisfied to wait for a while. In the meantime, the promoters try
to get more money from new customers or to get safely out of town.
No matter how these scams unfold, they always end the same way: You
are left with nothing--no capital and no profit.
How To Protect Yourself
The typical dirt-pile scam involves a highly sophisticated interstate
network of swindlers. By the time you suspect the investment may be
phony, it could be difficult to locate the promoter, the project manager,
the salespeople, or anyone else connected with the company. Because
the crux of the scam requires you to wait at least a year to realize a
return on your investment, promoters are often long gone by the time
law-enforcement officials are alerted to the scheme and can begin an
investigation.
The best protection you have is not to invest in a dirt-pile scam in the
first place. The following suggestions may help you avoid losing money
in a dirt-pile scam:
Be wary of unsolicited investment opportunities.
If this is such a great investment, why isn't the company getting
traditional financing from a bank instead of from you, a total stranger?
Be suspicious of guaranteed, high-return, risk-free investments in
precious metals.
The market for gold and other precious metals is unstable; be wary of
any exaggerated claims. Few legitimate companies can afford to
substantially undercut the market price for precious metals.
Be skeptical of extraordinary claims, such as "secret formulas" for
extracting otherwise unrecoverable precious metals from dirt.
Ask yourself, why am I hearing about this for the first time over the
telephone?
Don't let telephone salespeople convince you to invest on the spot.
A person selling a legitimate investment opportunity will allow you to
take some time to look over the company literature and to check out the
credibility of the claims with someone whose financial advice you
respect.
Don't be taken in by slick brochures and reports by so-called experts.
The claims made in the brochure are only as good as the company that
makes them.
Don't be impressed by statements that the mining claim is on land
managed by the Bureau of Land Management or the Forest Service.
It is relatively simple to file a claim on federally managed land, but that
does not mean the land is worth mining.
Check out all the claims made in the sales call and in the written
materials.
Call the state Bureau of Mines in the state where the mine is located to
get general information about the mineral content in the area to be
mined. Get an independent, credentialed geologist to inspect the written
materials. Call the state securities office in your state or in the state
where the mine is located. They can tell you if the promoter has violated
state securities laws in the past.
When in doubt, say no.
If you are not completely confident that you are investing in a legitimate
offer, do not take a chance. Once a swindler has your money, it is very
hard to recover it.
What To Do If You Are A Victim Of A Dirt-Pile Scam
If you thought you were investing in a legitimate mining operation and it
turned out to be a dirt-pile scam, speak up. First, try to contact the
mining company and attempt to get your money back. If you are not
successful, report your problem to the state securities agency, state
mining agency, Better Business Bureau, and Attorney General's office in
your state and in the state where the mine is located. If law enforcement
agencies are already looking into the company, your information will
help in an investigation. If they do not know about the problem, your
information may alert them to the need for one.
You also may contact the Federal Trade Commission. Write:
Correspondence Branch, Federal Trade Commission, Washington, D.C.
20580. Although the FTC generally does not intervene in individual
disputes, the information you provide may indicate a pattern of possible
law violations requiring action by the Commission.
For More Information
Additional information about telephone investment scams and how to
protect yourself is found in the FTC fact sheet Telephone Investment
Fraud. For a free copy, contact: Public Reference, Federal Trade
Commission, Washington, DC 20580; 202-326-2222. You also may
request Best Sellers, which lists all of the FTC's consumer and business
publications.
FTC CONSUMER & SMALL BUSINESS ADVISORY - PUBLIC
DOCUMENT
GOLDIGER. |
