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Many boiler rooms go to great lengths to build up a believable facade of respectability. They choose respectable names such as Bayer Investments, Legacy International, and Total Asset Management, which all sound legitimate. They might have a UK telephone number, but this can just be a forwarding service to anywhere in the world.
The people used by boiler rooms are highly trained to con victims out of their money. They have posh British accents or American accents, and many of them adopt what may seem to be Biblical names so that people will trust them from the beginning. Mostly, the names are false. Boiler rooms hire young people by advertising in newspapers to get them to come to Spain—I shall use Spain as an example because it seems to be very popular. The advertisement invites young people to come and work in Spain as a financial adviser, or young people may be recruited at employment fairs and lured into a job. In some cases their passports are taken from them when they arrive in the country, and they are threatened that they had better not tell anyone what they are doing. It is frightening.
My advice to newspapers is to take more responsibility for the advertisements that they accept. I also have advice for parents. Boiler room conmen seem to be picking on gap year students—young people between school and university, or those who have just left university—or young people who happen to be out in Spain already, who see people coming to bars flashing lots of money and driving fancy cars. That seems attractive to them.
I advise parents to pay more attention to what their youngsters get up to in their gap year. They should investigate far more thoroughly what their jobs are all about, because if a young person is offered a job as a financial adviser working abroad, the chances are that it is one of these scams.
The youngsters have to learn a script. They are drilled and trained thoroughly so that they sound believable. They do their homework about their would-be victims. They look up share registers to find out whether people regularly invest in shares, and the sort of shares that they invest in. They go so far as looking through yachting magazines or car magazines such as Auto Trader to find out who is selling those items. They know that if those people sell their car or yacht, they will shortly have a few thousand pounds in their pocket, and their telephone number may appear in the magazine, so the conman has all the information necessary to try to part them from their cash.
Why have I called for this debate? Members and their constituents might wonder, given that the crime is not new. I have done so because only very recently has the massive scale of the crime become apparent in the UK. I first heard about it when I was contacted by BBC Radio 4’s “You and Yours” programme for a comment. Reporter Shari Vahl has conducted an investigation into boiler room fraud for the past two years; I pay tribute to her determination and doggedness and to “You and Yours” for raising this issue. Every time it is mentioned on the radio or television, the police are inundated with mail, phone calls and e-mails from people who have finally concluded that they have been conned. The more we get the issue on the TV or in newspapers, the more people will come forward with their own evidence.
Even the police have been shocked by the scale of the crime. One officer on the case has admitted that the problem is much bigger than he had realised. I am sure that the majority of hon. Members have constituents who have been affected. I suspect that even today some of our constituents will have written cheques to send the con men; some may not yet have sent the cheques. One clear piece of advice would be that they should not send that cheque, no matter what harassment they are getting from the con men, but seek independent financial advice today—otherwise they will be the next victims. The con men may well lie low for a little bit while there is more publicity about this issue, but then they will come back again; as one boiler room closes down, another opens. The con men are persistent.
I want the Financial Services Authority to do more and the police to be given more resources, more training and better guidance. I have nothing but praise for the City of London police. I was with them today, and they are clearly focusing on and specialising in this scam. Other police forces, however, will not be up to speed with what is going on; I shall give examples of that later.
Boiler room fraud has been called a billion-pound business by an insider. As I said, that figure is hard for the police to verify, but they admit that they are merely scratching the surface of the problem. The police have given the figure of £500 million, which reflects the boiler room fraud that they know of. A senior fraud squad officer said:
“I’ve never dealt with a crime where there are such consistently high losses and so many victims. There’s a tidal wave of grief coming from these people.”
Here are some examples that give an idea of the scale of the problem. In the past two months, the FBI in Florida raided a $50 million boiler room based in Sao Paolo, Brazil. Twenty people were arrested. There are known to be thousands of victims of that one boiler room, and all are thought to be British. In another recent case, a British fraudster was arrested in the United States of America. This man, Mr. Gunter, and his daughter, had an estimated 15,000 British victims. He stole about £16 million.
Whom do boiler rooms target? Boiler room fraud is causing untold harm to ordinary people trying hard to save money for their retirement or to put their children through university. People even borrow money to invest in some of these scams—and when they think that they are on to a good thing, they tell their friends about it, and their friends invest as well. The issue is not about reckless city traders gambling on the stock markets with other people’s money; the people involved are victims of professional, clever crooks.
It is important to emphasise that this is not a crime that happens to stupid, greedy people with more money than sense. I know that a lot of us find it rather hard to believe that someone can get cold-called and, in a matter of months, start to part with thousands of pounds. We think, “I wouldn’t do that, so why would anyone else?” We have not had the telephone call from those professional con men, so, fortunately, the vast majority do not know what it is like to be on the receiving end.
One of the biggest misconceptions about boiler room fraud, which needs to be dispelled, is that its victims are stupid and greedy. The criminals play sophisticated
tricks to steal people’s money. Even when money has been stolen—when people find that the shares that they bought were worthless or when they do not do as well as expected—the fraudsters come back. People think, “I can make up my losses.” It is just like the old casino stuff. People will part with even more money to try to get their money back.
Victims who have recently come forward to tell their stories are intelligent, educated people. They include university professors, architects and lawyers. I even know of one case where an independent financial adviser lost £20,000. Part of the problem is that people are embarrassed, and that is why we have not scratched the surface of the problem. Not everyone tells their wife or husband what they are doing with the money. I know of one case where the victim kept it secret and lied about how much money they were investing. Victims are embarrassed when they find out that they have lost all the money. In some cases, they will not even go to the police and report the crime. I say to anyone who has been a victim of boiler room fraud, “Please go to the police and ensure that they know about it.” It should not be kept secret.
The criminals tend to pick on elderly people, although they do not do so exclusively. Sons, daughters and relatives should advise parents and grandparents about the scam. They should tell them what is going on and ensure that they have not been taking any cold calls whatsoever, let alone starting to invest their money with so-called brokers who are only out to steal it. It goes the other way, too. Parents should ensure that their sons, daughters and other younger relatives know about these scams. Everybody should tell everybody else about the scams, or else they could find that their relatives are soon victims.
Mark Pritchard (The Wrekin) (Con): My hon. Friend is making an excellent speech on a serious issue. Does he agree that as many of these crimes are perpetrated by those involved in organised crime and are often transborder crimes, they might be an issue for the Serious Organised Crime Agency?
Mr. Evans: Organised crime is certainly involved. There are no two ways about it. The police have broken up boiler rooms before, but others have sprung up. The real problem is that the pickings are so rich that the criminals are preying on people’s entire life savings. They are callous, cruel people without an ounce of compassion. Their only intention is to try to steal people’s money. They drive around in flash cars, such as Ferraris, and flash their money all over the place, but it is not their money. They have stolen it. Later, I shall say a little more about what I believe that all sorts of organisations, including SOCA, ought to be doing.
I mentioned elderly victims and the fact that the criminals are trying to steal their life savings. That is what it is all about. Let me give some examples. The first, sadly, led to a suicide, as the consequences of this crime can be devastating. I spoke this week to the widow of a man who committed suicide in October last year as a direct result of his losses.
The story of how the victim was conned is fairly typical. He had made some investments previously so his name appeared in several places as a share owner. The crooks obtained his details from a publicly available
register of shareholders, which is a common tactic. The fake brokers were in touch with him for some time before they got him to part with his cash. They build confidence by saying, “Something may be happening. We’ve heard that there may be an investment opportunity but we don’t want you to send any money yet. Are you interested if it comes off?” They learn dialogues to build up people’s confidence and persuade them that they will get a share of something big.
After the fraudsters build up people’s confidence, they go in for the kill. In the case I am describing, at first it was only a few thousand pounds, then a few thousand more and so on. The largest cheque the victim signed was for £38,000. It was two years before he admitted to his wife—in October 2007—the scale of his losses. The crooks had stolen more than £200,000 from him. The shame of having been conned and losing so much money, which was meant to support his wife and his young daughter, caused him to commit suicide.
Astonishingly, within weeks of his death his wife was contacted by another group of fraudsters—perhaps related to the first group, or even the same people. They told her that her husband had bought as an investment 36 bottles of Chateau Lafite worth almost £13,000. They threatened the widow and her young daughter with losing her home if she did not pay the money. How callous. How could they stoop so low? The fraudsters are clever. They sent flowers to one of their victims when he was in hospital. They wished him well, but they were still trying to sell him shares while he was in hospital.
This morning I visited Operation Archway, which is run by the City of London police to combat boiler room fraud. The police showed me piles of mail, much of it handwritten by elderly people—their evidence on lavender writing paper. I saw a letter from a man aged 83 who had lost £95,000. I saw a letter from a couple in their 80s who had lost £50,000. I was shown their e-mail inbox, which contained almost 1,600 e-mails sent over recent months.
I have been contacted directly by a lady whose parents lost more than £100,000. Her father contacted the largest firm of stockbrokers in Liverpool for advice because he had suspicions about the company. Not one person mentioned boiler room fraud. Only after several phone calls did a junior member of staff suggest that he should contact the police.
The House can imagine the outcry if £500 million a year had been stolen from people’s houses in burglaries. I pay tribute to the BBC programme “Working Lunch”, which today featured Mr. and Mrs. Fudge from Bournemouth who had £20,000 stolen from them. Mrs. Fudge said:
“It’s like having your house broken into. They’ve stolen everything we’ve ever worked for.”
The Financial Services Authority has made a poor response. The authority is supposed to be the UK regulator responsible for protecting consumers, including shareholders. I put a question to the Treasury earlier this month and received the following answer:
“The Treasury does not undertake consumer protection activity or raise awareness of boiler room frauds directly. The Financial Services Authority has a specific statutory objective to protect consumers, which includes advising and protecting investors against boiler room frauds.”—[ Official Report, 12 May 2008; Vol. 475, c. 1427W.]
The FSA has gone on record as saying:
“Boiler rooms are not authorised by the FSA, and are based abroad outside our reach, so victims are not protected by the financial services compensation and complaints schemes. Our strongest tool is to make people aware of the scam”.
I would argue that it is utterly failing in its remit to protect consumers and to help them to get a fair deal, and failing in the objective that it has set itself:
“to make people aware of the scam”.
The FSA says that it has been proactive, so what has it done? First, it has a page on its website about boiler room fraud. However, when I went online I found it incredibly difficult to get to that page. There is nothing on the front page of the website to warn people about boiler room fraud; one has to know what one is looking for. Several different pages refer to boiler rooms and investment scams, but they do not all link to each other. Unbelievably, there is no reference at all to Operation Archway on the boiler room fraud page.
Secondly, the FSA claims that most existing shareholders should have received warnings from their legitimate brokers. In fact, it has given brokers a form of words to use and asked them to fund their own publicity. As a result, many people have never seen a warning. That is astonishing complacency from the FSA and from legitimate brokers who risk having their reputations tarnished by the criminals who imitate them. I received from my hon. Friend the Member for Croydon, South (Richard Ottaway) a letter from one of his constituents who had heard me on the radio and written to Mr. Phelan of the FSA, who was on the same programme. The constituent—I will not name him—says:
“In the programme you say that Registrars have been sending out FSA advertisements about boiler rooms for the last two years and that the vast majority of investors should know about boiler room fraud as a result. I fear you may be out of touch with reality.”
“It is precisely because I had never ever received any boiler room fraud warning...that I wrote to you on 27 March 2008 with some suggestions. One of those suggestions was ‘Have you enclosed information leaflets with, for example, Tax Returns or pension advices, or contacted registrars so that something can be sent with company Annual Reports?’. I was quite surprised to hear you claim this had been going on for 2 years.”
He therefore asked some of his friends, most of whom—apart from one, who is involved in the finance industry—had never seen anything about boiler room frauds and knew nothing about them. He went on:
“There are three major Registrars, Capita, Computershare and Equiniti. Capita tell me they do not send out any FSA advertisement or warning about boiler rooms. They do have an advice line though if people telephone about boiler rooms. Computershare will only enclose a warning if requested to do so by the company concerned. Computershare look after about 1000 UK companies. I have asked how many of those 1000 agree to the boiler room warning being included. The compliance department at Equiniti are still due to contact me.”
I think that speaks for itself. The FSA believes that these warnings are going out, but they are not. People are totally ignorant about what boiler room fraud is, and there is astonishing complacency on the part of the FSA.
So what can we do? A publicity campaign is vital. There is a strong case for a national awareness-raising campaign, which should be led by the FSA—that is its job, and it should be getting on and doing it. All
legitimate brokers, banks and financial institutions should be giving out leaflets to customers, shareholders, and people who bank with them. Credit card companies should also be involved. We could even consider asking telephone companies and other companies that regularly send out statements to warn their customers about boiler room fraud. Many victims and potential victims do not use the internet, so just putting something up on the internet is not good enough. As I said, the FSA is not doing enough in that regard.
The City of London police are trying hard to raise awareness in innovative ways. For example, they are reaching out to older victims by putting articles in Saga magazine; publicising the scam through the Caravan Club and its members; and producing a DVD to show on holiday cruise ships. That is clever. They are thinking outside the box to try to reach as many people as they can.
The FSA should take the lead on awareness-raising. It should work closely with trading standards and the UK Consumer Protection Agency to conduct a national campaign. It should spearhead an advertising campaign to raise people’s awareness of boiler room fraud. The FSA also needs to work more closely with the police. It is not good enough that it does not even have a link to Operation Archway on its website. It should correct that immediately.
The national police need more resources. I welcome the creation of the National Fraud Strategic Authority, which will co-ordinate national counter-fraud efforts. I also welcome the Government’s announcement of the creation of a national fraud reporting centre.
Will the Solicitor-General assure me that those new initiatives will mean more officers and resources to tackle boiler room fraud, not just a rebranding of existing assets? What recent talks has the Solicitor-General held with her counterparts in the Home Office, officers in the Serious Fraud Office and in the Serious Organised Crime Agency, which my hon. Friend the Member for The Wrekin (Mark Pritchard) mentioned, and the City of London police about a co-ordinated approach to tackling boiler room fraud?
Spain is a favourite destination for the boiler room fraudsters and it took the City of London police some time to get any co-operation from the Spanish authorities. They are getting it, but it is belated. They say that United States of America is fantastic and co-operates brilliantly. One would think that an EU country might be a little more proactive in trying to help protect the citizens of the so-called union. It was suggested to me today that the lack of co-operation was because the victims were British, not Spanish, so perhaps the Spanish authorities did not perceive the fraud as important to them whereas, of course, if such fraud takes off here, it will happen everywhere. Police authorities throughout the EU should consider a co-ordinated approach to the matter.
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