Senior Citizens Tricked Into Buying Low-Risk Investments on Credit
At the Federal Trade Commission’s request, a federal judge has halted a telemarketing operation that allegedly conned senior citizens into buying precious metals on credit without clearly disclosing significant costs and risks, including the likelihood that consumers would have to pay more money or lose their investment. According to papers filed with the court, the scheme has taken in more than $37 million from consumers. The court has ordered a stop to the defendants’ allegedly deceptive practices pending a trial, and has frozen their assets and appointed a receiver to oversee the business.
According to the FTC’s complaint, the defendants promised consumers they could earn large profits quickly by investing in precious metals such as silver, gold, platinum, and palladium. Using high-pressure sales tactics, telemarketers led consumers to believe that they were offering low-risk investments that would double or triple in value in a short time. The company’s sales pitches and marketing materials claimed precious metals are low-risk investments because they are tangible, physical assets – bars, bullion and coins – but in fact the defendants did not use consumers’ money to buy precious metals. Instead, after taking fees and commissions that were not clearly disclosed to consumers, they deposited consumers’ money in the account of a clearinghouse that recorded the investments but did not buy or handle metals.
The FTC further alleged that consumers were often not told their investments were leveraged, that is, that they were agreeing to take out a loan and pay interest for up to 80 percent of the purchase price of the metal investment. In addition, consumers did not know that their leveraged investments were subject to equity calls that might require them to pay more money to prevent their investments from being liquidated. Because consumers’ leveraged investments were opened with low equity levels and incurred hefty interest charges, the investments were vulnerable to equity calls even if prices remained constant.
The FTC complaint charged Harry R. Tanner, Jr., and his wife, Andrea Tanner, and their company, American Precious Metals LLC, with violating the FTC Act and the FTC’s Telemarketing Sales Rule.
In a companion case, the Commodity Futures Trading Commission charged American Precious Metals, Harry Tanner, and Sammy Goldman with violating federal law by using the mails and other means of interstate commerce as part of a scheme to defraud consumers in the sale of precious metals contracts. The FTC and CFTC are part of the South Florida Securities and Investment Fraud Initiative, a multi-agency task force spearheaded by the U.S. Attorney’s Office for the Southern District of Florida to combat white collar fraud.
The Commission vote authorizing the staff to file the complaint was 5-0. The complaint was filed in the U.S. District Court for the Southern District of Florida.
NOTE: The Commission files a complaint when it has “reason to believe” that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. The complaint is not a finding or ruling that the defendant has actually violated the law. The case will be decided by the court.
The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 2,000 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s website provides free information on a variety of consumer topics. “Like” the FTC on Facebook and “follow” us on Twitter.
(FTC File No. 1023212)
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