Senior Citizens Allegedly Tricked Into Buying 'Low-Risk' Investments on Credit
The Federal Trade Commission took action to halt a telemarketing operation that allegedly took millions of dollars from senior citizens by conning them into buying precious metals on credit without clearly disclosing significant costs and risks, including the likelihood that consumers would subsequently have to pay more money or lose their investment.
According to the FTC's papers filed with the court, the operation has taken in almost $9 million from consumers in the past two years. The court ordered a stop to the defendants' allegedly deceptive practices pending a hearing, froze their assets, and appointed a receiver to oversee the business.
As part of the FTC's ongoing efforts to stop scammers who target the elderly, the FTC charged that Premier Precious Metals Inc., Rushmore Consulting Group Inc., PPM Credit Inc., and the companies' principal and owner, Anthony J. Columbo, promised consumers they could earn large profits quickly and safely by investing in precious metals. Allegedly using high-pressure sales tactics, telemarketers told consumers they were offering lucrative investments that were certain to earn consumers significant profits, with very little risk of loss. However, the leveraged investments were typically not profitable and carried a high risk of loss.
As alleged in the FTC complaint, the defendants did not clearly disclose the total costs of the investments, including the hefty fees, commissions and interest charges consumers had to pay to buy and maintain the investments. Consumers often were not told their investments were leveraged; that is, that they were agreeing to take out a loan and pay interest for up to 75 percent of the purchase price of the investment.
In addition, the defendants allegedly did not tell consumers that their leveraged investments were subject to equity calls that might require them to pay more money to prevent their investments from being liquidated. When a consumer's equity decreased to a certain level, an equity call was issued, which required the consumer to either invest more money or allow the investment to be liquidated at a loss. In some investments, the FTC alleged, consumers were not notified that their accounts were liquidated.
Most of the defendants' customers lost money, according to the FTC. Consumers' equity in their investments was drained by the fees and commissions at the start of their transactions, and by the constant accumulation of service fees and interest charges on the leveraged portion of their accounts.
The FTC complaint charged the defendants with violating the FTC Act and the FTC's Telemarketing Sales Rule. Columbo and Premier Precious Metals previously telemarketed precious metals investments for a similar operation, American Precious Metals LLC, which in May 2011 the FTC charged with deceiving consumers.
The Commission vote authorizing the staff to file the complaint was 4-0. The complaint was filed in the U.S. District Court for the Southern District of Florida.
The FTC acknowledges the assistance of the Better Business Bureau of Southeast Florida and the Caribbean, and the federal, state, and local law enforcement organizations that provided valuable investigative assistance in bringing this action: the Commodity Futures Trading Commission, the Florida Department of Agriculture and Consumer Affairs, the State of Florida Office of the Attorney General and Office of Financial Regulation, and the Broward County Sheriff's Office.
For consumers considering investing in precious metals, the FTC offers advice, including Investing in Gold? What's the Rush?, Investing in Bullion and Bullion Coins and Investing in Collectible Coins.
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. 1223009)
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