Telephone and mail solicitors, trading on "white guilt" and on government pressure to advertise in minority-oriented publications, are inducing thousands of businessmen to buy ads in phony publications, according to investigators for the Postal Services and the Los Angeles district attorney.
Nationally, the fraudulent sales amount to $25 million a year, postal inspectors say, and the schemes are proliferating as "salesmen," seeing how easy it is to make money, quit and set up their own operations.
The method is quite simple. Operating out of a storefront "boiler room," the solicitor, who may be an unemployed white actor skilled at imitating black or Mexican-American accents, places telephone calls to businesses across the nation.
Usually, according to Assistant Postal Inspector Peter Wade and postal investigator Wayne Collier, the telephone solicitor uses a voice that the white businessman regards as "black." The caller, using the name of a fictitious organization, often with "black" or "equal oppurtunity" in the title, asks the businessman to place an ad in a directory or other publication.
Whether or not the businessman agrees, the call is followed immediately by an invoice and sometimes by another invoice labeled "reminder notice." With surprising frequency, the businesses pay up.
Collier, considered by law enforcement officials here to be the most knowledgeable investigator of postal fraud, said the schemes take advantage of a section of the Equal Employment Opportunity Act of 1972 that encourages advertising in publication aimed at minority audiences.
As one of the actor-solicitors put it: "We're cashing in on white guilt, which is very big now in the corporate world."
"Over a two-year period we've received many complaints from business people who feel they've been strong-armed into taking space in a directory," said Los Angeles County Deputy District Attorney Gil Garcetti, a consumer fraud specialist. "Usually, these directories are never published."
These phony operations are hurting legitimate civil rights fund-raising and reputable telephone salespersons for established publications. Authorities urge businessmen' who are solicited by an unfamiliar publication to ask for a copy and for details of its circulation before buying any ads.
Inspector Wade said a dozen boiler room operators, using more than 70 organizational cover names, are under investigation in Southern California. He noted that solicitors here can begin their calls to Eastern points as early as 5 a.m. West Coast time and thus take advantage of the lower telephone rates prevailing at that hour.
Last year, postal authorities obtained the conviction on mail fraud charges of Michael Lasky, who they believed to be the largest single operator. Lasky was sentenced to five years in prison and is free pending appeal.
Lasky's firm, Space Advertising, in many cases didn't even bother to make phone calls but simply sent out hundreds of invoices. It operated under dozens of names, of which some of the most frequently used were "The Negro Newspaper Group," "Minority Viewpoint" and "El Mexicano."
Wade said similar cover names are now used by other solicitors.
An employee of one of these boiler rooms, a young white actor who has had bit roles in a few minor movies, agreed to talk about his experiences on condition that his name not be used.
This actor, who in the course of a 20-minute interview employed accents that he said were black, Mexican and Jewish, said his day usually began at 6 a.m. and lasted until 11 a.m. Operating out of a building near his home in Manhattan Beach and using a list culled from the telephone directory's Yellow Pages, he urged businessmen to buy ads in an "equal employment" directory. The ads cost from $150 to $800 for a full page, and the salespeople, most of them white males, received 20 per cent of the revenue.
If the businessman seemed interested but resisted, he was told he could buy a smaller ad at a special reduced price. If he still resisted, the caller remarked that his organization 'kept track of its enemies as well as its friends."
Whether or not the caller agreed to buy the ad, was sent an invoice unless he had threathened to call the police or the postal authorities, or had requested an advance copy of the directory, the actor said.
"We actually printed a directory but I think it was limited to a couple of hundred copies," this actor said. "As far as I know, it was never distributed."
The actor said he averaged between $800 and $1,000 a week and still had time to try out for movie roles.
But he also said that soliciting became "hard work" because both the sales pitch and the responses grew monotonous.
"It helped me get my accents down but now I'm bored by it," he said.
While the boiler rooms are typically located in the Redondo Beach or Manhattan Beach areas south of Los Angeles, to get their mail the solicitation schemes often used more prestigious addresses in Beverly Hills or Hollywood, where some of them also maintained answering services.
Wade said that because of increased suspicion by businessmen about invoices mailed from California, some of the solicitation schemes are now using mail drops in such places as Boston and Minneapolis. Checks collected in these cities are shipped to California.
Investigations are currently under way into various phases of the minority solicitation fraud by the postal authorities, the U.S. attorney, the state attorney general and the Los Angeles district attorney. All of these officials were reluctant to name any particular boiler room operator until an indictment is issued.
Because of the portable nature of boiler rooms, those who run them can quickly close down and move.
Also, mail fraud convictions are difficult to obtain, said an experienced trial lawyer here, because many businessmen are reluctant to file a complaint.
"They don't want to advertise that they've been burned," the attorney said.
Among those who were defrauded in the Space Advertising case, according to court records, were the Providence Hospital of Washington, D.C., Mitsubishi Aircraft of San Antonlo and Key Biscayne Bank in Florida.