The Grift of Gab

Stephen Tashman made a small fortune launching Telecard Dispensing Corporation. If only his investors had been so lucky.

Eight years ago he endured a ruptured disc and numerous blood clots in his lungs and legs. His ailments left him in constant pain and with little energy. A former CPA, Joiner sought a business he could operate with minimal effort, something with which his son could help out between high-school classes and baseball practice. TDC's machines and cards seemed like the ticket. Although Joiner called strictly out of curiosity, the company's spiel sounded so good he eventually plunked down more than $15,000 he'd pooled together through credit cards and the family's savings. Over the course of two nightmarish years, Joiner and his family managed to recoup only $6000 from their initial investment -- a $9000 loss that doesn't include the phone cards Joiner purchased and never sold.

"It sounded so good," recalls Joiner. "High return, low risk. In hindsight, you wonder."

Former TDC staffers describe how customers like Joiner were funneled through a five-gear sales engine that included fronters, references, closers, loaders, and locators. During trial the FTC plays an audiocassette of an undercover agent speaking with a fronter. The tape and testimonies of former customers reveal TDC's initial pitch.

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Potential investors were first patched to a fronter, who'd immediately qualify them by asking more than once if they could "comfortably handle" the investment. If callers indicated they could, fronters began to talk numbers. Investors were told that, with a $10,980 investment -- a minimum purchase of two machines -- and a mere three to five hours a week, they could expect a return of approximately $20,000 or more within the first year.

Do you like those figures? The fronter's pitch weighed heavy with "yes" questions, a telemarketing tool used to reinforce the best possible outcome of the sale in customers' minds. Investors like Joiner say that fronters also promised that the company would find locations for machines with foot traffic of at least 500 people a day. Fronters hailed the professed returns on initial investments as "very realistic." Territories were lauded as exclusive, and TDC pledged not to sell to any other customer within a 50,000-people radius -- in some areas, the size of a county.

Fronters also informed customers that they'd receive informational packets containing financial and disclosure documents. The packets should have outlined the earnings achieved by existing investors as well as the identities and legal histories of the company's officers. The FTC and former customers say the packets contained neither.

TDC's alleged scam began with its fronters. The FTC and ex-customers claim that TDC's fronters overhyped potential profits by offering callers a list of references, existing TDC investors who supposedly prospered from their purchases of machines and phone cards. "They all said essentially the same thing," says Joiner. "That the company helped them locate machines. Each said they had no difficulties. One guy [said that had] had 28 machines, that he'd been doing so well, he'd been buying more."

Former employees say that what TDC neglected to tell its customers was that the company paid its references anywhere between $15 to $30 per call, with some references pulling in as much as $2000 to $3000 a week for the glowing testimonies they gave regarding their investments. Ex-employees also say that one often-used reference person was actually a former fronter for TDC and that, while she did indeed own two machines, the dispensers were never set up.

Once customers decided to invest, closers stepped in to seal deals. They asked customers to send TDC their area's phone book, which closers would later pass on to locators who would place the machines in nearby venues. Customers were told to tuck the payments for their investments within their phone books and that an overnight delivery service would pick them up.

Before customers received their machines, a final sales shove arrived in the form of a loader. Loaders called customers poised to receive their machines with extraordinary deals they claimed came from last-minute cancellations by other customers. Breaks on prices were offered if new investors agreed to take on more than their initial two-machine purchase. Because loaders promised also to sell any future machine at the "new" and lower price, most customers took the bait.

"I was going to buy only two. But I looked at it from a worst case. If they did half of what they said it would do, it would be a good investment," says Joiner. After listening to the loaders' pitch about savings and volume, Joiner picked up an extra machine.

With his new business venture now in hand, Joiner expected a smooth setup starting with machine placements and subsequent phone-card sales and profits. Instead, he says, he entered a months-long battle comprising poor service and lame excuses. Joiner claims that locators told him they couldn't find a single venue in his hometown of Colorado Springs, a city with a population exceeding 300,000. After repeated calls from Joiner, a locator finally proposed a food store 12 miles away from Joiner's home.

When Joiner and his wife arrived, they were met with yet another unpleasant surprise.

"I thought all we had to do was, 'Hi, where do you want us to set up?' [But] he had no interest in having a telephone-card machine," says Joiner, who was unaware that locators often called store owners and hustled initial interviews for TDC customers without actually securing placement for their machines. Joiner and other investors often scrambled around town of their own accord simply to find locations that TDC had already promised to procure.

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