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Articles on Use of Gemstones in Fraudulent Investment Schemes


Handles Bull Not Oxen

Sweet Song Corporation of L.A. California dba Pacific Wellington Associates marketed gemstones as investments to consumers and had registered a fictitious business name, Windsor & White Trading Company, under which it also did business. Ron Hudson, Inc., and Tsavorite Sword Corporation also did business as PWA.

They operated as a joint venture and shared a trade name, a business location, telephone lines, promotional materials, sales scripts and employees. Sweet Song and Tsavorite have the same owner, incorporator, director, and share at least one officer.

Hari Jiwan Singh Khalsa ("Hari Khalsa"), a/k/a Stephen Jon Oxenhandler a/k/a Bob Thomas, was the owner incorporator, director and an officer of Sweet Song and Tsavorite. Siri Ram Singh Khalsa ("Siri Khalsa"), a/k/a William Taylor a/k/a Phillip Anderson, was a salesperson for W&W and PWA.

According to the FTC, since at least 1993 and continuing thereafter to 1998, they maintained a substantial course of trade in the fraudulent offer and sale of gemstones as investments to consumers.


Gem Scam Operations in Thailand Continue to Victimize Tourists

02/08 - Thailand - Manoeuvring clients into paying top dollar for ordinary items is a common practice in the business world, but when there is outright trickery involved, as experienced by a large number of foreign visitors to Bangkok who have fallen victim to its infamous "gem scam", the question of legality comes into play.

Typically, the scam begins when tourists are spotted in front of popular tourist destinations, for example, at the entrance of the Grand Palace, Wat Pho, Wat Arun or the Erawan shrine. As they wander around, the tourists are approached by a friendly stranger who is an expert at initiating conversation.

From victims' accounts over the Internet, the stranger commonly opens with a casual, "Where do you come from?" This allows the scammer to learn a little about the tourist instantly. Sometimes the con artist gives "helpful" (though wrong) information such as, "The temple is closed today for a celebration."

Most tourists do not wish to appear rude, and many are eager at the chance to interact with locals. They tend to pay attention to the scammer, who may be male or female, and the conversation flows from there. Before long the stranger recommends to the usually novice traveller an alternative tourist destination, most likely a temple which is not marked on standard travel guides.

At this point, another stranger, usually better-dressed than the first, may appear on the scene, and eventually join in the conversation. He or she will recommend to the tourist a souvenir shop (almost always a jewelry store) worth visiting.

This shop will be described as a government-run export centre, often in the last day of a big discount promotion exclusively for tourists. After about 5 to 10 minutes of persuasive chit-chat, the stranger will then offer to call a tuk-tuk for the tourists to visit the alternate destination and then the jewelry shop, and even go to the extreme of bargaining the fare. The tuk-tuk driver in the end offers an extremely low fair, as of course he, along with the stranger(s) will get a commission on whatever jewelry the tourist may purchase.

At one famous tourist destination in the middle of Bangkok, novice tourists are approached by scammers seeking to make a quick buck.

Once the tourists are in the tuk-tuk, the driver may claim that he has given them a discounted fare because he will get a "petrol coupon" from the jewelry store for taking them to visit. Without a doubt, this is a clever way for the driver to gain some consideration from the tourists and guarantee their visit to the jewelry store.

Eventually the tourists arrive at the jewelry store, where they are greeted by professional but warm salespeople. Every manner of sales tactic is employed, but primarily they are enticed by the ridiculously attractive discounts. The offer is made to have the purchased items parcelled to their home address, "to avoid problems with customs or the risk of loss or damage during the trip," and of course, to prompt the sale.

Victims commonly report spending 100,000 to 200,000 baht on necklaces, rings and other accessories ornamented with precious stones. Payment is made at the store, and tourists are then made to sign a purchase contract that sets the terms and conditions for the transaction.

After the customers have made their purchases it normally takes days or weeks before they have the chance to have them valued by another jeweler. Then they realise they've paid far too much for too little quality, and that the friendly stranger(s), the tuk-tuk driver and the keen sales professionals they encountered were all working collectively to make some quick money.

Eventually they may take some small comfort in learning they are not alone when they read about the near-identical experiences of a host of other victims of the gem scam posted on the Internet, for example at http://www.2bangkok.com.

Scammers everywhere

One particularly lively account of the gem scam is provided by an expatriate living in Bangkok who recently contacted Perspective. The reader, a 51-year-old man who used to run a tour business in Bangkok, complains, "There are too many tourists getting cheated these days, and the authorities don't seem to care."

He says that many of his guests had complained of the constant scamming they faced during their visit. "I had a young couple tell me the Grand Palace was closed, and that it had been closed 3 years before on an earlier visit. They had visited Thailand twice and did not get to see the Emerald Buddha!"

According to the voluntary source, scammers are working around the entry to the Grand Palace in plain view of management and security, and there are 30 or more scammers working the Erawan. He estimates that they are approaching hundreds of tourists every day.

The source remarked that on his last flight into Thailand he observed a welcome video message from the Tourism Authority of Thailand (TAT) which did not offer any warnings to arriving tourists about possible gem scams, and in fact, it suggested that tourists buy gems in Thailand.

"Thousands of holidays are ruined by the devious, organised crime teams lurking at every tourism site. Even taxis and tuk-tuks are in on the scam. It's relentless," he said.

According to the source, tourists are hit on as soon as they arrive at the airport, and a recent crackdown at the Suvarnabhumi airport caught 900 scammers of various types working the arrival area - "who then paid a 1,000 baht fine and were back at it immediately." A news piece from the Bangkok Post confirms that in June and July last year, 900 illegal taxi drivers and tour guides were arrested at the airport.

Having been in Thailand for nearly two decades, the source says he is shocked to discover the extent of the multi-layered scams on tourists and regrets that some unfortunate tourists have no idea how devious these scammers are.

Suspecting he is a tourist, on his frequent walks past the Erawan Shrine the scammers approach him as well, telling him that they are doctors, lawyers or teachers in their attempt to lure him into the gem scam. He recently decided to photograph every scammer that approached him, and now has around 20 photos of different individuals.

He explains that these individuals are all working together, communicating by cell phone. In his words, "It is a very elaborate operation. They are well dressed, polite and speak good English. They pretend to be friendly Thais wanting to help lost tourists. Their goal is to lie and scam everybody they meet."

He alleges that many of the scammers are off-duty tourist police officers, and claims that two weeks ago he was attacked by scammers when he took their pictures.

"I fled into the Central World store when they tried to attack me. They had pulled the strap off my camera. This was recorded on the Central World security video system.

"But even though the security cameras clearly show the attackers, the police did nothing," he added. He hints that the security guards at the Erawan Shrine, the Amarin Plaza, the Gaysorn, the Erawan Plaza, the Central World, as well as members of the Thai police, the Tourist Police and BTS Security are all aware of what is going on.

"These security guards see the scammers all day, every day, but do nothing to protect the tourists. I even see the guards talking with them."

The source said he first contacted the TAT in June 2007 to report the matter, and has sent the Tourist Assistance division of the TAT two dozen letters since, some of which have included photographs of the scammers, but the same group of people congregate around the major tourist attractions every day.

He cautions that the gangs operate "at just about every tourism site in Bangkok, and many taxis parked in front of hotels are also plying the gem scam on visitors".

The official view

Mrs Niramol Plianjaroon, head of the Service Standard Development Section, Bureau of Tourism Service Development, TAT, admitted that the gem scam is not new to Thailand.

"Gem scams ranked first among all tourist complaints received when the TAT was established in 2002," she confirmed, acknowledging that they occur in the same fashion and are repeated time and again.

She thinks it is vital to address the matter to maintain Thailand's image among tourists. "Certainly, the scam sends the message that in Thailand, high prices are charged for low quality.

"Sellers should not seek to obtain impossible profit margins," she added.

Mrs Niramol said both the TAT and the Tourist Police Division offer victims assistance. Incidents can be directly reported at the Tourist Police Division, or by filing a complaint at any branch office of the TAT. Tourists who have travelled out of the country can report to the Ministry of Foreign Affairs or the Ministry of Commerce.

"Officers will then facilitate communication between the sellers and the tourists to address the matter," remarked Mrs Niramol.

Pol Maj-Gen Choochat Suwannakom, commander at the Tourist Police Division, noted that tourists who have been victims of the gem scam can get a refund of as much as 80% of the purchasing price from the store, provided that the gems are in good condition and no agreement in the sales contract is violated.

"Before, it would have been possible to get a total refund for the tourists, but nowadays the jewelry stores have the customers signing the sales contract which sets forth conditions for returning the items," he said.

The commander said the jewelry stores that have been reported are legally registered with the Ministry of Commerce.

He suggested that the gem scam persists because only limited action can be taken.

For example, overcharging for gems is not technically considered a crime, as the gems involved are not fakes. What's more, the value of gem stones can vary tremendously, according to cut, clarity or origin - and unlike gold, the prices are not standardised across the world.

"The only legal action that can be taken against those involved in the activity is a 1,000 baht fine, given on the basis that they are intentionally troubling tourists," he observed.

Nevertheless, the commander said there has been a decrease in gem scam cases in Bangkok, and commented that these days complaints from tourists who have been mugged or have lost bags on inter-provincial buses outnumber those who have fallen for the gem scam.

Data from the Tourist Police Division suggests that 62 gem scams had been reported over the course of 2007, a significant drop from the 83 cases reported in 2006. Most of the complaints have come from Australian, Malaysian, Singaporean and Korean tourists against the same handful of jewelry stores.

Pol Maj-Gen Choochat says his officers, both in uniform and in casual clothes, constantly monitor tourist destinations to apprehend the quick pitch artists waiting to lure tourists to these stores.

He remarked that tourists can contact the division's hotline, 1155, to report these incidents, or for assistance on any other matters. He said that on-duty officers on the hotline are skilled in the English and Chinese languages, and the division also has contacts with volunteers from 40 other nations.

To be on the safe side, he advises, tourists should be selective and only visit big shops with good reputation when purchasing precious items like gems. "Tourists should always look for a guarantee of the quality of the gems," Pol Maj-Gen Choochat said.

He added that members of the Thai Gems and Jewelry Association normally abide by a code of practice, which includes a provision for a refund of at least 80% up to 45 days after purchase.

I contacted the Thai Gems and Jewelry Association to discuss the issue with them, but they have been unable to schedule an appointment over the past 2 weeks.

Commander Choochat concluded by saying it was impossible to guarantee that tourists looking for jewels wouldn't face any problems. After all, jewelry stores are profit-based, like any other business.

Hence, in the end the phrase "Let the buyer beware" applies to those interested in purchasing gems in Thailand, particularly when they find themselves surrounded by overly friendly strangers.

TIPS FOR GEMS SHOPPERS IN THAILAND

In Thailand, bargains can be found on gems and jewelry, but one should not take risks unless they have guarantees of good quality.

Real gem shops very rarely offer sales, and anything advertised as "one day only" or "export special" is almost certainly a scam.

It is impossible even for a qualified gemologist to tell the difference between genuine and fake gems without the proper equipment. If you buy gems without getting them tested independently, you are buying solely on the word of the salesman or store.

The Thai government and the Tourism Authority of Thailand (TAT) do not own, sponsor, promote, endorse or authorise any gems stores. Anyone who says otherwise is lying.

It is recommended that customers look for after-sales services offered by the jewelry trader. For example, certain accredited gem stores will give customers a certificate upon their purchase, and they will offer customers a money-back guarantee for the merchandise if customers are not satisfied.

Help for Gem Scam victims:

Tourists who have been tricked into the gem scam should file their complaint with the Tourist Police or the Tourism Authority of Thailand (TAT).

The hotline for the Tourist Police is 1155. The head office is located at 2170 Krungthep tower, New Petchaburi Road, Huay Khwang.

The number for the TAT call centre, open daily from 8am to 8pm, is 1672. The TAT head office is located at 1600 New Petchaburi Road, Makkasan.

Visit http://www.tourismthailand.org or http://www.tourist.police.go.th for more information.

Bangkok Post - SIRIPORN SACHAMUNEEWONGSE


Mining The Same Victims

TWO INDIVIDUALS "RELOADING" PREVIOUS VICTIMS OF GEMSTONE FRAUD - 10/94

The Federal Trade Commission has charged the perpetrators of an allegedly deceptive telemarketing scheme that preyed on consumers trying to sell gemstones as investments.

The FTC charged  two Florida residents, Thomas E. O'Day and Jeffrey L. Kelley, alleging that they misrepresented the cost of their gemstone liquidation program and falsely promised that they had buyers ready and willing to purchase the consumers' gemstones.

The FTC alleged that consumers often paid thousands more for the gemstone liquidation program than the amount represented (including agreeing to purchase additional overpriced gems or coins from the defendants), and that the defendants did not locate buyers for consumers' gemstone collections.

The FTC is seeking consumer redress and a permanent prohibition against the deceptive scheme. The FTC's complaint detailing the charges names Thomas E. O'Day, doing business as Thomas O'Day (also known as Thomas O'Day Company, Tom O'Day Company, Thomas O'Day & Associates, or Tom O'Day & Associates) of Orlando, Florida, and Jeffrey Kelley, also known as Jeff Barnett.

Since at least 1992, the FTC alleged, the defendants have contacted consumers throughout the United States who had previously purchased gemstones as investments, many of whom purchased overpriced gemstones from the operators of other schemes and offered to liquidate consumers' gemstone portfolios for a fee.

The defendants allegedly offered to advertise the consumers' gemstone portfolio, and promised to fax copies of the gemstone certificates to prospective buyers who responded to their ads. Consumers were told that they would be charged a fee, usually $529 or one of their gemstones, for the advertising program, and would be charged a 5 per cent commission to be paid at the closing of the sale.

Thereafter, the complaint charges, the defendants misrepre sented that:

-- they had identified buyers ready and willing to purchase consumers' gemstone portfolios at a signifi- cant profit for the consumers, and that a sale was imminent (in fact, the FTC alleged, in numerous instances, the defendants had not identified a qualified buyer willing to buy the consumer's gemstones at a significant profit, and no sale was consummated).

-- consumers would not have to pay anything beyond the advertising fee and commission for the defendants to sell the consumers' gemstone portfolios (in numerous instances, the defendants allegedly pressured consumers into buying additional coins or gemstones to "round out" their portfolios, or into paying extra fees by claiming that they had a buyer and the additional money was necessary to close the sale); and

-- the coins or additional gemstones they sold consumers would be liquidated at prices that equaled or exceeded the prices consumers paid, and that the prices con sumers paid equaled or were close to the prices at which the gems or coins could be liquidated through a market sale (in fact, the FTC alleged, the defendants' victims are left owning additional overpriced gemstones or coins which they cannot liquidate at or close to their cost through a market sale).


Thomas E. O'Day agreed to pay up to $350,000 for consumer redress, related to charges arising from his role in an allegedly deceptive telemarketing scheme. Jeffrey Kelley has pledged $200,000.

 Charges against Kelley are still pending.

The settlement also permanently prohibits O'Day or Kelley from making misrepresentations regarding any material aspect of any future telemarketing offer though they must also post a bond of $1 million to protect future customers before marketing or liquidating coins or gemstones, or before acquiring any interest in a business that does so.

The order includes various reporting requirements that will assist the FTC in monitoring their compliance and further prohibits Kelley from using, or providing to any third party, his customer lists.

05/08/95 FTC File No. x95 0023 - Civil Action No. 94-1108-CIV-ORL-22

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