Scam Terms
Here’s a glossary of some common terms used to describe white-collar crimes.
Alter Ego Scheme The act of creating corporate entities for the sole purpose of defrauding others. The perpetrator attempts to escape responsibility and legal liability by claiming the actions were done on behalf of the corporation.
Boiler Room Cheap office space used for high-pressure telemarketing scams.
Bust-Out Scheme A scam under which the perpetrator sets up a storefront or warehouse and buys merchandise on credit. The merchandise is then sold at a different location at liquidation prices, with the sales proceeds being deposited into secret bank accounts. When the creditors come for their money, the firm files for bankruptcy.
Check Kiting When checks are continuously exchanged between two or more bank accounts to cover up for a lack of funds.
Cramming Charging customers on their phone bill for services they did not request.
Employment Scheme Targeting people who are desperate for work, the perpetrator promises jobs in exchange for an up-front fee, and then skips town without delivering the promised jobs.
Lapping Creative accounting scheme under which money intended for other purposes is used to cover up for stolen funds.
Mystery Pitch A scam in which a salesperson solicits money by convincing a victim that they have been selected to receive a valuable prize, but that they are prohibited “by law” from disclosing the prize. Of course, no such law exists and no prize is forthcoming.
Nigerian Scam (a.k.a. Advanced-Fee Fraud or 419 Fraud) Victim receives by mail or fax an unsolicited business proposal from Nigeria. The victim is asked to send a certain amount of money (say $1,000) to cover taxes or some other incidental expense, thereby supposedly freeing up a huge windfall. Often, that same victim is subsequently asked for even more money, to cover another unforeseen incidental expense.
Ponzi Scheme A ploy in which investors are paid with money raised from new investors, and led to believe the payments are actual investment returns.
Pyramid Scheme Endeavors in which money is generated by recruiting other people rather than from selling goods or services.
Recovery Room A boiler room where victims of scams can obtain, for an up-front fee, refunds from the companies that defrauded them.
Rip & Tear Operations Outfits that collect as much money as quickly as possible and then quit town before they are detected.
Slamming When phone customers are illegally switched to another phone carrier without their knowledge or consent.
Spam Unsolicited commercial e-mail, which is sometimes used to advertise fraudulent schemes.
