The Advance-Fee Game

Ever since Dutchman Peter Minuit euchred the Indians out of Manhattan Island for $24 in beads and trinkets, real estate has been one of the happiest hunting grounds of all for the Great American Confidence Man. Last week in Washington members of the Permanent Subcommittee on Investigations sat spellbound as witnesses unfolded a vivid account of the latest and biggest real-estate con game: the "advance fee" racket. From its birthplace in Chicago more than five years ago, the racket has expanded to all 48 states until some 70 firms now bilk unwary U.S. property owners of an estimated $25 million-$50 million a year.

Deceptive Words. The advance-fee racket begins, explained William Parker, a onetime "salesman" who spent 2 1/2 years in prison, when a smooth-talking salesman finds a small property owner anxious to sell out. He ridicules his victim's low asking price, insists that his agency can get much more. After determining the prospect's wealth, he then asks an advance fee of about 1% of the newly inflated asking price, pressures the hopeful property owner into signing a contract on the spot.

At times, said Parker, the salesman cons the owner into believing his property is worth as much as $100,000, walks off with $1,000 as an advance fee. When the prospect calls in a lawyer, it just makes the game easier. "We would simply tell the lawyer he could get from 2 to 3% of the total sale price when the business was sold," explained Witness Parker. "So naturally he would approve the deal." The hooker, of course, is that the promised sale almost never comes off. The deceptively worded contract promises only that the firm will try to sell the property through its advertising and sales promotional facilities, which usually turn out to be ads in cheap-rate newspapers, or a booklet listing properties.

Leading the Blind. Witnesses told the committee of cases throughout the U.S., mostly involving the old, the infirm, the widowed, or those who had simply reached the end of the line. Another soft touch is the blind: they cannot read the contracts. Said Donald McClure, California's assistant real-estate commissioner: "This is one of the most vicious rackets we've ever had to deal with."

Stopping it is another matter. Because the misrepresentation is in the beguiling pitch rather than the written contract, FTC got a "cease and desist" agreement with only five of 30 firms it investigated. To give FTC some teeth, the subcommittee is considering a bill providing a maximum penalty of $5,000 fine and/or five years' imprisonment for advance-fee operators, hopes that new public awareness will weaken the racket.

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