Pacific Continental Securities employed dozens of young salesmen with no investing experience to spend all day on the phone fishing for suckers who would buy their scam stocks. Essentially, a boiler room operation. The scary part is that one former broker came forward revealing all their duplicitous tactics. He’s heard some of his former co-workers might be at it again with new firms. Maybe he’s just pissed he isn’t a part of the new scam?
Tony Levene, a financial writer for The Guardian Newspaper, wrote about some of the details the now-anonymous former broker gave (all the phone scam and strip club info after the jump):
There was no formal training. The way it worked was that four or five juniors would report to a desk head. I later learned my desk head had previously worked for a Barcelona boiler room. I was paid Â£18,000 (~$35,000) a year plus commission. But desk heads earned a lot more. My job was to phone "leads". We got some from a "marketing company". If anyone asked, we would refer to some form they had filled in or some sort of market research they had helped with.
This almost sounds like the exact plot of the movie. You wouldn’t believe anyone would actually buy some unknown stock from an unsolicited phone call. But apparently they did.
The broker, who should probably watch his back if he’s revealing this and it’s all true, continued his story by saying:
One stock I sold shares in was New Millennium Resources. It was listed on AIM and involved in mining in Angola. We were told to tell clients about the press releases this company put out, detailing its new diamond finds. It was a good story to sell – and I got rid of about Â£40,000 (~$78,000) in this one – including Â£5,000 (~$9,700) to an elderly lady.
Whenever any of us made a big sale, we’d shout, clap and cheer – even laugh if the customer had caved in for a big amount without a fight. Then we’d be praised in the office and taken out by the desk head – champagne and, for some, strip joints.
Strip joints? Here we go! Good thing he mentioned the ‘for some’ stipulation in there. I would never believe an entire room full of con artists would want to see naked ladies. Unfathomable. It always seems like the illegal trading goes hand in hand with the strip club visits. Someone should really do a study on that correlation.
This all kind of sounds like small money, even when you factor in the exchange rate, but these so called ‘desk heads’ were getting some of those sweet promotion ‘pounds’. The informant says his desk head was making Â£750,000, or $1.4 Million, a year from redialing and selling more shares to the old ladies they already scammed.
I’m surprised these guys were able to get away with this for so long but, as evidenced on film, they put up a very convincing front for a real business. It all stems from getting legal loans and start-up cash for fake companies, making a lot of phone calls, and then lying to suckers and grannies.
There is a happy ending to the story though – "Pacific Continental Securities (UK) went bust in June 2007. Insolvency practitioners Smith & Williamson sold the assets to Brooklands. PacCon was wound up in March 2008. Investors who show mis-selling can now lodge claims with the Financial Services Compensation Scheme (go to fscs.org.uk). Claims could total Â£250m."
Guardian: Confessions of a rip-off artist, May 31, 2008