Crude Scam

A $30 million rip-off

The handsome brochures in the mailboxes carry distinguished references, authoritative research and cite the CIA, Jimmy Carter and the Wall Street Journal. The pitch: buy spot oil futures contracts and, in six months, you too will be as rich as an Arab oil sheik. With only $6,000 down, the smart investor is promised OPEC-like profits of $30,000.

There is one major catch. "This is the biggest telephone rip-off in the country," says John Field, enforcement chief of the Washington-based Commodity Futures Trading Commission (CFTC). "All the con artists in the world got out of aluminum siding and land sales and into commodity options." The New York State attorney general's office and the CFTC, in a complaint filed jointly in federal district court in Manhattan, have charged 30 companies and 37 individuals in eight states and Panama with illegally selling oil futures contracts. These commit the buyer to purchase petroleum for either delivery or resale by an agreed date. The firms--among them, International Petroleum Exchange Inc., Bartex Petroleum Corp. and Comercial Petrolera Internacional S.A.--are specifically accused of using false promotional material, failing to disclose risks and defrauding customers in at least 31 states. The ripoff: as much as $30 million.

The charges grew out of a four-month investigation by New York and CFTC officials. Scam busters discovered seedy boiler rooms where pitchmen used computer lists to contact unsuspecting pigeons, or potential victims. The salesman, in a follow-up phone call, might then say discreetly, "If you act now, I can squeeze you in on a contract." While most of the contracts have not yet fallen due, investigators allege that brokers in fact do not possess the oil to back up the bogus deals. Eventually, customers would find that the salesmen had either left town or were no longer in business at the time of delivery.

Officials concede that the latest court action is unlikely to stop over-the-phone scams. Like some Hydraheaded monster, one get-rich-quick operation is no sooner closed down than another takes its place. Federal and state agents are usually one step behind boiler-room artists ready to sell to a gullible public. Says Attorney General Robert Abrams: "The same types of salesmen who brought us underwater land, worthless uranium stocks and phony gold certificates are in the process of perpetrating on the American public their latest scheme--oil futures contracts." A lawyer with the New York attorney general's office last week lamented that the masters of scam would probably soon be peddling chopped-liver futures.

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