A "fool's gold rush" of gold mining scams has swept the West since October's stock market crash, and Utahns should beware of sinking their savings into so-called "dirt pile swindles," regulators say.
Telephone solicitors, pitching worthless parcels of unmined ground, have already bilked unwary Utah investors of millions of dollars in what regulators say is the fastest-growing investor fraud threat of 1988."We want to stop the fool's gold rush of 1988 before it reaches epidemic proportions in Utah," said John Baldwin, Utah Securities Division director.
"Utah residents who hear from high-pressure telephone salesmen pushing these `dirt pile' swindles should hang up, call our office at 530-6600 and report the scam."
Baldwin said his office has issued three cease-and-desistorders against gold mine and oil and gas promoters, and the state's attorney general office is investigating three more suspected illegal operations. He said the telemarketing schemes run until they are uncovered, then disappear along with investors' money.
The North American Securities Administrators Association and the Council of Better Business Bureaus estimate investors will lose $250 million this year in at least 52 known phony gold mine companies being promoted by "boiler room" operations that typically pitch their wares via telephone.
Hoping to stem the losses, NASAA has organized "Project Goldbrick" to launch a campaign against the investment scams and has published an investor alert newsletter available at the division offices in the Heber M. Wells building, 160 E. 300 South.
At the heart of a dirt pile swindle is the promise of gold at bargain basement prices, Baldwin said, with the catch that if any gold exists it's still in the ground.
A typical investment involves about $5,000 in exchange for title to a 100-ton unit of unprocessed dirt guaranteed by promoters to contain 20 ounces of gold. Under such an arrangement an investor would be paying $250 an ounce, well below the $430 an ounce world spot market price quoted early Tuesday.
Delivery of the gold is deferred for 15 months to three years, at which time investors learn their aggregate ore is nothing more than a worthless pile of dirt somewhere in the desert or scrubland regions of the Southwest, Baldwin said. "Most of the phony mine sites investigated to date are not operational and much of the dirt contains less gold than is found in sea water."
One case sited by NASAA concerned a Wyoming inmate already jailed on a fraud charge who used prison telephones to bilk investors in Minnesota and Wyoming of $6,250 each for worthless dirt from an inactive Utah mine. When he was caught the second time, prison authorities moved him to solitary confinement.