Author: Azizur Rahman
5 October 2012
2 min read
Aziz Rahman examines the increase and explains that, quite often, not everyone inside the boiler room is as guilty as they may appear
In an area of fraud that relies on bogus figures there are some that have stood out as being genuine. The now defunct Financial Services Authority (FSA) reported that in 2011 it received 5,401 reports of boiler room fraud — up from 4,527 the previous year. That was an increase of almost a fifth. When you also bear in mind that, at that time, the FSA knew of 770 people who paid out an average of £20,000 to alleged boiler rooms that year, it is clear the scale of the problem had been apparent for many years.
Boiler rooms usually involve people being telephoned and persuaded to buy shares the caller has no right to be selling: either real shares in a genuine company that the caller doesn’t possess, non-existent shares in a genuine company or “shares’’ in a completely fictional company. Fictional addresses, phone numbers and websites can give the appearance of UK respectability to an operation that is most likely run from abroad. The FSA reported back in 2011 that the number of boiler rooms using “cloned’’ versions of genuine firms almost tripled last year to 449, from the 2010 total of 161.
Nothing is what it seems at face value in such operations — modern technology has helped boiler rooms prosper by creating an authentic-looking image. At Rahman Ravelli, we have been involved in some of the biggest boiler room cases. As a result, we are ideally placed to advise those accused of working for a boiler room who maintain their innocence. The victims of boiler room fraud are very often not only those people who have handed over their money and received nothing. Many of those arrested when a boiler room is raided are equally innocent — and also face losing whatever wealth they have.
At Rahman Ravelli, we have seen that many of those involved in the selling believed they were offering investors genuine stock. All too often, the boiler room is inhabited by dozens of poorly paid people who saw it as their only chance to gain employment. They are taken on to do the cold calling for a meagre wage, with most of the proceeds going to the men at the top. All the effort that may go into making a boiler room operation look reputable to investors can be equally misleading to those who go and work for it.
On many occasions, boiler room raids by the authorities only result in them catching the little men in the room… leaving the big guys outside the room free to set up and start all over again. All too often, the people arrested need the right legal advice instantly if they are to ever gain justice. The FSA was, of course, the regulator but has been replaced by the Financial Conduct Authority (FCA). Many of these operations are based overseas so they can practise away from the FCA’s authority. Spain, and principally Barcelona, was the favourite stomping ground of those involved but Rahman Ravelli has advised in cases where the operators were selling in the UK market from Korea and the Middle- East.
Just like the unlucky person who invests in a boiler room, the unfortunate person who ends up working for one will eventually need expert legal advice to help save their skin.
Aziz Rahman is Senior Partner at Rahman Ravelli and its founder. His ability to coordinate national, international and multi-agency defences has led to success in some of the most significant corporate crime cases of this century and top rankings in international legal guides. He is recognised worldwide as one of the most capable legal experts regarding top-level, high-value commercial and financial disputes.