For Con Men, Orange County Is the Land of Opportunity

Agnes Mitchell remembers being very impressed with the man, especially after he invited her to his home on Easter Sunday to meet his wife and two young sons. She was so taken with the boys, about 7 and 9, that she gave each of them $5 in an envelope.

But that was nothing compared to what she gave their father, who convinced the 80-year-old woman that he could do wonders with her money. And over several months, Mitchell (not her real name) gave the man $57,000 to invest in various real estate ventures.

The initial requests for money--in increments of $5,000, $7,000 and $15,000--were for properties he was fixing up, he told Mitchell. The last time, the man drove Mitchell out to a lot that had two “for sale” signs. He told her that he owned the property and was going to build homes on it. She could buy into the venture, he told her, for another $30,000.

The man paid back the first $5,000. But that was the last Mitchell ever saw of her money. Eventually, she and a friend did some checking and found that someone else owned the lots.

Today, about two years after her dealings with the man ended with her losing $52,000, Mitchell said, “Everything he did was crooked.”

Possible legal action against the man’s Newport Beach operation is pending, with investigators saying there may have been as many as 1,500 victims with total losses of more than $10 million.

The operation is just one of dozens of swindles that are operating at any one time out of Orange County, local, state and federal prosecutors say. From small-potatoes scams in which victims send $50 for pen-and-pencil sets, to elaborate schemes in which people lose life savings, Orange County has proved fertile ground for swindlers.

The problem grew to such proportions that as recently as 2 1/2 years ago, federal officials were calling Orange County “the fraud capital of the nation.”

Federal prosecutors, citing dozens of successful state and federal prosecutions in the last couple of years, say they have dented the problem. However, one federal official said, “if someone wanted to be honest with you, they’d probably tell you we’re getting our butts kicked.”

Federal officials say there may be as many as 100 illegal telemarketing operations in Orange County. These are swindles initiated over the telephone, in which con men, usually working from large computerized lists of names, try to entice people to invest in such diverse interests as precious metals, real estate, or oil and gas leases.

Besides those operations, where individuals are conned, the county has also proved lucrative for swindlers defrauding businesses or other financial institutions. Much of that fraud involves real estate transactions, federal prosecutors say, such as obtaining loans or other financing through fraudulent representations.

Nancy Wieben Stock, who heads the U.S. attorney’s Santa Ana branch, which opened in January, said, “Per capita, (fraud in Orange County) is just really out of hand. It’s really pretty amazing.”

The problem has become so serious in recent years that, because of the heavy workload, federal prosecutors sometimes turn down cases if the loss from the scam isn’t at least $1 million.

How did the home of Mickey Mouse and oranges become a haven for swindlers?

According to local police and federal officials, Orange County’s susceptibility to con games is the product of several factors, many of them the same things that make the county appealing to honest citizens.

“For a swindler to sell a package, it’s much easier to sell the California promise with a yacht in the front yard, palm trees and girls in bikinis, as opposed to, say, Palm Springs, where all you can show is a desert and a couple of Gila monsters crawling around,” said Kacy McClelland, who heads a five-member U.S. Postal Inspection Service team in Orange County.

“I’m from the Midwest,” McClelland said, “and when I pictured California, the first thing I thought of was a home in Newport Beach, a boat in the front yard, a glass front on the house, the sun setting right behind you. I think they market that kind of promise to the investor.”

Part of the county’s problem, not surprisingly, is its size. “Whenever you have a large population, you’re going to have a certain segment of the population who engage in illegal white-collar crime,” said Terree Bowers, who heads the U.S. attorney’s major fraud section in Los Angeles.

“In Orange County, we’ve got another aspect, in that it’s a fairly affluent area. There’s a lot of nouveau riche, a lot of people legitimately making a success out of entrepreneurial ventures. . . . But what you have is a lot of people attracted to this area and they see people and their success, and the life styles of the rich and famous or whatever you want to call it, and rather than go through the work and time that is required to develop a legitimate business, they want immediate gratification, so they’ll go in and establish scams where the sole objective is to get as much money as they can.”

Indeed, getting rich quick has become part of the Southern California mentality. In Orange County, that impression is strong because of the legitimate fortunes made--in many cases quickly--in real estate and other ventures.

“That’s one of the reasons you see cocaine trafficking out there and other easy-street ways to make a quick buck,” Stock said. “That’s not to say somebody in Beverly Hills doesn’t also salivate as they see Ferraris being driven up and down Rodeo, but I think the perception of available access (to wealth) is greater in Orange County because, literally, if you look around, the place didn’t exist until recently. There are entire commercial areas that used to be broccoli fields. It’s just a place that in people’s minds developed overnight.”

The desire to get a piece of the pie that is Southern California obviously attracts con men, and it may, subconsciously or not, also make Orange County residents more vulnerable, Stock said. “There are few places in Orange County you can go where you won’t see affluence, as opposed to places in L.A., where you can drive around and not see any 450 SELs and other really nice things that people might be influenced by,” Stock said. “It might be that people are socked in 24 hours a day in this sort of golden little place, where even if you don’t personally have it, you see it around you, and maybe there’s sort of a rub-off effect. That’s not to say that everybody is greedy, but there is that sort of feeling that, ‘Gee, people are really going for it down here. I think maybe I’ll go for it. I’ve never done anything like this in my life, but I think I’ll give it a shot.’ ”

Since many of the scams are conducted over the telephone and then followed up by flashy brochures, having a prestigious Southern California mailing address fills out the picture of respectability, experts say.

That is one reason Newport Beach has became a focal point for swindlers. “It’s a high-profile area because of the glamour,” Bowers said. “It’s kind of like Hollywood and Beverly Hills. When you’re soliciting people in other parts of the country or in other nations, it’s a recognizable name that can add credibility to your efforts. Address is a factor. You have a Beverly Hills address or a Newport Beach address, people will assume you’re doing OK.”

The Newport Beach Police Department has increased its fraud squad from two to five in the last two years. Todd Wilkinson, the detective sergeant who heads the section, said, “I’d guess in Newport Beach, it wouldn’t surprise me (if) there were 10 companies doing telemarketing that are cheating people.”

There probably are an equal number, or more, doing legitimate telemarketing, Wilkinson said.

What concerns law enforcement officials about telemarketing fraud is that, as with the prognosis for other aspects of Orange County, the peak period hasn’t been reached.

“I think it’s going to get bigger and bigger,” Wilkinson said. “Because it’s very lucrative, it’s nonviolent, it’s safe. It’s safe to be the perpetrator of a crime like this. It’s not like a dope burn, where you’re taking the chance of getting blown away for your product or having to blow someone else away for his money.”

Orange County also is victimized by one of the traits that it trumpets around the country--a place where a little ingenuity and business daring can pay off.

“There is sort of an entrepreneurial freedom in Orange County,” Stock said. “There aren’t the same kind of restraints one would see in other parts of the country. You literally don’t have to have a past. People can come here and become overnight sensations--commercially, politically, financially--and really kind of attain instant glorification.”

In older, more established cities, including Los Angeles, she said, “you have to know certain people and you have to come from somewhere, and your money has to come from somewhere. It seems in Orange County so many of us are transplanted and done well that it’s not unusual for someone to come here and make a million overnight, and so they’re not automatically suspect.”

The county is overbuilt commercially, which also plays into a con man’s hands, McClelland said. “You see all kind of high-rise buildings with signs on top saying, ‘for lease,’ ” McClelland said. “So office space is readily available, so people are more willing to rent to someone, and they don’t do a background check on them before they lease to them.”

The Southern California Fraud Task Force, formed late in 1985, has dented the problem, Bowers said. In the task force’s 2 1/2 years, he said, nearly 200 convictions have come out of federal or Orange County courts. Another 75 cases are currently under investigation, he said.

Tougher sentences in the last couple of years have helped, he said.

“There’s a general misperception that it (fraud) is not going to be taken that seriously, that they’re not going to jail,” Bowers said. “Which is wrong. They are going to jail for long periods of time. That’s why stiff sentences are important, because in this area we are dealing with intelligent people who can alter their behavior based on what they perceive will happen. They weigh the risk, and if there is a risk that they will go to jail for a long time, maybe they won’t engage in the next scam.”