The U.S. Postal Inspection Service

Financial Frauds

refer to caption
Advertisement for work-at-home jobs in the women’s section of the Los Angeles Timeshelp wanted ads from January 21, 1957. Courtesy of the Los Angeles Times

Postal inspectors investigate hundreds of claims of investment fraud each year. In the 1920s, inspectors’ investigations included individuals who used the stock market to steal money from investors in schemes from bucket shops to boiler rooms (high-pressure salespeople pushing worthless stocks). Stock fraud never went out of style. Some of the inspectors’ most notable arrests in the late 20th and early 21st centuries involved crooks using the stock market to fleece their victims.

The bucket shops of the 1920s were offices where individuals gambled in the stocks, bonds, and commodities exchanges. In bucket shops, brokers took victims’ money but never bought the ordered equities. This was called “bucketing” the order. Fraudsters figured that the speculative stock would fail and victims would not know that the orders were never placed. If they did not fall, then the scammers would change the shop’s name and location.

The post-World War II era saw the growth of work-at-home schemes like raising mushrooms, breeding chinchillas, or making artificial flowers. One of the most notable con men that inspectors brought to justice in the 1950s was Nels Irwin, who sold a wide range of novelty items along with his work-at-home scams. Irwin’s company sold what he called “franchises,” or opportunities to make sales to others, to his victims. He averaged about 3,000 sales a year before inspectors brought him to justice. His swindle offered an “exclusive franchise” for only $29.95. For that sum, victims received instructions and a note that if they wanted a mailing list for making sales they could obtain it from his company for $90. Most franchise holders could only sell a few items, never making back their investment. Those that complained were told they could not receive a refund until they had purchased more materials. Irwin was tried and convicted on 16 counts of mail fraud.