London's Canary Wharf becoming a favoured address for scams
(Although Daniel Smith, the author
of this contribution, worked for a wine investment company, his experience
could I believe be replicated in a number of other dubious investment
companies. Their modus operandi is
similar whether they happen to sell wine, biofuels, carbon credits, coloured
diamonds, etc.
Smith
provides a fascinating insight into this highly competitive, masculine world.
It shows how important cold calling is to this style of investment scam and
equally how important it is never to accept any investment offer proposed by a
cold caller.
It is
standard practice for these telesales ‘brokers’ to use false names.
Of
course, the fact that Daniel Smith did not see any wine during his employment
does not mean that no wine was bought. Wine for investment should be kept in a
bonded warehouse, so you wouldn’t expect to see cases of wine in the company’s
offices. It is, however, an illustration of how sketchy the training given by
this style of company is that a wine broker thought it was strange to see no
wine during his time at Snake Oil Investments Ltd.
Parts of
South London, especially Bromley and Croydon, have unfortunately become a
magnet for dubious investment companies. They also seem to be increasingly
attracted to Canary Wharf – London’s alternative financial centre.)
Daniel Smith:
First of
all, I'd rather you didn't refer to me by name. The principal reason for this
is that, far from just being a shady operation contractually and morally
speaking, I also believe that Snake Oil Investments Ltd have genuine ‘muscle’
and could pose a criminal threat to anyone trying to denounce their activities.
In any case I'm living in Peru now and it would be difficult for them to track
me down.
When I
first saw an advert to become a ‘wine broker’ on a recruitment website I was
intrigued, because I have a degree, had previous sales experience and was
attracted by the claim ‘earnings in excess of £80k/year’. After all, there's
nothing wrong with being young and ambitious. They were accepting any
candidates that were willing to show up to an open day.
I
attended the interview day at Sofitel Gatwick Airport. This day was the
recruitment process. It consisted of a man giving an introductory talk on the
world of wine broking whereby he made clear that it was not a world to get into
if you were interested in "knowing about wine and appreciating wine",
it was more about trading the commodity of wine. My understanding prior to
this, albeit limited, was that you accessed the world of brokering fine wines
through exceptionally good knowledge of wines/estates/domains because fine
wines are a rare form of diminishing asset. Snake Oil Investments Ltd put more
emphasis on the investment potential of wine at this initial stage than the
wine itself and where the return was actually coming from. Then they made us do
exercises, which tested our confidence, speaking in front of a room full of
strangers, selling things like ‘invisible paint’ and ‘calculators without
buttons’. In hindsight, this should have been a sign. Honest selling relies on
the benefit of a product or service to a company. These exercises had nothing
to do with selling, they were to do with manipulation.
Halfway
through a broker from the firm showed up and the number of applicants was
dramatically pared down. We had a further talk, this time about the ‘hunger to
succeed’ that is essential to all brokers. The latter part of the day,
curiously, was about testing this hunger; what did we want to buy if we had
£500k, how much money would we ideally make in a day, etc. Whilst it is
important to be highly motivated financially in a high-pressure sales
environment I should have been dubious as to whether this needed testing as
rigorously as it did in the interview process. I now realise that it was
because Snake Oil Investments Ltd (as well other wine brokerages, no doubt)
wanted people who were financially motivated to the point of desperation,
because these people were more likely to pick up the phone and sell.
Eventually
I reached the end of the day and a number of us got an ‘offer’ from the broker
that had showed up. He was looking for people to start (on an almost
fortnightly basis) at their offices in Croydon. The advert had said ‘Canary
Wharf’ which was right near where I lived at the time, so this came as a shock
and disappointment. No contract was offered and no explanation given as to why
the location was different from the one advertised. At this point I sensed
something wasn't quite right. I learned much later from a recruiter that it was
illegal to post false information in job adverts and to advertise jobs that
didn't actually exist or that hadn't been signed off on a budgetary level.
I stayed
in contact with the broker about the opportunity and went to see the offices in
Croydon and meet him further. Quite out of the blue he announced that he had
"something to clear up about the job" and launched into a defence of
Snake Oil Investments Ltd, saying that "I may have heard a thing or two
about the world of wine brokering and that's not at all the way we
operate", etc. He made clear that what wine brokers were offering was
essentially a financial service that was unregulated by the FSA because wine is
a consumable good (which I'm not even sure is strictly true). He said he was
still happy to take me on but again offered no contract. I was partially
assuaged by his assurances that SOI were a reputable brokerage, but also
intrigued by the alleged bad press on this industry.
Eventually,
after not quite getting through some other interviews and badly needing the
money, I put aside these concerns and decided to join Snake Oil Investments
Ltd. I was in a desperate situation myself and, in any case, I had a passion
for wine and wanted to get into trading it. I thereafter began a training
period. Still no contract. In the training period I was told why this was.
Their stance was that, because of the high earnings in that job they chose to work
with ‘consultants’ who were ‘self-employed’ but received a monthly fee by
cheque. This lowered their tax-bill. Tax evasion (? avoidance?) was never far
from their thoughts, as you have blogged about yourself. Basically they paid
their staff cash in hand, all 40 or so of them! The lack of contract allowed
them to fire people at will and impose unfair holiday restrictions, i.e. once a
year at Christmas (a fortnight). This seems unfair and most people would want
out at this stage, but then they would invoke a notion of 'sacrifices must be
made if you're to earn the big bucks'.
They
also explained their methods of selling. The telesales pitch was given to us in
script form, we were instructed to learn it and make it our own in whatever way
we could. We were told that attitude counted for 60%, ability on the phone 30%
and investment/product knowledge 10% – which was almost laughable. The main
focus was on handling the objections of the customer and making us into
‘talented brokers’ the instructions being to ‘bang the phone’ Boiler Room style. They focused
intensely on hard work, meritocracy and the ‘go-hard or go-home’ mentality. I
had been through training for sales before – even telesales. Those sessions
differed dramatically. At SOI there was no focus on how to develop a pipeline
of business. This, we were told, was taken care of for us through a company
from whom they purchased leads for us to call. Nothing was revealed about who
this company was. I found it bizarre that the they didn't go into much more
detail about the economics of wine trading but instead offered up that ‘the
simpler we make it sound the more likely people were to invest’. In reality on
the phone, the opposite very much seemed to be the case with people demanding
an explanation as to how and why they were investing.
Other
inspirational training techniques were ‘watch Glengarry Glen Ross or Boiler
Room and see what you can pick up’ – honestly! We were brainwashed with
motivational twoddle like: ‘Learn the three principals: 1. 'I have to earn it',
2. 'I am always responsible', 3. 'I always pay'’. The principal reason they had
to go over things like this was because the majority of their workers had come
from very poor backgrounds, had no qualifications and as such didn't have the
kind of self discipline that comes from independent study (the cornerstone of
the most companies' hiring criteria). The workers were however willing to work
hard and driven financially.
Something
I found very strange was that SOI encouraged us to take on a ‘persona’ (I would
call it a false name). Their reasons for this were that you could have a lot of
baggage to leave behind at home and having a persona encouraged you to become that
successful persona you choose for yourself through hard work. I actually had
done quite well for myself before I had gone there and I found this
particularly insulting. Why would I not want to be me? Why should I do well
under a different name, didn't I want people to know I had achieved good
things? Obviously this was their linchpin: it made it immensely difficult to
find out who was actually working at SOI especially since they had no contracts
or no real names.
People
stayed there because it was indeed possible to earn plenty of money, but the
Snake Oil Investments Ltd commission scheme was far from fair: earn your own
monthly fee in commission before you get a penny, gain five clients in a month
for a 3k bonus... In truth there were some quite staggering incentives. So you
would have a retainer of £1250/month plus the same amount in commission plus a
bonus (you also got a Rolex or something similar for being one of the first
three ‘employees’ to achieve this in any given month). However, telesales are
far from easy when you're talking about thousands of pounds per sale and these
targets were hard to achieve. Curiously if you didn't achieve them you were
rarely fired. They obviously needed as many people as possible to man the
phones and found it hard to employ people given the lack of a proper contract.
This pay
structure achieved two things: people ringing absolutely anyone they could
whenever they could in order to get the five client monthly target and an attitude
among staff that no better opportunity could possibly exist for people of their
means – after all what companies do you know giving out Rolexes on a monthly
basis? This was underlined in training when they talked about the director Tito
Pepe. We were told (I paraphrase):
‘Tito a
great guy. He's rich and he just wants people around him to be rich. There's
absolutely nothing to stop you from getting to where he is now if you work hard
and apply yourself. It's hard to start off with but the longer you stay, the
more clients you get and the more they add to their portfolios the more it all
adds up and after year two things really get good.’
Tito
would hold daily motivational talks urging people to push the billings. He
seemed to do very little himself, often swanning off in his Lamborghini around
3pm. My overwhelming impression of him was that he was amusing bloke, clever,
driven and ruthless. After his talks we would often role play our pitches in
front of the room, practising the best way to handle objections (according to
them this was to ignore it completely first time it came up, then rephrase it
as a question in order to make the client say yes, then handle it
somehow).
The
actual sales structure was what I found really odd and was my biggest clue that
the whole organisation was one very elaborate and lucrative scam – at least if
it wasn’t they ran the company in a very peculiar way. Essentially, the initial
call to a prospect was placed by an ‘opener’ who was ringing to introduce the
investment proposition and send over a company brochure. This was all an
‘opener’ did. The prospect then received a follow-up call from the ‘closer’ who
got the prospect’s thoughts on the brochure (obviously the brochure exuded the
image of an immensely reputable company) and closed the sale. The ‘closers’ got
a lesser percentage of the original commission on that sale (they plucked the
prices out of thin air, anyway) and more for any subsequent purchases from that
client. Often clients would 'invest' about 5k initially to see if it was worth
it, then add lots more once they had seen a good return. They always saw a good
return, because the ‘closers’ no doubt lied through their teeth about not only
what they had purchased for the client, but also the return it had made.
Obviously the only career progression possible at SOI was from ‘opener’ to
‘closer’ where earnings could be up to £100k a month sometimes according to the
board which showed what business we were doing (a simple whiteboard, wiped
clean every day). I imagine Tito selected the closers personally. Were they
privy to more intimate information about the company? Is that why they get such
a better deal?
We
worked from 1pm till 8pm and were constantly on the phone. At the end of the
day a group of older employers would get into their various hyper cars and
drive home. We were encouraged to buy expensive things, save nothing and keep
our hunger alive – which I just thought needlessly frivolous. We were
instructed to put pictures of material objects around our desks to reinforce
this notion.
Academic
learning was almost actively discouraged. The only thing they wanted us to work
on was our phone pitch and sales skills through listening to motivational
speakers such as Brian Tracy. Any questions about the actual purchasing of the
wine were ducked or handled with responses like ‘all the wine is kept in the
London City Bond where the Queen keeps her wine’. I once asked one of the
senior brokers to tell me more about the process. He looked away awkwardly and
said that an opening account form for the LCB was posted out after clients had
sent the cheque, they subsequently filled it in and sent it back to us and we
allocated the wine to them in the bond through our account. Surely if nothing
weird was going on at this firm they would have been more forthcoming with
this, even clarifying it on day one.
SOI were
also more than happy to lie on your behalf and say you were earning enormous
sums in order to get a mortgage on a house or something similar, because this
tied in with their philosophy of keeping the earnings high (also because it
presumably kept people on their side). They presented themselves as the ideal
employer. Tough but fair, generous but not a free ride. This allowed them to
get away with forcing people to come in to work even if they felt sick on the
pretence that if you looked sick then you would be sent home. Absences
were not tolerated in any way. Ccuriously, though, the top earner disappeared
for a week and came back after SOI had announced that he wouldn't – for some
reason no one on the sales floor seemed to notice or care. Obviously the more
money you brought in for them the more leniency you could afford. It made me
wonder whether there was an inner circle of people who were in the know who
genuinely made all the decisions and got a share of the profits of what I had
come to see as an enormous Ponzi scheme. The high earnings then afforded them
status at the firm, although obviously these were false.
Reading
your blog about how much Tito drew through dividends really opened my eyes. He was
preying not only on innocent investors, but also on his own staff. To make
things worse some of these investors were pensioners and suchlike, it is true.
Yet actually, the majority of people working at SOI had sufficient conscience
to put notes on the system not to bother these people. I genuinely got the idea
that the majority of them had been hoodwinked into working there because they had
no better option. Some of them deserved better and were good sales people, who
believed they were just doing well in an unregulated industry. The world of
investment cold calling seems to be an intricate network of conmen; people use
the same skills in carbon credit investment selling, land and precious stones
as well. Tito Pepe even learned these skills from some
other company where all the other dodgy brokers seem to have originated from.
It’s just slightly disappointing for me as I genuinely have an interest in wine
and would have quite liked to be a broker somewhere reputable such as Berry
Brothers or Fine and Rare.
It's
funny, they mentioned you when I was there! They were less than
complimentary... But I have to say I think you're doing a great job, particularly
as I had nearly convinced some of my friends and family to invest. I think wine
is and can be a great investment, but it requires care and attention and above
all for investors to actually lay eyes on what they’re buying. The entire time
I was at SOI I never saw one bottle!
(NB The
names of people and company have been changed – those used are entirely
fictitious.)
