TV Reporter Exposes Shady iPhone Resellers

April 24, 2014

On the heels of Apple executives reporting the company sold 43 million iPhones during the last quarter, a Colorado entrepreneur is using homeless people and Apple’s stores to supply his iPhone reselling operation. A KUSA-TV report says the scheme was uncovered at the Cherry Creek (Denver) Apple store, and leaves the homeless and other down-and-outers holding monthly cellular contracts they can’t afford to pay. According to the report, the resellers drive the streets looking for people who might need quick cash, offer them a deal, and then drive them to an Apple store. Inside, the resellers provide cash for the recruits to purchase one or more iPhones tied to a cellular carrier. The recruits are told they can easily cancel the monthly cellular contracts, leaving them with no liability. In exchange for their help purchasing the iPhones, the recruits receive $100 or more. Only later do the recruits discover that they are on the hook for the monthly charges or contract cancellation charges. KUSA reporter Jeremy Jojola identified the resellers as two men from Beverly Hills (Calif.) operating a company that offers unlocked iPhones, and said they seemed to be working with one particular Cherry Creek store employee. However, Jojola didn’t speculate on whether that employee was part of the resellers’ scheme. Jojola did say the number of people he saw at the Cherry Creek store indicated to him that employees must have been aware of the resellers’ activities. Denver police have classified the situation as a civil matter and have declined to investigate the scheme Jojola uncovered.

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{ 11 comments… read them below or add one }

ex-apple April 25, 2014 at 1517

This isn’t new. Every launch day, the line has been filled with homeless people and immigrants falling for the same scam; in SF they get people from Chinatown. Apple can’t refuse to sell to them and, when you warn them about the contract implications, they don’t care. Quick cash. Most of the time they don’t begin to understand what they are signing. It’s sad for them…and sad for “real” customers as they encounter faster sell-out as a result.

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Bob Erran April 26, 2014 at 0210

It’s called an “unconscionable contract” and it’s illegal. Apple is exposing itself to liability, even if the contract is between the customer and the carrier, by allowing it’s employees to knowingly assist in credit fraud. Get any specialist on the witness stand and ask “Did you see Mr Smith in the store on tuesday and sell him a phone? And did you see Mr Smith on Wendesday and sell him a phone again? And twise on Thursday? Because the sales records say you did. Here are the receipts, and we’ve subpoenaed the POS records.” Apple needs to put pressure on the carriers to tighten the credit application process, increase deposit requirements, and make clear, explicit, consistent, and concise identity verification procedures. Any scheister in a metro area looking to cash in on a class action suit filed on behalf of the iMules (who won’t see a dime of the settlement) will clean up as soon as they realize that moneybags Apple is in the middle of this.

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Graham May 4, 2014 at 0621

Yeah but what is the alternative? I worked at an Apple Store, and we often do knew what we were doing and will do what we have to to negate this from happening, but if their ID and everything checks out we must move forward or it would have been racial profiling.

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Bob April 26, 2014 at 0724

This has been happening for YEARS. Store management doesn’t care because they are moving units. If you’ve never worked in one of the stores, it’s all about moving units. There’s little concern for customer’s needs. That’s either in the Red Zone or the Family Room. I know, I worked in Retail for three years. I finally had enough and needed to get out before the company that I held in such high regard had been completely ruined for me. Our store’s managers didn’t care about selling to these scammers and the market leaders didn’t either. I’m sure Tim Cook would be pissed if he knew this was happening. But hen again, it’s all about moving units…

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Joe Apple April 26, 2014 at 2105

Every launch I worked saw literal bus loads of Chinese people who spoke no English come in with wads of cash to buy phones. We were instructed to sell to everyone, no matter what. The company could not be exposed to discrimination lawsuits. Bob’s take on this is far more evil than the reality. Maybe the leaders in his area truly didn’t care, but I can tell you that we all cared. A lot. But there was nothing we could do, so we sold, sold and sold some more.

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Bob April 28, 2014 at 0339

> But there was nothing we could do, so we sold, sold and sold some more.

And there’s the problem. Something could have been done. No one wanted to do it. Least of all your managers. At the end of the day, I bet they were looking at their metrics versus their market’s stores and were thrilled they were selling phones. I’m just glad I wasn’t working in the Red Zone once this practice started. We all knew it was a scam, but no one higher up wanted to do anything about it.

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Bob Erran April 28, 2014 at 1110

>And there’s the problem. Something could have been done. No one wanted to do it.
Not necessarily. The only thing that could have been done at the STORE level is for employees to follow the ID guidelines more closely (government issued photo IDs and residential billing addresses), or to be more aggressive about declining forms of ID (suspicion of falsification, that sort of thing). But all that puts the store and the store leadership at risk of criminal and civil suits for discrimination charges.

What needs to happen at Apple’s corporate levels (and all top-tier handset makers) is to pressure the carriers to do better credit checks and be more aggressive about declining contracts. It doesn’t do the carriers any good to sign a contract where the payee will default (collection costs and phone subsidies will out way profits), and again, as soon as the lawyers and state attorney generals start circling with class action suits about this predatory contract policy, Apple and the carriers will be paying out of what little revenue they receive.

The manufacturers will make more money selling direct to the underserved markets the phones are destined for anyway, even if they lower their margins to be competitive. The carriers are all scrambling right now to see who can race to the bottom anyway, that system is going to collapse (in the US anyway) as soon as the share holders realize they can’t increase subscriber numbers anymore, and that none of them are increasing revenue because no one wants to blink on the rockbottom-subscription price and cheap but glamorous handsets.

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Joe Apple April 28, 2014 at 1845

Eventually, policies changed and the amount of iPhones we would per person came down from 5 to 2, if I remember correctly. There were also other criteria that had to be met – I’ve been gone over 5 years so I really can’t remember what it was, but it helped somewhat.

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Ex Apple April 28, 2014 at 1230

At Apple Washington Square, they let customers go in and buy as many phones as they want. In fact, they don’t even really care about photo ID. For iPhone 5S, I saw at least 15-20 customers buying the iPhone, with the same ID, and credit cards. They would literally pass the photo ID from one customer to another, same with the credit cards.

Managers would say, were not iPhone police. As long as were selling phones, that all that matters to Apple.

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Bom Smith May 2, 2014 at 2055

This, as others have said, has been going on for years. Some stores have had to have armed undercover, off duty, cops present during store hours, due to threats to employees. It was finally halted in one state, when a certain carrier started clamping down on fraudulent attempts, from the same people coming in and buying multiple phones, multiple times per day. The purchaser would somehow get his address to show on the EasyPay device (apparently by getting someone at this certain carrier to add the purchaser as an account manager). It was interesting to see how one individual could be an account manager on hundreds of individual accounts, and hundreds of people would all be listed as having the same address.

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zoetmb May 19, 2014 at 1319

How are these “homeless” people paying for the phone? How are they signing up for the wireless service? Generally, you need a credit card for that, correct?

I don’t see this as an Apple issue, but I do see it as a carrier issue. What I don’t understand is when you sign the contract with the carrier and the phone is “enrolled” online, why a credit check isn’t done at that time. Presumably, the “homeless” people wouldn’t pass the credit check. It’s certainly not in the carrier’s interest to take on a customer who isn’t going to be paying the bill, especially when they’re buying a subsidized phone.

Maybe I’m missing something, but I don’t see this as a difficult problem to solve.

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