Every day, phones are ringing in homes across the country. Maybe yours. On the line: organized teams of con artists trying to bilk you out of thousands of dollars by impersonating your loved ones. One especially lucrative scam targets the supposedly vulnerable demographic of grandparents. A journalist and grandmother sets out to discover who's calling—and the real reason why the "grandparent scam" works so damn well.

One morning last spring, Richard Muller, my neighbor of some 40 years, was in the kitchen about to make his breakfast when his phone rang. A muffled and distraught voice came on the line: “Grandpa, I’m so glad you’re there. This has been the most awful day of my life. I’m in jail, and I can only make this one call.” Dick checked the area code—514—and thought it seemed right for the University of Oregon, where his grandson was a sophomore. (He was close: Eugene is 541.)

“Eric? Why didn’t you call your dad?” Dick wanted to know. The answer, in a quivering voice: “Because I knew you would help right away. Dad would get all excited and mad and I wanted to be back at the dorm before calling him.”

The story spilled out of the phone, fast and frenetic: Eric had gone out with his dorm mate; they’d had a couple of beers. His friend drank more, so Eric was elected to drive them home. A guy had swerved from the other lane, forcing Eric to hit a stopped car. They were OK, except that Eric’s mouth had been smashed by the airbag, which was probably why he didn’t sound like himself. A woman in the stopped car was taken away in an ambulance. Then the cops gave Eric a Breathalyzer test and said the alcohol level in his blood was .09: legally drunk. DUI. Again he pleaded, “Please don’t call mom and dad.” He had to go, he said, but a lawyer assigned to his case would call Dick soon.

Besides being my neighbor, Dick is the doting grandfather of four youngsters at or near college age. He is also an emeritus professor at the University of California-Berkeley, whose research in the area of microsystem electronics (MEMS, or those sensors that, for example, make it possible for iPhones to be read horizontally or vertically) is prizewinning on an international level. In his 80s now, he continues to travel the world, lecturing, consulting, and visiting former students. But on this particular morning, all he could think about was his grandson. He pushed away the doubts that were blurring his ability to concentrate on the problem at hand. He had to contain the pumping dread that was, quite probably, raising his blood pressure.

Within 20 minutes the phone rang again. On the line was a man who identified himself as William Reid, the attorney charged with helping Eric. He gave a brusque, professional rundown of the situation: The police report put the accident at 10:47 p.m. on Tuesday; the driver in the stopped car, a foreign diplomat from Trinidad named Faye M. Scott, was injured, but not seriously. She had been hospitalized and given a series of tests, which had turned up no long-range problems. Reid rushed on with the good news: He had been able to convince the judge to drop the DUI charge by proving that the police Breathalyzer was not calibrated correctly. And he had just returned from the hospital, where Ms. Scott had agreed to accept $1,950 to cover her costs. She was ready to sign a release just as soon as that amount was wired to a Trinidad address. The lawyer had all the details ready; he even had the address of the closest pharmacy in Berkeley where Dick could purchase a MoneyGram. Eric could be back in his dorm that night with a clean record—as soon as Dick phoned Reid with the registration number on the wire transmission. Eric’s fate was in his grandfather’s hands.

Driving to the pharmacy, Dick felt “more than a bit rocky” about the whole transaction. “Growing up in New Jersey,” he told me, “you learn to question everything.” He tried his grandson’s cell phone: no answer. Next he phoned his son, Paul, to casually ask if he had heard from Eric recently, careful not to break his promise. No, Paul hadn’t spoken to him.

None of the estimates about how much people are losing can come close to reality, because the great majority of victims refuse to admit they have been, as my neighbor put it, "suckered"—much less report the fraud to authorities.

Dick didn’t like how this was playing out, but he paid cash for the MoneyGram anyway, sent it off, and phoned Reid with the numbers. Grandpa to the rescue.

Not quite. The next morning there was another call, a reprise. Reid launched into an arcane explanation of why Eric was still in jail: There had been a bomb threat at the courthouse, which turned out to be a hoax, but for complicated legal reasons, Dick needed to send another wire—the initial $1,950 would somehow be refunded—but he had to do it now.

The warning lights flashed brighter. Dick told Reid he’d get back to him. Then he dialed his grandson’s cell phone again. This time the real Eric answered.

“I’ve been suckered,” Dick told me. In a mass email, he warned everyone he knew. “But curiously,” he said, “before the disgust set in, my first reaction was relief that my grandson hadn’t gone through any of this.”

Some in our group of friends—retired professionals with kids and grandkids out of the house—were amazed that Dick, of all people, had been taken in by what is widely known in law enforcement and the media as the grandparent scam. I wasn’t so shocked, but only because a couple of months earlier another good friend, also a retired professor and someone I would have sworn was unscammable, had turned out not to be. Then I learned that my hairdresser’s father had a close call. I had read the news accounts about an “epidemic” of scams on America’s growing elderly population. While stories about victims were easy to come by, I found myself becoming increasingly intrigued by the fraudsters: performers who enact a form of improvisational theater for an audience of one—at $1,950 (or much, much more) a ticket.

IT WAS MIDMORNING, SOME weeks after my friends had been swindled, when my phone rang. I said hello to a silent line. I hung up. It rang again; I hung up again. When the phone rang a third time, I glanced to see who could be so persistent. Area code 514. Oh no.

In fact, 514 is the area code of Montreal: Canada, it turns out, is to phone scams what Nigeria is to email fraud. Vancouver, Toronto, and bilingual Montreal have long been hubs of call centers for reputable firms—for catalog sales or orders for parts—and less-than-reputable enterprises pushing, say, credit cards to the financially vulnerable. (In the mid-2000s, some of those legitimate call centers were outsourced to places where labor is cheap, such as India, the Philippines.) Montreal, it turns out, is the Queen City of the grandparent scam, as well as a whole litany of other frauds, many of them aimed at telephone numbers in the U.S.

(Illustration: Clare Mallison)

When my phone rang that third time, I picked up and shouted, “Hello, hello, hello!” On the line was Daniel Williams, a supervisor at the Canadian Anti-Fraud Centre, returning my call. “I’m so sorry I hung up on you,” I blurted. “I thought you were a telemarketer. Or worse.” He laughed.

Williams collects data on a wide range of mass-marketing frauds for a project called COLT—the Centre of Operations Linked to Telemarketing Fraud—which joins Canadian and U.S. forces, including the Royal Canadian Mounted Police and such U.S. agencies as the Postal Inspection Service and the Department of Justice’s major fraud units. These organizations work together in an effort to contain the flourishing trade in illegal telemarketing by shutting down what they call “boiler rooms,” where fraudsters work. Not an easy job, according to Kevin Ross, a corporal in the Royal Canadian Police and in COLT’s Commercial Crime Section. He said it was like playing Whac-A-Mole: “We take one down, two sprout to replace it. Like mushrooms or parasites.” In one rare instance, a woman in Montreal pressed her ear to the wall of her condo and listened to grandparent scams being played out in the adjoining unit. Then she invited the Royal Canadian Mounties to put their ears to the wall: one boiler room full of moles, whacked.

IN THE FALL OF 2002, during the boom years of Canada’s call center industry, the Toronto Star sent reporters to write about that city’s telemarketing trade. “It wasn’t hard to get a job,” one of the undercover reporters, Robert Cribb, told me. “Anyone with a pulse could get in the door. You work strictly on commission.” He recalled going into phone centers where about 20 men and women sat at long desks equipped with telephones. He was given a script and told that it had been written by lawyers and had to be followed precisely, presumably to establish the outfit’s dedication to the rule of law.

One of the successful salesmen at the call center coached Cribb on the basics: tone of voice, how to be aggressive, the psychology of the sale. Cribb could see pretty quickly that all of the top salespeople broke the law with “half-truths and outright lies.” His first job was to sell a credit card for a $199 fee. He was provided with a list of names and phone numbers that included many people who had gone through bankruptcy. “They were desperate to re-establish their credit,” he told me. “Pretty soon they would be giving me their checking account number, the whole thing. It was stunning how easy it was.”

“Montreal and Vancouver are turning plastic promises into a billion-dollar industry,” Cribb wrote for the Star. Ethically, the reporter could not complete a sale, so within a day or two he would be fired, and go on to the next place. The exposé ultimately shut down several of the centers that had crossed the line.

In the Star series, Cribb wrote about a successful telemarketer, a law student named Vicki, who told him a student could make $800 a month at one of the city’s law firms, while “people can walk out of here with $3,000 a month.” Had Vicki chosen to move from the gray area of aggressive telemarketing to what insiders call “the Dark Side,” where there is no question about legality or morality, she could have walked out with $3,000 a week.

"If scammers could find a way to use social media efficiently, that would be a bonanza."

"YVAN" MOVED TO THE dark side, he told me, because he had failed in business. He was in his mid-20s, in debt, living in a disgusting apartment, and desperate. The prospect of earning good money by making telephone calls was irresistible. He’d stay in just long enough to pay off his debts, he told himself.

I faced Yvan this June across a conference table in a U.S. federal prison, in a room with just one narrow window that offered a sliver of daylight. I had agreed that I wouldn’t reveal his identity. Yvan is one of the few who have been arrested for the grandparent scam, and he knows there are others, higher on this criminal food chain, who would not approve of his revealing that industry’s business plans. Yvan’s is one particular view from inside the world of telephone fraud—and into the swindling of grandparents, his specialty.

His best guess is that Montreal has 20 to 30 scam outfits, each working as an independent unit that picks up and moves—from apartment to commercial office space and back again—about every six months. (Yvan says the term “boiler room” is seriously out of date.) One unit can consist of as few as four “reps” or “pitchers,” both men and women, who work the phones.

One rep plays the role of the grandchild, another the lawyer. On the phone, the voice of the “granddaughter” may quiver, and a grandparent can picture her in jail, close to tears. In reality this faux granddaughter is likely sitting back in some sorry room in Montreal, maybe a cigarette in hand, a vine of tattoos trailing up one leg. The lawyer with the take-charge voice? He may be lounging around in boxer shorts.

The reps set the cycle in motion, provoking small armies of grandparents to fire off wire transfers. Money goes whirling around the globe—through places like Spain, Ecuador, Mexico, and the Dominican Republic, where it can move untraced via MoneyGrams, Western Union orders, and Green Dot MoneyPaks from Walmart. All the fake Faye M. Scotts are in place with their bogus documents, collecting the money and sending it back to Montreal, minus a few deductions each time it changes hands.

Yvan told me he was no good on the phone, but he was good with details. He served as a middleman, working with the reps, and the Spanish, Trinidadians, Ghanaians. (“The Ghanaians were the best—they were trustworthy. I hated working with the Nigerians.”) In Mexico, he explains as an example, it is easy to pick up people willing to make $100 a pop to receive, and then pass on, the funds using two, three, or four forged IDs in as many names.

Each rep needed one phone to make the calls, another to receive them, and a third for personal use, Yvan told me. For the calls, the reps used prepaid cell phones that were tossed out either every six weeks or after they had scammed people out of about $10,000. In certain bars around Montreal, Yvan said, you could spot the scammers by the number of phones they carried.

(Illustration: Clare Mallison)

In the search for victims, fraudsters have been known to buy “lead sheets”—lists of names and phone numbers—by conning legitimate businesses such as Infogroup, a company that provides data “proven to increase customer acquisition” to clients like Time Inc., FedEx, and the March of Dimes. Companies like Infogroup are far from the only providers of call lists. The White Pages are a good source, the census reports excellent, Yvan told me. By purchasing a list of people over the age of 65, with assets of $100,000 or more, it’s not hard to turn up a trove of grandparents.

Why grandparents? I wondered. I wanted to know if, as many news reports indicate, it is because scammers figure that my generation tends to be easy to dupe. Yvan shrugged off the issue of age to emphasize the practical benefits of targeting the elderly: We are often at home, and our land-line numbers are more likely to show up on lists. But the most important factors are the geographic and psychological distances that usually exist between a grandparent and a grandchild. Grandparents aren’t likely to know the day-to-day details of their grandkids’ lives, but that doesn’t mean they won’t rally at a moment’s notice to protect a cherished relative.

In fact, across Montreal, the grandparent scam is only one of many impostor frauds. Some variations on the theme: For the Polish community, there’s the distant relative who went to Germany for serious surgery and finds himself without funds to pay the doctors. For local Muslims, it’s the traveling holy man, the imam, who is on his way to a mosque in Toronto but had his luggage seized in the U.K. and needs help to complete his journey. The Croatian version has a countryman with visa problems on his way to Canada, stuck on a ship docked in the Bahamas. The current hot impostor fraud has phone scammers posing as law enforcement officers, threatening arrest for some legal infraction—such as not turning up for a phantom court appearance.

Daniel Williams, of Canada’s Anti-Fraud Centre, had told me that the fraudsters scan social media sites like Facebook, but when I asked Yvan if that was right—as some of the victims I interviewed assumed—he quickly said no, that it takes too much time. The reps need to make 10 or 20 calls from a lead sheet before getting one hit, moving through the names fast. Unless they check area codes, they don’t know where their victims live, and unless the victim tells them, they don’t have a clue where the grandchild is either. But, Yvan offered, if the scammers could find a way to use social media efficiently, that would be a bonanza.

SEVERAL STUDIES SUGGEST THAT the people who run these frauds are mostly young, middle-class white men. Yvan, though, described the reps he worked with as “lower working class” men and women, across a range of ages. Some had failed businesses; some had drinking or drug problems. Scammers can come over to the Dark Side with no obvious skills but, with enough real-time rehearsal, discover they have a talent for true crime theater.

Once the rep in Montreal hits on a possible victim, the first challenge is to put a name to the grandchild being impersonated. Sometimes it happens spontaneously: When my neighbor Dick Muller heard the words “Grandpa ... I’m in jail,” he came back with a concerned “Eric?” And the swindle was on.

Several friends tell me they would never fall for the grandparent scam. Psychologists call this "the illusion of invulnerability." I suggest that, never having been subjected to this form of emotional torment, they should not be so sure.

Ellyn Lindsay, an assistant U.S. attorney in Los Angeles who specializes in international fraud, told me, “The scammers are in the business of getting people unnerved. They freak people out, get them worried and upset until they aren’t thinking right. They get them in an agitated state and keep it that way— they pull an emotional trigger.”

As the University of Chicago psychologist Sian Beilock, who studies how people perform under pressure, explained: “In these types of stressful situations, worries and distracting thoughts essentially rob people of the thinking and reasoning skills they need to make rational decisions. We have only a limited amount of working memory—our cognitive horsepower that supports reasoning and thinking—and in stressful situations part of this horsepower is taken away.”

Back in Canada, the scammer team of fake grandchild and fake lawyer understand the urgent need to move their victim into a state of unrelenting dread. There is a basic script and setting: a scared-to-death grandchild, a plea for secrecy. A car accident with a diplomat victim, a judge, a courthouse, a dollar figure. Tears and trembling. This script was followed for both of my friends, fashioned in one case to a grandson and in the other to a nephew. One diplomat was from Spain, the other from Trinidad—both easy pick-up points for wire transfers.

Should a wavering grandparent attempt to slip in an identifying question—asking for, say, the name of the family dog—the voice of the “lawyer” turns stone-cold and he jerks the grandparent back into his invented reality by suggesting a worst-case scenario. “Some of the reps push it to crazy,” Yvan told me. “They do evil things, especially if they are having trouble closing. They will tell you the person your grandson hit is on life support. Or even that he died. Cruel things. Anything to get them to wire the money.”

With this intense emotional pressure, the only way out could be for the false reality to implode: for the real grandchild to answer his phone, or—the last line of defense—for someone to step in to stop the charade. My hairdresser’s father was attempting to send off $5,000 to rescue his grandson when the clerk at Western Union intervened: “I smell something fishy about this,” he told the grandfather.

Several of my friends tell me they would never fall for the grandparent scam. Psychologists call this “the illusion of invulnerability.” I suggest that, never having been subjected to this form of emotional torment, they should not be so sure. A May 23rd article in the New York Times reported how Art Hurme, a retiree from the federal government, received a phone call from a woman who said she was his grown daughter, calling from Los Angeles. She was in jail, charged with drunk driving. She needed $3,000. Hurme drove to the local Walmart, bought six $500 MoneyPak cards, and sent them away. The call was a bad connection, he said, and his hearing is not great. The woman told a slick and convincing story; she answered every question he raised. He was warned against telling anyone, a good move on the rep’s part—even though she probably had no idea that Hurme’s wife happens to be Sally B. Hurme, a lawyer with the AARP and an expert on fraud.

Mr. Hurme’s dilemma: having to choose between the humiliation of being duped and the possibility that the woman on the phone was indeed his daughter—in jail, miserable, and counting on her dad. I read it as an act of courage that he chose to risk embarrassing himself and his wife rather than abandon his daughter in case she was, in fact, his daughter.

(Illustration: Clare Mallison)

From inside federal prison, Yvan told me that he feels disgraced about his life on the Dark Side. “We lived in a weird reality,” he said. “It is difficult to make friends when you live with lies, and the lies become a reality.” The fraudsters never witness the chaos they unleash in the lives of people they will never see, making it easy to believe they have done no real harm. “It’s something you do that doesn’t exist,” he said.

Or is it something that you rationalize away? As one accused fraudster said on a recent television news broadcast, “I figured people making $100,000 a year could lose a couple thousand here and there.”

THE MONTREAL PHONE SCAMS, Williams said, usually cost a victim between $1,500 and $3,000. (Some cases are extreme: Canadian Daniel Marcotte was extradited to the U.S., in July, where he is charged with having extorted $30,000 from a woman in Seal Beach, California, using the grandparent scam.) Yvan estimated that the reps each take in $2,000 to $5,000 during an average week; $10,000 in a good week; and in a rare great week, as much as $20,000. Trying to figure out how much money is lost each year to financial fraud is like trying to catch soap bubbles. The figure often floated is $40 billion a year in the U.S., citing a 1995 study by the National Institute of Justice. A 2005 Federal Trade Commission study estimated the total loss to financial fraud was about $2.92 billion a year in the U.S. (48.7 million individual frauds, with the average loss coming in at $60 per transaction).

Trouble is, none of these figures can come close to reality, because the great majority of victims refuse to admit they have been, as my neighbor put it, “suckered”—much less report the fraud to authorities. (Even when they do try, local authorities are often clueless about where to report it. Dick Muller’s local police department doubted it was even a crime since he handed over the money, and when he reported the scam to the university police at U.C. Berkeley because of his fears that professors were being targeted, they told him it was not a campus issue.) A 2012 report from a survey by the Financial Industry Regulatory Authority says there is compelling evidence that more than 75 percent of victims fail to come forward. Amazingly, even that figure could be low. Daniel Williams, of the Canadian Anti-Fraud Centre, wrote me that his group documents some $60 million a year in losses to personal fraud—but believes that this “is in the range of one to five percent of what is out there.” In other words, 95 percent or more of victims may not be reporting the crimes. Williams explained: “We originally got these numbers from a Canadian University study and they are borne out time and time again. Whenever we are given the victim lists seized from a raid on a suspect boiler room operation or from bank account records where scammers were getting victims to wire funds, reverse searches of our database will show three out of 130 victims logged on our system [to report the scam]. We are confident that Canadian losses alone should account for $1 to $5 billion a year.”

In 2013, reported losses in the U.S. and Canada for just the grandparent scam came to $3,386,400—less than half what it chalked up in 2010, thanks largely to the education of the public through wide press coverage in the U.S. But that number does not include the whole playbook of scams. As Williams pointed out, there are no figures for scams that have you winning the lottery, inheriting a fortune, being eligible for a luxury vacation, or any of the new versions that appear as fast as the Dark Side playwrights can churn them out.

When I asked Yvan what he thought it would take to put a stop to all these scams, he didn’t hesitate: “A combination of law enforcement and shutting down the money transfer industry.” This answer is, of course, bleak, since much of the world’s business—both legitimate and not—depends on fast global wire transfers. As the Wall Street Journal reports, wire fraud is “huge ... the problem is epidemic.” As for law enforcement, the telefraudsters are neither physically violent nor can they force their victims to send money. So when they are caught, the Canadian police give them what one scammer said was “a slap on the wrist.” (U.S. laws are tougher.) On the issue of policing wire transfers, you get the feeling that the federal agencies responsible for protecting consumers have trendier fraudsters to fry: Since its launch in 2011, the Consumer Financial Protection Bureau has focused on mortgage, student loan, or credit card-related abuses. The Department of Justice has been focused on high rollers, such as J. P. Morgan, in the wake of the financial crisis. In one hopeful sign, in February the Federal Trade Commission confirmed it was investigating Western Union over allegations that the company looked the other way as fraud-induced payments flooded their wires over the last decade.

THIS PAST JANUARY, SEARS announced that it would eliminate nearly 800 jobs in its Montreal call center by the end of this year, outsourcing the English-language division to the Philippines and the French division to Europe. One longtime employee bemoaned the loss of his job, and the prospects for another, explaining to a local news outlet that “the market is competitive.” If a job doesn’t show up for long weeks, any of the unemployed might turn to one of the telemarketing centers that pay commission only, where the line between legal and illegal is often blurred. And if that doesn’t work out, and debts and desperation pile up, there is a guy in a bar—someone carrying three cell phones, who could suggest another possibility: “Hey, you could be like a secret agent”—become a rep, a pitcher, a fraudster. And sure, stay only until your debts are paid off, until you get back on your feet.

For more on the science of society, and to support our work, sign up for our free email newsletters and subscribe to our bimonthly magazine. Digital editions are available in the App Store (iPad) and on Google Play (Android) and Zinio (Android, iPad, PC/MAC, iPhone, and Win8).