iPhone Scam: Homeless men in Memphis get taken for a ride

April 30, 2013: 7:17 PM ET

A local TV station's report triggers a Secret Service investigation.

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FORTUNE -- Sabrina Hall did a good job reporting a nasty little scam involving iPhones, carrier subsidies and homeless men willing to put their credit ratings on the line.

Hall is a reporter for WREG-TV, the CBS affiliate in Memphis, Tennessee. On a tip from a mission volunteer she took a camera crew to the local Skid Row to investigate a swindle being perpetrated on the city's down and out.

Her 3-minute report lays out the scheme pretty clearly. Homeless guys with valid IDs and decent credit ratings were promised $100 if they would buy an Apple (AAPL) iPhone on an AT&T (T) or Verizon (VZ) contract. They filled out the forms, handed over the devices, and discovered too late that they were stuck with monthly bills for iPhones no longer in their possession.



The con artists, meanwhile, sold the phones, presumably unlocked, for $600 or more. And in some cases they refused to pay the promised $100. "They gave me 10 cigarettes and a 24 oz. can of Colt," said one victim.

Hall's report is worth watching if only to see her march right up to the alleged perps and confront them with their misdeeds.

Thanks to her reporting, the U.S. Secret Service, which is responsible for investigating major fraud and other financial crimes, is on the case.

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