Saturday, May 06, 2006

Retailers Find their Stolen Merchandise for Sale on eBay

Shoplifting costs retailers billions of dollars a year and we all pay for it in the form of higher prices. On the low end, you have teenagers and opportunists "boosting" merchandise. Moving up the retail theft food chain you have people supporting drug habits and even organized gangs, who steal from retailers on a larger scale.

A common misconception is that the majority of losses stem from individuals stealing items for their own use. In fact, the majority of stolen goods are converted into cash.

With the increased focus on the traditional means of converting stolen merchandise into cash, such as refunding, common and professional "boosters" are flocking to eBay to accomplish their primary goal.

This was a matter of concern raised at the Retail Fraud Conference held in London recently. Penelope Ody of the Retail Bulletin reports:

Retailers at this week's Retail Fraud conference in London (May 4) had a new preoccupation adding to the usual concerns over dishonest cashiers, sweethearting and back door delivery thefts-eBay. According to Boots head of loss prevention and security, Robert Jennings, this is now in the top five areas of concern as retailers increasingly see their merchandise offered in bulk on the web auction site.

Link, here.

Note that the Jennings is saying for "offered in bulk," which would lead one to speculate that this isn't being done by the "opportunists" and is more likely the work of organized gangs.

Interestingly enough, there has been a lot of buzz recently on organized gangs involved in shoplift activity. Margaret Pressler of the Washington Post recently wrote:

Retailers and theft experts say criminals have discovered that large profits can be made relatively easily, and without much risk, by stealing merchandise from crowded, understaffed stores. They say the most stolen items tend to be high-priced, widely used products that are routinely sold in chain stores: over-the-counter medicines, razors, film, CDs and DVDs, baby formula, diapers, batteries, hair-growth and smoking-cessation products, hardware, tools, designer clothes and electronics.

Link, here.

AND another recent viewpoint from might lead one to believe that organized retail crime has ties to illegal immigration and terrorisim.

Liz Mart'nez wrote:

According to CIS Robert W. Nolen, a lead trainer in a course developed with Bureau of Justice Assistance grant money called "Understanding, Combating, and Surviving Terrorism," many criminals from terrorist countries specialize in the re-sale of stolen consumer goods. The profits from these enterprises are used to fund terrorist activities.

In many cases, men and women from El Salvador, Honduras and Mexico travel together, doing the actual stealing. Each person in the crew has a particular area of expertise, whether it be distracting store employees, doing the actual boosting, or driving the get-away vehicle. These professional thieves often earn $3,000 a week.

Link, here.

Although not stated in the article, if illegal immigrants are doing the stealing and criminals from terrorist countries are selling the goods, it makes me wonder how close their relationships could be?

Another issue, retailers have had with eBay is the sale of gift cards on the site. Whether purchased with bogus financial instruments, or issued as refunds (which could be a direct result of shoplifting), gift cards are another means of converting stolen proceeds into cash.

In another interesting article, again from the Washington Post, Ariana Cha wrote:

The shoplifters discovered some stores would allow them to return the goods without receipts for store credit or gift cards. They then sold those vouchers on the giant online marketplace. It was easy, instant and anonymous. The money flowed in -- they got 76 cents per dollar of stolen merchandise, a huge takeaway considering that shoplifters traditionally net 10 percent or less of the retail value of the items. The group made more than $200,000 in 10 months.

This is yet another example of many, where crimes of all sorts are occurring in the Internet auction world (particularly eBay). We can't hold auction sites accountable for being in collusion with criminals, but we can hold them accountable for not providing a safe shopping environment.

After all, how long would one of these retailers survive if they allowed the amount of crime to occur within their four walls with people walking around? My guess is that they would be out of business pretty quickly.

The same standard needs to be applied to the Internet and if this "business model" is to survive, the auctioneers needs to wake up and smell the coffee. Thus far, eBay has been able to blame everyone, but themselves; however as corporations become victims, the stakes are likely to grow.

Corporations have money and can afford a lot of lawyers.

Tiffanys might have already started this trend with it's pending litigation regarding the sale of counterfeit merchandise on eBay.

Thursday, May 04, 2006

PI's Get a Black Eye from the FTC for Selling Phone Records

In the information age, our personal information has been gathered, sold and indexed for profit. Unfortunately, all too often, this information isn't protected properly and used by people, who have no right to it.

Criminals, Snoops and Stalkers delight in being able to get their hands on people's personal information AND this results in people becoming victims of a lot of different crimes.

Recently Private Investigators of the Internet sort have been offering personal telephone records for sale. Since the information is being sold over the Internet, we can assume, it is being sold to anybody and everybody. The FTC is sending a message that this is illegal and some of these Internet PI's are probably going to end up with a "black eye."

Here is a press release from the FTC:

FTC Seeks Halt to Sale of Consumers’ Confidential Telephone Records

The Federal Trade Commission has filed federal court complaints charging five Web-based operations that have obtained and sold consumers’ confidential telephone records to third parties with violating federal law. The agency is seeking a permanent halt to the sale of the phone records, and has asked the courts to order the operators to give up the money they made with their illegal operations.

“Trafficking in consumers’ confidential telephone records is outrageous,” said Lydia Parnes, Director of the FTC’s Bureau of Consumer Protection. “It robs consumers of their privacy and exposes them to everything from snoops to stalkers. We intend to put a stop to it.”

In congressional testimony last February, the FTC said it was investigating companies that advertised on the Internet that they would obtain and sell telephone records. The testimony said that FTC staff had surfed the Web to locate companies that offered to sell consumers’ phone records, identified targets, and completed undercover purchases of the phone records. FTC staff followed up with warning letters to operators of 29 Web sites that continued to advertise the sale of phone records to the public.

The Telecommunications Act of 1996 states that customers’ phone records are their private property and can only be disclosed to the customer or with the approval of the customer. According to the FTC complaints in these cases, the defendants advertised on their Web sites that they could obtain the confidential phone records of any individual, including lists of outgoing and incoming calls, and make that information available to their clients for a fee. “The account holders have not authorized the defendants to obtain access to or sell their confidential customer phone records. Instead, to obtain such information, defendants have used, or caused others to use, false pretenses, fraudulent statements, fraudulent or stolen documents or other misrepresentations, including posing as a customer of a telecommunications carrier, to induce officers, employees, or agents of telecommunications carriers to disclose confidential customer phone records,” the FTC complaints state. The defendants then sold the records to third parties. According to a Commission complaint, one of the defendants, Integrity Security & Investigations Services, Inc., based in Yorktown, Virginia, also advertised, obtained and sold consumers’ financial records, including credit card information.

The agency charged that the practices violate the FTC Act and has asked the courts to permanently bar the illegal practices and order the defendants to give up their ill-gotten gains.

The FTC brought these cases with the invaluable assistance of the Federal Communications Commission. The FTC also acknowledges the assistance of Cingular Wireless LLC, Sprint Nextel Corp., and Verizon.

The defendants in these cases are: 77 Investigations, Inc., and Reginald Kimbro, based in Upland, California, and using mailing addresses in Jacksonville, Florida, Broomfield, Colorado, and Nashville, Tennessee; AccuSearch, Inc., doing business as, and Jay Patel, based in Cheyenne, Wyoming; CEO Group, Inc., doing business as Check Em Out, and Scott Joseph, based in Fort Lauderdale, Florida; Information Search, Inc., and David Kacala, based in Baltimore, Maryland; and Integrity Security & Investigation Services, Inc., Edmund L. Edmister, Tracey Edmister, and F. Lynn Moseley, based in Yorktown, Virginia, with a mailing address in Laguna Beach, California.

The Commission vote to file the complaints was 5-0.

Link, here.

If you spot this type of activity, here is where you can report it:

To file a complaint in English or Spanish (bilingual counselors are available to take complaints), or to get free information on any of 150 consumer topics, call toll-free, 1-877-FTC-HELP (1-877-382-4357), or use the complaint form.

For a previous post, I did about private companies selling your information, link here.

BIN (Buy it Now) Scams on eBay

Fraud on eBay has victimized a lot of people AND eBay rarely admits fault, or takes effective action against the fraudsters. The latest activity seems to be BIN (Buy it Now) scams.

Ina Steiner of AuctionBytes reports:

"Over the past month, eBay sellers on U.S. discussion boards have been discussing the problem of Chinese "BIN bandits" on eBay. The problem described by posters is that newly registered, zero-feedback members from China are buying BIN (Buy It Now) items from eBay sellers in a systematic fashion, and not following through on the transactions."

It seems the intent of these BIN (Buy it Now) scams is to get the merchandise shipped (0ff-eBay) and pay for it via a payment scam. This might be done with fraudulent cashiers checks (rampant in the world of internet fraud), or with one of the fraudulent debit/credit card numbers (sold in Internet Relay Chat) chatrooms OR even with one of the counterfeit money orders that are flooding the world of Internet scams.

Another problem with this scam is eBay refunding the fees to sellers when one of these BIN bandits backs out of a transaction. There seems to be a lot of "negative feedback" regarding eBay's process to get the fees refunded. Allegations are that the process is full of red tape and it often is difficult to get a refund.

Ms. Steiner stated in her article:

"One seller alleges that in a previous BIN bandit episode that lasted over 7 months, eBay only took action when sellers flooded the California and New York Attorneys General's offices with complaints."

Another speculation from the article is:

"Some eBay sellers have speculated that the BIN bandits might be members of eBay's affiliate program who receive generous compensation for sending new bidders to In the U.S., affiliates can earn between 40 - 70 percent of eBay's revenue on winning bids or Buy It Now transactions within 7 days of an affiliate action. Affiliates also earn between $12 and $20 for each new active confirmed registered user (ACRU) driven to eBay ("

Link to article from AuctionBytes, here.

eBay is taking limited action, but only the sort that won't limit their profits. For one, they suggest only using PayPal (which they own and profit from) and there are a lot of people out there, who prefer other methods of payment.

The article refers to a lot of this coming from China, but other points of compromise could be Nigeria, Singapore and those Eastern European nations. "Buy it Now" fraud seems to be the latest mutation of Auction fraud, which sometimes includes Advance Fee scams.

When reading the AuctionBytes article, I came across a great site dedicated to fraud on eBay (eBayMotorsSucks). The site is very up-to-date and a great resource to protect people. I highly recommend it.

Here are some previous posts, I've done on Auction fraud:

Do It Yourself Hacker Kits

25 Ways to Avoid Auction Fraud From a Seller's Perspective

eBay's Fraud Hall of Shame

Wednesday, May 03, 2006

A Case of the Fox Watching the Henhouse

The head of a Medicaid fraud unit has been stripped of her responsibilities stemming from testimony she gave two years ago about committing fraud. Since she was testifying against her boss, the Governor, prosecutors made a deal with her that allowed her to continue working for the people of Connecticut.

Apparently, Kristine Ragaglia, head of Connecticut's Medicaid fraud unit, is being assigned to administrative duties after the new governor (M. Jodi Rell) reopened the case.

Even now, she can't be fired immediately.

When the investigation came to a head against former Governor (John Rowland), she left her post as head of the child protection agency, did a brief stint in the attorney general's office and then was hired to run the Medicaid fraud unit.

This all happened after she admitted to a grand jury of committing fraud.

For the full story from the Associated Press, link here.

This illustrates what's wrong with a lot of our social programs and the legal system. In my opinion, further investigation should also occur into everyone, who allowed this to happen.

Sunday, April 30, 2006

Counterfeit Goods, A Borderless Problem

Counterfeit goods are a worldwide problem. With the global economy, the companies being counterfeited are spending a lot of money to try to stop the problem. But have they been successful?

The Daily Times of Pakistan is reporting:

A long campaign to remove pirated goods from shop fronts in Asia is finally having an impact but the crackdown has also changed the nature of the problem and new outlets are flourishing. The results of police raids, a slate of new laws and increased prosecutions can be seen across the region on the back streets of Beijing, Hong Kong, Taipei, Singapore and to a lesser extent Phnom Penh and Hanoi.

To counter the authorities, black market buccaneers are shifting their goods from roadside stalls and shopping malls to the Internet. Su's team now also conducts daily patrols of Internet sites. His point was echoed by industry observers in Mumbai and Seoul, where much like Bangkok and Jakarta, it's business as usual with counterfeit products brazenly on display in the tourist precincts.

In other words, the people behind counterfeiting are very adept at mutating their method of operation and carrying on.

Link to Daily Times article, here.

Of course, we in the West can blame Asia and the third world for this activity, but if weren't for people in the West buying these goods, I doubt it would have grown into an international (worldwide) problem.

AND the companies being counterfeited probably have something to worry about. With the popularity of Internet auctions, the business of counterfeiting goods is likely to grow. Internet auctions are big business and sites, such as eBay refuse to accept blame for the actions of their members. The sale of counterfeit goods is rampant on these sites and Tiffanys and Microsoft are spending a lot of money bringing legal action to try to curb it.

Some of these companies might be contributing to the problem in another way. After all, do you think all the $100.00 tennis shoes we buy are made in North America, or Europe? Not very likely in the global economy. In the quest for cheap labor, long regarded as one of the major expenses of doing business, many of our goods are produced in the same countries that produce the counterfeits. The end result is counterfeits of about the same quality as the item being counterfeited.

I doubt there will be any significant impact on this problem until all parties involved clean up their acts. We can blame and prosecute counterfeiters in far-away lands, but as long as there is a demand and a ready means to distribute these goods, the problem isn't going away.

I recently read a book by Tim Phillips, "Knockoff," which is best analysis of the situation I've seen.

If you are interested, I would highly recommend reading it.

A Rumor of Raids Against Illegal Immigrants

Nina Bernstein of the NY Times is reporting:

False rumors of random federal immigration raids have sent panic through immigrant communities around the country this week, emptying classrooms, work sites and shopping areas and sending thousands of people into hiding.

Whatever their source or intent, the rumors have given an unintended jump-start to a nationwide boycott many groups have planned for Monday, a day on which immigrants are being urged to stay away from work and to refrain from shopping to protest legislation that would make it a felony to stay in the United States without proper papers. At the same time, some immigrant advocates fear that the scare will keep people away from public demonstrations called as an alternative to the boycott. Immigration and Customs Enforcement offices have been deluged with inquiries about reports of random raids, from pizza parlors to construction sites, said Ernestine Fobbs, a spokeswoman. Many denials, she said, have failed to stem the rumors.

Link, here.

This is a sensitive issue, on one hand, no one wants to target hard working people trying to make a better life for themselves, but on the other hand, a lot of criminal activity is related to illegal immigration.

In fact, criminals (primarily the organized type) make a lot of money smuggling humans and other things over the border.

There is also the need to secure our borders from the very real threat of terrorism.

Unfortunately, it also seems that a lot of corporations turn a blind eye to all this criminal activity, which victimizes the general public and the immigrants, themselves.

Then there is the problem of social programs going bankrupt. Part of this is fueled by the needs of people, who are here illegally and the fact that the corporations hiring illegal immigrants aren't paying their fair share of the social costs.

Tomorrow should be interesting, but the fact remains that massive reforms and actions need to be undertaken to address this problem.

Perhaps, we should give preferential treatment to those illegal immigrants, who turn in the criminals profiting from their hard work?

Recognizing those, who exhibit the qualities of a good citizen should be one of the factors considered when deciding whether, or not they are fit to become legal.

It makes a lot more sense to use our resources planning raids against criminals instead of hard working people.

We need to create a fair and just way for hardworking people to immigrate and address the root of the problem, which is criminal enterprise.

California Predicts the Top Ten Scams for 2006

Much of the legislation to curb Fraud, Phishing and Financial Misdeeds enacted worldwide can be traced to laws in California. This is probably because of the amount of fraud that the Golden State has suffered in recent times.

Based on this, it would make sense to pay attention to what California predicts when it comes to fraud.

Here is what California predicts for 2006, courtesy of the Department of Corporations:

Senior Investment Fraud. The elderly are targeted for fraud for several reasons, such as older Californians are most likely to have a nest egg, own their own home or have excellent credit-all of which the con artist will try to tap into. As seniors plan for retirement, they may fall victim to such investment schemes as oil and gas, real estate, and annuities. They should be careful when solicited by mailers, telephone, and through free lunch or dinner seminars. In the past year, DOC assisted with a Southern California district attorney's office to bring criminal charges against three perpetrators for selling promissory notes offering a 12 percent annual return and then absconding with seniors' money. The defendants were charged with 850 felony counts of senior fraud.

Mortgage Fraud. Predatory mortgage lending involves a wide array of abusive practices and usually takes place in the subprime market, targeting borrowers with weak or blemished credit records. The most common lending abuses include excessive fees, abusive prepayment penalties, loan flipping, and other shady practices. In addition, foreclosure schemes are on the rise in which the prepetrators mislead the homeowners into believing that they can save their homes in exchange for a transfer of deed and up-front fees. The perpetrator profits from these schemes by remortgaging the property or pocketing fees paid by the homeowner. DOC, as part of a California task force comprised of local district attorneys and the California Attorney General filed a judgment in 2006 against a major subprime lender to resolve predatory lending allegations against the company, which will provide consumers $295 million in restitution and require sweeping reforms of the firm's business practices.

Affinity Fraud. These scams exploit the trust and friendship that exist in groups of people who have something in common, such as religious or ethnic communities, the elderly, military servicemembers, or professional groups. The fraudsters who promote affinity scams frequently are-or pretend to be-members of the group and enlist respected community or religious leaders from within the group to unwittingly spread the word about the scheme. In 2005, DOC brought enforcement actions against perpetrators of investment scams affecting members of the African American and the Korean American communities in Southern California, and a foreign currency scheme targeted at the Chinese American community in the Bay Area.

Identity Theft/Phishing. Identity theft is a trend that is often aided by technology and is the criminal activity of stealing someone's personal information for financial gain. More often than not, it involves "phishing," where Internet users believe that they are receiving e-mail from a specific, trusted source, or that they are securely connected to a trusted Web site, when that is not the case. As more investment and banking accounts, as well as 401(k) plans, are accessible online, thieves may attempt to obtain your access codes and passwords so they can transfer all of the assets out of accounts.

Online Escrow Fraud. In 2005, DOC enforcement actions to crack down on online escrow fraud increased by 16 percent from 2004. Escrow services fraud involves a perpetrator proposing the use of a third-party escrow service to facilitate the exchange of money and merchandise. The buyer sends payment to a phony escrow site that closely resembles a legitimate escrow service. Or, the seller sends merchandise to the bogus buyer, and waits for the payment through the escrow site, which is never received because it is a sham.

Commodities/Foreign Currency. Consumers should take special care to protect themselves from the many types of commodities fraud. They might be selling precious metals, such as silver or gold, or foreign currency, such as Euros, Yen or Deutschmarks. Be wary of any firm that offers to sell commodities or commodity futures or options, particularly if a firm promises high profits and low risks, or claims that they have made profits for all of their customers. The commodities and futures markets are very risky, and investors can lose their entire investment very quickly. In 2005, DOC took enforcement action against a firm and sales representatives in San Diego County who were not registered with the Commodity Futures Trading Commission to sell foreign currency contracts. Investors were not aware that the promoter had been barred from the National Futures Association, the self-regulatory organization for the futures industry, and a principal had been ordered by the NASD to pay damages in two separate incidents. Oil and Gas Scams. With oil prices at record levels and continued Middle East instability, DOC is concerned about the increase in oil and gas scams that it is experiencing. Perpetrators lure investors into unsuitable or fraudulent oil and gas ventures promising quick profits on a low risk investment. A San Diego scam using five different company names touted a 90 to 95 percent probability of striking oil in oil wells and returning investors' principal investment within a few years, which some customers never received. At least seven California residents invested more than $770,000 in the scam. The perpetrators failed to disclose prior convictions of mail fraud and wire fraud and that at least seven other states had taken administrative action against the sales agents for securities fraud.

Ponzi/Pyramid Schemes. Named for swindler Charles Ponzi, the premise is simple: use money from later investors to pay early investors. Instead of investing customers' funds, the operator pays dividends to initial investors using the principal amounts invested by subsequent investors. The scheme generally falls apart when the operator flees with all of the proceeds, or when a sufficient number of new investors cannot be found to allow the continued payment of dividends. Another very old form of fraud, a pyramid scheme, promises consumers or investors large profits based primarily on recruiting others to join their program, not based on profits from any real investment or real sale of goods to the public. A product may be used to hide the pyramid structure if the company's incentive program force recruits to buy more products than they could ever sell, or the sales occur only between the people inside the pyramid structure or to new recruits joining the structure, not to consumers out in the general public.

Military Fraud. There has been heightened concern at the federal and state government levels about the financial vulnerabilities of servicemembers and their families, particularly in light of recent deployments to Iraq and Afghanistan. Money woes can be especially difficult for National Guard and Reserve soldiers, who often have to make a rapid switch from civilian to military life when they get called up. DOC created the California Troops Against Predatory Scams (TAPS) program to provide financial education and consumer protection tips, supported by an effective and timely consumer enforcement program.

Disaster and Charity Scams. Scammers will attempt to capitalize on the aftermath of Hurricane Katrina and other disasters. Be careful of investment fraud scams which claim to be trading programs that guarantee high returns, with a portion going to aid relief efforts. Others promote businesses that stand to profit from relief and rebuilding efforts. Be cautious of the influx of Web sites soliciting for charitable donations to avoid phishing and identity theft.

It never ceases to amaze me at the lack of moral fiber fraudsters have. If California is correct, they will target the elderly, charities, people's homes, their identities, their retirement savings and even the military in time of war.

Besides supporting legislation to put these people away (for a long time), the most effective tool against fraud is awareness. It is a kind thing to share awareness to protect those, who might fall into harm's way by an activity that is becoming epidemic in nature.

I would like to thank the State of California for sharing this with us all.

Press Release link, here.