Friday, June 20, 2008

Mortgage crooks arrested nationwide in FBI sweep!

Recently, the FBI hinted that a lot of criminals might be getting arrested for contributing to the mortgage meltdown.

It appears that they are now backing up their words with some action.

From the FBI press release:

From March 1 to June 18, 2008, Operation Malicious Mortgage resulted in 144 mortgage fraud cases in which 406 defendants were charged. Yesterday, 60 arrests were made in mortgage fraud-related cases in 15 districts. Charges in Operation Malicious Mortgage cases were brought in every region of the United States and in more than 50 judicial districts by U.S. Attorneys’ Offices based upon the law enforcement and investigative efforts of participating law enforcement agencies. The FBI estimates that approximately $1 billion in losses were inflicted by the mortgage fraud schemes employed in these cases.

Most notably two Bears and Sterns executives were taken off the job in handcuffs:

Today, the U.S. Attorney’s Office for the Eastern District of New York announced an indictment against two senior managers of failed Bear Stearns hedge funds, charging Ralph Cioffi and Mathew Tannin with conspiracy, securities fraud and wire fraud. Cioffi was also charged with insider trading. The indictment alleges that the managers marketed the two funds as a low risk strategy, backed by a pool of debt securities such as mortgages. The indictment alleges that by March 2007, the managers believed the funds were in grave condition and at risk of collapse, but made misrepresentations to stave off investor withdrawal. The funds subsequently collapsed in the summer of 2007 resulting in approximately $1.4 billion in losses to investors.

There is no doubt that a lot of dishonest and very greedy people took advantage of the public at large.

Some people are comparing the mortgage crisis with another economic crisis, where only a rumor of fraud has been suggested thus far.

One of the reasons housing costs skyrocketed and them plummeted was a lot of property flipping. "Many experts blame the US real estate bubble in 2004 and 2005 on investor speculation and "irrational" flipping. Very low interest rates were a root cause, but speculation and flipping compounded the bubble," according to Wikipedia.

Most of this was based on speculation that the price would keep going up.

Now it is rumored that a key reason energy prices are skyrocketing is speculation in the oil market. Huge chunks of oil are bought on paper and paid for with credit. In a lot of instances, the oil is never even actually delivered. The result is that we hear that the price is being driven up because of demand.

Bill O'Reilly (Fox News) did a pretty interesting talking point on this subject, where he said:

Bottom line: Oil is being artificially marketed, and because we all need oil to live, we must pay what the industry dictates because there is no competition.

Add to this the oil speculators. These are people who buy oil contracts for delivery in the future. Only they don't really want the oil. They want the paper.

Speculators bet that oil prices will go higher, and if they do, they sell the paper to concerns that will actually take the oil. If prices go lower, the speculators lose their money.

But get this. The speculators don't have to pay cash to buy the paper contracts. They use credit, so it is easy to play this Las Vegas-type game.
Being just an average person, this leads me to believe that we might see (my opinion) some scandals come out in the future in the energy market, just as we are seeing them now come out in the mortgage meltdown now.

At the end of his talking point, Bill lamented that any help might be a long way off because of all the special interests the oil industry has in Washington.

Interestingly enough, a scandal is now brewing about two prominent Washington types getting sweetheart deals from a mortgage company, while all the real estate speculation was ongoing. The latest is that this money will be given to charity, but it illustrates Bill's last thought on why relief for the average person in the oil crisis might be a long way off.

Granted this is a speculation on my part, but it doesn't appear that it's illegal to speculate, does it? Well I suppose, as long as the person doing the speculating isn't ripping the general public, it isn't.

A short while ago, I did another post on this matter:

Does our current economic situation make sense?

Given that the U.S. Commodity Futures Trading Commission is hosting a International energy market manipulation conference to look into this, perhaps we will hear a rumor that the authorities are hot on the trail of this issue, also.

Maybe some wishful thinking on my part, but remember I'm only speculating!

FBI press release on the recent arrests, here.

Wawa gas pumps latest target of payment card skimming devices!

When I'm traveling on business in the Mid Atlantic, Wawa is a great place to stop. They literally provide just about anything a road warrior would desire.

Unfortunately their self service pumps are the latest targets of payment card (credit/debit) skimming devices. Just about any self service machine that accepts payments, or dispenses money (ATM machines) can have a skimming device mounted to it.

CBS 3 Philadephia reports:

With gas prices rising and the state of the economy in disarray, even thieves are resorting to more creative measures. At least two Wawa filling stations in the Philadelphia area have fallen victim to a string of recent credit card skimming scams.

"Just like any identity theft, until you see it on your credit card or bank statements, it's really important to check for any usual transactions," said Ela Voluck of AAA.

Thieves place a device over the card reader and can instantly record the information on the card.

Unfortunately, no pictures of the devices at Wawa seem to be available.

Recently, Redbox, a company that dispenses movies at self-service kiosks were the target of skimming devices. I have to commend them for being transparent and proactive by letting the public see exactly how this occurs.

They provided a warning on their website, along with some interesting pictures.

The only defense a person has is to carefully inspect these devices at self service places, such as the gas pumps at Wawa. Some of them are pretty bad and will literally fall off if handled too roughly.

Here are some pictures of skimming devices:

Skimmers are mounted on ATM machines, or any remote self service device. There are also portable ones that dishonest employees use to skim a card when they take it for payment.

Google has a neat sampling of pictures, which can be seen, here.

Monday, June 16, 2008

$60 billion would provide a lot of health care to the people who need it!

The candidates all are talking about making the health care system available to everyone. I wonder if any of them have considered that a lot of tax dollars are already being handed over to crooks scamming the current system providing free healthcare to the general public? Some estimate that this costs the taxpayers up to $60 billion a year.

$60 billion would go a long way to helping people, who need medical attention and can't afford it.

Carrie Johnson of the Washington Post writes:

All it took to bilk the federal government out of $105 million was a laptop computer.

From her Mediterranean-style townhouse, a high school dropout named Rita Campos Ramirez orchestrated what prosecutors call the largest health-care fraud by one person. Over nearly four years, she electronically submitted more than 140,000 Medicare claims for unnecessary equipment and services. She used the proceeds to finance big-ticket purchases, including two condominiums and a Mercedes-Benz.
And while law enforcement efforts are admirable in going after this, it is is being described as a game of "Whack a Mole."

The article sums up the problem rather nicely:

A critical aspect of the problem is that Medicare, the health program for the elderly and the disabled, automatically pays the vast majority of the bills it receives from companies that possess federally issued supplier numbers. Computer and audit systems now in place to detect problems generally focus on overbilling and unorthodox medical treatment rather than fraud, scholars say.

"You should be able to spot emerging problems quickly and address them before they do much harm," said Malcolm Sparrow, a Harvard professor and author of "License to Steal," a book about health-care fraud that advocates for greater federal vigilance. "It's a miserable pattern, a cycle of neglect followed by a painful and dramatic intervention."

Southern Florida was targeted by the authorities because a large amount of money seemed to be going up in smoke there, according to the Washington Post article.

Miami became a focus for Medicare fraud after investigators realized that a good portion of the medical suppliers weren't even open during normal business hours and didn't even have working telephone numbers (?). Even worse, the Government Accountability Office has been calling out that these programs had weak oversight for about a dozen years (?).

Southern Califonia is also one of the targets in the latest efforts to correct this problem:

The strike force recently established a base in Los Angeles, another area rife with fraud. Prosecutors announced criminal charges last month against two medical equipment company owners who are accused of falsely billing Medicare more than $2 million. Plans call for a similar rollout this fall in Houston, another potential fraud hot spot.

The political candidates can promise free health care for everybody -- but unless we start exercising a lot more due diligence spending this money -- any system is likely to go broke in a short time. I'm all for better health care for all, but we need to start making sure the money is being spent on the people receiving the care.

Spending even more money on law enforcement task forces to combat a problem described as a game of "Whack a Mole" isn't very proactive, either.

What is needed is a little more common sense in running these programs. If the programs are this mismanaged, I would propose investigating the enablers of this problem (the program managers) and find out why they are wasting so much money. By doing this, we might start spending the money where it should be spent, or on people who need medical attention.

This might go a long way to having the means to provide care to the people, who the money was earmarked for in the first place!

Washington Post article, here.

Sunday, June 15, 2008

Credit Card fraud used to fund Terrorist Organization

Here is an example of cyber crime being used to fund terrorism. Fortunately, the person behind this is now behind bars.

The Sri Lanka Ministry of Defence website reported:

The mastermind behind the international credit card fraud for funding the LTTE terrorist organization has been arrested by the Special Task Force (STF) personnel while conducting a search operation in the Wellawatta area on Friday, June 13.

The suspect Anandan, alias Neshanadan Muruganandan, was in a super luxury apartment in Wellawatta at the time he was arrested by the special police team, sources said. He had a large number of Personal Identification Numbers (PIN) and bank receipts issued by both local and foreign banks, amounting to a massive sum of money, over Rs. 100 million, in his possession when he was arrested.

This isn't the first time a tie between payment (credit/debit) card fraud and funding terrorism has been suggested. In the past, it's been widely reported that Al Qaeda training manuals teach their minions to use credit card fraud as a way to survive in foreign lands.

There has also been speculation that organized crime and terrorists mingle in the underground economy when it suits their needs. In another story, also found on Sri Lanka's Ministry of Defence site, it mentions that 130,000 passports were stolen and that some of them were provided to the highest bidder (Al Qaeda).

Also mentioned in the interesting story is other ways this terrorist group, the Tamil Tigers, obtain their funding.

While I doubt organized criminals, and or terrorists are going to admit they are taking advantage of stolen personal and financial information in public, it could be a bigger problem than we realize (?).

Here in the West, Suad Leija and her husband have been trying to get this message out to everyone on their site (Paper Weapons). If you are interested in understanding how paper (and sometimes plastic) weapons might be used by people with twisted political objectives, I highly recommend visiting their site.

Send Dad a "Phishy" E-Card for Father's Day

In case you forgot to send a Father's Day card, here are some free ones courtesy of the fine folks at the Federal Trade Commission designed to educate him about phishing, which is a leading cause of identity theft on the Internet.

These were sent to me courtesy of Alvaro Puig from the Federal Trade Commission’s Division of Consumer and Business Education in Washington , D.C.

Please note that most of the consumer awareness materials from the FTC are available in both English and Espanol.

Avaro wrote:

With Father’s Day right around the corner, I wanted to let you know about our Father’s Day phishing e-card. This e-card, which is available at (and in Spanish) gives “Dear Old Dad” some useful tips on how to recognize and avoid phishing emails and protect his personal information. The e-card also links to our newly released “Phishy” videos that are designed to create awareness of phishing in a humorous way.

The FTC and their government agency partners provide a lot of free educational resources about fraud, phishing and financial misdeeds on the Internet at A lot of these presentations are visual and great tools to learn, or spread the word!

In the war against fraud, there is no more powerful tool than communication. The reason for this is that no matter how good a scam is -- human beings are less likely to fall for it if they are aware of the consequences.

More consumer awareness information can be obtained on the FTC's website and it is available in both English and Espanol.