80 year old man loses over $700,000 to advance fee (419) scammers

With spam e-mails offering too good to be true come-ons filling up our mailboxes, we often forget that there are some very real people who get victimized after falling for one of them.

Of course with the availability of botnets -- which command legions of spam spewing zombies (compromised computers)-- even if only a few people fall for the scheme, the scammers still make a tidy sum off of other people's misfortunes.

An example of this can be found on the Newport Beach Police website, where an elderly gentlemen lost a lot of money (probably his life savings) to one of these schemes:

Recently, an 80 year old resident of the city learned he was a victim of an international lottery scam. He originally received an email claiming he had won an overseas lottery which required him to pay a processing fee to have the funds released. This scam continued for a two year period and ended with the victim losing over $700,000.00.

Scam operators (often based in Canada) are using email, telephone and direct mail to entice U.S. consumers to buy chances in high-stakes foreign lotteries from as far away as Australia and Europe. These lottery solicitations violate U.S. law, which prohibits the cross-border sale or purchase of lottery tickets by phone or mail.

This type of scam is often referred to as an Advance Fee (419) scam.

Of course, the lottery scam isn't the only one out there. There are work-at-home (job) scams, secret shopper, romance, lottery and auction scams being sent out in millions (billions ?) of e-mails, also. And if you don't have your own financial resources, the scammers will gladly provide you with a wide array of counterfeit financial instruments to negotiate. They could care less if you get arrested and expect that you will wire them any proceeds if you successfully pass the bogus instrument.

Please note, that just because you initially are able to pass the instrument doesn't mean that someone won't come after you, later.

The news release from Newport Beach Police Department offers the following advice on how to report scams like this:

The FTC works for the consumer to prevent fraudulent, deceptive, and unfair business practices in the marketplace and to provide information to help consumers spot, stop, and avoid them. To file a complaint or to get free information on consumer issues, visit ftc.gov or call toll-free, 1-877-FTC-HELP (1-877-382-4357); TTY: 1-866-653-4261. The FTC enters Internet, telemarketing, identity theft, and other fraud-related complaints into Consumer Sentinel, a secure online database available to hundreds of civil and criminal law enforcement agencies in the U.S. and abroad.

They also point to a page on the FTC website about cross border scams, which can be seen here.

If you are a more "visual type," I recommend going to fakechecks.org, which has a series of video presentations on this subject.

When sweepstakes scammers target the elderly should it be considered elder abuse?

Photo courtesy of speedwaystar at Flickr

Lottery and sweepstakes scams are on the rise and there seems to be little help for the victims, who fall for them. There also seems to be not very many consequences for the criminals, who are stealing people blind.

Paul Wenske of the Kansas City Star did a telling story in the Kansas City Star, which focuses on how senior citizens in the Midwest are being targeted and losing their entire life savings in the process.

From the Star article:

Canadian telemarketers spent two years bilking Walter Blevins of Arkansas City, Kan., out of $300,000 — his life savings.

The scammers initially told the 78-year-old former aircraft worker he’d won $2.2 million in a lottery. He just needed to wire cash to cover the taxes and other fees on his windfall.

The article also states that no one seems to be able to help these people once they've sent the money, but these crimes are now being classified as "cross border fraud."

The Missouri AG has tried to step in, but is limited in his jurisdictional powers to sending cease and desist letters to the scammers up North:

Seniors who make the mistake of responding to one mailing or phone call often end up on lists that are sold and resold, resulting in a flood of junk mail.

Late last year, Missouri Attorney General Jay Nixon launched “Senior Sting,” an ongoing operation in which 300 seniors were asked to save such solicitations. They collected 8,000 pieces of mail in the first month.

Don Burnett, of Louisiana, Mo., said at one time he was receiving eight mailings a day from foreign lotteries, sweepstakes and check schemes.

Interestingly enough, a lot of these solicitations are coming in junk mail and telemarketing calls and not from spam e-mails.

The article speculates that the fraudsters doing this are compiling telemarketing lists. While this is probably true, an information broker (InfoUSA) was recently accused of selling market segment targeted lists to some of these scammers.

Given the fact, most of these enterprises pose as legitimate businesses, I wonder how hard it is for them to simply purchase these lists?

The article also cites information from the Federal Trade Commission and the National Consumer League's Fraud Center.

The NCL site has an entire section on Elder Fraud, which can be reached by clicking, here.

Not to be outdone, the FTC also covers this subject in great detail on their site, here.

What's interesting to me is that I see elder abuse becoming a hot issue. The National Center for Elder Abuse is an organization that lobbies for stricter laws when senior citizens are abused.

While most of these telemarketing scams are considered fraud -- which many think of as a low priority crime, perhaps if when it involves senior citizens, we think of it as elder abuse -- the authorities on both sides of the border might begin to get more aggressive in prosecuting the criminals behind these schemes.

In my opinion -- stealing a senior citizen's entire life savings is nothing less and the criminals doing this deserve to be considered as what they truly are -- one of the lowest forms of life on the Planet!

Kansas City Star article, here.

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.