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August 28th, 2003
by Roger H. Schmedlen, CPP, CFE, CII, MIPI
(Published in Campus Safety & Student Develpment, January/February
2002 Edition)
Consumer fraud is rampant in America. The FBI estimates
there are 14,000 separate illegal telephone sales operations
defrauding consumers in the United States every day. The
Better Business Bureau reports that consumers lose an estimated
$40 billion a year through telemarketing fraud alone and
a Louis Harris Survey conducted for the National Consumers
League found that 92% of adults in the United States reported
receiving fraudulent telephone offers.
In an article like this, it is not possible to touch on
all the scams making the rounds, but the following are some
of the more successful frauds being used to bilk consumers
today.
The Nigerian Letter: The Granddaddy of Scams
Probably the most prolific consumer fraud today is the
venerable Nigerian Letter Scam. However, since the Postal
Inspectors have finally caught on to the fact the fraudsters
use counterfeit stamps on their mass mailings, these spurious
offers are now more likely to arrive via broadcast fax or
e-mail. This crude fraud is so successful that the 419 Coalition
believes it to be the third largest industry in Nigeria.
Because of its record of success, this scam has been adopted
with slight variations by fraudsters operating from other
West African nations, such as Ghana, Sierre Leone, the Gambia
and the Ivory Coast. In fact, some have been tracked back
to the U. S.
Framework for fraudulent pitch. These fraudsters have not
picked up on our politically correct tendancies, so most
of these offers start off "Dear Sir," although
some omit any salutation whatsoever and after noting "Urgent
Request" get right to the meat of their spurious offer.
Typically the author of the letter claims the title of
chief, doctor, director, accountant or attorney and often
alleges to be an official of a Nigerian ministry, a Nigerian
gas, oil or steel company, or a banker. In other versions,
the writer relates a sob story, usually involving the murder
of a parent or an entire family, and goes on to chronicle
a perilous flight from the country.
There are many variations of the letter, but the gist of
the offer is that the writer has from $20 - $60 million
U. S. dollars--usually implied to have been embezzled from
the government by over invoicing--and needs the intended
victim's help in transferring this money out of Nigeria
or another West African nation. In the sob story scenarios,
the funds are usually alleged to have been embezzled by
the deceased and left in a safe deposit box for the writer.
The letter requests that the target allow the writer to
transfer the funds to the target's bank account--and for
providing this service, the target will be allowed to keep
$8 - $15 million of the funds. The "Luigi version"
is particularly amusing as the fraudster claims to have
previously sent another $20 - $30 million to Luigi, an Italian
who proved to be a villain and absconded with all the transferred
funds. The writer explains he was understandably disappointed
in Luigi and goes on to say this is why he is now contacting
the intended victim, a person who has been "highly
recommended" by an undisclosed but trusted party.
Appeal dampens recipient's caution. Ignoring the fact that
if such an offer was authentic (which it never is) it would
constitute international money laundering, a surprising
number of otherwise rational people respond to these fraudsters.
One Wharton MBA, for example, lost $50,000 in this scheme.
Those who respond then either have their bank account cleaned
out or become victims of various, creative advanced fee
scams involving their fronting up to $500,000 in an effort
to complete the bogus transfer of nonexistent funds.
Newer variation more aggressive. In some cases, however,
the targets have even been enticed to travel to Nigeria,
where some have been kidnapped or killed. A recent version
is more aggressive and the first contact letter asks that
the victim immediately make arrangements to travel to Ghana
to open a transfer account. Some of the more sophisticated
"419 fraudsters" target specific groups. Recently,
for instance, personalized targeted offers have been sent
to Mormons, veterinarians and small village council officials.
In 1992, Washington Post Foreign Correspondent, Keith Richburg
stated, "Welcome to Nigeria, world capitol of the business
scam. Shake hands, but be sure to count your fingers."
This is good advice when dealing with any unsolicited offers
that sound too good to be true--whether they originate in
Nigeria or elsewhere.
Chain Letters--Another Popular Scam
A chain letter is a "get rich quick" scheme that
promises that your mail box will soon be stuffed full of
cash if you participate. The victim is advised he or she
can make thousands of dollars every month by following the
detailed instructions in the letter.
Structure of offer. These offers usually include names
and addresses of several people, some of whom the victim
may even know. The victim is instructed to send a certain
amount of money, usually $5 - $10, to the person at the
top of the list, then eliminate that name and add his or
her name (the victim's) to the bottom of the list. The victim
is then to mail copies of the letter to other individuals
who will hopefully repeat the entire process. The letter
claims that if the victim follows this procedure, their
name will gradually move to the top of the list and they
will begin receiving money.
Solicitation of money or valuables with promise of gain
is illegal. Chain letters are illegal if they request money
or other items of value and promise a substantial return
to the participants. Chain letters are considered a form
of gambling, and sending them through the mail (or delivering
them in person or by computer, but mailing money to participate)
violates Title 18, United States Code, Section 1302, the
Postal Lottery Statute. Recently, high-tech chain letters
disseminated over the Internet have begun surfacing.
Chain letters don't work because the premise that all participants
in a chain letter will be winners is mathematically impossible.
Also, many people participate, but do not send money to
the person at the top of the list. Often, too, fraudsters
create a chain letter that lists their name numerous times--in
various forms with different addressee. Thus, in reality,
all the money in a chain is going to them.
The United States Postal Inspection Service (USPIS)
warns:
"Be doubly suspicious if there's a claim that the
U. S. Postal Service or U.S. Postal Inspection Service has
declared the letter legal. Neither the Postal Service nor
Postal Inspectors give prior approval to any chain letter."
Other Common Scams
College Campus Card Scam: In these cases,
high school seniors receive an official-looking mailing
stating that a "Campus Card" is required for many
services, purchases and privileges at the institute of higher
learning which the high school senior plans to attend. However,
no such card is actually required or recognized by such
institutes. The company sending the mailing requests a fee
for this card and states or implies a connection with the
college or university, which in fact, does not exist.
Counterfeit Goods at House Parties: Bargains
on Coach, Dooney & Bourke, Coogi Australia, Chanel and
similar high end designer goods are often found at house
parties. The fraudster often claims the low prices apply
because the goods are discontinued designs or there are
minor imperfections. These goods, however, are always poor
quality counterfeit products. No legitimate designer goods
are ever marketed through house party schemes.
Advanced Fee Scams: These come in a variety
of forms. Some can be quite creative, while others are rather
lame and obvious. In most cases, the intended victim is
contacted and advised by the fraudster that he or she has
a large amount of money coming, but that there is a small
fee required first. Typical examples are claims that the
victim won a sweepstakes or lottery, but that up front "taxes"
must be paid by credit card over the phone before the winnings
can be forwarded. In other cases, the victim is told that
he or she will receive a large settlement from an estate
or class action lawsuit, but some fees or costs must be
paid first. Often the perpetrators of these scams allege
that they are calling from a foreign country and request
that funds be overnighted to them out of the U. S. Some,
in fact, do call from overseas. The bottom line here is
that people generally do not get something for nothing and
any advance fee request is a red flag.
Credit Cards for Persons with Bad Credit:
This is a variation of the advanced fee scam which targets
persons with poor credit histories or other financial problems.
Although some of these offers sound legitimate, these schemes
can cost the victims a lot of money and the credit card
allegedly being offered will never be obtained. In these
scams, the intended victim is contacted by a solicitor claiming
that for a fee (usually $25 - $75) he or she can get you
a "pre-approved" major credit card--usually VISA
or MasterCard--or, for a fee, can establish that you are
credit-worthy enough to be issued such a card. Usually,
these fraudsters will state that the card can be obtained
without a credit check. After the victim pays the fee, a
card may actually be received, but rather than a regular
major credit card, it is a single-use credit card--that
is a card that can only be used to purchase goods from one
source, a business owned by the issuer of the card. In other
words, the card received is not the standard credit card
which can be used at any business, but a card which can
only be used to buy products from the issuer of the card--usually
a catalog sales operation offering substandard or overpriced
goods. In other cases, victims who pay this fee just receive
a list of banks that issue credit cards, perhaps along with
instructions on how to apply.
Fake U. S. Customs Scam: In these cases,
the fraudster calls claiming to be a U. S. Customs agent.
The pitch continues that the intended victim received a
package from overseas and that when the package was checked
by Customs, exceptionally valuable contents were discovered--such
as expensive jewels, negotiable checks, bearer bonds, or
even cash. The fraudster then states that there is a duty
which must be paid before this valuable package can be delivered
and the intended victim is asked to provide a credit card
number so the duty can be charged and the package forwarded.
Fake Telephone Repair Service Scam: In
these scams, a spurious telephone repair technician calls
the victim's home and claims there have been problems on
the line and assistance is needed in tracking down the cause
of the problem. He or she then asks that the resident dial
90#--that is, nine, zero, pound--and then hang up. If this
is done, the caller is able to utilize the phone line of
this person to make long distance calls from a remote location.
These calls will, of course, be charged to the victim.
Area Code 809 Scams: In these cases persons
receive a notice promising a desirable service, a travel
deal, a bad credit repair--or items such as free prizes.
In other cases, the recipient is told that he or she is
a sweepstakes or lottery winner or is "qualified"
for something or other. In one variation, a fake invoice
is sent to the target and the invoice lists a number to
call if there are questions. The number is prefixed by the
area code 809. Although this area code sounds like a U.
S. code, it is actually a Caribbean prefix, which can be
used to charge callers by the minute in the same manner
as 900 number services--but without the caller being made
aware of the charges until the next phone bill is received.
Free Prize Scams: In these scams, intended
victims are notified by mail that they have won a free prize
which is one of five or so items listed. Sometimes these
may include new cars, houses, expensive vacations, etc.
as well as one item of little value. To get the prize, the
victim must call the sending company. There usually is a
free prize, but shipping and handling charges apply. For
instance one "winner" paid $69 shipping and handling
for his free $1,000 savings bond with a 30 year maturity.
(These are available through the U. S. government for $50.)
In other cases an "all terrain vehicle" turned
out to be a lawn chair with wheels and a "sport fishing
boat" was an inflatable raft. The scam artists make
their profits by requiring the victim to pay exorbitant
shipping, handling and/or processing fees--or require that
the victim purchase inferior or overpriced goods sold by
high pressure salespeople working from the boiler rooms
where the victim's calls are directed.
Internet Spam Scams: Spam got it's name
from the old Monte Python skit where a group of Vikings
invaded a restaurant chanting "spam, spam, spam"
drowning out all the conversations of the other customers.
Most, spam messages are frauds, rip-offs or phony get-rich-quick
schemes, often punctuated by dollar signs and screaming
capitalized words. Most spam messages contain an easy method
to be "removed" or "unsubscribed" from
the list via e-mail so as to avoid receiving future e-mail
spam. However, rather than being taken off a list, such
a response simply confirms the spammer has hit an active
address making the address more salable to other spammers.
In other cases, the spam victim is instructed to unsubscribe
by phone or fax to a 900 or 809 area code number.
Prison "Pen Pals" Scam: Prisoners
run ads in supermarket tabloids targeting lonely women and
after proclaiming their innocence or admitting to making
a minor mistake gain the confidence of their target over
time. Proposals of marriage are not uncommon. Usually these
fraudsters won't ask their victims for money, but rather
eventually ask that they cash a money order for them and
forward the proceeds to a friend who is working on getting
the prisoner released. Before sending money orders to the
target, however, the jailbird alters the face value from
a couple of dollars to $250 - $500. Victims are usually
instructed to hold the altered money order as collateral--or
deposit it in their bank account, buy a cashiers check with
cash and send it on to the prisoner's confederate. When
the victim, who is the one taking the hit, eventually finds
her account debited by her bank to cover the altered money
order and informs her prison paramour, she may receive a
response with an outside post mark, indicating that he has
been inexplicably released and can soon cover the loss--or
he may claim to have been unwittingly victimized by another
prisoner. In any event, the victim will soon receive a Dear
Jane letter while her pen pal stays busy conning up to 100
other victims. (Male victims may also be conned in this
manner by male prisoners posing as females.)
Unsolicited Merchandise: This scam has
been around since Pluto was a pup, but still provides a
profitable business to scam artists. However, with the exception
of clearly marked free samples and merchandise mailed by
legitimate charitable organizations soliciting contributions,
it is illegal to send merchandise to someone, unless that
person has previously ordered or requested it. These rules
are codified in Title 39, United States Code, Section 3009.
That section of the Postal Reorganization Act of 1970 incorporates
these protections for American consumers and makes the mailing
of unordered merchandise unfair methods of competition and
unfair trade practices under the law. Consumers are under
absolutely no obligation to pay for (or return) any unsolicited
merchandise and in the U. S. it is illegal for a company
that sends unordered merchandise to follow the mailing with
a bill or dunning or any type of collection communication.
Other common frauds to be aware of include the
following:
- Scams geared for obtaining credit card numbers and personal
information;
- Unsolicited investment opportunities;
- Oil and gas well investment opportunities;
- Fake police and fire fighter solicitations;
- Telephone "slamming" (switching services without
customer's knowledge);
- Fraudulent charity scams;
- Checks which when endorsed sign the consumer up for
an overpriced service;
- Franchise or distributor get rich quick schemes;
- Low cost health insurance frauds (one 93 year old woman's
supplemental health care plan covered only maternity benefits);
- Fake inheritance scams;
- Advance fee loan application scams;
- Foreign lottery frauds;
- Multilevel marketing schemes and pyramid-style Ponzi
scams;
Missing persons scams;
- Deceptive government-looking mail scams;
- Free prize scams;
- Free internet "viewers" (once installed they
may automatically connect your computer to a 900 number);
- Abandoned property and unclaimed asset frauds;
- Remote land sales frauds;
- Scams providing services for a fee which are offered
free from the government;
- Free vacation scams (pay for an upgrade or end up at
the Bates Motel);
- Work from home info scams;
- Fake medical cures and deceptive vitamin & food
supplement scams;
- Phony "credit repair" services;
- Work at home assembling products scams (buy their components);
- Work at home stuffing envelopes scams (buy their kit);
- Phony job opportunities;
- U. S. Postal Service jobs information cons;
- Invention submission & marketing schemes;
- New drivers licenses and social security number scams;
- Foreign passport frauds;
- Overseas employment scams; and
- "Get Paid to Go to Night Clubs-type" fax back
900 scams.
Avoiding Fraud
Always remember that fraudsters can be friendly, credible
and convincing. If they weren't, they might have to seek
honest work. If any offer sounds too good to be true, assume
it is a fraud. The following is a list of tips for becoming
a victim of fraud:
- If a decision must be made immediately, just say no.
- Avoid all offers where there is any advance fee required.
- If you are told you won a contest you never entered
you are being targeted as a victim.
- If an investment promises a unrealistic return on investment,
treat it with suspicion.
- Evade unsolicited telephone offers by using services
such as Privacy Manager or simply avoid accepting blocked
and out of area calls. (Answering blocked calls makes
about as much sense as opening your door to folks wearing
masks.)
- In areas where caller i.d. is unavailable, call screening
with an answering machine is prudent.
- Never provide credit card or personal information to
unknown parties.
- Do not feel guilty by keeping and using unsolicited
merchandise and not remitting payment.
- Avoid unorthodox sales venues when seeking brand name
products.
- Do not use the unsubscribe feature of spam. Instead
use a spam filter available free from most ISPs.
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Byline: Roger Schmedlen has over 30 years experience in
the security consulting and international investigations
field and is based at Loss Prevention Concepts, Ltd. in
Hartland, Michigan.
Author's Note: More information on the Nigerian Letter
Scam, along with sample letters, faxes, and e-mails can
be found on the Loss Prevention Concepts, Ltd. Web site:
www.lpconline.com as well as details on a variety of personal
and business frauds and information on identifying counterfeit
products.
Copyright © 2002 Roger H. Schmedlen
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