A Sad, Sad Case That Might Be Used When Teaching Personal Finance:  Another Joe Lewis Example
"Desperate times:  Ex-Celtic Williams, once a top scorer, is now looking for an assist," by Bob Hohler, Boston Globe, July 2, 2010 ---
http://www.boston.com/sports/basketball/celtics/articles/2010/07/02/desperate_times/

Every night at bedtime, former Celtic Ray Williams locks the doors of his home: a broken-down 1992 Buick, rusting on a back street where he ran out of everything.

The 10-year NBA veteran formerly known as “Sugar Ray’’ leans back in the driver’s seat, drapes his legs over the center console, and rests his head on a pillow of tattered towels. He tunes his boom box to gospel music, closes his eyes, and wonders.

Williams, a generation removed from staying in first-class hotels with Larry Bird and Co. in their drive to the 1985 NBA Finals, mostly wonders how much more he can bear. He is not new to poverty, illness, homelessness. Or quiet desperation.

In recent weeks, he has lived on bread and water.

“They say God won’t give you more than you can handle,’’ Williams said in his roadside sedan. “But this is wearing me out.’’

A former top-10 NBA draft pick who once scored 52 points in a game, Williams is a face of big-time basketball’s underclass. As the NBA employs players whose average annual salaries top $5 million, Williams is among scores of retired players for whom the good life vanished not long after the final whistle.

Dozens of NBA retirees, including Williams and his brother, Gus, a two-time All-Star, have sought bankruptcy protection.

“Ray is like many players who invested so much of their lives in basketball,’’ said Mike Glenn, who played 10 years in the NBA, including three with Williams and the New York Knicks. “When the dividends stopped coming, the problems started escalating. It’s a cold reality.’’

Williams, 55 and diabetic, wants the titans of today’s NBA to help take care of him and other retirees who have plenty of time to watch games but no televisions to do so. He needs food, shelter, cash for car repairs, and a job, and he believes the multibillion-dollar league and its players should treat him as if he were a teammate in distress.

One thing Williams especially wants them to know: Unlike many troubled ex-players, he has never fallen prey to drugs, alcohol, or gambling.

“When I played the game, they always talked about loyalty to the team,’’ Williams said. “Well, where’s the loyalty and compassion for ex-players who are hurting? We opened the door for these guys whose salaries are through the roof.’’

Unfortunately for Williams, the NBA-related organizations best suited to help him have closed their checkbooks to him. The NBA Legends Foundation, which awarded him grants totaling more than $10,000 in 1996 and 2004, denied his recent request for help. So did the NBA Retired Players Association, which in the past year gave him two grants totaling $2,000.

Continued in article

"An Oregon woman who is out $400,000 after falling for a well-known Internet scam says she wasn't a sucker or an easy mark." Fox News, November 17, 2008 --- http://www.foxnews.com/story/0,2933,453125,00.html

Janella Spears of Sweet Home says she simply became curious when she received an e-mail promising her $20.5 million if she would only help out a long-lost relative identified as J.B. Spears with a little money up front.

Spears told KATU-TV about the scammers' ability to identify her relative by name was persuasive.

"That's what got me to believe it," She said. "So, why wouldn't you send over $100?"

• Click here to visit FOXNews.com's Cybersecurity Center.

Spears, who is a nursing administrator and CPR teacher, said she mortgaged the house and took a lien out on the family car, and ran through her husband's retirement account.

"The retirement he was dreaming of — cruising and going around and seeing America — is pretty much gone for him right now," she said.

Her family and bank officials told her it was all a scam, she said, and begged her to stop, but she persisted because she became obsessed with getting paid.

The scheme is often called the "Nigerian scam" and it's familiar to many people with e-mail accounts. It still exists and it still works.

Spears first sent $100 through an untraceable wire service as directed by the scammers. Then, more multimillion dollar promises followed so long as she sent more money.

The scammers sent Spears official-looking documents and certificates from the Bank of Nigeria and the United Nations. President Bush and FBI Director Robert Mueller were also involved, the e-mails said, and needed her help.

They sent official-looking documents and certificates from the Bank of Nigeria and even from the United Nations, saying her payment was "guaranteed."

But it wasn't and now Spears is paying the price for her costly lesson.

"The hope is [other people] are not going to fall as hard as I fell," Spears said.

Click here to read more on this story on the Web site of Portland, Ore., TV station KATU.

Nigerian 419 Scams --- http://en.wikipedia.org/wiki/Nigerian#Crime

Who are these perpetrators of Nigerian frauds?
A good cyber-scammer can make up to $7,000 a month - 22 times the average Nigerian wage - from milking gullible Westerners. His controlling boss, with an army of trained scammers under his wing in both America and Europe, will be raking in many times more. Though the fraud is apparent to many, some people think they have stumbled on a once-in-a-lifetime deal, and scammers can string them along for months with mythical difficulties. Some victims eventually contribute huge sums of money to save the deal when it is suddenly "at risk". Samuel is 19, handsome, bright, well-dressed and ambitious. He has a special flair for computers and until he quit the game last year was one of Festac's best-known cyber-scam champions.
Robyn Dixon, "Run-down town where scammers target the West," Scotsman, October 30, 2005 --- http://news.scotsman.com/international.cfm?id=2168172005

New Scam on eBay and Craig's List:  Overpayments
When is a “cleared check” not necessarily a good check?

"eBay, Craig's List Users Targeted in New Scam," by Brian Ross, The Blotter-ABC, October 2, 2007 --- http://www.freerepublic.com/focus/f-news/1906412/posts

Selling something on eBay or Craig's List? Watch out for who's signing the check to buy it.

Tens of thousands of Americans are being targeted by the latest scam sweeping America, many of them targeted online through Craig's List and eBay.

Scammers overpay with counterfeit checks that look so good most banks accept them. It's only after victims have sent the overpayment amount back to the scammers that they learn the checks are no good, and they are out the money.

U.S. Postal Service officials say they have seized more than $2 billion worth of high-quality counterfeit checks coming from Nigeria, England, the Netherlands and Canada.

But, they say, many more phonies are still getting through. . That's the kind of check Jill Parker, a pharmaceutical company manager in Richmond, Va., got in the mail.

Using Craig's List to rent an apartment she owned in Chicago, she was contacted by someone moving from London.

"He was going to send me a check for $25,000," she told ABC News. "I was to deduct what he owned me for the first month's rent and the security deposit, and I was to wire the balance back to his agent, who was handling his furnishing."

She took the check to her bank and called a few days later to see if it had cleared. Told that it had, Jill, as agreed upon, wired the remaining $21,000, thinking she was ahead $4,000.

"Everything looked great; everything went fine until about a week later," she said.

The bank informed her that the check was no good and had been returned not paid. And Jill, not the bank, was out the money.

American banks say they are required by law to make the money available well before a final determination is made as to whether the check is good.

"Certain funds, for example, have to be available on the day after deposit," Nedda Feddis, senior federal counsel for the American Bankers Association, told ABC News. "And the fraudsters are taking advantage of that rule."

Good Morning America Video: Phony Check Scam Hitting America There have been tragic consequences.

Chris Soens, suffering from health problems, thought she got a dose of good news in the mail when she won $90,000 in a supposed European lottery.

Once the check had been deposited and posted to her account, Chris wired back $40,000 for what she was told were fees and taxes.

When the check was discovered to be a phony, the bank told Chris she had to repay the entire amount.

Her sister, Rebecca Woodworth, says it led to suicide.

"I think she was devastated," she said. "I think she was plunged into depths of despair knowing that everything she had was gone."

The problem has grown so large that the U.S. Postal Service is launching a nationwide TV campaign starting tomorrow to warn Americans about the dangers of the bad check scam. The Postal Service has also set up a new Web site to educate the public on check fraud: www.fakechecks.org  .

Bob Jensen's threads on how not to get taken on eBay are at http://www.trinity.edu/rjensen/FraudReporting.htm#eBay

Bob Jensen's threads on Nigerian frauds are at http://www.trinity.edu/rjensen/FraudReporting.htm#NigerianFraud

Work at Home Scams

The general pitch may be built around a sob story, a promise of lottery winnings, a foreign business offer or a work-at-home opportunity. But the bottom-line offer is the same: We'll send you a check, you cash it at your bank, and you keep a portion and send the rest back to us. Americans appear to be increasingly susceptible to such scams, according to U.S. Postal Inspection Service investigators, who yesterday announced a crackdown. They said they intercepted 540,000 checks worth more than $2.1 billion mailed to U.S. residents in the first eight months of the year. They said 77 people had been arrested in connection with the schemes -- 60 in the Netherlands, 16 in Nigeria and one in Canada. Aided by authorities in those countries and in Britain, investigators said, they had traced many of the come-ons to a shifting network of Nigerians who, with a few computers, cellphones and bank routing numbers, have been cashing in on the naivete, goodwill or complicity of Internet users.
Anita Huslin, "Crackdown Takes Aim At Check-Cashing Scams," The Washington Post, October 4, 2007, Page D02 --- Click Here

Scamming the Nigerian Scam Artists

"Baiters Teach Scammers a Lesson," by Robert Andrews, Wired News, August 4, 2006 --- http://www.wired.com/news/technology/internet/0,71387-0.html?tw=wn_index_1

They pilfer nearly $200 million from Americans annually and drive some of their victims to suicide, but Nigeria's notorious e-mail scam artists may finally have met their match -- and the results can be hilarious.

British online vigilante "Shiver Metimbers" is leading tens of thousands of "scambaiters" in a crusade to shut down advance-fee fraudsters, grifters who spam unwitting victims with elaborate, e-mailed sob stories promising a share of nonexistent fortunes in return for upfront payments.

 

So-called 419 scams, named after the section of Nigeria's criminal code that covers the conduct, are the most common type of con; victims are sometimes left penniless.

But Metimbers and crew turn the tables on scammers one by one, boomeranging the tricksters' own tactics to entice them into performing outlandish tasks in desperate pursuit of cash -- then trumpeting evidence of the con artists' naïveté for the online world's amusement.

A 43-year-old, self-employed computer engineer from Manchester, England, Metimbers has most recently spun counter-yarns that have compelled 419ers to make elaborate wood carvings, pose for comical photos and fly from London to Scotland. In one episode, which concluded in March after a five-month exchange, he succeeded in having a Nigerian fraudster tattoo "Baited by Shiver" on his body in order to claim a fictional $46,000 prize.

"Another time, the scammer thought he was going to get $18,000 out of me, but I actually got the guy to send me $80," said Metimbers, who started the 419 Eater community site almost three years ago after receiving a wave of spam in his inbox.

"I've got between five and 10 on the go at any one time," Metimbers said. "The worst thing that could possibly happen to these guys is they get their photo slapped on a website. I feel like a cybervigilante, doing my bit for the public."

Metimbers, whose real forename is Mike and who spends up to seven hours a day scambaiting, is team captain in a growing internet blood sport, in which photographic evidence of competing baiters' successes constitute trophies.

419 Eater alone numbers more than 20,000 participants around the world. Other initiatives have also surfaced in the anti-scam resistance movement, including Artists Against 419, which kills criminals' online accounts with a deluge of traffic. Baiters delight in convincing correspondents to be photographed with embarrassing and lewd Western banners -- like Metimbers, they operate using aliases to protect themselves against the death threats issued by disgruntled scammers upon realizing they have been had.

Other humor-heavy vigilantes include Bait A Mugu, theScamBaiter.com, ScamBaits, Scamorama and The Billy Goat Curse.

"Shiver is exceedingly creative in getting scammers to allow their greed to override their judgment," said one disciple nicknamed mrsbean, a 29-year-old female IT worker from Kentucky who claims to have wasted months of organized scammers' time.

"It is equal parts theater, chess game, psychological study, crime prevention, education and vigilante justice; it's a battle of the wits," said mrsbean. "Internet scams are unique in that they offer you an opportunity to personally combat them without compromising your own safety; the same is just not true of most crime -- one wouldn't take on the drug dealers in a local neighborhood, for instance.

"The threat of jail certainly doesn't deter these people, but being humiliated in front of their peers just might cost them some reputation. It's likely the only punishment most scammers get."

Advance-fee fraud boomed in Nigeria as government corruption and an economic downturn during the 1990s fueled poverty and disillusionment in the country, said Insa Nolte of the University of Birmingham's Centre of West African Studies.

To some, internet scams looked like an easy way to bag some quick cash.

"The availability of e-mail helped to transform a local form of fraud into one of Nigeria's most important export industries," Nolte said.

Some law enforcers trying to shut down 419 scammers now look on scambaiters' brand of Schadenfreude with envy. The 419legal.org message board was started by a South African antifraud officer to gather intelligence from worldwide combatants, while London's Metropolitan Police said it began a "coordinated approach" this month to get tips directed from baiter sites to proper channels. But investigators warn the counter-criminals are walking a fine line.

"People do it as a hobby or a part-time occupation," said detective Sgt. Stephen Truick of the Met's Economic and Specialist Crime Operational Command Unit. "But what they often don't realize is that, while they are baiting, these criminals' accounts are left open and other people are still getting scammed.

"We are taking down around 200 sites and up to 2,000 e-mail accounts per month -- we are turning the tide," said Truick. "We've seen our traffic from sites like these increase -- that's been brilliant, but I could never condone some of their actions."

Continued in article

Humor link forwarded by Richard Campbell --- http://www.quatloos.com/brad-c/directory01.htm

Federal Trade Commission (Then and Now) --- http://www.ftc.gov/index.html

Federal Trade Commission Bureau of Consumer Protection --- http://www.ftc.gov/bcp/index.shtml

Internet Fraud Prevention Helpers from the Federal Trade Commission
OnGuard Online --- http://www.onguardonline.gov/default.aspx

How to Report Internet Fraud
http://www.ultimatecoupons.com/how-to-report-internet-fraud.html
Also see the FBI Complaint Center  --- http://www.ic3.gov/default.aspx 

How to Report Internet Fraud

Although Internet scams and fraud can be found in almost sector on the Internet, some common scams include: Internet auction fraud, emails with foreign officials asking for money, miracle health claims, and credit card and identity theft.

Fraud Tips

Many people encounter problems with online auctions, often bidding on an item on a popular auction site, making a payment when they win, but never receiving what they bought. In other cases, people buy something but when the item gets to their home, it’s not what they paid for. In other instances, some people receive mysterious emails claiming that someone needs to move a large amount of money into the US, but they can’t do it themselves so they need help from a third party. They tell people to deposit a check with a big figure and send back a small percentage of the total amount. Then, the check will bounce and the person will be cheated out of their money. It’s also common for personal information like credit card information or social security numbers to be stolen when hackers hack shopping sites. Here’s a look at more Internet scams.

• Avoiding Fraud: Discusses the best ways to avoid becoming a victim.
• How to Avoid Internet Investment Scams: Discusses how to avoid one of the most common types of scams.
• Common Scams: Lists the most common Internet scams.
• Internet Fraud and Abuse: Looks at the types of scams that are on the rise and how to recognize them.
• Online Consumer Protection: Guide for people who shop online.
• Internet Fraud: Provides a lot of helpful tips.
• Internet Fraud Protection: Simple guidelines for avoiding Internet scams.
• Auction Tips: More tips for preventing fraud in Internet auctions.

Fraud Agencies

Internet fraud has become so prevalent that many established organizations now have divisions that are designed to exclusively target it. The Department of Justice, FBI, and FTC all have special sectors devoted to fighting Internet fraud. Many consumer protection agencies also have special Internet fraud sections including the Federal Trade Commission, National Consumers League, and even the US Postal Inspection Service.

• Department of Justice: Department of Justice page that discusses Internet fraud and agencies to contact.
• Federal Bureau of Investigation: FBI page that discusses Internet fraud complaints.
• National Consumers League: An organization that handles consumer fraud issues.
• Agency List: List of agencies that can help with fraud complaints.
• US Postal Inspection Service: Website for the USPI organization.
• Federal Trade Commission: Website for the FTC which also helps people with Internet fraud.
• National Association of Attorneys General: Another agency that helps with controlling Internet fraud.

Filing a Complaint

The government actually set up a special website where you can file a complaint online. It’s quick and easy. This organization is known as the Internet Fraud Complaint Center. All you have to do is go to the website, fill out the complaint form with accurate information and submit it. The IFCC then conducts an investigation and decides if it has to be turned over to the authorities.

• Internet Crime Complaint Center: A place to file a complaint with the IC3.
• Filing Complaints: Links to websites for each type of Internet fraud.
• eConsumer Page: Another government page for filing complaints.

Additional Resources

• Internet Fraud: Explains what Internet fraud entails.
• The Internet and Online Trading: Discusses investing and the Internet, including scams.
• Internet Fraud Data: A look at the most damaging Internet scams.
• Types of Fraud: Discusses different ways fraud is committed on the Internet.
• Internet Crime FAQ: Provides information on Internet crime and how to deal with it.

 

EthicsPoint whistleblowing options for employees, customers, and vendors --- http://www.ethicspoint.com/en/default.asp

Thomas Neches & Company Links to Useful Websites --- http://www.thomasneches.com/links.htm

Bob Jensen's threads for detecting and reporting frauds and scams ---
http://www.trinity.edu/rjensen/FraudReporting.htm

How to Fight Global Crime and Corruption
Transparency International (News, Tools, etc.) --- http://www.transparency.org/ 

PwC's Global Economic Crime Survey ---
http://www.pwc.com/en_GX/gx/economic-crime-survey/pdf/global-economic-crime-survey-2009.pdf

Bob Jensen's updates on fraud are at http://www.trinity.edu/rjensen/FraudUpdates.htm

Center for Systems Security and Information Assurance ---] http://www.cssia.org/
 

Read the Fine Print in Your Life Insurance Policy and Its Amendments
Many life insurers, including Allstate Corp., AXA Equitable Life Insurance Co., Fidelity Investments, Lincoln Financial Group, MetLife Inc., New York Life Insurance Co. and Prudential Financial Inc., use customers' overseas-travel plans as a factor in making underwriting decisions, and some may deny a policy or increase premiums to customers going to countries deemed dangerous. Some companies even deny coverage based on previous travel to a dangerous region. The countries that trigger denials are often on the State Department's travel warning list, which includes popular destinations such as Israel, Indonesia and Kenya.
Rachel Emma Silverman, "Life Insurers Face Backlash Over Policy on Foreign Travel:  New Laws Curb Practice Of Denying Coverage to People Who Visit Certain Countries," The Wall Street Journal, May 4, 2006; Page D1 --- http://online.wsj.com/article/SB114670871469043437.html?mod=todays_us_nonsub_pj

How to find people, places, and databases (for reporting frauds) ---
http://www.melissadata.com/Lookups/

Internet Fraud --- http://www.fraud.org/internet/intset.htm

Consumer Ripoffs --- http://www.ripoffreport.com/

HowToComplain.com --- http://www.howtocomplain.com/

Lemon Law America (Federal and State) --- http://www.lemonlawamerica.com/
(Choose Where You Live)

Complaints.com --- http://www.complaints.com/

Consumer Reports (not free) --- http://www.consumerwebwatch.org/

Consumer World (a great resource site) --- http://www.consumerworld.org/

Consumer Review --- http://www.consumerreview.com/channels/consumerreview/data/main/index.html

FirstGov for Consumers --- http://www.consumer.gov/
The link in question is this one:
http://www.consumer.gov/idtheft/. You'll find a similar resource published at
http://www.criminal-justice-careers.com/crime/id-theft.html

Federal Trade Commission --- http://www.ftc.gov/

Federal Trade Commission Bureau of Consumer Protection --- http://www.ftc.gov/bcp/index.shtml

TOP TEN RETAIL RIPOFFS EXPOSED --- http://www.trampolinesales.com/ripoffs.htm

DMA Consumer Assistance --- http://www.dmaconsumers.org/

Internet Fraud Prevention Helpers from the Federal Trade Commission
OnGuard Online --- http://www.onguardonline.gov/default.aspx

Clever Idea:  New ShopSmart from Consumer Reports

"Getting Sales Advice From Your Cellphone:  New Service Offers Ratings By 'Consumer Reports'; Categories Are Limited," by Walter S. Mossberg, The Wall Street Journal,  December 14, 2005; Page D14 --- http://online.wsj.com/article/SB113452481752621918.html?mod=todays_us_personal_journal

At one time or another, all of us have been handed a Christmas or birthday gift list that includes seemingly simple items such as "coffee maker," "luggage," or the most dreaded item of all, "TV." But choosing the right one is no easy task. Once you're actually in the store, surrounded by options, it's easy to buy the worst brand of coffee maker, or the luggage that is infamous for wearing out too soon, or the overly expensive television set.

Wouldn't it be easier if you had some independent help, right there in the store, to make the best choice and resist the often bad information provided by salespeople?

Consumer Reports certainly thinks so. This week, it introduced a cellphone application, ShopSmart, that allows you to carry the magazine's famous product comparisons and ratings with you while shopping, right on your mobile phone. Available for Verizon Wireless and Sprint Nextel customers just in time for the holiday shopping season, this new service costs $3.99 a month. Cingular will start carrying ShopSmart next month.

The idea is that, while you're in a store, dazed by a row of similar-looking products like digital cameras, you can just whip out your cellphone, launch ShopSmart, and see which camera Consumer Reports recommends, or how it rates the particular camera you're holding.

We love and trust Consumer Reports, which runs a very successful and useful paid Web site in addition to its legendary print magazine. But we were dubious. How well would a cellphone handle such an application? Would it be easy for last-minute shoppers to rapidly receive, read and use the data provided by ShopSmart? So, we tested this new application using a Verizon LG VX8100 cellphone -- a newer phone that runs on Verizon's ultrafast EV-DO network, which downloads data at about the speed of a low-end home DSL connection.

(Consumer Reports has a content-sharing relationship with The Wall Street Journal Online.)

Overall, we were impressed by ShopSmart's straightforward and easy-to-use approach. Each screen was simple to read at a glance, and browsing from one screen to the next took just a couple of seconds. We especially liked the program's ability to add certain products to a "Favorites" list, for accessing later, and a feature that lets you email the ShopSmart data to yourself, or anyone else, for later perusal.

There are a couple of downsides. For now, ShopSmart covers only three categories of products -- electronics, appliances, and home and garden. It omits important categories Consumer Reports covers in print and online, including cars, personal finance, food and travel. So it won't help you to buy that luggage, even though the magazine reviewed it. And people who already subscribe to the magazine and/or the Web site don't get it free. Like everyone else, they have to pay the $3.99 monthly fee.

Also, while performance was very good on our test phone running on the fast EV-DO network, the product-information downloads would be much, much slower at the typical network speeds most people use.

The program is updated weekly. It uses Yahoo Shopping to provide up-to-date price ranges for each product, listing prices from online stores as well as retail chains, so you can find where each product is sold for the lowest cost.

After downloading ShopSmart through your phone carrier's built-in online store -- our phone used Verizon's Get It Now -- it can be opened by pressing just a few keys. This might be particularly useful for shoppers who use this program only once in a while, so they don't easily forget how to get started.

To make the best use of the phone's small display, ShopSmart is simply organized into different sections using five tabs labeled Ratings, Search, Favorites, Articles and About. The products themselves are divided into three main categories: Appliances, Electronics, and Home and Garden. Product types are listed alphabetically within each category, 10 per screen. Under the Search tab, we found that the Appliances category included 20 different types, starting with air conditioners and ending with washing machines, including coffee makers and gas ranges along the way.

Continued in article

Help for victims of investment fraud --- http://www.helpforinvestors.org/
Think you're a victim of investment fraud? Want to check out your financial adviser? Need to report identity theft? A new streamlined Web site from the Alliance for Investor Education, www.helpforinvestors.org, provides direct links to the right government agencies, regulators, and trade groups.
Lauren Young, "A Tool for Investors in Distress:  The new Web site from the Alliance for Investor Education offers lots of help, including for those who may have been duped," Business Week, June 15, 2005 --- http://www.businessweek.com/bwdaily/dnflash/jun2005/nf20050615_4371_db035.htm?chan=tc

Kim Zetter. "ID Theft: What You Need to Know," Wired News, June 29, 2005 --- http://www.wired.com/news/privacy/0,1848,68032,00.html?tw=wn_tophead_8

What should I do if my wallet or purse is lost or stolen?

Immediately contact all three credit reporting agencies -- Equifax, Experian and TransUnion -- and have them place a fraud alert on your account. This means that companies issuing new credit accounts in your name will have to call you to obtain permission first. The alert will last for 90 days only. You can extend the alert to seven years, but only if you've been a victim of identity theft and can provide a police report.

Equifax: 1.800.525.6285

Experian: 1.888.397.3742

TransUnion: 1.800.680.7289

In addition to contacting the credit reporting agencies, you should file a police report if your property was stolen. Close any accounts that you think may have been compromised by the loss or theft. The FTC provides more information and a chart to tick off steps you should take.

What can I do to prevent myself from becoming a victim?

There isn't really anything you can do to prevent identity theft. As long as Social Security numbers are used for purposes other than Social Security, you are at risk of having your identity stolen any time someone has access to documents that carry your number and other personal data. There are, however, things you can do to lower your risk of becoming a victim.

• Review monthly financial statements carefully for fraudulent activity.
• Request a free copy of your credit report from a credit-reporting agency once a year to examine it for fraudulent activity. A new law requiring credit reporting agencies to provide a free annual report goes into effect nationwide in September. Until then, it's in effect only in western and Midwestern states. The credit report will show who requested access to your credit record. Look for requests from companies you haven't done business with and tell credit-reporting agencies if you see credit accounts that you didn't open or debts you didn't incur. Check to see that your name and address are correct.
• Don't give your Social Security number to any business that doesn't really need it.
• Cross shred sensitive documents. Thieves have been known to piece together strips of paper that are shredded only once. Cross-shredders double-shred documents.
• Shred pre-approved credit-card offers before tossing them in the garbage.
• Don't store sensitive personal information, such as bank account numbers and passwords, on home computers or handheld devices.
• Install a firewall and anti-virus software on your computer and keep the virus definitions up to date to prevent viruses and Trojan horses from infecting your computer and feeding personal information back to hackers.
• Don't fall for phishing scams. Phishing occurs when someone sends you an e-mail purporting to be from your bank or other company you do business with and requesting you to update your account information.
• Use specially designed software programs to clean data from your computer before you sell or discard it. Simply deleting files will not remove data from the memory.
• Don't carry any documents in your wallet that have your Social Security number on them, including your medical card or military ID, on days when you don't need the card.
• Opt-out when your bank or other financial institution requests permission to share information about you with other businesses.
• Close all credit-card accounts except the one or two that you really need.
• If you are an identity theft victim and live in one of ten states, including California, Colorado, Louisiana, Maine, Texas, Vermont or Washington, consider placing a "freeze" on your credit report so that no one can access it without your permission. More than 20 additional states are considering passing similar legislation. Creditors need to look at your report before granting you credit. By freezing your report, it will prevent unauthorized people from seeing your personal data and it will prevent creditors from opening a new credit account in your name for an impostor. Some states only let victims of identity theft freeze their records. Other states allow anyone to freeze their record. The State Public Interest Research Groups maintains a list of states with freeze laws.

Bob Jensen's helpers on identity theft --- http://www.trinity.edu/rjensen/FraudReporting.htm#IdentityTheft

Bob Jensen's threads on computing and network security --- http://www.trinity.edu/rjensen/ecommerce/000start.htm#SpecialSection

What to know and do when you suspect fraud --- http://www.aicpa.org/pubs/jofa/jun2005/wells.htm

Association of Certified Fraud Examiners --- http://www.acfe.com/home.asp

• In particular note the Code of Business Ethics and Conduct ---  http://www.acfe.com/documents/code_of_business_ethics.pdf
• Fraud Resources Center --- http://www.acfe.com/fraud/fraud.asp
  Fraud Prevention Check-Up --- http://www.acfe.com/fraud/check.asp
  Fraud Prevention CD-ROM --- http://www.acfe.com/fraud/cd.asp
  How to Prevent Small Business Fraud --- http://www.acfe.com/documents/smallbusinessfraudexcerpt.pdf
  Other Downloads --- http://www.acfe.com/fraud/downloads.asp
• Also note the explosion of salaries of Certified Fraud Examiners ---
  http://www.acfe.com/documents/2005comp-guide.pdf
  CFE Career Center http://www.acfe.com/career/career.asp

PricewaterhouseCoopers - Global Economic Crime Survey 2003 --- http://www.acfe.com/documents/2003_PwC_CrimeReport.pdf

FraudNet the Government Accountability Office (GAO) --- http://www.gao.gov/fraudnet/fraudnet.htm 

The Institute of Internal Auditors --- http://www.theiia.org/

Information Systems Audit and Control Association --- http://www.isaca.org/

AICPA's Business Valuation and Forensic & Litigation Services Center (not free to the public) --- http://bvfls.aicpa.org/

Fraud Position Statement of the Institute of Internal Auditors of the UK and Ireland --- http://www.blindtiger.co.uk/IIA/uploads/48dc2e62-f2a7bd939a--7c26/2003FraudPositionStatement.pdf
I snipped this link to http://snipurl.com/IIAFraudStatementUK

The Fraud Detectives Consultant Network --- http://www.frauddetectives.com/ 
This is a helpful site, although I might add that accountants, attorneys, and others can list themselves free at this site with no filtering with regard to skills and experience.

February 18, 2005 message from Joanne Tweed [ibridges@san.rr.com] 

America's seniors are being cheated of their life's savings by securities Broker/Dealers. 
SENIORS AGAINST SECURITIES FRAUD http://seniorsagainstsecuritiesfraud.com  offers supportive educational links and solutions. Please consider linking.

Most Sincerely,
Joanne Tweed

Occupational Fraud Report 

In 2003, occupational fraud is estimated at $660 billion.

 

2004 Report to the Nation on Occupational Fraud and Abuse, The Association of Certified Fraud Examiners --- http://www.cfenet.com/resources/rttn.asp 

 

Occupational fraud and abuse is a widespread problem that affects every entity, regardless of size, location or industry. The ACFE has made it a goal to better educate the public and anti-fraud professionals about this threat. The 2004 Report to the Nation is based on a survey that began in late 2003 and ran through the early months of 2004. Certified Fraud Examiners throughout the US were asked to provide detailed information on one fraud case he or she had personally investigated that met the following criteria: The case involved occupational fraud; The fraud occurred within the last two years; The investigation of the fraud was complete; and The CFE was reasonably sure that the perpetrator had been identified.

The end result is a comprehensive report that sheds light on occupational fraud and abuse while offering stark lessons and valuable insights about its prevention and detection.

Download the 2004 Report to the Nation * (564 kb)
Order a printed copy of the 2004 Report to the Nation
Download the 2002 Report to the Nation * (857 kb)
Download the 1996 Report to the Nation * (235 kb)

The Museum of Hoaxes http://www.museumofhoaxes.com/ 

Academic fraud and plagiarism threads are at http://www.trinity.edu/rjensen/plagiarism.htm 

How Technology Can Reduce Fraud

Resources to prevent and discover fraud from the Association of Fraud Examiners --- http://www.cfenet.com/resources/resources.asp 

Self-study training for a career in fraud examination --- http://marketplace.cfenet.com/products/products.asp

Bob Jensen's Other Documents On Fraud  

Important Links for Reporting Frauds and Important Things to Know in Avoiding Fraud (including ID theft)

FTC helpers if suspect someone else has become you --- http://www.ftc.gov/bcp/conline/pubs/credit/idtsummary.pdf 

Federal Trade Commission Bureau of Consumer Protection --- http://www.ftc.gov/bcp/index.shtml

FTC helpers in getting your credit report and FICO score --- http://www.ftc.gov/bcp/conline/edcams/credit/index.html 

FTC consumer warnings --- http://www.ftc.gov/ftc/consumer.htm 

Federal Trade Commission Bureau of Consumer Protection --- http://www.ftc.gov/bcp/index.shtml

U.S. Consumer Product Safety Commission --- http://www.cpsc.gov/

Lemon Law America (Federal and State) --- http://www.lemonlawamerica.com/

TOP TEN RETAIL RIPOFFS EXPOSED --- http://www.trampolinesales.com/ripoffs.htm

Fraudulent (Supposed) Publishers (especially targeting poets) --- http://www.foetry.com/ 

A government Website on Cybercrime --- http://www.usdoj.gov/criminal/cybercrime/
Bob Jensen's threads on computing and networking security are at http://www.trinity.edu/rjensen/ecommerce/000start.htm#SpecialSection

Consumer Reports Web Watch --- http://www.consumerwebwatch.org/for-consumers.cfm

Richard Campbell notes a nice white collar crime blog edited by some law professors --- http://lawprofessors.typepad.com/whitecollarcrime_blog/ 

ID Theft Protection --- http://www.criminal-justice-careers.com/crime/id-theft.html

Question
What should you do if you think you're a possible victim of ID theft?

Answer
There are a number of things to do, especially the following:
Fill out an identity theft report with your local, state or federal law enforcement agency. It's unclear if the mere loss or theft of personal information constitutes identity theft, but filing a report may offer additional protections. The FTC makes an affidavit available at http://www.consumer.gov/idtheft/pdf/affidavit.pdf

When your credit card is lost or stolen, first notify your credit card company. You should always carry the 800 phone number that appears on the back of you card in some location other than relying only on the card for the phone number.

"Internet sleuths get new way to report stolen data," MIT's Technology Review, June 17, 2010 ---
http://www.technologyreview.com/wire/25638/?nlid=3139&a=f

A new program being spearheaded by Microsoft Corp. is designed to provide a trusted way for researchers to report stolen credit card numbers and other data they've found in the dark corners of the Internet.

Establishing that link is important because when a researcher finds stolen data, it can be hard to convince a bank or another affected institution that the data is legitimate. The lost time can mean the difference between someone's identity being used for fraud, and stopping a fraud before it occurs.

The program Microsoft is spearheading could greatly help researchers deal with data they've found online and submitted to affected companies, said Dan Clements, former president of CardCops, which specializes in tracking down stolen payment card numbers online.

When researchers find card numbers being sold or hawked online, "We send it to everybody immediately. We send it to companies, the government, the consumer -- it's a blitzkrieg. That way they have all the intel and can act accordingly," he said. "You could call it scattershot. It's the only way you can assure that we've done our job. But we have no way of knowing it's effective."

Clements said the speed of the new program -- how quickly it leads to notifications for affected institutions and consumers -- will be key to whether it is successful.

Some merchants and gambling websites have tried similar programs in the past. They created databases of stolen cards against which they'd check transactions, Clements said. But the programs fell apart, partly because the companies didn't work well together without a middleman, he said.

The new program is being managed by the National Cyber-Forensics & Training Alliance, a nonprofit organization focused on cybercrime. Other participating organizations include the American Bankers Association and eBay Inc.

More banks, retailers and Internet security firms will be added as they sign up and are vetted by a third party.

Nancy Anderson, Microsoft's deputy general counsel, said in an interview that the idea for the program came from problems Microsoft security researchers encountered in their attempts to alert banks and online retailers to fraud they've discovered.

"When these kinds of credentials are stolen, they may not get used immediately, so the goal here is to get the information to the institutions quickly, quickly, quickly, so the appropriate action can be taken before the damage is done," she said.

Clements said that one weakness of Microsoft's program is that it won't allow people to anonymously submit what they've found, which could discourage whistleblowers from coming forward.

He cited an example from CardCops that involved an insider at an e-commerce company who discovered his company was hacked and lost 50,000 credit card numbers. The employee said management threatened to fire him if he disclosed the breach. Clements said CardCops allowed the employee to disclose the breach anonymously and sent the information to the banks and the government.

Bob Jensen's threads on fraud reporting are at
http://www.trinity.edu/rjensen/FraudReporting.htm

Bob Jensen's threads on computer and network security are at
http://www.trinity.edu/rjensen/ecommerce/000start.htm#SpecialSection

"Tips for Preventing or Catching Identity Theft:  Contacting one of three credit reporting agencies is the key to monitoring possible fraud," MIT's Technology Review, May 24, 2006 --- http://www.technologyreview.com/read_article.aspx?id=16923

Consumer advocates have some advice for the 26.5 million veterans whose personal information was stolen from the home of a Veterans Affairs employee: Don't panic.

Identity theft may be a growing problem that affected 9.3 million Americans last year, according to Javelin Strategy and Research. But consumer advocates say a few precautions can lessen the chances of becoming a victim, even for people whose personal information has been stolen.

The first thing to do if you think your Social Security number, birth date or other sensitive data has fallen into the wrong hands is to place an initial fraud alert on your credit reports. There are three major credit reporting agencies, but a call to one -- for instance, Equifax at 800-525-6285 -- will ensure the other two are notified.

A fraud alert entitles you to a free copy of your credit report from each of the three companies. Order one from each and scrutinize them carefully for accounts you didn't open or debts you don't recognize. Also, make sure that information such as your Social Security number and employer are correct on each report.

If you discover accounts or transactions you didn't authorize, call and speak with someone in the fraud department of each company involved. Keep a log of each person contacted, along with the date, time and topics discussed on each call.

An initial fraud alert also requires businesses to take additional steps to confirm your identity before issuing loans or opening accounts in your name. Be prepared for loan and credit card applications to take slightly longer to be processed.

It's important to understand that an initial fraud alert, as the name implies, is only a temporary fix. That's because it remains in effect for only 90 days. To prevent becoming a victim after the three months are up, you'll need to take additional steps.

Next, fill out an identity theft report with your local, state or federal law enforcement agency. It's unclear if the mere loss or theft of personal information constitutes identity theft, but filing a report may offer additional protections. The FTC makes an affidavit available at http://www.consumer.gov/idtheft/pdf/affidavit.pdf 

Ask each of the three credit reporting companies to place a freeze or extended alert on your account. Seventeen states have enacted laws that require the reporting companies to block access to your files in most instances. Check with the Consumers Union Web site or attorney general in your state to see if this is available where you live.

Even if your state doesn't offer this protection, ask Equifax, TransUnion and Experian to give you an extended alert anyway. This option will entitle you to two free credit reports per year, and it will also require the credit reporting companies to remove you from lists marketers use to send prescreened credit offers for five years.

To qualify for an extended alert, the reporting companies will require you to prove you've been the victim of identity theft, even though it is not always clear how the law defines a victim in this case. Be sure to include the FTC affidavit or other law enforcement report you filed. It is legal documentation that your personal identification has been stolen.

Finally, recognize that safeguarding your privacy is a never-ending task, even for people who have no reason to believe their personal information has been stolen. A little education and prevention, say consumer advocates, can go a long way.

''You need an ongoing vigilance,'' says Paul Stephens, a policy analyst with the Privacy Rights Clearinghouse in San Diego. ''We want people to be proactive, to be vigilant, but we also don't want to have people panicking.''

On the Net:

http://www.ftc.gov/bcp/conline/pubs/credit/idtheft.htm 

http://privacyrights.org 

http://www.consumersunion.org/creditmatters/creditmatterslearnmore/002583.html

Also see Identity (ID) Theft Prevention and Reporting

ID Theft Protection --- http://www.criminal-justice-careers.com/crime/id-theft.html

Lexis Nexis Fraud Prevention Site ---  http://risk.lexisnexis.com/prevent-fraud

One link is to a listing of where you can file Internet complaints ---
http://www.consumerwebwatch.org/consumer-center.cfm

Organizations and government agencies featured in this section are listed alphabetically.

Better Business Bureau Online
The Better Business Bureau Online, the electronic arm of the Better Business Bureau, offers consumers the opportunity to file a complaint against e-commerce sites as well as offline businesses. The Better Business Bureau was founded in 1912 and seeks to create a more fair marketplace through consumer education and voluntary self-regulation on the part of companies.
http://www.bbbonline.org/consumer/complaint.asp

Consumer Sentinel
Consumer Sentinel is a complaint database designed to provide law enforcement agencies with information on Internet cons, telemarketing scams and other consumer fraud-related complaints. The database, which is maintained by the Federal Trade Commission, is available to 40 federal law enforcement organizations, more than 200 state and local fraud-fighting agencies, and every state attorney general in the United States. You may register a complaint here.
http://www.consumer.gov/sentinel/index.html

econsumer.gov
This international site, launched by a coalition of 13 nations, registers cross-border e-commerce complaints and offers tips for safe shopping online. It utilizes the Consumer Sentinel's network of Internet fraud complaint data and shares it in several languages with consumer protection law enforcers in countries that belong to the International Marketing Supervision Network.
http://www.econsumer.gov

Internet Fraud Complaint Center
The Internet Fraud Complaint Center enables consumers to log online fraud complaints. The center is the result of a partnership between the FBI and the National White Collar Crime Center (NW3C), a nationwide support network for enforcement agencies involved in the prevention, investigation, and prosecution of economic and high-tech crime. NW3C is funded through a grant from the Bureau of Justice Assistance, Office of Justice Programs, and the U.S. Department of Justice.
http://www.ic3.gov/default.aspx 

National Fraud Information Center
The National Fraud Information Center (NFIC) was established in 1992 by the National Consumers League and continues to be funded by the organization. NFIC offers an online form for consumers who are interested in registering an Internet fraud complaint.
http://www.fraud.org/

State Attorneys General
Contact your state attorney general if you feel you have been a victim of consumer fraud on the Web. Consult individual state sites for telephone or electronic contact information for filing complaints. U.S. Securities and Exchange Commission The U.S. Securities and Exchange Commission offers tips on avoiding Internet fraud when investing, and a mechanism to register Internet fraud or spam complaints for investigation.
http://www.naag.org/ag/full_ag_table.php

U.S. Securities and Exchange Commission
The U.S. Securities and Exchange Commission offers tips on avoiding Internet fraud when investing, and a mechanism to register Internet fraud or spam complaints for investigation.
http://www.sec.gov/complaint.shtml

"SEC Whistleblower Fund Totals $450 Million," Huffington Post, October 29, 2010 ---
http://www.huffingtonpost.com/2010/10/29/sec-whistleblower-fund-450-million_n_776397.html

The Securities and Exchange Commission says it has set aside about $450 million for payments to outside whistleblowers whose information results in successful cases and penalties collected from companies or individuals.

The SEC set up the program in accordance with the financial overhaul law enacted in July. It follows intense public criticism of the agency for the breakdown that allowed Bernard Madoff's multibillion-dollar fraud to go undetected for 16 years, despite numerous red flags raised by whistleblowers.

A report issued Friday by the SEC shows it has put $451.9 million into a new fund to pay whistleblowers, which must have a minimum $300 million.

Bob Jensen's threads on whistle blowing ---
http://www.trinity.edu/rjensen/FraudConclusion.htm#WhistleBlowing

 

Corporate Fraud Reporting

• Bob Jensen's Links http://www.trinity.edu/rjensen/FraudReporting.htm 
  
• FBI Corporate Fraud Hotline (Toll Free) 888-622-0177
  FBI  http://www.fbi.gov/
  Federal Bureau of Investigation: White Collar Crime and Fraud (FBI, History) --- http://www.fbi.gov/whitecollarcrime.htm

   

• Commodity Futures Trading Commission   http://www.sec.gov/answers/cftc.htm
  
• Defense Criminal Investigative Service  http://www.dodig.osd.mil/INV/DCIS/
  
• Department of Labor  http://www.dol.gov/
  
• Federal Energy Regulatory Commission  http://www.ferc.gov/
  
• Internal Revenue Service  http://www.irs.gov/
  
• National Association of Securities Dealers  http://www.nasd.com/
  
• Postal Inspection Service  http://www.usps.com/postalinspectors/
  
• Securities and Exchange Commission  http://www.sec.gov/
• "SEC Whistleblower Fund Totals $450 Million," Huffington Post, October 29, 2010 ---
  http://www.huffingtonpost.com/2010/10/29/sec-whistleblower-fund-450-million_n_776397.html

  The Securities and Exchange Commission says it has set aside about $450 million for payments to outside whistleblowers whose information results in successful cases and penalties collected from companies or individuals.

  The SEC set up the program in accordance with the financial overhaul law enacted in July. It follows intense public criticism of the agency for the breakdown that allowed Bernard Madoff's multibillion-dollar fraud to go undetected for 16 years, despite numerous red flags raised by whistleblowers.

  A report issued Friday by the SEC shows it has put $451.9 million into a new fund to pay whistleblowers, which must have a minimum $300 million.

  Bob Jensen's threads on whistle blowing ---
  http://www.trinity.edu/rjensen/FraudConclusion.htm#WhistleBlowing

   

Dirty Tricks Played on Job Seekers
Job hunters using Monster.com, the employment Web site owned by Monster Worldwide, received fake job offers by e-mail that asks for their Bank of America account information. The e-mail contains personal information collected when hackers tricked Monster.com customers into downloading a virus in a fake job-seeking tool, according to researchers at Symantec, the world's biggest maker of security software.
Rochelle Garner, "Monster.com Users Get Fake Offers And Request," The Washington Post, August 23, 2007, Page D04 --- Click Here

Question
What's the use of spoof@paypal.com ?

November 13, 2006 message from Schatzel, John [JSchatzel@STONEHILL.EDU]

Yeah, these "phishing" scams have netted crocks over $2.8 billion this past year according to an article I read recently. I thought the number sounded high, but they are bombarding people with genuine looking requests from PayPal and Amazon.com saying that your account has been restricted, charged for something you didn't buy, or is being investigated for account tampering by their security staff. A lot of people panic apparently when they see this stuff and reply with personal account information. I feel sorry for them so every time I get one for PayPal I reply by sending it to spoof@paypal.com  and they supposedly investigate them. If anyone has a similar email address for Amazon, please let us know. Just using Amazon's customer service form is not enough. The whole message has to be forwarded to them, so they can investigate the source of the illegal message.

John Schatzel

November 14, 2006

Snopes has a pretty good page for identifying phishing spoofs. Enter "phishing" into the search box at http://www.snopes.com/

Also see what you get when you enter "Nigerian" into the search box.

Bob Jensen

Comprehensive summary of Paypal ---  http://www.howstuffworks.com/search.php?terms=Paypal

December 21. 2009 message from George Wright [Geo@LOYOLA.EDU]

Experienced eBay users swear by it, as one has more recourse in the event of problems.

An experienced friend also tell me that it's a good idea to open a new bank account specifically for PayPal purposes. The reason is that you can move newly deposited funds to an account beyond PayPal's reach. I'm told this prevents PayPal from sequestering your funds in the event of a late protest by the source of the funds.

Geo

Association of Certified Fraud Examiners --- http://www.acfe.com/home.asp
In particular note the Code of Business Ethics and Conduct ---  http://www.acfe.com/documents/code_of_business_ethics.pdf
Fraud Resources Center --- http://www.acfe.com/fraud/fraud.asp
Fraud Prevention Check-Up --- http://www.acfe.com/fraud/check.asp
Fraud Prevention CD-ROM --- http://www.acfe.com/fraud/cd.asp
How to Prevent Small Business Fraud --- http://www.acfe.com/documents/smallbusinessfraudexcerpt.pdf
Other Downloads --- http://www.acfe.com/fraud/downloads.asp
Also note the explosion of salaries of Certified Fraud Examiners ---
http://www.acfe.com/documents/2005comp-guide.pdf

PricewaterhouseCoopers - Global Economic Crime Survey 2003 --- http://www.acfe.com/documents/2003_PwC_CrimeReport.pdf

FraudNetrom the Government Accountability Office (GAO) --- http://www.gao.gov/fraudnet/fraudnet.htm 

The Institute of Internal Auditors --- http://www.theiia.org/

AICPA's Business Valuation and Forensic & Litigation Services Center (not free to the public) --- http://bvfls.aicpa.org/

Fraud Position Statement of the Institute of Internal Auditors of the UK and Ireland --- http://www.blindtiger.co.uk/IIA/uploads/48dc2e62-f2a7bd939a--7c26/2003FraudPositionStatement.pdf
I snipped this link to http://snipurl.com/IIAFraudStatementUK

The Fraud Detectives Consultant Network --- http://www.frauddetectives.com/ 
This is a helpful site, although I might add that accountants, attorneys, and others can list themselves free at this site with no filtering with regard to skills and experience.

Warning to retirees: Beware of your families
Financial swindles are one of the fastest-growing forms of elder abuse. By some estimates, as many as five million senior citizens are victimized each year, says Sara Aravanis, director of the nonprofit National Center on Elder Abuse, which provides information to federal and state policy makers. Because of the problem's spread, "many states have laws authorizing financial institutions to report suspicions of elderly abuse," says Bruce Jay Baker, general counsel for the Illinois Bankers Association. Earlier this summer, the Securities and Exchange Commission hosted a Seniors Summit to highlight the issue, with SEC Chairman Christopher Cox noting that protecting seniors' pocketbooks "is one of the most important issues of our time."
Jeff D. Opdyke, "Intimate Betrayal: When the Elderly Are Robbed by Their Family Members," The Wall Street Journal, August 30, 2006; Page D1 --- http://online.wsj.com/article/SB115689331870748918.html?mod=todays_us_personal_journal

February 18, 2005 message from Joanne Tweed [ibridges@san.rr.com] 

America's seniors are being cheated of their life's savings by securities Broker/Dealers. 
SENIORS AGAINST SECURITIES FRAUD http://seniorsagainstsecuritiesfraud.com  offers supportive educational links and solutions. Please consider linking.

Most Sincerely,
Joanne Tweed

Association of Certified Fraud Examiners --- http://www.acfe.com/home.asp
In particular note the Code of Business Ethics and Conduct ---  http://www.acfe.com/documents/code_of_business_ethics.pdf
Fraud Resources Center --- http://www.acfe.com/fraud/fraud.asp
Fraud Prevention Check-Up --- http://www.acfe.com/fraud/check.asp
Fraud Prevention CD-ROM --- http://www.acfe.com/fraud/cd.asp
How to Prevent Small Business Fraud --- http://www.acfe.com/documents/smallbusinessfraudexcerpt.pdf
Other Downloads --- http://www.acfe.com/fraud/downloads.asp
Also note the explosion of salaries of Certified Fraud Examiners ---
http://www.acfe.com/documents/2005comp-guide.pdf

PricewaterhouseCoopers - Global Economic Crime Survey 2003 --- http://www.acfe.com/documents/2003_PwC_CrimeReport.pdf

The Institute of Internal Auditors --- http://www.theiia.org/

AICPA's Business Valuation and Forensic & Litigation Services Center (not free to the public) --- http://bvfls.aicpa.org/

Fraud Position Statement of the Institute of Internal Auditors of the UK and Ireland --- http://www.blindtiger.co.uk/IIA/uploads/48dc2e62-f2a7bd939a--7c26/2003FraudPositionStatement.pdf
I snipped this link to http://snipurl.com/IIAFraudStatementUK

From the Government Accountability Office (GAO) --- http://www.gao.gov/fraudnet/fraudnet.htm 

FraudNET

The purpose of the Government Accountability Office's FraudNET is to facilitate the reporting of allegations of fraud, waste, abuse, or mismanagement of federal funds.

If you want to report such allegations, you may do so by filling out a FraudNET Form or by using one of these other methods:

• Send allegations via e-mail to fraudnet@gao.gov
  
• Send a fax to FraudNet at 202-512-3086
• Write to:

  GAO FraudNET
  441 G Street NW
  Washington, D.C. 20548

A FraudNET Form requires a web browser that supports forms, HTML 3.0 tables and 128 bit encryption.

In all cases, please provide as much detail as possible concerning the who, when, where, what, how and how much. You do not need to provide your name. The information you submit will be entered over a secure connection. All information submitted is safeguarded against unauthorized disclosure.

 

Free Corporate Fraud Hotline Initiated February 2003: 888-622-0117 

• 2,000 calls logged within eight months.  

• Callers can be anonymous 

• Several new cases opened based on caller information 

• Several existing cases were enhanced 

• Public cooperation is essential

The Fraud Detectives Consultant Network --- http://www.frauddetectives.com/ 

Welcome to the Forensic Group LLC, host of the FraudDETECTIVES Consultant Network, the premier Web source for locating leading Forensic CPAs, Certified Fraud Examiners, Certified Turnaround Professionals, Crisis Managers, Litigation Specialists, and Bankruptcy Professionals.

Fraud Tips
Free Fraud Advice from the experts.

Fraud Tales
Forensic accounting true Tales:
"Back to Basics"
"The Case of the Shrinking Margins".

What Is Fraud?
Do you realize how much fraud costs organizations annually? Read What Every CEO Should Know about fraud.

KnowFRAUD?
Take A Short Quiz just for fun to test your knowledge of fraud.

Comment from Bob Jensen
This is a helpful site, although I might add that accountants, attorneys, and others can list themselves free at this site with no filtering with regard to skills and experience.

Title Washing: How Car Titles Get Laundered
Unsuspectingly you may be purchasing a car that was flooded during a hurricane
Thousands of vehicles that sat in the murky waters left by hurricanes Katrina and Rita are starting to show up on the used-car market. Most states require that flooded cars be labeled as such on the title. But scam artists have found loopholes in the system. They re-register cars in states with looser title laws -- sometimes two or three states -- until the warning that the car was flooded is gone. This fraudulent practice is known as "title washing."
Jeff Brady, "Holes in Monitoring System Let Lemons Get Resold," NPR, January 31, 2006 --- http://www.npr.org/templates/story/story.php?storyId=5173717

Bob Jensen's fraud updates are at http://www.trinity.edu/rjensen/FraudUpdates.htm

"Identity Theft, Net Scams Rose in '04-FTC ," Reuters, The Washington Post, February 1, 2005 --- http://www.washingtonpost.com/wp-dyn/articles/A54010-2005Feb1.html?nav=headlines 

Americans lost at least $548 million to identity theft and consumer fraud last year as the Internet provided new victims for age-old scams, according to government statistics released Tuesday.

The U.S. Federal Trade Commission said it received 635,000 consumer complaints in 2004 as criminals sold nonexistent products through online auction sites like eBay Inc. or went shopping with stolen credit cards

Identity theft -- the practice of running up bills or committing crimes in someone else's name -- topped the list with 247,000 complaints, up 15 percent from the previous year.

Fraud and identity theft cost consumers at least $437 million in 2003.

Internet-related fraud accounted for more than half of the remaining complaints as scammers found victims through Web sites or unsolicited e-mail, the FTC said.

Auction fraud was the most common Internet scam, the FTC said in its annual fraud report, followed by complaints about online shopping and Internet access service.

The number of incidents was up across nearly every category from 2003, but it was unclear whether that represented an actual increase in fraud or simply a greater awareness of the FTC's Consumer Sentinel fraud program.

Consumers likely lost significantly more than the amount reported, as fewer than half were able to pin a dollar figure on their losses.

The median monetary loss reported was $259, though 41 consumers reported losses of $1 million or more.

The FTC did not specify how many identity-theft incidents took place online. A recent report by the Better Business Bureau found that most cases of identity theft occurred through the theft of a checkbook or other offline methods.

Federal Trade Commission Bureau of Consumer Protection --- http://www.ftc.gov/bcp/index.shtml

Question
What should you do if you think you're a possible victim of ID theft?

Answer
There are a number of things to do, especially the following:
Fill out an identity theft report with your local, state or federal law enforcement agency. It's unclear if the mere loss or theft of personal information constitutes identity theft, but filing a report may offer additional protections. The FTC makes an affidavit available at http://www.consumer.gov/idtheft/pdf/affidavit.pdf

"Tips for Preventing or Catching Identity Theft:  Contacting one of three credit reporting agencies is the key to monitoring possible fraud," MIT's Technology Review, May 24, 2006 --- http://www.technologyreview.com/read_article.aspx?id=16923

Consumer advocates have some advice for the 26.5 million veterans whose personal information was stolen from the home of a Veterans Affairs employee: Don't panic.

Identity theft may be a growing problem that affected 9.3 million Americans last year, according to Javelin Strategy and Research. But consumer advocates say a few precautions can lessen the chances of becoming a victim, even for people whose personal information has been stolen.

The first thing to do if you think your Social Security number, birth date or other sensitive data has fallen into the wrong hands is to place an initial fraud alert on your credit reports. There are three major credit reporting agencies, but a call to one -- for instance, Equifax at 800-525-6285 -- will ensure the other two are notified.

A fraud alert entitles you to a free copy of your credit report from each of the three companies. Order one from each and scrutinize them carefully for accounts you didn't open or debts you don't recognize. Also, make sure that information such as your Social Security number and employer are correct on each report.

If you discover accounts or transactions you didn't authorize, call and speak with someone in the fraud department of each company involved. Keep a log of each person contacted, along with the date, time and topics discussed on each call.

An initial fraud alert also requires businesses to take additional steps to confirm your identity before issuing loans or opening accounts in your name. Be prepared for loan and credit card applications to take slightly longer to be processed.

It's important to understand that an initial fraud alert, as the name implies, is only a temporary fix. That's because it remains in effect for only 90 days. To prevent becoming a victim after the three months are up, you'll need to take additional steps.

Next, fill out an identity theft report with your local, state or federal law enforcement agency. It's unclear if the mere loss or theft of personal information constitutes identity theft, but filing a report may offer additional protections. The FTC makes an affidavit available at http://www.consumer.gov/idtheft/pdf/affidavit.pdf 

Ask each of the three credit reporting companies to place a freeze or extended alert on your account. Seventeen states have enacted laws that require the reporting companies to block access to your files in most instances. Check with the Consumers Union Web site or attorney general in your state to see if this is available where you live.

Even if your state doesn't offer this protection, ask Equifax, TransUnion and Experian to give you an extended alert anyway. This option will entitle you to two free credit reports per year, and it will also require the credit reporting companies to remove you from lists marketers use to send prescreened credit offers for five years.

To qualify for an extended alert, the reporting companies will require you to prove you've been the victim of identity theft, even though it is not always clear how the law defines a victim in this case. Be sure to include the FTC affidavit or other law enforcement report you filed. It is legal documentation that your personal identification has been stolen.

Finally, recognize that safeguarding your privacy is a never-ending task, even for people who have no reason to believe their personal information has been stolen. A little education and prevention, say consumer advocates, can go a long way.

''You need an ongoing vigilance,'' says Paul Stephens, a policy analyst with the Privacy Rights Clearinghouse in San Diego. ''We want people to be proactive, to be vigilant, but we also don't want to have people panicking.''

On the Net:

http://www.ftc.gov/bcp/conline/pubs/credit/idtheft.htm 

http://privacyrights.org 

http://www.consumersunion.org/creditmatters/creditmatterslearnmore/002583.html

I am really glad to see the Digital Duo return to PBS television.  Back in the 1990s I loved this show as a helper to those of us struggling to learn new computing and networking technologies.  The most important attribute of this show is the willingness of the Duo to criticize the products or services that they are evaluating.  The Duo is consumer-oriented.  Unlike its counterpart Computer Chronicles, the Digital Duo are probably not especially popular among vendors who supply the products and services.

The main site for the Digital Duo http://www.pcworld.com/digitalduo/index/0,00.asp
The Digital Duo is the independent, irreverent video review of all things digital. Hosted by Stephen Manes and Angela Gunn. More about PC World's Digital Duo 
The weekly shows are probably listed in your television guide for your local PBS channel.  I suggest you record each show and then save the recordings that you think will be helpful to your students or your family in the future.

One of the features that I watched this weekend featured free access to credit reports.  The Duo pointed out how the majority of the sites that now offer free credit reports should be avoided.  They recommended using https://www.annualcreditreport.com/cra/index.jsp
I think this is good advice, but I have some other recommendations below.

From "Smart Stops on the Web," Journal of Accountancy, January 2004, Page 31 --- http://www.aicpa.org/pubs/jofa/feb2004/news_web.htm

Online Education for Managers
www.bettermanagement.com
CPAs and business managers can brush up on the basics of fraud as well as learn detection and prevention strategies from articles and case studies at this Web site. Titles include “Business Intelligence in the Financial Services Industry.” Fraud investigators can explore the library section to read related content on money laundering, regulatory compliance and risk management and also “solve business problems” with anti-money-laundering and financial services solutions.

Fraud or Frivolity?
www.stockfraudlawyersnetwork.com
CPAs acting as financial consultants will want to visit this e-stop to find out about broker misconduct and what distinguishes a securities fraud case from a frivolous claim. Users also can locate a securities fraud lawyer in their area and get a free consultation.

Fraud Is…
alextalksbusiness.com
Alex Kwechansky, public speaker and author of the book Never Underestimate Who Can Cheat You, gives users a better understanding of fraud in publicly and privately owned companies and how to spot and, hopefully, thwart it at this Web site. The section Dirty Deeds defines different fraud concepts including embezzlement, insider trading and skimming, while the section Here’s the Point outlines some of fraud’s early warning signs.

Insure Against Fraud
www.insurancefraud.org
CPAs looking to advise clients on insurance fraud will find legislative news, the Fraud Case of the Month and the Fraud Hall of Shame at this Web site, first listed as a Smart Stop in April 2002 in response to fraudulent 9/11 claims. Visitors to the Coalition Against Insurance Fraud’s Web stop also can receive a free sample of Insurance Fraud Weekly ePort.

Worth Revisiting
www.ifccfbi.gov
The Internet Fraud Complaint Center (IFCC) Web site, another Smart Stop worthy of more than one mention and first listed in the November 2001 JofA, now offers users IFCC Warnings, which address credit card and identity theft, employment scams and Internet auction fraud. The section Internet Fraud Preventive Measures offers tips on recognizing and preventing online fraud.

The main computer security site is probably CERT --- http://www.cert.org/ 

The U.S. Department of Justice Cybercrime Website --- http://www.usdoj.gov/criminal/cybercrime/ 

You should also know about this site when you have a computer security question --- http://www.alw.nih.gov/Security/security.html 

Bob Jensen's computer security bookmarks are at --- http://www.trinity.edu/rjensen/bookbob4.htm#200503Security 

Bob Jensen's Technology Glossary on security --- http://www.trinity.edu/~rjensen/245glosf.htm#Security1 

Before Purchasing Real Estate or Vehicles

Before you finance your next car, home, or other purchase, you should check out the going rates at http://www.bankrate.com/brm/default.asp 

Before purchasing real estate, take a look at http://realestate.yahoo.com/ 

For purchasing or leasing a vehicle, check out the following sites:

• Yahoo Auto --- http://autos.yahoo.com/ 
• Capital One Auto Financing --- http://www.capitaloneautofinance.com/Public/Home/Default.aspx 

Bob Jensen's purchasing helpers are at http://www.trinity.edu/rjensen/bookbob3.htm 

National Crime Prevention Council --- http://ncpc.org/

Free Whistle Blower Hotlines from TeleSentry (all hours seven days per week) --- http://telesentry.org/hotline.htm 

We have designed our toll free reporting service specifically to provide employees an anonymous communication channel to bring forth Code of Conduct concerns and establish a protected platform for on-going communications with your company.

The U.S. Department of Justice Homepage --- http://www.usdoj.gov/ 

The U.S. Department of Justice Cybercrime Website --- http://www.usdoj.gov/criminal/cybercrime/ 

This is a good site!
AICPA Antifraud & Corporate Responsibility Resource Center --- http://www.aicpa.org/antifraud/ 

Internet Consumer Fraud Continues to Rise --- http://www.ftc.gov/ 
Annual FTC report says 47 percent of non-identity theft complaints were Internet-related in 2002. http://ecommerce.internet.com/news/news/article/0,,10375_1573071,00.html 

Federal Trade Commission Bureau of Consumer Protection --- http://www.ftc.gov/bcp/index.shtml

The Australian Investment and Securities Commission also has SCAM pages, at http://www.asic.gov.au/FIDO/fido.nsf/byheadline/Scams+%26+Swindlers+portal?openDocument and also has a monthly GULL award.

Code Orange: CyberCrime Center --- http://www.eweek.com/article2/0,3959,1104230,00.asp 
It's gotten so bad that even the feds are worried. So the Department of Homeland Security plans on opening a Cyber-Security Center in DC to address the problem. We're not just talking about nabbing script-kiddies, either—big-time criminals are flocking to the Web. But one key piece is missing—and our experts think the new center will flop until it's addressed. Find out what the fatal flaw is and learn details of this new government bureaucracy in our special coverage.

Resources to prevent and discover fraud from the Association of Fraud Examiners --- http://www.cfenet.com/resources/resources.asp 

Self-study training for a career in fraud examination --- http://marketplace.cfenet.com/products/products.asp

How to Blow the Whistle at Trinity University
Until I recently ran into Gary Tanner, Trinity University's head of internal auditing, I was not aware that Trinity had a fraud hotline for anonymous (although it does not have to be anonymous) reporting suspected frauds, sexual abuse, or other bad things that happen on campus.  Scroll down to the "Fraud Hotline" button at http://www.trinity.edu/gtanner/ 

If you don't have an immediate need for this hotline button, I suggest you scroll back to the top of Gary 's page just to smile at the really cute animation of the Trinity Tiger spotting his tail and then commencing to chase the tail.  Of course Gary never runs around in circles like that.  

February 24, 2004 reply from Bill Spinks

Being curious, I went to the website and our "community" might find this statement interesting:

The management of Trinity University does have the right to review any and all university computer activities including e-mail, key strokes and uses that do not coincide with the mission of Trinity University. (emphasis mine)

So remember when you type those "key strokes" you are not alone. Big Northrup loves you and watches over you.... ................

billspinks

FirstGov.Gov Web Site Wins 'Oscar' of Good Government --- http://www.washingtonpost.com/wp-dyn/articles/A32750-2003May8.html 
The site is at http://www.firstgov.gov/ 

Find Government Benefits Shop Online Apply for Government Jobs Change Your Address Find Parks and Recreation Spots		Renew Your Driver's License Get a Passport Application Apply for Social Security Check Immigration Case Status More Online Services

Information by Topic » Benefits and Grants Defense and International Education and Jobs Environment, Energy and Agriculture Family, Home and Community Health History, Arts and Culture Money and Taxes Public Safety and Law Science and Technology Travel and Recreation Voting and Elections
Especially For » Kids Parents Seniors Americans Abroad More Audiences	Consumer Help » Consumer Action Guide Consumer Safety A-Z Free and Low-cost Publications Recalls Scams and Fraud

 

A new invention that makes a person feel full while eating less food is being tested as an alternative to surgical treatments for morbid obesity. The pill expands in the stomach after being swallowed --- http://www.wired.com/news/medtech/0,1286,58705,00.html 

Do you suppose there will be alternative models giving us choices?
Paris - Doctors who have grown penile tissue in animals to demonstrate the possibility of organ replacement have now gone one better - they have added nerve cells --- http://www.news24.com/News24/Technology/News/0,,2-13-1443_1353789,00.html 

Class Action Securities Fraud Lawsuits up in 2004
While the number of federal securities fraud class actions filed in 2004 increased only moderately from 2003 levels, rising to 212 companies sued from 181, the decline in stock market capitalization corresponding to these actions increased dramatically, according to a report released today by the Stanford Law School Securities Class Action Clearinghouse in cooperation with Cornerstone Research.  The total decline in the market capitalization of the defendant firms from the trading day just before the end of the class period to the trading day immediately after the end of the class period, or the "Disclosure Dollar Loss (DDL)," nearly tripled from $58 billion in 2003 to $169 billion for cases filed in 2004. This 192 percent increase in the DDL index is attributable entirely to eight filings, in which each defendant firm experienced disclosure dollar losses in excess of $5 billion. In sharp contrast, there was only one filing with losses that large in all of 2003.
AccountingWeb, January 6, 2005 --- http://www.accountingweb.com/cgi-bin/item.cgi?id=100321 

Free Fraud Alerts Services

Google offers a News Alert System that includes news alerts about scams in various regions of the U.S. --- http://www.google.com/newsalerts?q=%22Better+Business+Bureau%22&hl=en 

Informercial Scams (even those carried on the main TV networks)--- http://www.infomercialscams.com/

Richard Campbell notes a nice white collar crime blog edited by some law professors --- http://lawprofessors.typepad.com/whitecollarcrime_blog/ 

Lexis Nexis Fraud Prevention Site ---  http://risk.lexisnexis.com/prevent-fraud

Questions
What do airline fares and Congressional legislation have in common?

Answer
There are a lot of surprises that are revealed only after you're struck with the deceptions (especially about baggage fees in both instances).
What you end up with is not necessarily what you'd planned on getting.

In 2009 the airline seat demand is expected to drop off a cliff for a variety of reasons, not the least of which is the economy.
Beware of increasingly deceptive ticket deals.

Travel companies say that by the end of this year, consumers will be able to comparison shop for airfares that for the first time will include the fees airlines have been tacking on to advertised fares only after you hit the "buy" button. Already TripAdvisor.com and FlyingFees.com offer elementary tools for calculating fees, and advanced technology that can fold fees into fare quotes at travel agencies, online vendors and airline Web sites is likely to hit the market later this year.
"Airfare Quotes That Lay Bare Hidden Fees:  Sites Build Tools to Compare the Actual Costs of Flights; When Baggage Tips the Scale," by Scott Macartney, The Wall Street Journal, March 10, 2009 --- http://online.wsj.com/article/SB123664662318478683.html?mod=todays_us_personal_journal

Shop for airline tickets online or through a travel agent and the price quotes you get don't tell the whole story these days. But that's about to change.

Travel companies say that by the end of this year, consumers will be able to comparison shop for airfares that for the first time will include the fees airlines have been tacking on to advertised fares only after you hit the "buy" button. Already TripAdvisor.com and FlyingFees.com offer elementary tools for calculating fees, and advanced technology that can fold fees into fare quotes at travel agencies, online vendors and airline Web sites is likely to hit the market later this year.

"This has tremendous potential to turn air-travel shopping on its end," said Kyle Moore, vice president of product marketing for Sabre Travel Network.

A $200 ticket on one airline may look like a good deal, but could ultimately be more expensive than a $250 ticket on another carrier if that first airline charges fees for checking baggage, transporting pets or unaccompanied minors. Even perks like seats with extra legroom, priority security-line privileges or one-day passes to an airport lounge can significantly boost the price of a ticket.

Airlines have found customers willing to pay more at the airport when fees are separate from fares. Folding fees into fares could limit airlines' ability to dig deeper into traveler wallets.

Sabre Holdings Corp. and Amadeus IT Group SA, two leading airline booking companies, say they'll have tools out to travel agents, Web sites and airlines beginning later this year that will add fees consumers plan to use into ticket prices, showing bottom-line prices much as car-rental companies were pressured into showing the total price of a rental with all fees, taxes and surcharges included.

Rough early attempts to fold fees into prices give travelers a better idea of the fees they may incur, but still leave a lot of the math to travelers. TripAdvisor, a company owned by Expedia Inc. that built a following collecting travelers' hotel and destination reviews, added airline ticket search capabilities to its site on Feb. 27 and unveiled a "fee estimator" that can re-rank prices based on how many bags you plan to check. The fee estimator, developed in-house by TripAdvisor, can also calculate expected fees for each flight for meals, drinks, snacks and 

"Customers are looking for clarity in pricing," says Bryan Saltzburg, general manager of new initiatives for TripAdvisor.

Without fees, a $193 round-trip fare between New York and Fort Lauderdale for travel later this month on US Airways Group Inc. looks cheaper than a $197 fare at JetBlue Airways Corp., for example. But if you're checking two bags, you'll pay $80 in fees on US Airways and only $40 on JetBlue.

The fee estimator takes into account whether you have elite status at an airline that may exempt you from some fees. But there are lots of limitations. TripAdvisor's estimator only works for domestic flights and does not price out the costs of overweight or oversized luggage, priority seating, pets, unaccompanied minors or other charges. TripAdvisor says it concentrated on the most frequently incurred fees; more fees may be coming.

Continued in article

Bob Jensen's threads on consumer fraud and reporting are at http://www.trinity.edu/rjensen/FraudReporting.htm

Jensen Comment
Add-on fee collecting greatly complicates product costing since most of these fees are in essence for separate products. But the products are in no way independent since the all depend on the purchase of the main ticket. Also these products share many common fixed costs such as the cost of baggage handling. The airline needs a baggage system to serve both the "free baggage" that is part of the ticket price and the "fee baggage" that is charged baggage not covered in the price of a ticket. Cost accounting and pricing decisions are very complicated and offer an opportunity for new case studies in cost and managerial courses. Add this to the problem of frequent flier liabilities and you may write up a case that nobody can solve. Those incomprehensible telephone bills demonstrated that consumers really hate complicated billings with lots of hidden surprises in the fine print.

Report to the Nations on Occupational Fraud and Abuse, 2010 Global Fraud  --- http://www.acfe.com/rttn/rttn-2010.pdf
Thanks to Jim McKinney for the heads up.

Bob Jensen's Fraud Updates are at
http://www.trinity.edu/rjensen/FraudUpdates.htm

Better Business Bureau Sets More Records, Releases Its Top Ten --- http://www.dayton.bbb.org/topten2004.html 

Financial services is new to the top ten lists with a dramatic 900% increase in complaints. The 90 complaints in this industry can all be contributed to one company in our service area, which does business nationwide. The complaints against this company concern a wide variety of issues, including advertising, sales, delivery, repair or service, guarantee or warranty, product quality, refund or exchange, contract, customer service and credit or billing issues. Donna Childs, CAE, BBB President & CEO, says, "It is vital that consumers read contracts and ask questions. If you don't know what something means, ask for clarification. And, always read the fine print."

Mortgage companies and brokers continue to be high on both lists. This can be contributed to the fact that interest rates are still attractive. The 36% increase in inquiries on companies in this industry is due to consumers checking around to find reputable companies to do business with. Unfortunately, complaints are up 50% in this industry also. This increase may be attributed to a high demand in this industry. Companies are having a difficult time keeping up with the volume of business.

The home improvement industry and related industries like heating & A/C, windows, plumbers and roofing contractors continue to be among the most complained and inquiried about industries. Though they are still on the top ten lists, some of these industries have seen a decrease in activity. Donna Childs says, "Roofing contractors have seen a 29% decrease in the number of complaints filed in their industry and a 33% decrease in the number of inquiries. This can be attributed to the fact that the majority of roofing jobs generated from the 2001 hail storms have been completed and the activity in this industry is falling back to normal levels."

Work-at-home offers were new to the top ten complaint list. Again, this was due to one company operating in our service area. The company involved has a pattern of unanswered complaints concerning unfulfilled contracts, selling practices and advertising practices.

Donna Childs says, “Ads promoting assembly work, chain letters, envelope stuffing, multi-level marketing, online business and medical insurance claims processing are tempting, but many people are victimized by work-at-home schemes like these and are losing more money than ever. In fact, the Federal Trade Commission reports work-at-home schemes were one of the top ten consumer frauds that it received complaints about in 2002." She continues, "It’s important to keep in mind that any work-at-home offer requiring an upfront fee or purchase is probably not legitimate. If you send money to one of these, you will probably never see your money again or earn money by working at home. Avoiding work-at-home opportunities is the easiest way to save your money. But, if you are considering an offer, investigate before you commit or pay fees. Ask questions and get ten references from people successful in the venture in your area. Don’t feel pressured to make a decision."

Also new to the lists are tree cutting and trimming companies and home furnishing stores. Complaints against tree cutters and trimmers varies from missed appointments, incomplete work and failure to call customers back. Donna Childs says, "One of the common complaints the BBB hears involves stump removal. One of these contractors may cut down a tree in a yard and promise to come back and take out the stump. Time goes by, call after unreturned call, the stump is still in the yard, leaving a frustrated consumer."

Home furnishing stores complaints involve warranty issues. For example, a customer has a couch delivered and the customer notices it is ripped upon arrival. The customer is upset because instead of replacing the couch the company sends someone out to fix it. This action may be covered by the warranty, but the consumer is upset because they wanted a new couch, not one that has been repaired.

Donna concludes, “The bottomline is you need to know who you are doing business with. So, before you do business with a stranger, check with a friend…your Better Business Bureau." Put the BBB to work for you by visiting www.dayton.bbb.org or calling (937) 222-5825 or (800) 776-5301, 24/7.

Additional information about the industries on the Better Business Bureau's top ten follows.

The Better Business Bureau of Dayton/Miami Valley, Inc. is a private, nonprofit association founded in 1925. The Bureau serves the Miami Valley, including Montgomery, Greene, Clark, Darke, Miami, Preble, Shelby and northern Warren Counties.

The 10 Most Faked Artists  --- http://www.artnewsonline.com/currentarticle.cfm?type=feature&art_id=1853

Scam Warning
Denny Beresford sent me a message about the latest Social Security email scam. Always remember that government agencies like the IRS and the Social Security Administration, along with banks credit unions, do not send you email messages out of the blue seeking your privacy information or your money. These messages come from crooks, most of whom reside outside the legal jurisdiction of the United States. I don't even open email messages from these institutions.

The sad part is that these scams work so successfully!

Bob,

You might be interested in this - http://www.ssa.gov/pressoffice/pr/colaPhishingScam-pr.htm 
(This is a warning from the Social Security Administration! )

I'm receiving social security benefits now and I have to say that the email I received earlier this morning looked fairly official. However, it seemed unlikely that Social Security would make such a notification by email. So I found the announcement on the official Social Security site. While I'd bet that most people don't fall for the "wife of the former president of Nigeria" type of scam, this looks like one that might have a higher degree of success.

Denny

November 13, 2006 reply from Alexander Robin A [alexande.robi@UWLAX.EDU]

It's mind boggling that anyone would believe that someone they don't know would share millions of dollars with them for helping transfer out (mostly stolen) money from wherever. Does anyone on this list know of any good psychological studies on this phenomenon? It would be fascinating to understand it better.

Robin Alexander

November 13, 2006 reply from Scott Bonacker [aecm@BONACKER.US]

It's been a few years, but my only two personal experiences with these scam letters came close together.

One was a call from a woman wanting to know how much income tax she would owe if she was paid $6M to arrange a funds transfer. I only had one contact with that person. The other call was from a former client who was in desperate financial straits over an illness in his family, after several conversations and showing him the results of research I convinced him it wasn't a real offer.

The thing that was common to both situations was that the people were in desperate need, so they were willing believers. It's something like the lottery mentality - where they think there is one big deal, a home run play, that will fix everything that is wrong.

If there were a study on this kind of thing, I think it would include mention of suspension of disbelief.

Scott Bonacker
Springfield, Missouri

Hi Robin,

There's a bit of insight into this at http://www.trinity.edu/rjensen/FraudReporting.htm#NigerianFraud 

It's especially enlightening when the victims turn the tables on the scammers. The huge underlying reason why these schemes are successful is that far too many people are willing to bend ethics one time when the promised payoff is enormous.

When I was at FSU I raised horses. Across the road at the time were 100,000 undeveloped acres (mostly pine forest) where occasional drug deals were made --- at least I assumed so since the setting was so perfect for privacy. I used to ride horseback for miles on dirt roads through those woods wondering (actually daydreaming) what I would do if I stumbled on two drug dealers who killed each other and left a million dollars of cash laying there for the taking.

It would be tempting to load up my saddlebags before returning to the barn to report the shootings. (In those days there were no cell phones such that I could not phone in the crime until I returned to the barn).

Can't say whether it was good news or bad news that I never encountered such an opportunity in real life. Hypothetically I insist that I would take the high road! That's the beauty of fiction!

Bob Jensen

Jensen Comment
Even the familiar Nigerian-type scams are still enormously successful. These scams are the second most lucrative export (oil is number one) from Nigeria, and Nigeria is only one of many places in the world where such scams originate. Many also come from Eastern Europe where technology geniuses are always miles ahead of law enforcement and vendor security protection upgrades --- http://www.trinity.edu/rjensen/FraudReporting.htm#NigerianFraud

Beware of Counterfeit U.S. Postal Money Orders
In the last six months, the F.B.I. and postal inspectors say, international forgers - mostly in Nigeria, but also in Ghana and Eastern Europe - appear to have turned new attention to the United States postal money order. More than 3,700 counterfeit postal money orders were intercepted from October to December, exceeding the total for the previous 12 months, according to postal inspectors. Moreover, 160 arrests have been made in the United States since October in cases where people have been suspected of knowingly receiving fraudulent postal money orders or trying to cash them, Paul Krenn, a spokesman for the United States Postal Inspection Service, said.
Tom Zeller Jr., "Authorities Note Surge in Online Fraud Involving Money Orders," The New York Times, April 26, 2005 --- http://www.nytimes.com/2005/04/26/business/26forgery.html?

"Phishy Investment Plans," by Brian Krebs, The Washington Post, October 31, 2005 --- http://blogs.washingtonpost.com/securityfix/2005/10/phishy_investme.html?referrer=email

When I visited Fe-International.com -- the investment site Johannes mentioned -- the toolbar popped up a warning:

"The page you are trying to visit has been blocked by the Netcraft Toolbar because it is believed to be part of a fraudulent phishing network. Do you still want to go there?"

I clicked "Yes" because I wanted to poke around some more (for the record, unless you really know what you're doing, it is best just to avoid known or suspected scam sites altogether.) Netcraft dug up a bunch of information on the site, including records indicating that the site domain name was associated with a host named "got.raped.org." (Nice touch, I thought. Gee, no, that's not phishy at all.)

With a few hours of research, I soon discovered that there are literally hundreds if not thousands of these sites online at any given time, advertising high-yield investment plans (HYIPs) that claim to offer quick profits through a variety of poorly explained methods usually related to day-trading or buying foreign currencies or stocks.

The advertised rate of return varies by site, but the rates offered usually are far in excess of what most legitimate investment vehicles offer, promising anywhere from 1 to 2 percent per day to 130 percent over 30 days.

I suppose it's possible some of these sites are legit, but it appears that most are little more than old-fashioned Ponzi schemes gone virtual. The funds may pay out in the beginning, but eventually they will attract more investors than they can reasonably pay off with the money they're taking in. When that happens, the fund inevitably closes down and lots of investors are left without anything.

All of the funds require investors to make their deposits via some type of virtual gold-backed currency like eGold or E-Bullion. Such payment methods are largely outside the control of U.S. financial regulators and are "non-repudiable," meaning once money has been sent there is no way to reverse the transaction.

Most of the sites allow people to invest anywhere from $1 to $10,000, with claims of "guaranteed payouts." But from browsing one of many HYIP forums dedicated to tracking the lifespan and performance of these high-risk investments, it seems the majority pay back only a fraction of what people pay into them.

Continued in article

"Charities Next to Feel Regulators’ Scrutiny," AccountingWEB, March 31, 2004 --- http://www.accountingweb.com/cgi-bin/item.cgi?id=98965 

You write that check to your favorite charity, send it off and feel pretty good about your philanthropic gesture, right? Federal and state regulators are taking steps to make sure that tax-deductible donation is being used properly by the nonprofit receiving it. Following the firestorm that erupted in corporate America in the wake of numerous accounting scandals, some are wondering if enough is being done to regulate the nonprofit sector, with Massachusetts Attorney General Thomas F. Reilly leading the charge.

"We are seeing more mischief in this area than I think we've seen before," Reilly told the New York Times. He is calling for legislation in his state to tighten controls over charities.

New York Attorney General Eliot Spitzer proposed a series of laws to tighten up regulation of the nonprofit sector last summer, but the bills have stalled in the legislature. "When his efforts didn't go anywhere, I think some charities decided it was just a fad," Michael W. Peregrine, a lawyer in Chicago who represents many nonprofit groups, told the Times. "But the confluence of high-profile, notorious developments among charities is giving these attorneys general and congressmen the ammunition they need to push these measures through."

Senator Charles E. Grassley (R-IA), chairs the Senate Finance Committee and told the Times his committee’s staff would be looking at charitable issues "over a long period of time." He added that there may be hearing held in the matter, which the charities had hoped wouldn’t be necessary.

"In Congress, we legislate so much and delegate, but we need to do more oversight to make sure checks and balances work and supervise the tax credits we're giving," Grassley told the Times. "We give tax deductions for charitable giving, so there's a public policy interest in how the money gets used."

Rep. Bill Thomas (R-CA), chairman of the Ways and Means Committee, sent shock waves through the nonprofit sector earlier this month when he said his committee would be questioning the benefit taxpayers receive when a hospital or credit union is nonprofit as opposed to for-profit.

"They're in direct competition with institutions that pay taxes, and what is the good and worthy cause for which they were given the nonprofit, therefore tax-preferred, status?" he asked, referring to credit unions in a speech to the Federation of American Hospitals, reported by the Times. "I think some of it's gotten murky or lost in their attempt to build and grow and provide services to the point that if I put one down on paper and said profit or nonprofit, you couldn't tell the difference."

FBI: Don’t be Fooled by Work-at-Home Scams
The FBI and the Internet Crime Complaint Center (IC3) continue to receive numerous complaints from individuals who have fallen victim to work-at-home scams and remind consumers to be vigilant when seeking employment online. These work-at-home schemes are designed by criminals to gain the trust of job seekers in order to take advantage of working relationships to further illegal activity. Most victims do not even realize they are engaging in criminal behavior until it is too late. In many of the reported scams, victims are often hired to “process payments,” “transfer funds,” or “reship products.” However, these scams exploit unwitting employees by having them cash fraudulent checks, transfer illegally obtained funds for the criminals, or receive stolen merchandise and ship it to the criminals. Other scams entice victims to sign up to be a “mystery shopper,” receiving fraudulent checks with instructions to cash the checks and wire the funds to “test” a company’s services. Victims are told they will be compensated with a portion of the merchandise or funds.
Free Republic, February 4, 2009 --- http://www.freerepublic.com/focus/f-news/2178604/posts

Investing Scams

"Boomers Wearing Bull's-Eyes Postcrisis:  Those Over 50 Targeted in Investment Scams; Problem is 'Rampant'," by Blake Ellis, The Wall Street Journal, December 13, 2011 ---
http://money.cnn.com/2011/12/13/real_estate/home_sales_revision/index.htm

Beware of the So-Called Investor Education Programs (especially beware of infomercials)

"I don't see frankly much out there that really does the job, and that's partially because investors are their own worst enemy," says former SEC Chairman Arthur Levitt. "They refuse to invest skeptically, and are too easily seduced by all the purveyors of financial products that prey upon their worst instincts."
"Investor Education 101: How to Avoid Scams:  Outreach Programs Target Most-Vulnerable Americans, But Success Is Hard to Assess,"  By Lynn Cowan, The Wall Street Journal, May 9, 2006; Page D3 --- http://online.wsj.com/article/SB114713241888747241.html?mod=todays_us_personal_journal

An onslaught of investor education is being unleashed, thanks to an ever-growing stockpile of money set aside for this purpose by regulators.

Senior-citizen investors being preyed upon? The nonprofit Investor Protection Trust is financing a Florida state program that teaches retirees to identify and report suspected scams.

Military families feeling pressured into buying unnecessary financial products? The National Association of Securities Dealers' Investor Education Foundation has launched a specialized Web site: saveandinvest.org.

Auto workers receiving lump-sum retirement buyouts in coming months? There is a new Securities and Exchange Commission publication that warns that they could be prime targets for fraud.

There seems to be no end to the list of publications, public-service announcements and seminars being funded in the wake of a landmark settlement in 2003 between regulators and Wall Street over stock analysts' conflicts of interest. The settlement provided $80 million in investor-education funds, and regulators add to that amount every year with more penalties for new securities-industry transgressions.

Unfortunately, there's also a seemingly infinite trove of outright hucksters and smooth marketing materials bombarding investors every day, say regulators and observers. And no one knows how effective investor-education programs are in combating them.

"I don't see frankly much out there that really does the job, and that's partially because investors are their own worst enemy," says former SEC Chairman Arthur Levitt. "They refuse to invest skeptically, and are too easily seduced by all the purveyors of financial products that prey upon their worst instincts."

There's also little information available about what kinds of programs really work to educate and protect investors. Regulators and investor-education specialists say they are working hard to expand their materials beyond brochures with basic information to encompass interactive games for students, television programs and in-person seminars.

But regulators add that they are also fighting against strong forces in their battle to educate and protect investors from scam artists, their own emotions and a legacy of conflicts of interest in the brokerage industry.

Scam artists are the most easily identified investor-protection issue: Often organized in pyramid, or "Ponzi," structures, the schemes promise outsized returns and can exist for years before collapsing. Investor-protection programs can easily focus on warning about this kind of threat because it has some obvious hallmarks.

Regulators' second villain is trickier: investors' own inertia and greed. Getting most people in the U.S. to learn the basics of a careful investing strategy is akin to asking them to read a legal footnote, but there is no shortage of people willing to sign up for the chance to earn 130% on ersatz securities.

Possibly the most innovative investor-education program in existence today targets investors who are drawn to these get-rich-quick scams. The SEC runs several Web sites that pose as can't-fail investment schemes. One, growthventure.com, outlines the business dealings of a fake construction-supply company, Growth Venture, which invites viewers to invest and receive returns of 350% a year. Anyone falling for the bait is linked to an SEC page that gently chides them and describes how to avoid scams.

But such educational tools aren't as easy to construct for one of the thorniest issues facing investor-education programs: teaching people about protecting themselves in daily interactions with the legitimate brokerage industry.

Although larger Ponzi scams, such as the Financial Advisory Consultants bust in California in 2004, are headlined for bilking investors out of as much as $300 million, industry wide brokerage scandals involving well-known firms have surpassed $1 billion apiece. From Prudential Securities' abusive sales of limited partnerships in the early 1990s to the conflicts of interest in analyst research in the late 1990s, major Wall Street firms appear to be struggling with improper systematic conduct every decade.

Yet investor educators often express concern about finding the right balance between warning investors and condemning a highly regulated industry that provides legitimate advice and services.

Continued in article

Jensen Comment
Also be careful what mutual fund or brokerage firm you deal with. My advice is to avoid high-commission brokerage firms. My advice is to also compare the mutual fund expense rates with benchmark rates of Vangaard and Fidelity.

Check the fraud rates of firms of better known firms. For example do a search on "Merrill" at http://www.trinity.edu/rjensen/FraudRotten.htm

Bob Jensen's investment helpers are at http://www.trinity.edu/rjensen/Bookbob1.htm#Finance

Question
What is hyperbolic discounting?

"Psychology of poverty and temptation," by Chris Blattman, September 2009 ---
http://chrisblattman.com/2009/09/15/psychology-of-poverty-and-temptation/

Some people are impulsive and impatient; they prefer a dollar or a donut today far more than a dollar or a donut tomorrow, so much so that they’re willing to give up shocking amounts of dollars and donuts tomorrow for just one today. This is one reason, some say, that we see such high interest rates for short-term borrowing, from New York to Calcutta.

Some people are not only impulsive and impatient, but inconsistently so. they care a lot about a dollar today versus tomorrow, but could care less between getting a dollar either 10 or 11 days from now. Economists call this ‘hyperbolic discounting’.

Both behaviors–impatience and time inconsistency–could be a source of persistent poverty.

Or not. Abhijit Banerjee presented a new paper here yesterday, written with MIT colleague Sendhil Mullainathan. They look at a number of seemingly unusual behaviors by the very poor–from exorbitant rates of short-term borrowing to the low take-up of small, high-return investments. Impatience cannot explain the patterns, they say. The impatience approach also requires the poor think differently than the rest of the population.

Another view: we’re all impulsive and impatient in the same way, but over a narrow range of goods that are quickly and cheaply satisfied. If you’re poor, these temptations are a big fraction of your income. If you’re even somewhat wealthy, they are not. Temptations are declining in income.

The paper runs through half a dozen perplexing patterns of behavior, and shows that these simple assumptions can explain a great deal.

This approach has a great deal in common with hyperbolic discounting, but is empirically distinct (and has very different policy implications). Parsing out and testing these subtleties strikes me as one of the most important frontiers in the study of poverty. Declining temptation, if true, could explain all sorts of odd behaviors. With more than a few Uganda and Liberia surveys on the horizon, I’m now scheming ways to test whether it’s true.

It’s a difficult paper, especially for those uninitiated in micro-economic theory. Even if that sounds like you: the subtle points are worth the slog.

For an intro to the subfield, see Senthil’s essay, Development economics through the lens of psychology. Another great resource is Stefano Dellavigna’s recent JEL article on evidence from the field. Both are ungated.

 Behavioral and Cultural Economics and Finance --- http://www.trinity.edu/rjensen/theory01.htm#Behavioral

78% of former NFL players have gone bankrupt or are under financial stress because of joblessness or divorce.
Championship Rings in pawn shops, IRS vaults, Ponzi schemer stashes offshore, or in the clutches of ex-wives

What on earth did athletes learn in college?

Pros seem especially susceptible to Ponzi schemes. Some recent examples --- Click Here

10 Ways Sports Stars (multi-millionaires) Go From Riches To Rags," by Lawrence Delevingne, Business Insider, September 18, 2009 --- http://www.businessinsider.com/10-ways-sports-stars-destroy-their-finances-2009-9

 Sports Illustrated article this year showed how shockingly common financial ruin is:

• By the time they have been retired for two years, 78% of former NFL players have gone bankrupt or are under financial stress because of joblessness or divorce.
• Within five years of retirement, an estimated 60% of former NBA players are broke.
• Numerous retired MLB players have been similarly ruined.

If that's not bad enough, the recession has made things even worse. Too much money in real estate; investments in Ponzi schemes; and poor financial advising have been exposed with the down economy.

A sign of the times? More former stars are selling their championship rings for money than ever. "It's amazing that I heard the recession was over," says Timothy Robins, owner of Championshiprings.net, who buys bling from current and former pros and has seen a 36% increase in sales during the past year. "I'm getting more calls from players than ever. They're having a really hard time."

While just about everyone has lost money over the past year, athletes tend to make particularly bad financial decisions, and it's not just reckless spending.

How they lose their wealth --- Click Here
http://www.businessinsider.com/10-ways-sports-stars-destroy-their-finances-2009-9#put-cash-in-a-ponzi-scheme-1

The 10 ways sports pros blow their cash >>

Jensen Comment
The same goes for many, many movie stars like Debbie Reynolds who, very late in their lives, are "willing to work for food."

The boots in Hollywood's Boot Hill are not stuffed with savings.

Bob Jensen's helpers in personal finance ---
http://www.trinity.edu/rjensen/Bookbob1.htm#InvestmentHelpers

How to avoid losing your money to fraud ---
http://www.trinity.edu/rjensen/FraudReporting.htm

Behavioral and Cultural Economics and Finance --- http://www.trinity.edu/rjensen/theory01.htm#Behavioral

Avoid hucksters that try to sell you knowledge of how to take advantage of naive investors in inefficient equity markets!
Especially avoid those high pressure "FREE workshops" in posh hotels that try to sell books, software, and schemes for beating the market.

"SEC goes after infomercial personalities in investor workshop fraud," AccountingWeb, March 11, 2008 ---
http://www.accountingweb.com/cgi-bin/item.cgi?id=104771 

The Securities and Exchange Commission has filed civil fraud charges against two promoters who illegally made millions selling a get-rich-quick stock trading system they touted on TV and at investor workshops at hotels in dozens of cities nationwide.

The Commission's complaint alleges that Linda Woolf and David Gengler, both of Utah, duped seniors and others who had attended free introductory seminars into believing they would make extraordinary stock market profits if they bought expensive "Teach Me to Trade" (TMTT) classes, mentoring, and computer software.

In order to con victims into paying as much as $40,000 for TMTT products and services, the Commission alleges that Woolf and Gengler lied about their success with the trading system, when in truth neither Woolf nor Gengler ever purchased TMTT's products or became successful traders.

"The allegations depict a cold-hearted scheme that preyed on the elderly, the desperate, and even the unemployed by promising financial security while instead robbing victims blind," said SEC Chairman Christopher Cox. "The Commission's charges should send a warning to all those who would masquerade as successful traders on TV while prowling the country for victims."

Linda Chatman Thomsen, Director of the SEC's Enforcement Division, added, "The evidence shows they callously urged customers to go into debt to purchase expensive products and services. Today's charges make clear that we will hold accountable those who prey on seniors and other investors."

The Commission's complaint alleges that at their workshop presentations between 2003 and 2006, Woolf and Gengler made false and misleading statements to sell TMTT packages of personal mentoring, software and classes ranging in price from approximately $11,000 to $40,000. According to the Commission's complaint, Woolf and Gengler also appeared in television infomercials portraying themselves as successful former TMTT customers, with Woolf targeting retirees, among others. In his workshops, Gengler urged investors to borrow against their retirement accounts to follow TMTT strategies.

Through false stories of their own trading success and bogus claims of a 96.5 percent success rate for TMTT students who purchased personal mentoring, courses, and software, Woolf and Gengler convinced attendees that they, too, would make extraordinary profits in the stock market if they followed TMTT's trading strategies that emphasized options trading and short-term swing trading.

In one infomercial, for example, Woolf told how she used to be an elementary school teacher and was able to replace her entire income after attending TMTT workshops. "I had no idea it was that easy to learn how to make money in the stock market," Woolf said. In another infomercial, Gengler claimed, "If you can simply follow steps and follow our principles, you'll make money. It's that simple."

Instead, the Commission alleges, Woolf and Gengler are unsuccessful traders, with Woolf having never declared a trading profit on her federal tax returns and Gengler typically declaring losses, or no profits. However, Woolf reaped approximately $4 million in commissions from selling TMTT packages, and Gengler made approximately $2.25 million, according to the Commission's complaint.

The Commission's complaint against Woolf and Gengler seeks disgorgement of their ill-gotten gains, civil money penalties and permanent injunctions enjoining the defendants from violating the antifraud provisions of the federal securities laws.

In a related action, the U.S. Attorney's Office for the Eastern District of Virginia has announced the filing of an indictment against Woolf and Gengler.

The Commission acknowledges the assistance of the U.S. Attorney's Office for the Eastern District of Virginia, the U.S. Postal Inspection Service, the Federal Bureau of Investigation and the Florida Attorney General's Office.

The Commission's investigation is continuing.

Questions
Should you believe these many claims that the equity capital markets are inefficient and that it's worth investing the time and money to beat the market?

Answer
A Dartmouth College finance professor would have us conclude that in recent years the equity markets are a bit like Las Vegas. It's possible to leave Las Vegas more than a million dollars ahead if you take high risks, but the odds are decidedly in favor of the casinos. Similarly, it's possible to beat the stock index funds if you take the risks, but the odds are definitely against beating the index funds.

This we return to the age old paradox. It's rather useless to carefully conduct a financial analysis of audited accounting reports in an effort to gain superior knowledge to take advantage of more naive investors. On the other hand if a sufficiently large number of investors did not make a sufficient number of "sophisticated-knowledge" buys and sells the equity markets might be less efficient. Even in efficient markets we must remain diligent in restraining earnings management and other types of creative accounting ploys that mislead sophisticated investors.

Sophisticated investors (apart from insiders) cannot take advantage of naive investors because there are so many sophisticated investors. Of course insiders can exploit efficient markets, but the SEC spends most of its budget trying to prevent insider trading. If the SEC was not successful in this effort by and large, the equity capital markets would cease to exist. This is why corporate executives turned more to stealing from their own companies (e.g., outrageous salaries, kickbacks and options backdating) rather than in exploiting inside information for direct buying and selling of their (or their sex partners and family) own shares at timely points in time.

"Can You Beat the Market? It’s a $100 Billion Question," by Mark Hulbert, The New York Times, March 9, 2008 --- Click Here

The study, “The Cost of Active Investing,” began circulating earlier this year as an academic working paper. Its author is Kenneth R. French, a finance professor at Dartmouth; he is known for his collaboration with Eugene F. Fama, a finance professor at the University of Chicago, in creating the Fama-French model that is widely used to calculate risk-adjusted performance.

In his new study, Professor French tried to make his estimate of investment costs as comprehensive as possible. He took into account the fees and expenses of domestic equity mutual funds (both open- and closed-end, including exchange-traded funds), the investment management costs paid by institutions (both public and private), the fees paid to hedge funds, and the transactions costs paid by all traders (including commissions and bid-asked spreads). If a fund or institution was only partly allocated to the domestic equity market, he counted only that portion in computing its investment costs.

Professor French then deducted what domestic equity investors collectively would have paid if they instead had simply bought and held an index fund benchmarked to the overall stock market, like the Vanguard Total Stock Market Index fund, whose retail version currently has an annual expense ratio of 0.19 percent.

The difference between those amounts, Professor French says, is what investors as a group pay to try to beat the market.

In 2006, the last year for which he has comprehensive data, this total came to $99.2 billion. Assuming that it grew in 2007 at the average rate of the last two decades, the amount for last year was more than $100 billion. Such a total is noteworthy for its sheer size and its growth over the years — in 1980, for example, the comparable total was just $7 billion, according to Professor French.

The growth occurred despite many developments that greatly reduced the cost of trading, like deeply discounted brokerage commissions, a narrowing in bid-asked spreads, and a big reduction in front-end loads, or sales charges, paid to mutual fund companies.

These factors notwithstanding, Professor French found that the portion of stocks’ aggregate market capitalization spent on trying to beat the market has stayed remarkably constant, near 0.67 percent. That means the investment industry has found new revenue sources in direct proportion to the reductions caused by these factors.

What are the investment implications of his findings? One is that a typical investor can increase his annual return by just shifting to an index fund and eliminating the expenses involved in trying to beat the market. Professor French emphasizes that this typical investor is an average of everyone aiming to outperform the market — including the supposedly best and brightest who run hedge funds.

Professor French’s study can also be used to show just how different the investment arena is from a so-called zero-sum game. In such a game, of course, any one individual’s gains must be matched by equal losses by other players, and vice versa. Investing would be a zero-sum game if no costs were associated with trying to beat the market. But with the costs of that effort totaling around $100 billion a year, active investing is a significantly negative-sum game. The very act of playing reduces the size of the pie that is divided among the various players.

Even that, however, underestimates the difficulties of beating an index fund. Professor French notes that while the total cost of trying to beat the market has grown over the years, the percentage of individuals who bear this cost has declined — precisely because of the growing popularity of index funds.

From 1986 to 2006, according to his calculations, the proportion of the aggregate market cap that is invested in index funds more than doubled, to 17.9 percent. As a result, the negative-sum game played by active investors has grown ever more negative.

The bottom line is this: The best course for the average investor is to buy and hold an index fund for the long term. Even if you think you have compelling reasons to believe a particular trade could beat the market, the odds are still probably against you.

Bob Jensen's threads on accounting theory are at http://www.trinity.edu/rjensen/Theory01.htm

Avoid hucksters that try to sell you knowledge of how to take advantage of naive investors in inefficient equity markets!
Especially avoid those high pressure "FREE workshops" in posh hotels that try to sell books, software, and schemes for beating the market.

"SEC goes after infomercial personalities in investor workshop fraud," AccountingWeb, March 11, 2008 ---
http://www.accountingweb.com/cgi-bin/item.cgi?id=104771 

The Securities and Exchange Commission has filed civil fraud charges against two promoters who illegally made millions selling a get-rich-quick stock trading system they touted on TV and at investor workshops at hotels in dozens of cities nationwide.

The Commission's complaint alleges that Linda Woolf and David Gengler, both of Utah, duped seniors and others who had attended free introductory seminars into believing they would make extraordinary stock market profits if they bought expensive "Teach Me to Trade" (TMTT) classes, mentoring, and computer software.

In order to con victims into paying as much as $40,000 for TMTT products and services, the Commission alleges that Woolf and Gengler lied about their success with the trading system, when in truth neither Woolf nor Gengler ever purchased TMTT's products or became successful traders.

"The allegations depict a cold-hearted scheme that preyed on the elderly, the desperate, and even the unemployed by promising financial security while instead robbing victims blind," said SEC Chairman Christopher Cox. "The Commission's charges should send a warning to all those who would masquerade as successful traders on TV while prowling the country for victims."

Linda Chatman Thomsen, Director of the SEC's Enforcement Division, added, "The evidence shows they callously urged customers to go into debt to purchase expensive products and services. Today's charges make clear that we will hold accountable those who prey on seniors and other investors."

The Commission's complaint alleges that at their workshop presentations between 2003 and 2006, Woolf and Gengler made false and misleading statements to sell TMTT packages of personal mentoring, software and classes ranging in price from approximately $11,000 to $40,000. According to the Commission's complaint, Woolf and Gengler also appeared in television infomercials portraying themselves as successful former TMTT customers, with Woolf targeting retirees, among others. In his workshops, Gengler urged investors to borrow against their retirement accounts to follow TMTT strategies.

Through false stories of their own trading success and bogus claims of a 96.5 percent success rate for TMTT students who purchased personal mentoring, courses, and software, Woolf and Gengler convinced attendees that they, too, would make extraordinary profits in the stock market if they followed TMTT's trading strategies that emphasized options trading and short-term swing trading.

In one infomercial, for example, Woolf told how she used to be an elementary school teacher and was able to replace her entire income after attending TMTT workshops. "I had no idea it was that easy to learn how to make money in the stock market," Woolf said. In another infomercial, Gengler claimed, "If you can simply follow steps and follow our principles, you'll make money. It's that simple."

Instead, the Commission alleges, Woolf and Gengler are unsuccessful traders, with Woolf having never declared a trading profit on her federal tax returns and Gengler typically declaring losses, or no profits. However, Woolf reaped approximately $4 million in commissions from selling TMTT packages, and Gengler made approximately $2.25 million, according to the Commission's complaint.

The Commission's complaint against Woolf and Gengler seeks disgorgement of their ill-gotten gains, civil money penalties and permanent injunctions enjoining the defendants from violating the antifraud provisions of the federal securities laws.

In a related action, the U.S. Attorney's Office for the Eastern District of Virginia has announced the filing of an indictment against Woolf and Gengler.

The Commission acknowledges the assistance of the U.S. Attorney's Office for the Eastern District of Virginia, the U.S. Postal Inspection Service, the Federal Bureau of Investigation and the Florida Attorney General's Office.

The Commission's investigation is continuing.

"Tax Scams Targeting Poor, Elderly," SmartPros, July 2011 ---
http://accounting.smartpros.com/x72366.xml

Taxpayers beware: Scammers are out there and they're digging for your personal information and for money.

The IRS is reporting an increase in tax return related scams that typically involve taxpayers who normally do not have to file federal taxes. The scammers con the taxpayers into believing they should file a return with the IRS for tax credits, refunds or rebates for which they are not entitled.

Some unscrupulous tax return preparers have been deceiving people into paying for advice about how to file false claims and some charge unreasonable amounts for preparing legitimate returns that could have been prepared for free by the IRS or by IRS sponsored Volunteer Income Tax Assistance partners.

Many of the scammers are targeting taxpayers in the Midwest and in the South, according to Sue Hales, spokeswoman for the IRS for Illinois. Some are stealing the identities of conned taxpayers and they most often prey on low income individuals and the elderly.

Taxpayers should be wary of any of the following claims:

-- Fictitious claims for refunds or rebates based on excess or withheld Social Security benefits;

-- Claims that Treasury Form 1080 can be used to transfer funds from the Social Security Administration to the IRS, enabling a payout from the IRS;

-- Unfamiliar for-profit tax services teaming up with local churches. Flyers and advertisements for free money from the IRS, suggesting the taxpayer can file with little or no documentation, have been appearing in community churches around the country. Promoters are targeting church congregations and exploiting their good intentions and credibility. These schemes often spread by word of mouth among unsuspecting, well-intentioned people telling friends and relatives;

-- Home-made flyers and brochures implying credits or refunds are available without proof of eligibility;

-- Promises of refunds for "Low income -- No Documents Tax Returns."

-- Claims for the expired Economic Recovery Credit Program or Recovery Rebate Credit;

-- Advice on using the Earned Income Tax Claims based on exaggerated reports of self-employment income;

-- In some cases, non-existent Social Security refunds or rebates have been the bait used by the con artists. In other situations, taxpayers deserve the tax credits they are promised but the preparer uses fictitious or inflated information on the return which results in a fraudulent return.

Continued in article

Unfortunately there's not much you can do personally to protect yourself on this one other than to file your tax return early, and it's a little late for that!

"A Call for Action On Tax Scams," by Stephen Barr, The Washington Post, April 14, 2008; Page D01 --- Click Here

The scam goes like this:

A bogus tax return using a stolen Social Security number is submitted to the Internal Revenue Service early in the tax-filing season. Because the IRS does not know the return involved identity theft, it sends a refund.

When the real tax return is filed, it gets flagged as a duplicate, freezing any refund. It sometimes takes months for the innocent, legitimate taxpayer to sort it all out with the IRS.

Filings of fictitious tax returns to steal refunds have jumped dramatically, perhaps because con artists can file them electronically and get a direct-deposit refund long before the real taxpayer finds out.

From 2002 to 2007, the number of fraudulent tax return complaints to the Federal Trade Commission jumped to 20,782, from 3,061, according to a report by the Treasury Inspector General for Tax Administration, or TIGTA.

The rise in fraudulent tax returns was an issue at a Senate Finance Committee hearing last week called by the committee chairman, Sen. Max Baucus (D-Mont.). "I am disappointed that the IRS does not notify a taxpayer when someone else has filed a return using the victim's Social Security number," he said.

Nina E. Olson, the national taxpayer advocate, who provides an independent voice on behalf of taxpayers, told the committee she is concerned the IRS does not know how many taxpayers are affected by identity theft and said the problem may be more widespread than IRS data suggest.

Another witness, J. Russell George, the inspector general for tax administration, said the IRS "processes and procedures have been inadequate in reducing the burden for taxpayers who have been victimized. When the IRS becomes aware of employment-related identity theft, it does not take action unless the case relates to a substantive tax or conspiracy violation."

Unless the IRS acts to address identity theft and related computer security issues, George said, "there is no deterrent to keep the problem from spreading."

Olson, in additional testimony submitted to the committee, said her staff is receiving calls from senior citizens who filed for this year's tax rebate after not filing returns for several years and who have discovered that someone else has been using their Social Security numbers on tax returns.

She and George also described another common scam involving tax returns.

These cases often involve illegal immigrants and undocumented workers who use another person's identity -- name, Social Security number or both -- to obtain employment. The employer files a wage and tax statement, the W-2, under the stolen identification information, and the IRS computers attribute the earnings according to the Social Security number. Then the IRS levies an additional tax on the lawful owner of the Social Security number, creating consequences for the innocent person.

Continued in article

Where do you find help with taxes?

Start with the IRS links shown above. These services are free from the IRS.
Especially note the IRS Taxpayer Advocate Service --- http://www.irs.gov/advocate/index.html
Taxpayer Advocate Service. --- http://www.irs.gov/advocate/index.html 
IRS Site Map --- http://www.irs.gov/sitemap/index.html

Check with you local or state Society of CPAs. These societies often provide links to free local taxpayer assistance helpers.
Links for U.S. states and territories can be found at http://www.aicpa.org/Legislative+Activities+and+State+Licensing+Issues/State+News+and+Info/States/info/index.htm
or just Click Here

There are thousands of commercial taxpayer assistance companies, attorneys, and accountants that charge fees and deal with varying levels of tax problem complexities. Be sure to investigate the credentials and reputations of these service providers. There are many fraudulent taxpayer serivice firms --- http://www.trinity.edu/rjensen/FraudReporting.htm#TaxScams
Unless the provider has an established reputation, don't deal over the phone or the Internet. A local provider should have an office and an address other than a postal box. Taxpayer assistance is an area where you may not get what you pay for.

There are some helpers for obtaining professional services at http://www.trinity.edu/rjensen/fees.htm

Bob Jensen's threads on Phishing, Spoofing, Pharming, Slurping, and Pretexting --- http://www.trinity.edu/rjensen/ecommerce/000start.htm#Phishing

"IRS issues warning about identity theft," Free Republic, August 24, 2006 ---
http://www.freerepublic.com/focus/f-news/1689286/posts

The IRS warned taxpayers Wednesday not to be duped by scammers posing as private debt collectors the agency has hired to chase unpaid tax debts.

The Internal Revenue Service designed the debt collection program to minimize that risk "because we know what it's like out there with regard to identity theft nowadays," said Brady Bennett, IRS director of collection.

But some critics of the program see so many pitfalls that they're urging debtors to insist on negotiating payment directly with the IRS.

The National Treasury Employees Union, which represents IRS employees and opposes the program, has even drafted a sample letter that taxpayers can send to opt out of the private collection program and demand that the IRS handle their case.

The IRS plans to assign 12,500 accounts with unpaid tax debts to three private agencies beginning Sept. 7. About 40,000 accounts will be turned over by the end of the year. The IRS chose taxpayers who owe less than $25,000 and don't dispute the debt.

Anyone contacted by a private collection agency has the right, among others, to insist that only the IRS deal with their account. Bennett said he hoped few taxpayers with debts sent to private collectors would opt out.

"The purpose of this program is to provide value to the American taxpayer. Those who don't pay have an impact on everybody else who does," he said.

Bob Jensen's threads on identity theft are at
http://www.trinity.edu/rjensen/FraudReporting.htm#IdentityTheft

More tax preparers indicted over telephone tax refund scams
"We saw limited but serious instances of abuse," said IRS Acting Commissioner Kevin M. Brown. "We used our enforcement resources to move swiftly and decisively to protect this valuable refund for the vast majority of taxpayers and tax preparers who are requesting it properly. We want everyone who is eligible for the telephone tax refund to get it but not to inflate the amount requested." The IRS has been monitoring telephone excise tax refund requests for potential problems. Shortly after the tax-filing season opened in early January, the agency observed problems with returns from some tax preparers that indicated possible criminal intent. Along with the search warrants carried out by the IRS, other tax preparers across the nation who prepared questionable telephone tax refund requests received visits from IRS revenue agents (auditors) and special agents. The IRS has advised taxpayers to stay away from unscrupulous promoters and tax preparers who make false claims about the telephone tax refund and suggest that many, if not most, phone customers can get hundreds of dollars or more back under this program.
AccountingWeb, June 2007 --- http://www.accountingweb.com/cgi-bin/item.cgi?id=103623

Late Tax Scam Discovered, Says IRS, SmartPros, April 16, 2007 --- http://accounting.smartpros.com/x57274.xml

The Internal Revenue Service learned late Friday of a new tax scam on the Internet that lures taxpayers into filing tax information on a site masquerading as a member of the Free File Alliance.

The latest twist on tax scams involves tax preparation Web sites that inaccurately say they are part of the Free File Alliance, a partnership between 19 tax software companies and the IRS, for taxpayers with an adjusted gross income of $52,000 or less.

The IRS said it is working with the Treasury Inspector General for Tax Administration to look into allegations that the Web sites -- which were not identified -- accepted tax information from taxpayers, changed the taxpayers’ bank account numbers to their own and then filed the return through a legitimate Free File partner.

The IRS reminded taxpayers the only place to access the Free File program is through the official IRS.gov Web site.

Seventy percent of the nation's taxpayers are eligible to use the free electronic filing system, although the IRS says few taxpayers take advantage of the program.

Question
What are the "dirty dozen" things that bad guys might try to do to you in tax season?
The answer comes from IRS Commissioner Mark V. Everson

"Be on the Lookout For: IRS Names “Dirty Dozen” for 2006," AccounitngWeb, February 9, 2006 http://www.accountingweb.com/cgi-bin/item.cgi?id=101762

Two new schemes have joined the Internal Revenue Service’s (IRS’) list of most noxious tax scams this filing season. Several usual suspects also remain on the list, which was released earlier this week. The IRS reminds taxpayers and tax preparers that involvement with tax schemes can lead to fines and even imprisonment.

“When it comes to taxes, everyone has to pay their fair share,” IRS Commissioner Mark V. Everson said in a prepared statement detailing the 2006 list. “I urge taxpayers not to be taken in by hucksters who promise to lower or eliminate taxes. Getting caught up in the Dirty Dozen or similar schemes can lead to big headaches.”

The Dirty Dozen List

1. Zero Wages NEW! A taxpayer attaches either a Form 4852 (Substitute Form W-2) or a “corrected” Form 1099 showing no or very little wages or other income. A statement indicating the taxpayer is rebutting information submitted to the IRS by the payer, a reference to the paying company’s refusal to issue a corrected Form W-2 for fear of IRS retaliation or an explanation on Form 4852 citing the “statutory language behind Internal Revenue Code (IRC) 3401 and 3121,” may also be included when the tax return is filed.

    

2. Form 843 Tax Abatement NEW! This faulty interpretation of the IRC involves the use of Form 843 by the taxpayer to request abatement of previously assessed tax. Form 843 is used to provide a list of reasons for the request, which often includes “Failed to properly compute and/or calculate IRC Section 83 – Property Transferred in Connection with Performance of Service.” This scam is most frequently used by those who have not previously filed tax returns in an attempt to abate tax assessed by the IRS through the Substitute for Return Program.

    

3. Phishing Identity thieves, posing as financial institutions or even the IRS itself, attempt to acquire personal information and financial data that can be used to access the financial accounts of consumers. Ficticious e-mail messages, phone calls and other correspondence, solicit taxpayer Social Security Number, credit card number, PIN number and other data, by pretending to notify them of suspicious activity on their account or that their account is under audit/review. NOTE: The IRS DOES NOT use e-mail to initiate contact with taxpayers about issues related to their accounts. Taxpayers can confirm authentic IRS contact by calling 800-829-1040.

    

4. Zero Return Taxpayers enter all zeros or enter zero income, their withholding and write “nunc pro tunc” (“now for then” in Latin) on their federal tax return. This is also done with amended returns in hope that the IRS will disregard the original return on which they reported wages and other income. This is similar to the “Zero Wages” listed in Number 1 above.

    

5. Trust Misuse Taxpayers are encouraged, with promises of reducing the income subject to tax deductions for personal expenses and reduced estate or gift taxes, to transfer assets into trusts. Some trusts, however, do not deliver the promised tax benefits. The IRS is actively examining these arrangements, with more than 200 active investigations currently underway, as well as three dozen injunctions obtained against the promoters of non-performing trusts since 2001.

    

6. Frivolous Arguments Promoters of this tactic have been known to make wild claims including: the Sixteenth Amendment, concerning the power of Congress to lay and collect taxes, was never ratified; wages are not income; filing returns and paying taxes is voluntary; being required to file Form 1040 violates the Fifth Amendment right against self-incrimination or the Fourth Amendment right to privacy; and more. These arguments are false and have been thrown out of court.

    

7. Return Preparer Fraud Dishonest return preparers, who derive financial gain by skimming a portion of their clients’ refunds and charging inflated fees for return preparation services, cause many headaches for taxpayers lured in by the promise of big refunds. Since 2002, the courts have issued injunctions ordering dozens of individuals to cease preparing returns. The Department of Justice has filed complaints against dozens of others. More than 110 tax preparers were convicted of tax crimes during fiscal year 2005.

    

8. Credit Counseling Agencies The IRS Tax Exempt and Government Entities Division is in the process of revoking the tax-exempt status of numerous credit counseling organizations that operated under the guise of educating financially distressed consumers with debt problems while charging debtors large fees and providing little or no counseling. Taxpayers are encouraged to exercise caution when considering utilizing the services of credit counseling organizations that claim they can fix credit ratings, push debt payment plans or impose high set-up fees or monthly service charges that may increase existing debt levels.

    

9. Abuse of Charitable Organizations and Deductions Tax-exempt organizations are being increasingly used to improperly shield income or assets from taxation. According to the IRS this can occur when a taxpayer moves assets or income to a tax-exempt supporting organization or donor-advised fund, but maintains control over the assets or income, thereby obtaining a tax deduction without transferring commensurate benefits to charity.

    

10. Offshore Transaction Taxpayers continue to try to avoid U.S. taxes by illegally hiding income in offshore bank and brokerage accounts, or using offshore credit cards, wire transfers, foreign trusts, employee leasing schemes, private annuities or life insurance policies, despite crackdowns by the IRS and state tax agencies, which yielded 68 convictions on charges of promotion and use of abusive tax schemes designed to evade taxes during fiscal year 2005.

     

11. Employment Tax Evasion A number of illegal schemes, based on an incorrect interpretation of Section 861 and other parts of tax law, instruct employers not to withhold federal income tax, or other employment taxes, from wages paid to their employees. The IRS has observed an increase in activity in the area of so-called double dip parking and medical reimbursement issues lately and courts have issued injunctions against more than a dozen persons, ordering them to stop promoting the scheme. More than 50 individuals were sentenced to an average of 30 months in prison for employment tax evasion during fiscal year 2005. Employers can also be held responsible for back payments of employment taxes, plus penalties and interest. Employees who have nothing withheld from their wages are still responsible for payment of their personal taxes.

     

12. ”No Gain” Deduction Taxpayers attempt to eliminate their entire adjusted gross income (AGI) by deducting it on Schedule A by listing their AGI in the section labeled “Miscellaneous Deductions” and attache a statement to the return referring to court documents and including the phrase “No Gain Realized.”

Report Suspected Tax Fraud Activity

Suspected tax fraud can be reported to the IRS using IRS Form 3949-A, Information Referral or by sending a letter detailing the alleged fraudulent activity to the Internal Revenue Service, Fresno, CA 93888. The letter should contain specific information regarding who is being reported, the activity being reported, how the individual reporting the activity gained knowledge of it, when the activity took place, the amount of money involved and any additional information that might be helpful in an investigation. The person reporting the alleged violation are not required to identify themselves, although it is helpful and their identity can be kept confidential. The individual may also be entitled to a reward.

The two scams that dropped of the “Dirty Dozen” list this year were the “claim of right” and “corporation sole”. IRS personnel have noticed less activity using these scams over the past year as a result of court cases against a number of promoters.

IRS "Member Satisfaction Survey" is a Scam
The Internal Revenue Service has issued a consumer alert regarding a new, two-step e-mail scam that falsely promises recipients they will receive $80 for participating in an online customer satisfaction survey. In the scam, an unsuspecting taxpayer receives an unsolicited e-mail that appears to come from the IRS. The e-mail contains a URL linking to an online "Member Satisfaction Survey."
AccountingWeb, August 31, 2007 --- http://www.accountingweb.com/cgi-bin/item.cgi?id=103950

August 31, 2007 reply from Ganesh M. Pandit, [profgmp@HOTMAIL.COM]

Today I received an email asking me to log on to a site in order to claim my income tax "refund"...$109.30! Just for fun, I clicked on the link given and was taken to a screen that asked for my name, SSN, birthdate, debit card number, PIN, expiration date and secret 3-digit code on the back of the card! :)

Of course, if you put your cursor over the link given in the scam email message, you can see the underlying "fake" web site location.

Ganesh

Bob Jensen's tax helpers are at http://www.trinity.edu/rjensen/Bookbob1.htm#010304Taxation

Question
What online pharmacies are selling fake drugs?

"FDA Warns About Fake Internet Drugs FDA Says 24 Web Sites May Be Involved in Distributing Counterfeit Prescription Drugs," by Miranda Hitti, WebMD, May 1, 2007 ---
http://www.webmd.com/news/20070501/fda-warns-about-fake-internet-drugs

The FDA today strongly cautioned consumers about purchasing drugs from 24 web sites that may be involved in the distribution of counterfeit drugs.

The FDA links two of the 24 web sites to counterfeit versions of the weight loss drug Xenical.

The FDA says that Xenical's maker, the drug company Roche, tested three phony Xenical pills obtained from brandpills.com and pillspharm.com.

One phony Xenical pill contained the active ingredient in another weight loss drug. The two other fake Xenical pills contained only talc and starch, according to the FDA.

The FDA has previously linked four of the 24 web sites to counterfeit versions of the flu drug Tamiflu and counterfeit versions of the erectile dysfunction drug Cialis.

Overseas Web Sites

The web sites, which the FDA says appear to be operated outside the U.S., are:

• AllPills.net
• Pharmacy-4U.net
• DirectMedsMall.com
• Brandpills.com
• Emediline.com
• RX-ed.com
• RXePharm.com
• Pharmacea.org
• PillsPharm.com
• MensHealthDrugs.net
• BigXplus.net
• MediClub.md
• InterTab.de
• Pillenpharm.com
• Bigger-X.com
• PillsLand.com
• EZMEDZ.com
• UnitedMedicals.com
• Best-Medz.com
• USAPillsrx.net
• USAMedz.com
• BluePills-Rx.com
• Genericpharmacy.us
• I-Kusuri.jp

The 24 web sites appear on pharmacycall365.com under the "Our Websites" heading, the FDA notes.

FDA's Advice to Consumers

The FDA says consumers using online pharmacies should be wary if there is no way to contact a web site pharmacy by phone, if prices are dramatically lower than the competition, or if no prescription from your doctor is required.

The FDA's web site includes these safety tips for people buying prescription drugs online:

• Make sure the web site requires a prescription.
• Make sure the web site has a pharmacist available for questions.
• Buy only from licensed pharmacies located in the U.S.
• Don't provide personal information such as credit card numbers unless you're sure the web site will protect that information.

The FDA urges consumers to visit www.fda.gov/buyonline for more information before buying prescription drugs over the Internet.

Oxymoron:  Medical Ethics
Two drug companies are paying doctors millions to prescribe anemia drugs, which regulators now say may be unsafe.
Alex Berenson and Andrew Pollack, "Doctors Reap Millions for Anemia Drugs," The New York Times, May 9, 2007 --- Click Here

Bob Jensen's fraud updates are at http://www.trinity.edu/rjensen/FraudUpdates.htm

Wow! It's hard to believer PayPal will go this far in protecting eBay customers
Can PayPal continue to afford this kind of protection?
On June 20, eBay announced that it will fully reimburse buyers and sellers when transaction problems arise, providing they use eBay’s PayPal payment service. That means eBay will foot the bill when, say, a buyer purchases an item that was misrepresented on the site or not sent. So, if that too-good-to-be-true bargain Gucci bag turns out to be a cheap knockoff, eBay will give the buyer a refund. The additional protections will go into effect this fall. “We’re combining the power of eBay and PayPal to give all buyers and sellers more confidence and trust,” said Lorrie Norrington, eBay’s president of Marketplace Operations in a statement. “Buyers who pay with PayPal on eBay will be covered, with no limits, on most transactions.”
Catherine Holahan, Business Week, June 19, 2008 --- http://www.businessweek.com/the_thread/techbeat/archives/2008/06/post_7.html?link_position=link3

Bob Jensen's threads on consumer fraud are at http://www.trinity.edu/rjensen/FraudReporting.htm

Comprehensive summary of Paypal ---  http://www.howstuffworks.com/search.php?terms=Paypal

December 21. 2009 message from George Wright [Geo@LOYOLA.EDU]

Experienced eBay users swear by it, as one has more recourse in the event of problems.

An experienced friend also tell me that it's a good idea to open a new bank account specifically for PayPal purposes. The reason is that you can move newly deposited funds to an account beyond PayPal's reach. I'm told this prevents PayPal from sequestering your funds in the event of a late protest by the source of the funds.

Geo

How to proceed if you're taken by a fraudulent eBay seller
While eBay officials say the vast majority of transactions take place without a hitch, company spokesmen acknowledge that the growth in online buying has been accompanied by a growth in online disputes, from simple disagreements over a sweater's color to more serious allegations. And, says eBay spokeswoman Catherine England, fraud also occurs against sellers, when buyers don't pay up as agreed. Cracking down on such problems has been a hot topic at the annual "eBay Live!" gatherings of buyers, sellers and company executives. This year's, in Las Vegas in June, was no exception: EBay president and chief executive Meg Whitman in her keynote speech ticked off a number of improvements in eBay's online dispute-resolution process.
Kathleen Day, "Self-Defense For EBay Buyers Avoiding Unpleasant Surprises On World's Biggest Auction Site," The Washington Post, July 2, 2006 ---
Click Here

"eBayer invites buyers to rip him off:  Sony laptop punted to scammers worldwide," by Lester Haines, The Register, February 11, 2008 --- http://www.theregister.co.uk/2008/02/11/ebay_laptop_auction/

Here's an eBay auction with a difference: an apparently innocent-looking punt of a Sony VAIO VGN-NR21J/S laptop:

There then follows the usual item description, but what makes this particular sale a little more interesting is the vendor's candid purchasing advice for users of the world's favourite tat bazaar:

DIFFERENT WAYS YOU CAN STEAL THIS LAPTOP OFF ME:

PAYPAL:

Paypal is currently ebays preferred method of stealing high value electrical items off sellers. There are a number of various ways you can use to steal this laptop using paypal.

1: A Fake “Item Not Received” (I.N.R) Claim – All you simply have to do here is purchase my item using an unverified paypal account. Then when you receive the laptop, simply claim that you didn’t receive it at your registered (credit card) and paypal will give you all your money back !

2: A Fake “Item Significantly Not As Described” (S.N.A.D) This is a great way to steal items off sellers. Simply start a dispute after you get the laptop making up some lie about the item being damaged etc – You could use Photoshop to make up fake pictures of damage. Paypal will ask you to send the item back to me, but don’t bother – they never enforce that on buyers and after a short wait you will get all your money back and you will still have the laptop.

3: A fake “Unauthorised Use” Claim – This is a super way of stealing items on ebay and is widely used. Simply claim that someone hijacked your account (paypal & ebay) and that you didn’t order the laptop. Then in conjunction with a fake I.N.R claim you can simply steal the laptop and of course, get your money back.

4: A Stolen Credit card – Of course, ebay make no real attempt to vet any of its buyers, so hey, just register a new ebay account using fake ID information and link it to a paypal account set up with a stolen credit card – and hey presto – A free laptop.

WESTERN UNION

Although officially banned on ebay, fake western union payments are the preferred way for Nigerian Scammers to steal high value electrical items. Simply email me (using pigeon English) telling me that you would like to buy this item using Western Union – Tell me that you would be happy to pay over the odds for the laptop and that it is a present for your mother in law. Then send me a fake western union payment notification and I send you the laptop – Perfect. This method of stealing items off sellers is very widely used on ebay and of course, as ebay do not properly verify buyers its easy to do. Make sure you use Pigeon English as I am really really stupid and it’s bound to fool me.

MUGGING

If you are a traditionalist like me you may prefer a good old mugging. Simply offer to meet me on some dodgy housing estate somewhere and have a load of you mates hiding behind a hedge with a few iron bars. Again, offer to pay me over the odds as there is nothing better than using a sellers greed to bait them into a scam. I would be grateful if you could avoid killing me as this will cause bad publicity for ebay which would be terrible.

GENUINE BUYERS

In the unlikely event that you are actually a genuine buyer then you really should be shopping in a real shop and not this scammers paradise. However this laptop does really exist and is really for sale. You can email me or skype me with suggestions on how we may actually transact this item to both our satisfaction – with both our safety in mind. Don’t even think of buying it using paypal. I’ve only listed it as accepted because ebay run a protection racket that means I have to accept it. If you do pay by paypal I will simply refund your payment and give you a nice new shiny NEG.

FEEDBACK BLACKMAIL

Of course you will no doubt be aware that from May onwards you will be able to blackmail sellers into giving you free P&P / discounts etc. You will be able to give them neg feedback and they will not be able to give you any.. I regret to advise you that because this rule does not come in until May this option of scamming me is not open to you yet.

AUCTION WRECKING

I would grateful if some sad failed traffic warden could report this auction for two reasons

1: Ebay will see this listing and will hopefully close my account, saving me a 180 days wait to do it myself.

2: You will save me listing fees, making this a free advert.

Happy Bidding!

Continued in article

Overpayment Scam on eBay and Craig's List
When is a “cleared check” not necessarily a good check?

"eBay, Craig's List Users Targeted in New Scam," by Brian Ross, The Blotter-ABC, October 2, 2007 --- http://www.freerepublic.com/focus/f-news/1906412/posts

Selling something on eBay or Craig's List? Watch out for who's signing the check to buy it.

Tens of thousands of Americans are being targeted by the latest scam sweeping America, many of them targeted online through Craig's List and eBay.

Scammers overpay with counterfeit checks that look so good most banks accept them. It's only after victims have sent the overpayment amount back to the scammers that they learn the checks are no good, and they are out the money.

U.S. Postal Service officials say they have seized more than $2 billion worth of high-quality counterfeit checks coming from Nigeria, England, the Netherlands and Canada.

But, they say, many more phonies are still getting through. . That's the kind of check Jill Parker, a pharmaceutical company manager in Richmond, Va., got in the mail.

Using Craig's List to rent an apartment she owned in Chicago, she was contacted by someone moving from London.

"He was going to send me a check for $25,000," she told ABC News. "I was to deduct what he owned me for the first month's rent and the security deposit, and I was to wire the balance back to his agent, who was handling his furnishing."

She took the check to her bank and called a few days later to see if it had cleared. Told that it had, Jill, as agreed upon, wired the remaining $21,000, thinking she was ahead $4,000.

"Everything looked great; everything went fine until about a week later," she said.

The bank informed her that the check was no good and had been returned not paid. And Jill, not the bank, was out the money.

American banks say they are required by law to make the money available well before a final determination is made as to whether the check is good.

"Certain funds, for example, have to be available on the day after deposit," Nedda Feddis, senior federal counsel for the American Bankers Association, told ABC News. "And the fraudsters are taking advantage of that rule."

Good Morning America Video: Phony Check Scam Hitting America There have been tragic consequences.

Chris Soens, suffering from health problems, thought she got a dose of good news in the mail when she won $90,000 in a supposed European lottery.

Once the check had been deposited and posted to her account, Chris wired back $40,000 for what she was told were fees and taxes.

When the check was discovered to be a phony, the bank told Chris she had to repay the entire amount.

Her sister, Rebecca Woodworth, says it led to suicide.

"I think she was devastated," she said. "I think she was plunged into depths of despair knowing that everything she had was gone."

The problem has grown so large that the U.S. Postal Service is launching a nationwide TV campaign starting tomorrow to warn Americans about the dangers of the bad check scam. The Postal Service has also set up a new Web site to educate the public on check fraud: www.fakechecks.org  .

 

Man Sold Goods on EBay, Never Delivered
A 37-year-old man was found guilty Tuesday of collecting more than $90,000 in payments for Rolex watches and sports tickets through eBay but never delivering the merchandise to customers. A federal court jury convicted him of 12 counts of mail fraud. Vartanian faces a maximum penalty of 20 years in prison. He was arrested earlier this year in Fremont.
PhysOrg, August 8, 2007 --- http://physorg.com/news105770216.html

Question
What can you do to prevent being taken on eBay?
(Word of Caution:  Never open an email message that pretends to be from Pay-Pal)

Two brothers have published a book of "true tales of treachery, lies and fraud" from eBay. "Dawn of the eBay Deadbeats" contains stories written by eBay buyers and sellers. From stories of disappointing purchases to out-and-out fraud, the book is a manual of what can go wrong when buying and selling on auction sites. Brothers Stephen and Edward Klink co-wrote the book, illustrated by Clay Butler. The idea for the book sprung from a website Stephen Klink had created. A New Jersey police office, he founded eBayersThatSuck.com - a site that aims to help people avoid auction scams - after he himself was ripped off online.
Ina Steiner, "Dawn of the eBay Deadbeats: New Book Uncovers Online Auction Treachery,"  AuctionBytes.com,  December 28, 2005 --- http://www.auctionbytes.com/cab/abn/y05/m12/i28/s01

"Beware of eBay deadbeats, author warns," PhysOrg, March 1, 2006 --- http://physorg.com/news11295.html

Imagine buying vintage Spiderman comics for $16,000 and receiving instead, a box of printer paper or losing a whopping $27,000 in purchasing a big rig that didn't exist in the first place. These are just many of the online auction fraud horror stories that brothers Edward and Steve Klink compiled from their eBay watchdog Web site eBayersThatSuck.com (E.T.S.).

Ebay Fraud Specialists - www.sherlockinvestigations.com
Sherlock helps you get back your cash. Contact us today!

World-Check - www.world-check.com
Leading KYC compliance database Heightened Risk People and Entities

In their book "Dawn of the eBay Deadbeats," some 70 strange-but-true stories were collected and retold with the help of illustrator Clay Butler.

The December 2005 publishing of the book comes just in time as the online auction giant has been criticized by consumer groups, most recently by the U.K. magazine "Computing Which?" for its passive and sometimes delayed approach in handling fraud reports.

At any given time, the site has 78 million listings, and 6 million new listings are added each day.

And while, eBay maintains that less than .01 percent of all listings end in a confirmed case of fraud, that could mean that of the 1.9 billion listings reported by eBay in 2005, that 190,000 cases were confirmed frauds in the last year.

Currently there are almost 900 horror stories from eBay fraud victims are on the E.T.S. site whose motto is "Winning the war on deadbeats."

And already the brothers are working on the next volume of horror stories, encouraging victims who want to get their tales to be told to get into contact with them.

United Press International spoke with Edward Klink about the recent book, their watchdog Web site, and the current state of eBay.

"We had collected hundreds of stories on the Web site and figured it was time to take these stories to a wider audience and let the victims have their say," Edward Klink said. "Plus with our combined backgrounds, Steve is a police officer and I'm a business writer, we felt we were ideally suited to get the job done."

Fraud on eBay can take on many forms including items paid for that vary from the description in the sale, unpaid items, and spoof eBay or Pay-Pal e-mails.

And like the many victims on their site, the brothers too have encountered the problem of auction fraud.

In 2003, Steve, a New Jersey police officer, won a set of "new" speakers, only to find that it looked as if they were "gnawed on by a wild animal."

"The seller said they weren't that way when mailed, and eBay said there was nothing they could do," Klink said. "Annoyed that he was stuck with the merchandise and given no recourse, Steve started www.ebayersthatsuck.com and stories began pouring in from around the world."

And the site has received a positive response since it's been up and running.

"People love it," Klink said. "On eBay, their official boards are closely monitored and talk about problems and scams and eBay's failings are not generally tolerated. So E.T.S. gives them an outlet. When it first came out Ebayersthatsuck.com was featured on Courttv.com and newspapers as far away as South Africa."

According to Klink, while eBay has what could be considered --"the ultimate business model" -- of collecting fees and delegating the marketing, selling, packaging, shipping, and customer service to eBay users, it's very easy for these same users to fall victim to fraud.

"I think consumers let their guard down when they are sitting at home and surfing the Web with their coffee," he said. "If a stranger offered them a $1,400 antique vase on the street they'd most likely walk away, but when that same vase is on the Internet for some reason the reaction is more, 'Say, now that looks interesting.'"

And have the brothers seen any improvements in eBay's handling of the fraud issue?

"eBay says it is a tiny fraction of all auctions," Klink said, "but the hundreds of people who told us their stories hate being in that tiny group and never thought they would be. Lots of fraud is underreported, too. EBay encourages users to settle it among themselves, and if they can't, then they are directed to pay $20.00 to have SquareTrade, a third party, mediate the dispute. But it's not often a scammer shows up for mediation!"

. . .

"We want people on eBay to have a good buying and selling experience - transparent, well-lit, and safe," the spokesperson said. "Fraud on all levels is something we take seriously."

The company also has a team dedicated to working with law enforcement rather it be educating them on fraudulent cases and working proactively taking information on specific cases to them or cooperating with investigations.

"We would invite anyone to visit the site and read more," said the spokesperson, who also emphasized that the no. 1 issue for online shoppers is to pay safely using Pay-Pal or a credit card than any other form of payment.

In many cases, consumers are able to get their money back, Pay-Pal offers up to $1,000 back with buyer protection and credit card programs usually have a pay back program in cases of fraud. In many cases, Pay-Pal offers a way for consumers to make purchases without providing personal information and at the same time protecting money.

"Dawn of the eBay Deadbeats" ($12.95) is available on Amazon, eBay, and in select bookstores.

"The Ol' Bait and Click:  Devices Meant to Reassure Online Buyers Are Often Used to Swindle Them," by Alan Sipress, The Washington Post, March 16, 2007, Page D01 --- Click Here

The eBay vendor had a glowing record -- more than 900 successful sales, with only a single complaint amid a long series of positive testimonials from customers. So when a Georgia bidder won the seller's auction for an Olympus digital camera in January, there seemed little reason to worry about dispatching almost $700 into cyberspace.

But the camera never arrived.

"I don't think I will ever buy anything over the Internet again," the conned bidder lamented in a posting on an eBay discussion board. "I am not a wealthy person, had saved long and hard for this camera for my business, and don't know when, or IF EVER I will see my $700 again."

Ever since the early days of the Internet, Web sites have struggled to find ways of reassuring users that a stranger could be as honest as a well-known local merchant, as knowledgeable as a respected teacher or as insightful as a wise grandparent. With Internet commerce now estimated to exceed $100 billion a year and greater numbers of people turning to the Internet for products, advice and love, Web sites are crafting more elaborate rating and feedback systems -- reputation monitors of sorts -- to help people evaluate whom they can trust. But the cheats have also noticed the unprecedented chance for ill-gotten gains. This has set off a high-stakes game of cat and mouse as Web sites spend more time and money to secure their systems against those trying to game them.

"We are increasingly living in a mobile, virtual world," said Chrysanthos Dellarocas, a professor of information systems at the University of Maryland business school. "To retain some form of social fabric in this world, we need some reputation mechanism."

One of the best-known reputation systems is the one used by Amazon.com, which provides user-written reviews of the books and it sells and then allows other users to rate the reviewers. Slashdot, a popular technology and current affairs Web site, developed what it calls a "karma" system for evaluating contributors. One of Yahoo's fast-growing features, Yahoo Answers, now boasts 75 million users who ask and answer each other's online questions about nearly any subject, with greater weight accorded to those who earn expert ratings from other users.

"Reputation is key to it all," said Bradley Horowitz, Yahoo's vice president of product strategy.

EBay established its position as the Web's premier auctioneer in part by pioneering a system to allow buyers and sellers to rate each other and comment on the quality of their transactions.

"It has been essential for eBay's success. It increased trust in the marketplace and created a community," eBay chief executive Meg Whitman said in an interview.

But users have repeatedly found ways to inflate or wholly fabricate their reputations. The online encyclopedia, Wikipedia, was thrown into turmoil late last month after users learned that one of the site's major editors was not a tenured university religion professor as he claimed in his online profile but a 24-year-old college dropout. At Amazon, a computer glitch three years ago inadvertently exposed the real names of reviewers writing under pseudonyms. Some turned out not to be disinterested literary judges but authors giving their own books glowing reviews to boost sales.

The scams take countless and ever more ingenious forms. These include intimidating other users who give negative ratings by threatening to retaliate with negative feedback of their own. Some con artists also create false secondary accounts, known as "sock puppets," that a cheat can use to give himself fake positive feedback. It also includes piling up legitimate positive reviews and then closing in for the kill as an eBay seller from New Jersey called "malkilots" did to nearly three dozen would-be camera buyers, including the bidder from Georgia.

That scheme -- according to feedback, discussion boards and auction descriptions on the eBay site -- went down like this: Malkilots built a sterling track record by selling memory cards for digital cameras for as little as $20 each. The vender sold them by the hundreds, delivering them as promised and accumulating page after page of positive feedback from satisfied customers.

Then, in late January, malkilots switched to offering the cameras themselves, which regularly fetched more than $650. In one auction, the Georgia bidder -- who communicated and did business only under a user name and did not respond to e-mails -- put in the highest of 37 offers for an Olympus SLR professional camera, paying for it online. Instead of receiving the camera, the buyer got a cheap camera bag.

"I had checked out the seller, all positive feedback going back several years," the buyer wrote. "What I didn't check out was WHAT kind of item that feedback was for."

Other successful bidders reported they also got cheap bags instead of cameras -- if they got anything at all. With losses totaling about $25,000, the bidders complained to eBay, which shut down the vendor's account. Negative feedback streamed into the site calling malkilots a fraud.

EBay did not return calls requesting comment on the case.

Continued in article

Jensen Comment
I've never purchased anything on eBay. But I do almost all my shopping (even grocery shopping) on Amazon these days. I cannot say enough good things about the product selections, prices, and service. I have an Amazon Visa for such purposes that gives me lower prices, and I often get free shipping. For example, Erika needed an extra-wide wheel chair because of her brace. At the moment we use a wheel chair to carry her up and down the front porch steps. Her Boston doctor wrote a prescription for temporary rental of the chair, but the price was about $120 per week. I purchased a great one through Amazon for $138 that included free shipping. The new high quality chair was here in the boonies in less than five days.

"A True eBay Crime Story," by Jen Shreve, Wired News, May 8, 2006 ---
http://www.wired.com/news/culture/0,70752-0.html?tw=wn_index_1

It was the scandal that rocked the internet. A seemingly worthless painting sold on eBay in early 2000 for $135,805 -- all because buyers believed it might be the work of the 20th-century abstract painter Richard Diebenkorn.

It wasn't.

Nor was the story behind the painting true.

In fact, Sacramento, California, lawyer Kenneth Walton had forged the suspiciously Diebenkorn-esque signature, which appeared in an auction photograph, and concocted the hokey yarn about finding it at a garage sale some years back. Some of the highest bids, it turned out, came not from serious art-buyers but from Walton's eBay business partner, Ken Fetterman.

Before long the tangle of deceits that led to the historic sale began to unravel on the front pages of newspapers around the country. Walton and another business partner, Scott Beach, pled guilty to federal felony charges. After three years as a fugitive, Fetterman was finally arrested while on his way to a Frisbee golf tournament in Kansas.

Walton tells his side of this true internet crime story in his new memoir, Fake: Forgery, Lies, & eBay. Wired News spoke to him about the book and his experiences as an online outlaw.

Carnegie Mellon University researchers are relying on an old adage to develop anti-fraud software for Internet auction sites: It is not what you know, it is who you know.

At sites like eBay, users warn each other if they have a bad experience with a seller by rating their transactions. But the CMU researchers said savvy fraudsters get around that by conducting transactions with friends or even themselves, using alternate user names to give themselves high satisfaction ratings -- so unsuspecting customers will still try to buy from them.

The CMU software looks for patterns of users who have repeated dealings with one another, and alerts other users that there is a higher probability of having a fraudulent transaction with them.

''There's a lot of commonsense solutions out there, like being more careful about how you screen the sellers,'' said Duen Horng ''Polo'' Chau, the research associate who developed the software with computer science professor Christos Faloutsos and two other students. ''But because I'm an engineering student, I wanted to come up with a systematic approach'' to identify those likely to commit fraud.

The researchers analyzed about 1 million transactions involving 66,000 eBay users to develop graphs -- known in statistical circles as bipartite cores -- that identify users interacting with unusual frequency. They plan to publish a paper on their findings early next year and, perhaps, market their software to eBay or otherwise make it available to people who shop online.

Catherine England, an eBay spokeswoman, said the company was not aware of the research and would not comment on it. But England said protecting the company's more than 200 million users from fraud was a top priority.

Online auction fraud -- when a seller does not deliver goods or sells a defective product -- accounted for 12 percent of the 431,000 computer fraud complaints received last year by Consumer Sentinel, the Federal Trade Commission's consumer fraud and identity theft database. Auction fraud was the most commonly reported computer-related fraud in the database.

And the scams run the gamut.

Last year, a federal grand jury indicted an Ohio man on charges he sold hundreds of thousands of dollars of stolen Lego merchandise on the Internet. Earlier this year, a New Mexico woman was sentenced to nine years in federal prison for selling forged hunting licenses on eBay, over the phone and by e-mail, and then not delivering trips paid for by out-of-state hunters.

Earlier this month, a man who failed to deliver tickets to the 2005 Ohio State-Michigan football game to 250 online auction customers was sentenced to 34 months in federal prison.

Johannes Ullrich, an Internet fraud expert with the SANS Institute in Bethesda, Maryland, said the CMU research ''sounds like a credible way to detect fraud.''

''Essentially, what they're trying to do is find these extended circles of friends who make positive recommendations to each other,'' said Ullrich, the chief technology officer of SANS' Internet Storm Center, which tracks viruses and other Internet problems.

But Ullrich said the CMU researchers must find a way to screen out false positives. He said a small group of users -- such as baseball card collectors -- might repeatedly buy from one another and could be flagged as high-risk.

Faloutsos said the researchers have thought of that in developing the software called NetProbe -- short for Network Detection via Propagation of Beliefs.

''We're not just looking at your neighbors (on the auction site),'' Faloutsos said. ''We're looking at the neighbors of your neighbors, and the neighbors of your neighbors' neighbors.''

Bob Jensen's threads on computing and network security are at
http://www.trinity.edu/rjensen/ecommerce/000start.htm

Medicare Drug Plan Frauds

Question
Should there be a doughnut hole in the Medicare D coverage under Medicare's new drug plan?

"Medicare Beneficiaries Confused and Angry Over Gap in Drug Coverage," by Robert Pear, The New York Times, July 29, 2006 --- Click Here

Tens of thousands of Medicare beneficiaries who signed up for prescription drug coverage are paying monthly premiums, but Medicare is not paying any of their drug costs because they have reached a gap in their coverage.

The gap, the notorious “doughnut hole,” is upsetting many beneficiaries, and it has become a potent symbol as politicians debate the merits of the new program.

Federal officials and outside experts say that 3 million to 3.5 million people may fall into the gap this year, about half the number predicted. While lawmakers and lobbyists were well aware of the problem, it is attracting fresh attention because many beneficiaries are just now discovering it.

The original estimates assumed that people would sign up for drug coverage in January, but many waited until April or May. They will file fewer claims than expected and are therefore less likely to reach the gap in coverage this year.

Poor people eligible for Medicare and Medicaid have no gap in the benefit. In addition, many retirees found that employer-sponsored health plans provided better drug benefits than Medicare, so they stayed in those plans, which rarely have a gap in coverage.

Beneficiaries often learn about the doughnut hole when they try to refill prescriptions. They may be asked to pay $75 to $125 or more for a drug they had been receiving for a co-payment of $20 to $30.

Marcella Crown, 80, of Des Plaines, Ill., near Chicago, takes Lipitor for high cholesterol, Diovan for high blood pressure, Synthroid for thyroid disease, Fosamax for osteoporosis, Nexium for heartburn and several other drugs.

Mrs. Crown signed up in November for a drug plan offered by Blue Cross and Blue Shield of Illinois. Her coverage began in January, and she reached the coverage gap in April.

Her husband, David F. Crown, a retired mechanical engineer, said: “Blue Cross is saying that even though she will get no benefit, she must still pay the premiums. That’s outrageous. We have never had insurance policies that gave us no benefit yet required us to pay premiums.”

Melvin A. Kinnison, 65, of Huntington Beach, Calif., a retired deputy sheriff with diabetes and prostate cancer, said: “The drug benefit was fine for a while, until the doughnut hole came around. It was a total surprise. Nobody ever explained it to me.”

Mr. Kinnison said he reached the coverage gap in June. The cost for a month’s supply of Cymbalta, which he takes for diabetic nerve pain, jumped to $104, from $20.

Former Senator Dave Durenberger, a Minnesota Republican who runs a national health policy forum, said, “The doughnut hole could have negative repercussions for Republicans in the November midterm elections.”

Democrats hope that is the case. The coverage gap is “a goofy idea,” said Senator Byron L. Dorgan, Democrat of North Dakota.

Administration officials play down such concerns.

Dr. Mark B. McClellan, administrator of the Centers for Medicare and Medicaid Services, said beneficiaries had already saved about $1,500 by the time they reached the coverage gap. Beneficiaries concerned about the gap, Dr. McClellan said, can often reduce their costs by switching to generic drugs and by taking advantage of assistance programs offered by many states and by drug manufacturers. Next year, he said, they can switch to plans that offer some coverage in the gap.

While beneficiaries are generally responsible for all drug costs in the gap, they do have access to discounts negotiated by their plans.

Many beneficiaries, like Mr. and Mrs. Crown, had heard about the coverage gap but did not fully understand how it worked.

Under the standard drug benefit defined by Congress in the 2003 Medicare law, the beneficiary pays a $250 deductible and then 25 percent of drug costs from $251 to $2,250. When total yearly drug costs, paid by the beneficiary and the plan, reach $2,250, the coverage stops, and the beneficiary pays 100 percent of the cost of each prescription, until the person’s out-of-pocket costs reach $3,600. At that point, insurance resumes, and the beneficiary pays about 5 percent of the cost of each drug. The tabulation of costs begins anew each year.

Wen A. Daniels of California Health Advocates, an insurance counseling organization, said she had clients who reached the gap in January or February because they were taking high-cost drugs like Avastin, Gleevec and Iressa for different types of cancer; Pegasys for hepatitis; Betaseron for multiple sclerosis; and Tracleer for a life-threatening lung condition.

UnitedHealth, the largest sponsor of Medicare drug plans, with 4.5 million members, said that 45,000 of them had reached the point where the coverage gap begins.

Continued in article

Under no circumstance should anybody sign up for a plan with a stranger over the telephone even if that person claims to be a Medicare representative or a licensed insurance agent who phoned out of the blue.

"Watchdogs Warn About Scams Alongside Medicare Drug Benefit," by Kelly Greene, The Wall Street Journal, October 18, 2005; Page D2 --- http://online.wsj.com/article/SB112959925370771490.html?mod=todays_us_personal_journal

Government and consumer watchdogs are bracing for the marketing scams likely to spring up alongside the long-awaited Medicare drug benefit. Already, the Centers for Medicare and Medicaid Services, the federal agency overseeing the new drug program, says it has enlisted help from law-enforcement officials to investigate two possible scams in which beneficiaries were asked for bank-card numbers and other personal information. Enrollment for the plans starts Nov. 15, and coverage begins Jan. 1. Drug-plan marketers are allowed to make calls to describe benefits and offers, and to solicit requests for pre-enrollment information. Yet it's illegal for marketers of Medicare drug plans to visit your home unless you invite them in advance, or to send you unsolicited emails, says Deane Beebe, spokeswoman for the Medicare Rights Center, a New York advocacy group. Although marketers can make unsolicited phone calls, they aren't allowed to sign you up during those calls. Several advocacy groups, including the National Consumers League (www.fraud.org/tips/internet/medicare.htm), are offering tips for protecting yourself from being victimized by a Medicare-related scam. Among the tips: Check the list of Medicare-approved prescription plans by calling the Centers for Medicare and Medicaid Services at 800-633-4227. If you're contacted by a plan that isn't on the list, it could be a scam. Make sure the plan is licensed. Call your state insurance department; there's a directory of these departments at www.naic.org/state_web_map.htm. Guard personal information, such as Social Security or bank-account numbers. Legitimate plans may ask for a Social Security number -- but not until you actually enroll. And they can't ask for your credit-card or bank data unless you're arranging automatic payments. No one can enroll in a drug plan before Nov. 15, though the plans can start advertising this month. If a plan asks for payment before that date, it could be fraudulent. Enrolling in a drug plan is voluntary. If someone says you must join a plan to avoid losing your other Medicare benefits, you're getting false information. For free advice, call your State Health Insurance Program or your local area agency on aging. For a state-by-state directory of state programs, visit www.medicare.gov/contacts/Static/SHIPs.asp or call Medicare's hotline. To find your local aging agency, go to eldercare.gov or call 800-677-1116. Even with legitimate plans, advocates for Medicare recipients urge seniors to study and compare several drug plans before choosing. "What incentive does a salesperson have to inform a senior that a competitor's plan might be better for them?" asks Shannon Benton, executive director of the TREA Senior Citizens League, an Alexandria, Va., advocacy group. The Medicare Rights Center developed a flow chart to help sort through drug-benefit options. To use it, go to medicareinteractive.org/aarp, then click on the yellow box on the right side of the screen labeled "New! Medicare Drug Coverage Information."

Jensen Comment:
Note that the traditional Medicare Supplement Plans (e.g., Plan J) are going to cease to exist.  The trusted place to start for information about new alternative is http://www.cms.hhs.gov/default.asp?

Oxymoron:  Medical Ethics
Two drug companies are paying doctors millions to prescribe anemia drugs, which regulators now say may be unsafe.
Alex Berenson and Andrew Pollack, "Doctors Reap Millions for Anemia Drugs," The New York Times, May 9, 2007 --- Click Here

Widespread price scanner fraud and errors
Please verify that your cash register receipt records the prices promised.
You may be getting unknown charges to your credit card account.
I wonder if they ever undercharge? I doubt it!

"New Legislation Would Prevent Overpricing," by Suzanne Le Mignot, CBS2Chicago, February 4, 2006 --- http://cbs2chicago.com/local/local_story_035165905.html

It's called scanner scamming. The price on the scanner doesn't match the price on a store shelf, and consumers get overcharged.

As CBS 2's Suzanne Le Mignot explains, Illinois Lt. Gov. Pat Quinn is proposing a new retail consumer act that hits stores with a steep penalty if they are caught making a scanner error.

Bob Hinde reported that he bought two tomatoes at a Dominick's food store in Des Plaines, and he said he was charged a lot more than the tomatoes cost.

"This was so egregious," Hinde said. "It was a clerical error of $102.15."

Hinde added: "They were very embarrassed. They gave us our money back immediately. But this is a mistake easy to catch."

Hinde happens to be the former consumer protection administrator in Des Plaines. In that position, he was responsible for making sure the prices on store shelves matched those at the register.

"The ones you don't catch are the 50 cents. The dollar and a half. The $3," he said. "Today, mothers and fathers are both working -- (they) dash into stores, boom, pay, out again."

Continued in article

Dirty Secrets of Credit Counseling Fraud

"IRS Cracks Down on Credit Counsel Services," SmartPros, May 16, 2006 --- http://accounting.smartpros.com/x53013.xml

The Internal Revenue Service has canceled the tax-exempt status for some of the nation's largest educational credit counseling services after audits revealed they exist mainly to prey on debt-ridden customers, Commissioner Mark Everson said Monday.

"These organizations have not been operating for the public good and don't deserve tax-exempt status," Everson said. "They have poisoned an entire sector of the charitable community."

A two-year investigation of 41 credit counseling agencies resulted in the revocation, proposed revocation or other termination of their tax-exempt status, he announced.

Everson said that many of those groups, representing more than 40 percent of the revenue in a $1 billion industry, offered little, if any, counseling or education as required of groups with tax-exempt status.

Other such agencies will be required to report on their activities. The IRS is sending compliance inquiries to each of the other 740 known tax-exempt credit counseling agencies not already under audit.

"Depending on the responses received, additional audits may be undertaken," the agency said.

Everson said groups looking to make a profit would secure tax exempt status and make cold phone calls to people in desperate financial straights. They would use scare tactics to sell the people "cookie-cutter" debt management plans that often were not geared toward reducing the consumers' debt and often were too costly to pay. Administrative fees, he said were sometimes collected by third parties handling the paperwork for a profit.

Everson recommended that consumers pick one of the 150 consumer counseling organizations approved by groups like the Better Business Bureau. But bad actors may exist even among those, because guidelines for approval differs between agencies, he said.

Everson added that the agency is following up the revocations with some criminal investigations, but would not detail them.

The IRS also is issuing new guidance on how to comply with federal law to legitimate organizations which educate people on how to maintain good credit.

The agency in recent years has tightened up its review of new applications by credit counseling firms for tax-exempt status. Since 2003, the IRS has reviewed 100 such applications and approved only three.

The actions come consumers and the counseling industry are having to learn to live under a new and more restrictive federal bankruptcy law.

Congress last year gave the financial counseling sector a new role in the nation's bankruptcy system by making it harder for people to wipe out debt and requiring consumers to consult with an approved credit counselor before they seek the protection of a bankruptcy court.

Exploiting the Poor

Inside U.S. companies' audacious drive to extract more profits from the nation's working poor

"The Poverty Business," by Brian Grow and Keith Epstein, Business Week Cover Story, May 21, 2007 --- http://www.businessweek.com/magazine/content/07_21/b4035001.htm

In recent years, a range of businesses have made financing more readily available to even the riskiest of borrowers. Greater access to credit has put cars, computers, credit cards, and even homes within reach for many more of the working poor. But this remaking of the marketplace for low-income consumers has a dark side: Innovative and zealous firms have lured unsophisticated shoppers by the hundreds of thousands into a thicket of debt from which many never emerge.

Federal Reserve data show that in relative terms, that debt is getting more expensive. In 1989 households earning $30,000 or less a year paid an average annual interest rate on auto loans that was 16.8% higher than what households earning more than $90,000 a year paid. By 2004 the discrepancy had soared to 56.1%. Roughly the same thing happened with mortgage loans: a leap from a 6.4% gap to one of 25.5%. "It's not only that the poor are paying more; the poor are paying a lot more," says Sheila C. Bair, chairman of the Federal Deposit Insurance Corp.

Once, substantial businesses had little interest in chasing customers of the sort who frequent the storefronts surrounding the Byrider dealership in Albuquerque. Why bother grabbing for the few dollars in a broke man's pocket? Now there's a reason.

Armed with the latest technology for assessing credit risks—some of it so fine-tuned it picks up spending on cigarettes—ambitious corporations like Byrider see profits in those thin wallets. The liquidity lapping over all parts of the financial world also has enabled the dramatic expansion of lending to the working poor. Byrider, with financing from Bank of America Corp. (BAC ) and others, boasts 130 dealerships in 30 states. At company headquarters in Carmel, Ind., a profusion of colored pins decorates wall maps, marking the 372 additional franchises it aims to open from California to Florida. CompuCredit Corp., based in Atlanta, aggressively promotes credit cards to low-wage earners with a history of not paying their bills on time. And BlueHippo Funding, a self-described "direct response merchandise lender," has retooled the rent-to-own model to sell PCs and plasma TVs.

The recent furor over subprime mortgage loans fits into this broader story about the proliferation of subprime credit. In some instances, marketers essentially use products as the bait to hook less-well-off shoppers on expensive loans. "It's the finance business," explains Russ Darrow Jr., a Byrider franchisee in Milwaukee. "Cars happen to be the commodity that we sell." In another variation, tax-preparation services offer instant refunds, skimming off hefty fees. Attorneys general in several states say these techniques at times have violated consumer-protection laws.

Some economists applaud how the spread of credit to the tougher parts of town has raised home- and auto-ownership rates. But others warn that in the long run the development could slow upward mobility. Wages for the working poor have been stagnant for three decades. Meanwhile, their spending has consistently and significantly exceeded their income since the mid-1980s. They are making up the difference by borrowing more. From 1989 through 2004, the total amount owed by households earning $30,000 or less a year has grown 247%, to $691 billion, according to the most recent Federal Reserve data available.

"Having access to credit should be helping low-income individuals," says Nouriel Roubini, an economics professor at New York University's Stern School of Business. "But instead of becoming an opportunity for upward social and economic mobility, it becomes a debt trap for many trying to move up."

HAPPY AS SHE WAS with the Saturn (GM ) she bought in December, 2005, Roxanne Tsosie soon ran into trouble paying off the loan on it. The car had 103,000 miles on the odometer. She agreed to a purchase price of $7,922, borrowing the full amount at a sky-high 24.9%. Based on her conversation with the Byrider salesman, she thought she had signed up for $150 monthly installments. The paperwork indicated she owed that amount every other week. She soon realized she couldn't manage the payments. Dejected, she agreed to give the car back, having already paid $900. "It kind of knocked me down," Tsosie says. "I felt I'd never get anywhere."

The abortive purchase meant Byrider could dust off and resell the Saturn. Nearly half of Byrider sales in Albuquerque do not result in a final payoff, and many vehicles are repossessed, says David Brotherton, managing partner of the dealership. A former factory worker, he says he sympathizes with customers who barely get by. "Many of these people are locked in a perpetual cycle" of debt, he says. "It's all motivated by self-interest, of course, but we do want to help credit-challenged people get to the finish line."

Byrider dealers say they can generally figure out which customers will pay back their loans. Salesmen, many of whom come from positions at banks and other lending companies, use proprietary software called Automated Risk Evaluator (ARE) to assess customers' financial vital signs, ranging from credit scores from major credit agencies to amounts spent on alimony and cigarettes.

Unlike traditional dealers, Byrider doesn't post prices—which average $10,200 at company-owned showrooms—directly on its cars. Salesmen, after consulting ARE, calculate the maximum that a person can afford to pay, and only then set the total price, down payment, and interest rate. Byrider calls this process fair and accurate; critics call it "opportunity pricing."

So how did Byrider figure that Tsosie had $300 a month left over from her small salary for car payments? Barely a step up from destitution, she now lives in her own cramped apartment in a dingy two-story adobe-style building. Decorated with an old bow and arrow and sepia-tinted photographs of Navajo chiefs, the apartment is also home to her new husband, Joey A. Garcia, a grocery-store stocker earning $25,000 a year, his two children from a previous marriage, and two of Tsosie's kids. She and Garcia are paying off several other high-interest loans, including one for his used car and another for the $880 wedding ring he bought her this year.

Asked by BusinessWeek to review Tsosie's file, Byrider's Brotherton raises his eyebrows, taps his keyboard, and studies the screen for a few minutes. "We probably should have spent more time explaining the terms to her," he says. Pausing, he adds that given Tsosie's finances, she should never have received a 24.9% loan for nearly $8,000.

That still leaves her $900 in Byrider's till. "No excuses; I apologize," Brotherton says. He promises to return the money (and later does). In most transactions, of course, there's no reporter on the scene asking questions.

A QUARTER-CENTURY ago, Byrider's founder, the late James F. Devoe, saw before most people the untapped profits in selling expensive, highly financed products to marginal customers. "The light went on that there was a huge market of people with subprime and unconventional credit being turned down," says Devoe's 38-year-old son, James Jr., who is now chief executive.

The formula produces profits. Last year, net income on used cars sold by outlets Byrider owns averaged $828 apiece. That compared with only $223 for used cars sold as a sideline by new-car dealers, and a $31 loss for the typical new car, according to the National Automobile Dealers Assn. Nationwide, Byrider dealerships reported sales last year of $700 million, up 7% from 2005.

"Good Cars for People Who Need Credit," the company declares in its sunny advertising, but some law enforcers say Byrider's inventive sales techniques are unfair. Joel Cruz-Esparza, director of consumer protection in the New Mexico Attorney General's Office from 2002 to 2006, says he received numerous complaints from buyers about Byrider. His office contacted the dealer, but he never went to court. "They're taking advantage of people, but it's not illegal," he says.

Officials elsewhere disagree. Attorneys general in Kentucky and Ohio have alleged in recent civil suits that opportunity pricing misleads customers. Without admitting liability, Byrider and several franchises settled the suits in 2005 and 2006, agreeing to inform buyers of "maximum retail prices." Dealers now post prices somewhere on their premises, though still not on cars. Doing so would put them "at a competitive disadvantage," says CEO Devoe. Sales reps flip through charts telling customers they have the right to know prices. Even so, Devoe says, buyers "talk to us about the price of the car less than 10% of the time."

Tsosie recently purchased a 2001 Pontiac from another dealer. She's straining to make the $277 monthly payment on a 14.9% loan.

Nobody, poor or rich, is compelled to pay a high price for a used car, a credit card, or anything else. Some see the debate ending there. "The only feasible way to run a capitalist society is to allow companies to maximize their profits," says Tyler Cowen, an economist at George Mason University in Fairfax, Va. "That will sometimes include allowing them to sell things to people that will sometimes make them worse off."

Others worry, however, that the widening income gap between the wealthy and the less fortunate is being exacerbated by the spread of high-interest, high-fee financing. "People are being encouraged to live beyond their means by companies that are preying on low-income consumers," says Jacob S. Hacker, a political scientist at Yale.

Higher rates aren't deterring low-income borrowers. Payday lenders, which provide expensive cash advances due on the customer's next payday, have multiplied from 300 in the early 1990s to more than 25,000. Savvy financiers are rolling up payday businesses and pawn shops to form large chains. The stocks of five of these companies now trade publicly on the New York Stock Exchange (NYX ) and NASDAQ (NDAQ ). The investment bank Stephens Inc. estimates that the volume of "alternative financial services" provided by these sorts of businesses totals more than $250 billion a year.

Mainstream financial institutions are helping to fuel this explosion in subprime lending to the working poor. Wells Fargo & Co. (WFC ) and U.S. Bancorp (USB ) now offer their own versions of payday loans, charging $2 for every $20 borrowed. Based on a 30-day repayment period, that's an annual interest rate of 120%. (Wells Fargo says the loans are designed for emergencies, not long-term financial needs.) Bank of America's revolving credit line to Byrider provides up to $110 million. Merrill Lynch & Co. (MER ) works with CompuCredit to package credit-card receivables as securities, which are bought by hedge funds and other big investors.

Once, major banks and companies avoided the poor side of town. "The mentality was: Low income means low revenue, so let's not locate there," says Matt Fellowes, a researcher at the Brookings Institution in Washington, D.C. Now, he says, a growing number of sizable corporations are realizing that viewed in the aggregate, the working poor are a choice target. Income for the 40 million U.S. households earning $30,000 or less totaled $650 billion in 2004, according to Federal Reserve data.

John T. Hewitt, a pioneer in the tax-software industry, recognized the opportunity. The founder of Jackson Hewitt Tax Service Inc. (JTX ) says that as his company grew in the 1980s, "we focused on the low-hanging fruit: the less affluent people who wanted their money quick."

In the 1990s, Jackson Hewitt franchises blanketed lower-income neighborhoods around the country. They soaked up fees not just by preparing returns but also by loaning money to taxpayers too impatient or too desperate to wait for the government to send them their checks. During this period, Congress expanded the Earned-Income Tax Credit, a program that guarantees refunds to the working poor. Jackson Hewitt and rival tax-prep firms inserted themselves into this wealth-transfer system and became "the new welfare office," observes Kathryn Edin, a visiting professor at Harvard University's John F. Kennedy School of Government. Today, recipients of the tax credit are Jackson Hewitt's prime customers.

"Money Now," as Jackson Hewitt markets its refund-anticipation loans, comes at a steep price. Lakissisha M. Thomas learned that the hard way. For years, Thomas, 29, has bounced between government assistance and low-paying jobs catering to the wealthy of Hilton Head Island, S.C. She worked most recently as a cashier at a jewelry store, earning $8.50 an hour, until she was laid off in April. The single mother lives with her five children in a dimly lit four-bedroom apartment in a public project a few hundred yards from the manicured entrance of Indigo Run, a resort where homes sell for more than $1 million.

Thomas finances much of what she buys, but admits she usually doesn't understand the terms. "What do you call it—interest?" she asks, sounding confused. Two years ago she borrowed $400 for rent and food from Advance America Cash Advance Centers Inc. (AEA ), a payday chain. She renewed the loan every two weeks until last November, paying more than $2,500 in fees.

This January, eager for a $4,351 earned-income credit, she took out a refund-anticipation loan from Jackson Hewitt. She used the money to pay overdue rent and utility bills, she says. "I thought it would help me get back on my feet."

A public housing administrator who reviews tenants' tax returns pointed out to Thomas that Jackson Hewitt had pared $453, or 10.4%, in tax-prep fees and interest from Thomas' anticipated refund. Only then did she discover that various services for low-income consumers prepare taxes for free and promise returns in as little as a week. "Why should I pay somebody else, some big company, when I could go to the free service?" she asks.

The lack of sophistication of borrowers like Thomas helps ensure that the Money Now loan and similar offerings remain big sellers. "I don't know whether I was more bothered by the ignorance of the customers or by the company taking advantage of the ignorance of the customers," says Kehinde Powell, who worked during 2005 as a preparer at a Jackson Hewitt office in Columbus, Ohio. She changed jobs voluntarily.

State and federal law enforcers lately have objected to some of Jackson Hewitt's practices. In a settlement in January of a suit brought by the California Attorney General's Office, the company, which is based in Parsippany, N.J., agreed to pay $5 million, including $4 million in consumer restitution. The state alleged Jackson Hewitt had pressured customers to take out expensive loans rather than encourage them to wait a week or two to get refunds for free. The company denied liability. In a separate series of suits filed in April, the U.S. Justice Dept. alleged that more than 125 Jackson Hewitt outlets in Chicago, Atlanta, Detroit, and the Raleigh-Durham (N.C.) area had defrauded the Treasury by seeking undeserved refunds.

Jackson Hewitt stressed that the federal suits targeted a single franchisee. The company announced an internal investigation and stopped selling one type of refund-anticipation loan, known as a preseason loan. The bulk of refund loans are unaffected. More broadly, the company said in a written statement prepared for BusinessWeek that customers are "made aware of all options available," including direct electronic filing with the IRS. Refund loan applicants, the company said, receive "a variety of both verbal and written disclosures" that include cost comparisons. Jackson Hewitt added that it provides a valuable service for people who "have a need for quick access to funds to meet a timely expense." The two franchises that served Thomas declined to comment or didn't return calls.

VINCENT HUMPHRIES, 61, has watched the evolution of low-end lending with a rueful eye. Raised in Detroit and now living in Atlanta, he never got past high school. He started work in the early 1960s at Ford Motor Co.'s hulking Rouge plant outside Detroit for a little over $2 an hour. Later he did construction, rarely earning more than $25,000 a year while supporting five children from two marriages. A masonry business he financed on credit cards collapsed. None of his children have attended college, and all hold what he calls "dead-end jobs."

Over the years he has "paid through the nose" for used cars, furniture, and appliances, he says. He has borrowed from short-term, high-interest lenders and once worked as a deliveryman for a rent-to-own store in Atlanta that allowed buyers to pay for televisions over time but ended up charging much more than a conventional retailer. "You would have paid for it three times," he says. As for himself, he adds: "I've had plenty of accounts that have gone into collection. I hope I can pay them before I die." His biggest debts now are medical bills related to a heart condition. He lives on $875 a month from Social Security.

Continued in article

Bob Jensen's "Rotten to the Core" threads are at http://www.trinity.edu/rjensen/FraudRotten.htm

Lost Hotel Card (Room Key) Fraud

Question
If you lost your hotel room's magnetic strip card that opens the door, I'll just be you thought your were free of all worries when you simply got a replacement card with a changed code that unlocks the hotel room door. Could anybody who found or stole your original card still take advantage of you?

"Street-Level Credit Card Fraud," by Brian Krebs, The Washington Post, March 6, 2006 --- Click Here

Until recently, Las Vegas police officers couldn't figure out why some of the prostitutes and drug addicts they arrested were found carrying multiple hotel room keys and slot machine player's club cards. When confronted, the suspects said they kept them as souvenirs or found them on the sidewalk. The cops initially assumed that the cards were stolen, or -- in the case of the prostitutes -- perhaps belonged to some of their more frequent clients.

"It was getting fairly regular that in post-arrest inventory, we would find eight to 10 room key cards ... all from different hotels," said Dennis Cobb, deputy chief of the Las Vegas Metropolitan Police Department's Technical Services Division.

The mystery began to unravel when a LVMPD officer slid one of the keys through a machine that reads the data stored on the card's magnetic stripe. Each swipe revealed a 16-digit credit number, a date, a person's name and the name of a bank. That's right, the keys functioned exactly like credit cards, allowing the carrier to pay for merchandise at any store or market where customers do their own swiping.

"The people who had these cards on them were using them in transactions with local businesses," Cobb said.

The revelation is hardly a surprising one for a city that had the nation's second highest rate of identity-theft complaints to the Federal Trade Commission last year. Cobb said the stolen card data comes from a variety of sources, but he said it is not unusual for service-industry workers who owe money to a drug dealer or a bookie to be handed a handheld magnetic stripe "skimmer" and ordered to periodically collect up to 100 accounts as a means of erasing their debt.

The discovery led Cobb's division to team up with researchers from the Identity Theft and Financial Fraud Research and Operations Center (IFFROC) at the University of Nevada, Las Vegas to devise technologies that police could deploy in the field to detect various types of fraud.

Hal Berghel, the center's director, said the people who are usually caught with key cards use them primarily at convenience stores, gas stations and other places where purchases are less than $20, which is below the scrutiny threshold for most fraud-detection technologies.

"By the time the bottom feeders get the cards, the data on them has already been shared with the organized criminals, who will bang on a credit card though mail-order and Internet purchases," Berghel said. At that point the cards are "throwaways that can only be used a couple of times before they're canceled."

Last year, Berghel filed a patent application on behalf of IFFROC for a technology called "Cardsleuth," software he demoed for me when we met up last week in Washington. He hopes that one day a pen-sized device will be used to read magnetic stripes and alert the user when unexpected data is found. Berghel and his team are working on a prototype, which he said could be updated periodically via a USB-based docking station.

Berghel said the technology could be especially useful in the case of a 9/11-type emergency by helping authorities distinguish first responders from those individuals -- be they terrorists or merely looters -- who might take advantage of a chaotic environment.

"There is still a need for on-the-spot validation of credentials where you have a convergence of emergency workers, many of whom have never seen each other before," he said.

Update, 11:45 a.m. ET: Apparently, I didn't make it clear enough what is really going on here. This post is not suggesting that hotel room keys are being encoded with credit card information by the hotels, which has always been something of an urban legend/e-mail hoax (see Snopes and previous discussions on Slashdot.) The folks I interviewed for this piece said the encoding was being done by the criminals (or more specifically, fraud rings who sold them to street hustlers who would wring every last dollar out of the cards before they were cancelled). From the crooks' perspective, the idea behind this is to be able to anonymously use someone else's credit card at a physical location; someone who got arrested holding someone else's actual credit card would have a lot of explaining to do, but hotel room keys are likely to be overlooked or set aside for what they appear to be.

School Tax Scams

Organized Crime is Stealing From Your Children (With the Help of Top School Officials)
The last thing people want to hear in a high-tax state notorious for political corruption is that their tax dollars are being mismanaged. But according to a two-year probe of school superintendents by New Jersey's State Commission of Investigation, that's exactly what's going on in Tony Soprano country. No wonder there's a property-tax rebellion brewing there as in many places around the country.
"Jersey School Scam," The Wall Street Journal,  March 21, 2006; Page A14 --- http://online.wsj.com/article/SB114290632601803676.html?mod=opinion&ojcontent=otep

The report -- "Taxpayers Beware: What You Don't Know Can Cost You" -- sampled 71 of New Jersey's more than 600 school districts and found a pattern of "questionable and excessive" practices that included boosting salaries and padding pensions surreptitiously and in ways that have cost unsuspecting taxpayers millions of dollars. A school chief in Ocean County was paid nearly $350,000, or 65% more than he reported to the Department of Education. A Camden official received $223,000, which included $43,000 in undisclosed bonuses, car expenses and an annuity. And a Bergen County superintendent received more than a half-million dollars in extra pay for unused sick time and other benefits.

According to the report, if these perks were disclosed at all they were in the minutiae of contracts rather than in reported salaries. "If a school board wants to pay a superintendent $300,000, fine," wrote the Newark Star-Ledger, a paper that typically favors higher taxes and spending. "But taxpayers shouldn't be told the salary is $200,000 and given no clue that the total package makes the compensation 50 percent higher."

That outrage is welcome, if also belated given that schools in New Jersey are mostly financed with local property taxes, which are among the highest anywhere and nearly double the national average. According to the latest Census data, average New Jersey property levies were $1,908 in 2002, well ahead of second-place New York ($1,760). They've since risen rapidly along with the real-estate boom -- enough so that both candidates in last year's race for governor promised to cut property taxes.

But Jerseyites shouldn't spend their refund checks anytime soon. New Governor Jon Corzine promised to increase property-tax rebates, but he's already backtracking. He's suddenly using phrases like "shared sacrifice," which means higher taxes for as many people as possible. Only two years ago, former Governor James McGreevey raised the top marginal income-tax rate to 8.97% from 6.37%, making it the fifth-highest in the country. New Jersey's revenues have grown by an average of more than 8% annually since 2002, but the politicians keep spending more: $28 billion last year, up from $20 billion in 2000 and $12 billion in 1990.

By the way, those absurd superintendent contracts were negotiated by school board members chosen in elections held in April, when no one votes. "If you think the superintendent contracts are bad," says Gregg Edwards, a former school board member who now runs New Jersey's Center for Policy Research, "wait until you get into the teachers contracts. And it's not just the money. It's the work rules."

The few who do bother to vote for school board members -- typical turnout is 10% -- tend to be union activists and others who have direct connections to the bureaucracy and no incentive to clean up this mess. If New Jersey is looking to reform, a good first step might be to elect school board members in November. The alternative is to keep getting scammed by these public-sector union contracts.

Consumers Beware of Unsuspected Automatic Billings

From The Wall Street Journal Accounting Weekly Review of February 24, 2006

TITLE: Automated Payments Pose Growing Problem
REPORTER: Carol Hymowitz and Elizabeth Bernstein
DATE: Feb 22, 2006
PAGE: D1
LINK: http://online.wsj.com/article/SB114057073099879624.html 
TOPICS: Accounting, Banking

SUMMARY: The article describes issues consumers face in stopping automatic payment arrangements. "...Consumers don't always know and follow the rules for recurring payments, and banks say they aren't able to cancel recurring credit-card charges when a consumer has signed a long-term contract with a merchant..." In addition, consumers must devote significant time to resolving issues. Accounting topics arise because the article uses the terms debit and credit; questions ask students to understand the use of these terms in banking transactions.

QUESTIONS:
1.) The article differentiates between debit card or bank account transactions and credit card transactions. What is the difference between a debit card and a credit card? How is a debit card similar to a checking account?

2.) What are the issues in resolving payment disputes on automated payment plans? Why do the issues differ between debit cards or bank accounts used for automated payments and automated charges to credit cards?

3.) The article uses the terms credit and debit in the title and other places, such as the statement that "Nancy Burleson's checking account was debited an extra week's mortgage payment..." Do these uses of the terms debit and credit correspond to the use of those terms in the balance sheet equation? Support your answer.

4.) Refer again to the statement quoted in question 3 about debiting a checking account. Describe how a customer checking account is classified on a bank's balance sheet, including a definition of the term "demand deposit." Explain how a demand deposit account is increased (with a debit or a credit?) and decreased (again, with a debit or a credit?).

5.) How is a customer credit card account balance (say, on a MasterCard or Visa account) classified in a bank's balance sheet? Explain how the account balance is increased (with a debit or a credit?) and decreased (again, with a debit or a credit?)

Reviewed By: Judy Beckman, University of Rhode Island

Bob Jensen's threads on banking frauds are at http://www.trinity.edu/rjensen/FraudRotten.htm

Dirty Secrets of Credit Card Companies, Banks,  and Credit Rating Agencies

Credit Scoring Models in the U.S. --- http://en.wikipedia.org/wiki/Credit_score_%28United_States%29

FICO --- http://en.wikipedia.org/wiki/FICO

"A Credit Score That Tracks You More Closely," by Tra Siegel Bernard,  The New York Times, December 2, 2011 --- Click Here
http://www.nytimes.com/2011/12/03/your-money/credit-scores/corelogics-new-credit-score-exposes-even-more-of-your-financial-life.html?_r=1

Anyone who has recently applied for a mortgage knows that lenders are already looking much more closely at your financial affairs. But soon, they’ll be able to easily delve into the deepest recesses of your financial life, accessing information that never before appeared on your credit report.

This week, a company called CoreLogic introduced a new type of credit file, which is based on the giant repository of consumer data it maintains on just about everything that most of the traditional credit bureaus do not: missed rental payments that have gone into collection, any evictions or child support judgments, as well as any applications for payday loans, along with your repayment history.

The new report also includes any property tax liens and whether you’ve fallen behind on your homeowner’s association dues. It may reflect that you now owe more than your house is worth or if you own any other real estate properties outright. It also is supposed to catch mortgages made by smaller lenders that the big credit bureaus may have missed.

The idea, CoreLogic says, is to provide lenders with more details about prospective borrowers, supplementing what they already know through the more traditional credit reports furnished by the big three credit bureaus, Equifax, Experian and TransUnion. Moreover, CoreLogic has formed a partnership with FICO — the provider of one of the most popular credit scores used by lenders — which will formulate a new consumer score based on the new data.

Perhaps it’s not surprising that a company decided to pull together this information, since much of it is already publicly available. But because it comes on top of all the other information that’s being collected about you — your exact location at every minute, where you’ve been on the Web — you can’t help but feel that some of these companies know more about your activities than your spouse.

While the CoreScore credit report became available to all types of lenders on Wednesday, the actual score, which will be ready in March, is being created specifically for mortgage and home equity lenders, though it could eventually be developed for other types of credit.

For many consumers, the files are likely to reveal black marks that previously went undetected, which may damage an otherwise clean record. But the companies contend that it works both ways: The added information could help consumers with thin credit files by illustrating positive behaviors elsewhere, say making timely rent payments.

So why now? Clearly, the two companies saw a business opportunity. Lenders, who just a few years back looked the other way, remain particularly skittish about mortgage lending and are looking for more information about prospective borrowers’ ability to pay their debts.

“Lending is very constrained and origination volumes need to grow to make for a profitable mortgage business,” said Joanne Gaskin, director of product management global scoring at FICO. “So lenders are looking for ways to expand, but to expand safely.”

An estimated 100 million American consumers will have a CoreScore credit report, while more than 200 million people have traditional reports from the big three bureaus. Though the new information can influence a lender’s decision, the new score isn’t replacing the classic scores used in the automated mortgage underwriting systems kept by Fannie Mae, Freddie Mac or the Federal Housing Administration, which buy or back the vast majority of mortgages (though CoreLogic said it has let the agencies know what it is doing). But the added information may sway a lender to charge you more (or less) in interest on a mortgage. Lenders of all stripes, including auto lenders, have access to the reports, and they will be marketed to employers and insurers, too.

Ms. Gaskin said that FICO was still tweaking the credit score’s formula. But the next step is to build something that will try to get even deeper inside your financial mind: The company plans to create a more sophisticated tool that will predict how you might behave under different loan terms.

The reason all of this is such a big deal, according to John Ulzheimer, president of consumer education at SmartCredit.com, is that CoreLogic already has major inroads with many lenders. When lenders want to pull your credit file, they go to a company like CoreLogic, which collects all three reports from the traditional bureaus, cleans them up a bit and merges them into a more user-friendly report. “They already have this massive market of mortgage companies that buy these credit reports from them,” he said. “It’s not like they have to go out and convince the companies to work with them.”

Continued in article

Watch for Fraud When Trying to Repair Your Credit ( FICO ) Score ---
 http://www.creditscore.net/

The WSJ is often my best source when I look for fraud reports and fraud warnings.

Although Paul Williams likes to put down the Wall Street Journal, I like to give some credit where credit is due.
The WSJ is making money at a time when most other newspapers are failing, and this allows the WSJ to afford some of the best reporters in the world, many of whom pride themselves on their independence and integrity.

Here is an old example followed by a new example.

Old Example
A dogged WSJ reporter deserves credit for the the first public arrow that eventually brought down Enron's house of cards. If the WSJ was overly concerned about the welfare of the largest corporations in the U.S., this reporter or his employer would've buried this report.
A WSJ reporter was the first to uncover Enron's secret "Related Party Transactions."  What reporter was this and what are those transactions that he/she investigated?
Answer --- http://www.trinity.edu/rjensen/FraudEnronQuiz.htm#22

New Example
"By pushing professional cards to consumers who otherwise wouldn't want them, card issuers can get around some of the provisions of the Card Act," says Josh Frank, a senior researcher at the Center for Responsible Lending, a consumer group.
"Beware That New Credit-Card Offer," by Jessica Silver-Greenberg, The Wall Street Journal, August 28, 2010 ---
http://online.wsj.com/article/SB10001424052748704913704575454003924920386.html?mod=WSJ_hps_sections_personalfinance 

Amid all the junk mail pouring into your house in recent months, you might have noticed a solicitation or two for a "professional card," otherwise known as a small-business or corporate credit card.

If so, watch out. While Capital One Financial Corp.'s World MasterCard, Citigroup Inc.'s Citibank CitiBusiness/AAdvantage Mastercard and the others might look like typical plastic, they are anything but.

Professional cards aren't covered under the Credit Card Accountability and Responsibility and Disclosure Act of 2009, or Card Act for short. Among other things, the law prohibits issuers from controversial billing practices such as hair-trigger interest rate increases, shortened payment cycles and inactivity fees—but it doesn't apply to professional cards (see table).

Until recently professional cards largely had been reserved for small-business owners or corporate executives. But since the Card Act was passed in March 2009, companies have been inundating ordinary consumers with applications. In the first quarter of 2010, issuers mailed out 47 million professional offers, a 256% increase from the same period last year, according to research firm Synovate.

The Card Act's strictures have squeezed banks' profits and their ability to operate freely. By moving cardholders out of protected consumer cards and into professional cards, banks might recoup some of the revenue they have lost.

"By pushing professional cards to consumers who otherwise wouldn't want them, card issuers can get around some of the provisions of the Card Act," says Josh Frank, a senior researcher at the Center for Responsible Lending, a consumer group.

Several solicitations from J.P. Morgan Chase & Co. have ended up in the mailbox of John and Gloria Harrison, a retired military couple who live in Destrehan, La., outside New Orleans. Mrs. Harrison says she gets an offer for an Ink From Chase card, geared toward small businesses, almost every month. She says she finds this puzzling because her husband retired in 1986 and doesn't own a business.

Bob Jensen's Rotten to the Core threads ---
http://www.trinity.edu/rjensen/FraudRotten.htm

Video:  FRONTLINE: The Credit Card Game [Flash Player] --- http://www.pbs.org/wgbh/pages/frontline/creditcards/

Don't Believe Everything Advertised Widely on TV
FreeCreditReport.com is a Scam! ---
http://www.consumerismcommentary.com/2006/11/16/freecreditreportcom-is-a-scam/
This isn’t the first time, but now the State of Florida Office of the Attorney General is investigating FreeCreditReport.com. You’ll notice I don’t link to the site. This site, run by credit reporting agency Experian is taking advantage of the ruling that anyone can receive a free annual credit report from each of the three major agencies. FreeCreditReport.com is not the website that offers free credit reports in conjunction with this directive. It’s misleading, and here’s the fine print on the site:

When you order your free report here, you will begin your free trial membership in Triple AdvantageSM Credit Monitoring. If you don’t cancel your membership within the 30-day trial period, you will be billed $12.95 for each month that you continue your membership. If you are not satisfied, you can cancel at any time to discontinue the membership and stop the monthly billing; however, you will not be eligible for a pro-rated refund of your current month’s paid membership fee.

Below I show you the legitimate place to go for a free credit report.

Your FICO credit score is crucial to your credit to your good name.  It can be altered without your knowing it due to fraud and errors.  Getting a free credit report may not give you a FICO scores as well.  The main advantage of the from http://www.myfico.com/ is that it will give you your FICO score from each of the three major credit reporting agencies.  Consumer Reports (August, 2005, Page 18) notes that credit scores nearly always differ between the three major credit reporting agencies.  You may miss something if you only get one agency’s score.

To monitor your FICO score, Consumer Reports (August 2005, Page 17) recommends that you get the $44.85 package from http://www.myfico.com/

 The FTC site of interest is at http://www.ftc.gov/credit

Federal Trade Commission Bureau of Consumer Protection --- http://www.ftc.gov/bcp/index.shtml

If you want to dispute your credit score, note http://www.ftc.gov/bcp/menus/consumer/credit/reports.shtm
Also see http://en.wikipedia.org/wiki/Credit_scoring

That some bankers have ended up in prison is not a matter of scandal, but what is outrageous is the fact that all the others are free.
Honoré de Balzac

I’m certain that most of you were overjoyed that you no longer have to pay to track your credit ratings and your FICO scores.  In the past few weeks I’ve stressed the bad things credit card companies are doing with FICO scores and the misleading advertising funded by credit card companies.

FTC helpers if suspect someone else has become you --- http://www.ftc.gov/bcp/conline/pubs/credit/idtsummary.pdf 

FTC helpers in getting your credit report and FICO score --- http://www.ftc.gov/bcp/conline/edcams/credit/index.html 

FTC consumer warnings --- http://www.ftc.gov/ftc/consumer.htm 

"Mandatory Usury in One Lesson:  How Congress dictated a 79.9% interest rate," The Wall Street Journal, January 2, 2010 ---
http://online.wsj.com/article/SB10001424052748704304504574610822590688140.html#mod=djemEditorialPage

'You might have less-than-perfect credit and we're OK with that," read an October credit-card solicitation from South Dakota-based First Premier Bank. The interest rate, however, will strike some as usurious: 79.9%. That's a more than eightfold increase from the 9.9% the bank previously collected for a similar card.

Wait, wasn't Congress supposed to have passed legislation against predatory lending? As a matter of fact, yes. The whopping rate increase is First Premier's way of complying with the Credit Card Accountability, Responsibility and Disclosure Act of 2009. Among other provisions, that law prohibits fees of more than 25% above a card's credit limit. First Premier has been offering an account with a $250 limit and annual fees of $256. By law the latter figure must come down to $75. To compensate for the lost $181 in fees, the bank is raising the rate by 70% of $250, or $175, a year.

If it sounds like a rotten deal either way, it is—if you have good credit. But if you don't, the cost may be worth it to re-establish your rating. Banks that lend money to customers with poor credit histories have to charge more to cover the extra risk. If Congress makes this impossible, banks will respond by refusing to lend to such customers, so that it will be harder for them to re-establish their creditworthiness.

Banks can't be expected to give money away, even if Congress is in the habit of doing just that. Unlike lawmakers, banks and other businesses can collect revenues only by offering something of value in return.

Jensen Comment
There are no easy answers to this dilemma. Having national FICO credit scoring made it "nearly impossible" for persons with bad credit scores to borrow money from anybody other than loan sharks (who sometimes break knee caps to collect). The one exception was when borrowers and their brokers submitted falsified credit applications such as in the case of subprime home mortgages where poison loans were passed on to Fannie Mae and Freddie Mack, but for those exceptions the mortgage brokers had to lie about borrower income, property values, and credit history of the borrower.

In 2005, Congress enacted the Bankruptcy Abuse Prevention and Consumer Protection Act to stem the explosion of what was tantamount to a racket where some people repeatedly declared bankruptcy in what was tantamount to legalized theft ---
http://en.wikipedia.org/wiki/Bankruptcy_Abuse_Prevention_and_Consumer_Protection_Act

And now borrowers with bad FICO scores find themselves in Catch 22 situations when trying to reestablish higher credit scores. There are all sorts of unfavorable consequences such as mortgage foreclosures, divorce, sending children to foster homes, gambling, prostitution, robberies, suicides, seeking out loan sharks, etc.

The Next Meltdown: Credit-Card Debt:

Chase Bank raised my rate from 8.99 to 30% for no reason—my reward for being a pristine customer. These are the same bullies that used to take your lunch money in first grade.
Jessica Silver-Greenberg, "The Next Meltdown: Credit-Card Debt:  Rising rates are accelerating credit-card defaults and soured debt could further undermine the financial system," (video included), Business Week, October 9, 2008 --- http://www.businessweek.com/magazine/content/08_42/b4104024799703.htm

The troubles sound familiar. Borrowers falling behind on their payments. Defaults rising. Huge swaths of loans souring. Investors getting burned. But forget the now-familiar tales of mortgages gone bad. The next horror for beaten-down financial firms is the $950 billion worth of outstanding credit-card debt—much of it toxic.

That's bad news for players like JPMorgan Chase (JPM) and Bank of America (BAC) that have largely sidestepped—and even benefited from—the mortgage mess but have major credit-card operations. They're hardly alone. The consumer debt bomb is already beginning to spray shrapnel throughout the financial markets, further weakening the U.S. economy. "The next meltdown will be in credit cards," says Gregory Larkin, senior analyst at research firm Innovest Strategic Value Advisors. Adds William Black, senior vice-president of Moody's Investors Service's structured finance team: "We still haven't hit the post-recessionary peaks [in credit-card losses], so things will get worse before they get better." What's more, the U.S. Treasury Dept.'s $700 billion mortgage bailout won't be a lifeline for credit-card issuers.

The big firms say they're prepared for the storm. Early last year JPMorgan started reaching out to troubled borrowers, setting up payment programs and making other adjustments to accounts. "We have seen higher credit-card losses," acknowledges JPMorgan spokeswoman Tanya M. Madison. "We are concerned about [it] but believe we are taking the right steps to help our customers and manage our risk."

But some banks and credit-card companies may be exacerbating their problems. To boost profits and get ahead of coming regulation, they're hiking interest rates. But that's making it harder for consumers to keep up. That'll only make tomorrow's pain worse. Innovest estimates that credit-card issuers will take a $41 billion hit from rotten debt this year and a $96 billion blow in 2009.

Those losses, in turn, will wend their way through the $365 billion market for securities backed by credit-card debt. As with mortgages, banks bundle groups of so-called credit-card receivables, essentially consumers' outstanding balances, and sell them to big investors such as hedge funds and pension funds. Big issuers offload roughly 70% of their credit-card debt.

But it's getting harder for banks to find buyers for that debt. Interest rates have been rising on credit-card securities, a sign that investor appetite is waning. To help entice buyers, credit-card companies are having to put up more money as collateral, a guarantee in case something goes wrong with the securities. Mortgage lenders, in sharp contrast, typically aren't asked to do this—at least not yet. With consumers so shaky, now isn't a good time to put more skin in the game. "Costs will go up for issuers," warns Dennis Moroney of the consultancy Tower Group.

Sure, the credit-card market is just a fraction of the $11.9 trillion mortgage market. But sometimes the losses can be more painful. That's because most credit-card debt is unsecured, meaning consumers don't have to make down payments when opening up their accounts. If they stop making monthly payments and the account goes bad, there are no underlying assets for credit-card companies to recoup. With mortgages, in contrast, some banks are protected both by down payments and by the ability to recover at least some of the money by selling the property.

THE BIG BOYS' BURDEN Making matters worse, the subprime threat is also greater in credit-card land. Risky borrowers with low credit scores account for roughly 30% of outstanding credit-card debt, compared with 11% of mortgage debt. More than 45% of Washington Mutual's credit-card portfolio is subprime, according to Innovest. That could become a headache for JPMorgan Chase, which agreed on Sept. 25 to buy the troubled thrift's credit-card business and other assets for $1.9 billion. Says a JPMorgan spokeswoman: "

Continued in article

"Avoid These Debit Card Traps:  New scams, fees, and traps to avoid," by Teri Cettina Close, Readers Digest, (Add Date) ---
http://www.rd.com/content/debit-card-traps-and-fees-to-avoid/

The Latest Target of Thieves When Brad Lipman took his family out for dinner in July 2006, he had no idea it would end up costing him $1,800. Lipman paid for the $60 meal with his debit card. After the waiter took the card, someone swiped it through a portable "skimmer." This handheld electronic device allowed the thief to copy Lipman's account information and security codes, and clone his card.

Over the following week, the culprit drained Lipman's checking account and tapped into his overdraft line. He didn't realize anything was amiss until his credit union called him about some unusual charges. "It's hard to explain the feelings of violation," says Lipman, 40, owner of a lending company in Thousand Oaks, California. "Someone had their hand directly in my money."

Many people wrongly assume that debit cards offer the same protection against fraud as credit cards. But when a debit card is stolen or copied, there's no grace period while you contest the charges. Your cash has already been electronically zapped from your checking account. And if it falls short, as Lipman's did, you could face expensive overdraft charges that your bank isn't required to repay.

Debit cards have overtaken credit cards as Americans' plastic of choice for in-store transactions—33 percent debit, compared with 19 percent credit. Financial experts often recommend them as a money-management tool. Three years from now, debit card use will account for more than half our retail purchases, according to the Nilson Report, a payment-systems industry publication.

Debit cards have become the latest target of thieves, and it's not just random cases like Lipman's. In early 2007, hundreds of customers of a national chain restaurant in Sioux City, Iowa, learned their debit card numbers had been stolen. Thieves made cloned cards and are using them in stores in California and northern Mexico. And in 2006, the TJX Companies, which owns T.J. Maxx and Marshalls, reported one of the largest customer-data breaches ever: 45.7 million debit and credit card numbers were stolen from the retailer's computer systems over an 18-month period. Authorities still don't fully know the scope.

There's little you can do to predict a mass retail theft. But you can be smarter about how you use your card to avoid these and other common pitfalls. In addition to scams, hidden overdraft fees are at an all-time high, not to mention surprise holds and mismanagement traps that could land your account in the red faster than the ATM can spit out your receipt.

Know When to Hold 'Em

When Ann Agent of Portland, Oregon, was planning to attend a children's book publishing conference in Tulsa, Oklahoma, she booked her hotel room over the phone by debit card. She and three colleagues intended to split the bill and each pay the hotel directly at checkout time.

Two days into the conference, Agent's husband called from home to read her a letter from her bank: Her checking account was overdrawn, and she was being charged $35 a day in overdraft fees. "I thought there had to be a mistake," Agent, 45, says. "I keep close track of my account balance."

Turns out when Agent reserved the room, the hotel "blocked," or held, enough money in Agent's account to cover the entire four nights' stay, plus miscellaneous charges, amounting to $580. This blocked every available penny she had and caused her to overdraw. The charges weren't reversed until Agent returned home the following Monday.

Holds are common practice in the travel and hospitality industry. They're the merchant's way of ensuring you'll pay your bill. If you rent a car, the agency could block several thousand dollars to make sure you return the vehicle. Some restaurants will place debit card holds for large parties, and a friendly bartender can put a hold on your card if you start a tab. The hold is usually removed within five business days, sometimes much sooner.

Gas stations are notorious for holds. On a Friday morning in January 2005, Jessica Hathaway of Allentown, Pennsylvania, bought $22.29 of gas by debit. On Saturday, the 34-year-old single mother of three checked her bank balance and learned she was almost broke. Right before the gas station debited Hathaway's account for the gas, it imposed a $75 block.

"I was living paycheck to paycheck. I didn't have much extra in my account, and this $75 charge worried me all weekend," she says. Hathaway was out of luck—and cash—until the following Tuesday, when her bank released the hold.

The kind of hold Hathaway described is a standard preauthorization for signature (non-PIN) transactions. Stations vary widely in their hold amounts. Because Hathaway bought gas before the weekend, her hold may have taken longer than usual to clear.

Avoid the Trap

Leave your debit card at home when traveling. "People should use a credit card, even if they don't any other time," advises Clark Howard, consumer advocate and radio host of The Clark Howard Show. Never use a debit card any place your card is taken out of sight, like a restaurant. Book dinner reservations on a credit card. If you must use debit at a gas station—a hot spot for skimming—use your PIN inside or at the pump. Your card is safest if it stays in your hand, and typing in a PIN eliminates the hold.

Be Wary on the Web Say you buy an MP3 player for $80 through an Internet discounter. You wait two weeks. Your music player never arrives, and now the seller is nowhere to be found.

If you used your credit card to buy the player, you've got options. Under the terms of the Fair Credit Billing Act, your card company must remove the questionable charge from your bill while it investigates. The law says you're liable for up to $50, but you'll most likely end up owing nothing.

If you paid by debit card, you're doubly out of luck: no pocket tunes for you, and your money is already gone. Under the Electronic Fund Transfer Act, your debit card issuer isn't required to step in if you make a deal with an unscrupulous merchant. You get to wrangle with the seller yourself, no matter what your bank promised when you opened your account.

Then there's the fraud issue. Federal law generally limits your liability to no more than $50 if your debit card is stolen or copied, as long as you report the crime within two days of receiving your statement. However, if you don't notice the suspicious activity till weeks later, you may be liable for up to $500 or more. As with transaction disputes, recouping your cash isn't a sure thing.

Avoid the Trap

Don't use debit for online purchases, especially if you don't know the retailer's reputation, says Avivah Litan, electronic security specialist for Gartner, an information technology research firm that works with banks. Also opt for credit for all expensive items, like furniture.

Fraud is trickier because it can strike even if you're careful. Nessa Feddis, a senior federal counsel to the American Bankers Association, recommends checking your printed statements every month. Better yet, register for online banking and track your money trail even more frequently.

Some card issuers offer zero liability policies, meaning they won't hold customers responsible for even that first $50 in fraud charges. But they are not legally bound to do so. "We get calls from listeners who struggle for weeks to get their own money back," notes Howard. Even if a store's card reader prompts for your PIN, you can override the system by pressing Credit/Other or asking the cashier to process the sale that way. When you sign a receipt, your debit transaction piggybacks on the credit card processing system, triggering the zero liability policy to kick in.

Steer Clear of Hidden Fees At the end of the week, most of us pull a wad of debit receipts out of our wallets and purses. Do we religiously record these amounts? Probably not. And even a $5 purchase can cause you to overdraw if your balance is tight.

"Banks sometimes change the order of transactions at night. They take your biggest transactions and run them first," says Ed Mierzwinski, consumer program director at the U.S. Public Interest Research Group. By manipulating the order of checks and debits, banks can cause you to overdraw sooner and more often than you thought, earning huge overdraft fees for themselves. Debit purchases and withdrawals are now the single largest cause of customer overdrafts, according to the Center for Responsible Lending (CRL). "Five years ago, if you didn't have enough money in your account to buy something, your card would be declined," says Leslie Parrish, a CRL senior researcher. Today banks extend "courtesy overdraft loans," the financial euphemism for letting you overdraw and then charging you for it. Charges average $34 per transaction and add up to an estimated $17.5 billion in annual fees for financial institutions, says the CRL.

Avoid the Trap

Link your checking account to another account in case you overdraw. The fee, if any, is much lower than overdraft loans. If you incur fees, banks will often waive them if you ask. Some banks offer e-mail or text-message alerts if your balance gets too low. That could be a warning that someone has copied your card or charged you incorrectly.

What's Next?

If you thought debit cards were popular now, just wait. The young tech-savvy generation is entering its prime earning and spending phase of life, and they live by their debit cards.

All the more reason for debit card security to step up a notch. Brad Lipman, the man who lost $1,800 at a restaurant (his credit union eventually returned his money, including overdraft fees) was inspired to develop TablePay, a device that allows diners to safely swipe their debit cards right at their tables. Before long, U.S. debit card issuers may embed electronic chips in cards' magnetic strips, predicts Litan, the security specialist. These sophisticated cards are much harder to copy and use fraudulently.

And that's good, since even fraud victims like Lipman aren't willing to part with their debit cards. "I just can't give up the convenience," he says.

How to avoid those huge debit card fees?
Debit cards may seem attractive to consumers who want to avoid racking up credit charges, because they appear to have the safeguard of drawing from your checking account. But it is possible to overdraw from your debit card, and the resulting fees are very high. Here's how to avoid such charges.
Michelle Singletary, "Watch Your Debit Card Balance," NPR, July 31, 2007 --- http://www.npr.org/templates/story/story.php?storyId=12374687
 

Compare Alternative Credit Card Deals

December 16, 2008 message from Ashley Turner [ashleyturns@gmail.com]

Hi Bob!

I stumbled upon your site looking for finance resources--I recently graduated college and am just starting to stand on my own feet financially. This is also my first year that I'll be paying taxes, so all your IRS info was especially appreciated! I actually wanted to suggest a site that your readers might be helpful: I've been consulting bankaholic.com quite a bit, and I've found their information to be quite good. I've read their section on comparing credit cards over and over again! Just a thought!

Take care,
Ashley T.

Bankaholic.com --- http://www.bankaholic.com/

Bob Jensen's investment and credit helpers are at http://www.trinity.edu/rjensen/Bookbob1.htm

Question
Why did Bob Jensen cut up his "free airlines mileage" credit cards?

Answer
Using such cards is now a bad deal relative to cards that provide cash discounts on nearly all purchases. In the past this added mileage from credit cards was a good deal and helped Erika and I get a number of free trips to Europe and elsewhere. Now these airline-miles credit cards are more of a scam, especially cards that charge an annual fee. The problem is the increased barriers airlines are putting up for redemption of the miles, especially the almost certain likelihood that one or more legs of your planned itinerary will not have free seating available.

My advice: 
Get a free credit card that offers cash discounts on almost all purchases. Shop around! There are some good deals in this regard and bad deals for airline miles. The airlines now have trillions in outstanding free mile liabilities for free miles that they are increasingly being creative on how to avoid providing free redemptions. Also the huge reduction in the numbers of flights scheduled by most all airlines is another bummer.

About the only good deal remaining for free miles, at least for me, is the Southwest Airlines free ticket deal, and you don't need any particular credit card to get this deal. Southwest Airlines, to my knowledge, is the only major airline to consistently earn a profit year-to-year. There are a lot of reasons why!

"Gauging the Worth of a Frequent-Flier Credit Card," by Ron Lieber, The New York Times, August 16, 2008 --- Click Here

One after the other in recent weeks, airlines have altered their frequent-flier mile programs, adding fees, taking away bonuses and raising the number of miles you need for some free tickets.

But lost in fliers’ frustration over the changes is this: It may make more sense to change the credit card you use, not the airline you fly.

Consumers are currently holding about 45 million credit cards issued by United States banks that reward their users with frequent-flier miles, according to The Nilson Report, a payments systems newsletter. That number has held steady for three years.

This may be the year that number starts dropping. After a certain point, it will no longer make sense for many people to pay the annual fees that mileage cards usually charge and pay new fees to book tickets or upgrades. Will they also want to spend tens or hundreds of thousands of dollars on a card just so they can try to redeem miles for a single free plane ticket?

I’ve come up with five questions to ask yourself if you’ve still got a mileage credit card at the top of your wallet, and a number of alternatives for different types of cards. But first, some snippets from the program changes, just in case you’ve missed them:

US Airways has stopped giving bonus miles to members of its Dividend Miles program who have elite status, and the airline also added reward booking fees that range from $25 to $50.

American added a new online booking fee for rewards tickets and is about to raise the number of miles required for many flights. Moreover, its customers will soon have to pay new or increased co-payments much of the time, along with their frequent-flier miles, for upgrades to the front of the plane.

Delta added its own surcharges and also raised the number of miles customers will need to redeem for many free flights. Perhaps most interestingly, it introduced a three-tier price chart. For flights to 49 states (not including Hawaii) and Canada, for example, you could end up trading 25,000, 40,000 or 60,000 miles for a round-trip flight.

That 25,000-mile price for a free ticket has become somewhat sacred. The major airlines have increased the prices in miles for many other tickets, but not this one. How many people will give up on finding available seats at the 25,000 level, then hand over 40,000 or 60,000 miles? It’s hard to say, but Delta probably hopes that it is a lot.

The availability question gets to the heart of the matter. How hard is it to get free seats? And is it getting harder? The frustrating thing about this whole game is that we don’t really know the answers.

We don’t know how often average fliers get their first (or 10th) choice of flight or destination when trying to use their miles or just give up and buy the ticket. The airlines don’t tell us how many seats are available on any given flight or if more will become available later. Joe Brancatelli, proprietor of the business travel site joesentme.com, refers to frequent-flier programs as unregulated lotteries, which gets it about right.

Are fewer seats available for reasonable amounts of miles? Well, most major airlines are reducing the number of seats they fly, often by double-digit percentages. Flights are extremely crowded. But the airlines keep selling their miles to credit card companies and others that want to give them away to their own customers.

That means more miles are chasing fewer seats, even if the airlines aren’t reducing the number of seats on each flight that customers can book with a reasonable amount of miles.

It’s tempting to throw up your hands in despair at the lack of information. But there are several questions that can help you determine whether you want to keep adding miles from credit card spending to the miles you earn on the plane. Start with these:

DO YOU CARRY A BALANCE? If you don’t pay your bill in full each month, you’re excused from this discussion. You’ll do better by using cards with lower interest rates than frequent-flier mile cards, which generally have pretty high rates.

ARE YOUR CHILDREN IN SCHOOL? If they are, you’ll be fighting everyone else who wants to travel at the same time. The airlines, knowing your desperation to get out of town, may make fewer free seats available during school vacations, since the airline will probably sell all the seats on those flights anyway.

DO YOU HAVE ELITE STATUS? Some airlines — like American, Northwest, United and Continental — carve out additional inventory of free seats at their lower mileage levels for some or all customers with elite status. That inventory, plus the bonus miles that most airlines still offer to elite members, make a mileage credit card more attractive.

ARE YOU A BIG SPENDER? If you’re wealthy, or can run business expenses through your card, you can earn six figures in miles from card spending alone each year. A huge mileage balance gives you the ability to exchange those miles for premium-class overseas tickets, which could cost $10,000 or more if you bought them with cash. Miles are worth a lot more if you redeem them for this sort of travel.

Continued in article

Bob Jensen's threads on the dirty secrets of credit card companies are at http://www.trinity.edu/rjensen/FraudReporting.htm#FICO

"Credit Card 101: Advice Before Shopping," AccountingWeb, November 22, 2006 ---
http://www.accountingweb.com/cgi-bin/item.cgi?id=102824

President Brad Stroh of Bills.com feels that consumers debts are growing without conscious decisions being made. "For those who are over their heads in debt, taking action quickly is critical, before it's too late to prevent any temporary hardships from becoming permanent financial crises," he warns.

Stroh has six steps that he says, if followed, will minimize the damage of mounting debts.

 

1. First and foremost, stop charging. Consumers are falling back on credit cards and using them as "emergency funds", often doing more harm by charging items that they don't need and that are not necessary.
   
    
2. Always pay bills on time. Pay on time, even if you can only afford a minimum payment. Penalty rates for late payments can be crippling, as high as 31 percent, which in turn leads to a higher balance and higher minimums and big late fees. Cards may even raise the interest rate if you are late in payment to another creditor.
   
    
3. Pay more than the minimum. Promise yourself that you will pay more than necessary when ever you can, even if it is $10 and round the amount out to the next $10 or $100 increment. By doing this, you decrease the debt faster.
   
    
4. Pay the highest interest debt first. Pay more on the debt that is charging the highest rate and move down in order of the rate, saving the lowest rate debt for last, such as a student loan.
   
    
5. Negotiate your rates. If you pay on time and have a bigger debt than you would normally have, you might be a company's ideal client, so try to capitalize on a good payment history by getting your rate lowered, especially if it is above the 14.67 national average. Call customer service and ask. Try more than once.
   
    
6. Get help. There are many sources that can provide help with debt problems and advice on how to get out of debt, especially in cases such as medical problems that have resulted in short-term debt. Borrowing money from family or combining old debt onto a no-interest, lower interest card are some ideas, as are borrowing against life insurance or retirement funds.

Bills.Com, is a free, online service for consumers who need help on complex and personal financial issues. The California company's co-founders and CEOs, Brad Stroh and Andrew Housser, were recently named finalists for Northern California by Ernst & Young's 2006 Entrepreneur of the Year Award. They handle more than 7,500 clients, nationwide.