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."

Ponzi/Pyramid Schemes --- http://www.trinity.edu/rjensen/FraudRotten.htm#Ponzi

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.

March 26, 2013 message from Paul Caron

IRS Releases 'Dirty Dozen' Tax Scams

The IRS today released (IR-2013-33) its 2013 “dirty dozen” list of tax scams:

1. Identity Theft
2. Phishing
3. Return Preparer Fraud
4. Hiding Income Offshore
5. “Free Money” from the IRS & Tax Scams Involving Social Security
6. Impersonation of Charitable Organizations
7. False/Inflated Income and Expenses
8. False Form 1099 Refund Claims
9. Frivolous Arguments
10. Falsely Claiming Zero Wages
11. Disguised Corporate Ownership
12. Misuse of Trusts

Bob Jensen's threads on tax frauds ---
http://www.trinity.edu/rjensen/FraudReporting.htm#TaxScams

This type of celebrity bankruptcy that frequently happens to professional athletes should not be happening to the likes of Diane Warwick with assets of $25,500 and debts of more than $10,700,000.

"Singer Dionne Warwick files for bankruptcy," Reuters, March 26, 2013 ---
http://www.reuters.com/article/2013/03/26/entertainment-us-dionnewarwick-idUSBRE92P04J20130326

As Joe Lewis supposedly said:
I been poor
And I been rich
Rich is better

2012 IRS Data Book

Message from Paul Caron on March 26, 2013 ---
http://taxprof.typepad.com/

2012 IRS Data Book

The IRS yesterday released the 2012 IRS Data Book, which contains a wealth of statistical information for the IRS's Oct. 1, 2011 - Sept. 30, 2012 fiscal year.  Here are the statistical tables:

Returns Filed, Taxes Collected, and Refunds Issued

• Table 1: Collections and Refunds, by Type of Tax
• Table 2: Number of Returns Filed, by Type of Return
• Table 3: Number of Returns Filed, by Type of Return and State
• Table 4: Number of Returns Filed Electronically, by Type of Return and State
• Table 5: Gross Collections, by Type of Tax and State
• Table 6: Gross Collections, by Type of Tax
• Table 7: Number of Refunds Issued, by State and Fiscal Year
• Table 8: Amount of Refunds Issued, Including Interest, by Type of Refund and State

Enforcement: Examinations

• Table 9a: Examination Coverage: Recommended and Average Recommended Additional Tax After Examination, by Type and Size of Return
• Table 9b: Examination Coverage: Individual Income Tax Returns Examined, by Size of Adjusted Gross Income
• Table 10: Examination Coverage: Returns Examined with Unagreed Recommended Additional Tax After Examination, by Type and Size of Return
• Table 11: Examination Coverage: Returns Examined Involving Protection of Revenue Base, by Type and Size of Return
• Table 12: Examination Coverage: Returns Examined Resulting in Refunds, by Type and Size of Returns
• Table 13: Returns of Tax-Exempt Organizations, Employee Retirement Plans, Government Entities, and Tax-Exempt Bonds Examined, by Type of Return

Enforcement: Information Reporting and Verification

• Table 14: Information Reporting Program
• Table 15: Math Errors on Individual Income Tax Returns, by Type of Error

Enforcement: Collections, Penalties, and Criminal Investigation

• Table 16: Delinquent Collection Activities
• Table 17: Civil Penalties Assessed and Abated, by Type of Tax and Type of Penalty
• Table 18: Criminal Investigation Program, by Status or Disposition

Taxpayer Assistance

• Table 19: Selected Taxpayer Assistance and Education Programs, by Type of Assistance or Program
• Table 20: Taxpayer Advocate Service: Postfiling Taxpayer Assistance Program, by Type of Issue and Relief
• Table 21: Appeals Workload, by Type of Case

Tax Exempt Activities

• Table 22: Tax-Exempt Guidance and Other Regulatory Activities
• Table 23: Determination Letters Issued on Employee Retirement Plans, by Type and Disposition of Plan
• Table 24: Closures of Applications for Tax-Exempt Status, by Organization Type and Internal Revenue Code Section
• Table 25: Tax-Exempt Organizations and Nonexempt Charitable Trusts

Chief Counsel

• Table 26: Chief Counsel Workload: All Cases, by Office and Type of Case or Activity
• Table 27: Chief Counsel Workload: Tax Litigation Cases, by Type of Case

IRS Budget & Workforce

• Table 28: Costs Incurred by Budget Activity
• Table 29: Collections, Costs, Personnel, and U.S. Population
• Table 30: Personnel Summary, by Employment Status, Budget Activity, and Selected Type of Personnel
• Table 31: Internal Revenue Service Labor Force, Compared to National Totals for Civilian and Federal Labor Forces, by Gender, Race/Ethnicity, and Disability

First-Time Homebuyer Credit

• Table A: First-Time Homebuyer Credit, by State

Press and blogosphere coverage:

• Bloomberg, IRS Audits of Individual Taxpayers Declined 5.3% in 2012

 

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

"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/Debit Card Companies, Banks,  and Credit Rating Agencies

There is a long history of questions about university sponsorship of credit and/or debit cards with alumni and students, sponsorships with kickbacks such as a percentage kickback on purchases

"Questions on Debit Cards," by Libby A. Nelson, Inside Higher Ed, February 1, 2013 ---
http://www.insidehighered.com/news/2013/02/01/cfpb-opens-wide-ranging-inquiry-campus-debit-cards

WASHINGTON -- The Consumer Financial Protection Bureau announced Thursday that it was beginning an inquiry into the arrangements between colleges, banks and debit card companies. The announcement is the latest indication that federal agencies and Congress are taking an increased interest in how debit cards are used to access federal financial aid.

The bureau is asking for input on a few separate topics: debit cards supplied by companies like Higher One, which give students the money left over from grants and loans after paying tuition; arrangements between colleges and banks that allow student identification cards to be used as debit cards; and college-affiliated bank accounts.

College business officers say those products are quite different from one another. Preloaded debit cards have caught on in recent years as a method of giving college students access to federal grants and loans for living expenses. While they have come under scrutiny for high fees, they are a way to give money to students without using paper checks, and do not require a bank account. Critics say students would be better off opening a bank account than relying on preloaded cards.

Higher One has dominated the debit card market for years, and has come in for much of the criticism for swipe fees, ATM fees and other charges that can chip away at students’ financial aid. As the cards have grown more popular, other banks, including Sallie Mae, have entered the market place.

Agreements between colleges and banks are more common at larger universities, unlike the debit cards, which are more popular at community colleges, said Anne Gross, vice president for regulatory affairs at the National Association of College and University Business Officers. Under the agreements, banks offer benefits to colleges, such as additional scholarship money. In exchange, the colleges offer students the option of using their ID cards as a debit card, encouraging them to use that bank for their checking accounts. 

The consumer protection agency appears concerned that those arrangements can stop students from shopping around for bank accounts that might offer a better deal. Past investigations, including one by New York Attorney General (now Governor) Andrew Cuomo in 2007, found that "preferred lender" arrangements between colleges and student lenders (until the conversion away from bank-based lending in 2010) sometimes led to deals that included benefits for colleges but weren't the best option for students.

Continued in article

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

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/

May 18, 2012 message from Mike Dolan

Hi Bob,

I stumbled upon your list of threads on Trinity's website about frauds and scams... WOW, what a valuable collection of info you have assembled over the years!! I actually own and operate a message board that has a large chunk dedicated to dealing with credit card fraud and financial ripoffs and I was wondering if you would consider including CreditCardForum as a resource on your list? In addition to the fraud section on my forum, you will see that I blog frequently on there about credit scams and sneaky marketing. For example, here's a recent post I wrote highlighting the shady practices behind the govt mandated AnnualCreditReport website.


Thanks and I hope life is treating you well since retiring to NH... a beautiful area for sure!

Mike

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.

Cuomo's Latest Targets Include Universities' Deals With Credit-Card Providers
Agreements with credit-card providers, however, appear to be only a portion of what Mr. Cuomo is now exploring. A deputy counsel to the attorney general, Benjamin M. Lawsky, this week outlined wide-reaching plans to broaden the office's investigations into conflicts of interest in the arrangements between colleges and companies that do business with the institutions or their students and alumni. The new investigative work will involve banking, health-insurance, textbook, food-service, and credit-card companies that have business relationships with hundreds of American colleges, Mr. Lawsky told a gathering of educators and guidance counselors from school districts on New York's Long Island on Wednesday, Newsday reported.
Paul Basken, Chronicle of Higher Education, February 29, 2008 --- http://chronicle.com/daily/2008/02/1898n.htm?utm_source=aw&utm_medium=en

Bob Jensen's threads on the dirty secrets of credit card companies, banks, and credit rating agencies are at http://www.trinity.edu/rjensen/FraudReporting.htm#FICO

Bob Jensen's threads on the accountability of colleges and conflicts of interest are at http://www.trinity.edu/rjensen/HigherEdControversies.htm#Accountability

What about your secret, hush-hush, Bankruptcy Risk Score that you don't even know about?

Thanks to new laws, you can find out your FICO credit score. But lenders now have a secret credit score on you that is their secret alone.
While most people are aware that their credit score can have a large impact on their financial lives, there is another score that the credit bureaus keep that most people are not aware of - your Bankruptcy Risk Score Your credit score is made up mostly of your history of obtaining credit and paying off debt. This score helps determine what type of interest rate you receive on credit cards or loans that you apply for. Most people assume that it is this score alone is used by the financial institutions considering whether or not to give you a loan. The truth is that a bankruptcy risk score is now being used more and more when lending institutions are looking at a person's credit history. The bankruptcy risk score has been around for about 20 years, but has been kept fairly hush - hush. It measures how likely a person is to file bankruptcy and uses information that makes it more specific than a credit risk score. The bankruptcy risk score is exclusively for lenders provided by the credit reporting agencies. This bankruptcy score is supposedly a complex mix of your credit score plus your spending habits. The credit agencies and those that use this report (and have contributed to creating it) don't want to reveal the model because they spend a lot of time and money developing it and if they explain it, they are giving away part of it's value. Therefore little is said about this report (and why you have never likely heard of it before). You may be able to learn a bit more about it in the near future. Experian is considering making its bankruptcy risk score available to consumers. This is after they revealed a study last July which ranked the states that had consumers who were most likely to file for bankruptcy within the next year.
"Bankruptcy Risk Score - The Hidden Credit Score ," Jeffrey Administrator, February 21, 2006 ---
http://www.savingadvice.com/forums/showthread.php?t=15148

Pay to Get Your FICO Score
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, 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/

Mike Kearl has an interesting document online called "Credit Card Crazy" --- http://www.trinity.edu/mkearl/credcard.html

Why this could easily hurt your FICO score!

"Canceling a card does not help your credit score," by Marshall Loeb, MarketWatch, November 15, 2006 ---
Click Here

According to Bankrate.com, canceling your credit card probably won't help your credit score. In fact, it could really hurt it. Here's why: If you cancel a card, your "credit-utilization ratio" is altered. Say you have five open credit-card accounts that add up to a total available credit line of $50,000. Your total outstanding balance on all five cards combined is $10,000. Thus, your credit-utilization ratio is 20%. But if you cancel two of those cards, bringing your total available credit line down to $25,000, the ratio jumps up to 40%. And that can make your credit score go down.

Bankrate.com also warns against canceling an old card. You build up a payment history on old cards, so if you cancel one you've had for a while, you're only trimming the length of your credit history. This can be especially damaging if the old card was one on which you made regular payments. T

he best bet, of course, is to simply pay off your cards. Unless you're paying fees to keep an account open, it's good enough to pay down the balance -- and cut that card up.

Overdue Library Books and Unpaid Parking Tickets May Harm Your FICO (Credit) Score
Late library books, unpaid parking tickets and other routine municipal fees are beginning to affect people's credit scores as city and state governments increasingly hire private collections agencies to collect fines.
Jane Spencer, "A New Threat To Your Credit Rating," The Wall Street Journal, January 3, 2006; Page D1 --- http://online.wsj.com/article/SB113625248988836069.html?mod=todays_us_personal_journal

This is Important

Egads!  Is this what you call filling in where schools fail?
The College Board will administer its revised college-admissions test to thousands of high-school juniors for the first time on Saturday, and the test has generated a bonanza of new study aids. "The new SAT has led to a flurry of new products because all publishers are starting new -- there's a new thing to compete over," says Justin Kestler, a founder of SparkNotes LLC, a division of Borders Group Inc.  Adds Jon Zeitlin, manager of college-prep programs for Kaplan Inc., a unit of Washington Post Co.: "We've been on a product-creation jag for months."  Test-prep giant Princeton Review Inc., which isn't affiliated with Princeton University, has developed software that delivers test questions, including critical-reading passages, to cellphone screens -- then grades the answers and sends the results home to Mom and Dad. Its chief competitor Kaplan has software for a cellphone or a Palm device: Order up easy, medium or hard questions in reading, writing or math.  Texas Instruments Inc. is programming all of its latest graphing calculators with SAT math and vocabulary drills. And SparkNotes has its test-prep eye on the ubiquitous iPod. "We're trying to figure out how to do it in audio," says Mr. Kestler. "It's the next big killer application."
June Kronholz, "To Tackle New SAT, Perhaps You Need A New Study Device:  Test-Prep CDs, Puzzles, Cellphone Software Hit A June Market of Nonreaders," The Wall Street Journal, March 8. 2005, Page A1  --- http://online.wsj.com/article/0,,SB111024562510773081,00.html?mod=todays_us_page_one 

Jensen Comment
College admission tests serve many purposes, not the least of which is to guide students into what to learn in school.  One of the failings of our schools and the college tests is the failure to test and motivate students toward understanding personal finance.  Why is this important?  Personal finances are a major cause of suicide and divorce.  Sometimes I don't think teachers really are concerned about the tragedies of life that affect nearly all people later in life from the very poor to the very rich.  Our graduates mess of their lives because they mess up their personal finances and/or allow themselves to be screwed by credit card companies, finance companies, brokers, financial advisors, and banks (yes and banks).

Please read the following:
"Survey: Students Not Taught Basic Finance," Ben Feller, SmartPros, March 7, 2005 --- http://accounting.smartpros.com/x47289.xml 

And then look at the following:

March 4, 2005 message from a staff member at Trinity University

Think of the many people whose lives might be saved and whose marriages might be more successful if they understood the basics of who to keep out of digging themselves into financial holes and how to stop digging once they're in those holes.

"Majoring in Credit-Card Debt:  Aggressive on-campus marketing by credit-card companies is coming under fire. What should be done to educate students about the dangers of plastic?" by Jessica Silver-Greenberg, Business Week, September 4, 2007 --- Click Here

This story is the first in a series examining the increasing use of credit cards by college students.

Seth Woodworth stood paralyzed by fear in his parents' driveway in Moses Lake, Wash. It was two years ago, during his sophomore year at Central Washington University, and on this visit, he was bringing home far more than laundry. He was carrying more than $3,000 in credit-card debt. "I was pretty terrified of listening to my voice mail because of all the messages about the money I owed," says Woodworth. He did get some help from his parents but still had to drop out of school to pay down his debts.

Over the next month, as 17 million college students flood the nation's campuses, they will be greeted by swarms of credit-card marketers. Frisbees, T-shirts, and even iPods will be used as enticements to sign up, and marketing on the Web will reinforce the message. Many kids will go for it. Some 75% of college students have credit cards now, up from 67% in 1998. Just a generation earlier, a credit card on campus was a great rarity.

For many of the students now, the cards they get will simply be an easier way to pay for groceries or books, with no long-term negative consequences. But for Seth Woodworth and a growing number like him, easy access to credit will lead to spending beyond their means and debts that will compromise their futures. The freshman 15, a fleshy souvenir of beer and late-night pizza, is now taking on a new meaning, with some freshman racking up more than $15,000 in credit-card debt before they can legally drink. "It's astonishing to me to see college students coming out of school with staggering amounts of debt and credit scores so abominable that they couldn't rent a car," says Representative Louise Slaughter (D-N.Y.).

Congressional Oversight Weighed

The role of credit-card companies in helping to build these mountains of debt is coming under great scrutiny. Critics say that as the companies compete for this important growth market, they offer credit lines far out of proportion to students' financial means, reaching $10,000 or more for youngsters without jobs. The cards often come with little or no financial education, leaving some unsophisticated students with no idea what their obligations will be. Then when students build up balances on their cards, they find themselves trapped in a maze of jargon and baffling fees, with annual interest rates shooting up to more than 30%. "No industry in America is more deserving of oversight by Congress," says Travis Plunkett, legislative director for Consumer Federation of America, a consumer advocacy group.

The oversight may be coming soon. With Democrats in control of Congress and the debt problems for college kids only growing worse, the chances of a crackdown have increased substantially. The Senate is expected to hold hearings on the credit-card industry's practices this fall. Representative Barney Frank (D-Mass.) has pledged to introduce tough legislation. And Slaughter introduced a bill in August to limit the amount of credit that could be extended to students to 20% of their income or $500 if their parents co-sign for the card.

The major credit-card companies take great issue with the criticisms. Bank of America (BAC), Citibank (C), JPMorgan Chase (JPM), American Express (AXP), and others say they are providing a valuable service to students and they work hard to ensure that their credit cards are used responsibly. Citibank and JPMorgan both offer extensive financial literacy materials for college students. Citibank, for instance, says it distributed more than 5 million credit-education pieces to students, parents, and administrators last year for free. At JPMorgan Chase, bank representative Paul Hartwick says: "Our overall approach toward college students is to help them build good financial habits and a credit history that prepares them for a lifetime of successful credit use."

Continued in article

In addition to a free annual credit report, you can get a report following ID theft

"Be Prepared For ID Theft:  A Quick Response Helps," by Brian Krebs, The Washington Post, June 18, 2006 ---
http://www.washingtonpost.com/wp-dyn/content/article/2006/06/17/AR2006061700106.html

Consumers who have evidence of attempts to open fraudulent accounts in their name should contact those creditors immediately, and file a report with the local police department. If possible, obtain a copy of the police report, or at least the police report number. Evidence of fraudulent activity allows victims to request that a 90-day fraud alert be extended to seven years, though a credit bureau will require proof of identity and a copy of the police report.

Placing a fraud alert entitles you to a free copy of your credit report from each of the major bureaus, in addition to a free report the law allows every consumer to request annually. If you get a fraud-related credit report, Givens advises waiting a few months before ordering the annual free one.

Alert the credit bureaus and credit issuers in writing of any inaccurate information or fraudulent accounts listed in your credit reports. You also have the right to have the credit bureaus strike any inquiries against your credit history that were generated by fraud.

For many identity-theft victims, being denied a loan or line of credit or receiving a call from a debt collection agency is the first sign of trouble. By law, if you inform a collector that a debt is the result of identity theft, that collector also must inform the creditor, and creditors are prohibited from selling debt that results from identity theft or placing it for collection. You also are entitled to a copy of all information about fraudulent debt, including late notices and account statements.

At least 23 states have passed "security freeze" laws that allow consumers to indefinitely prevent anyone from issuing credit in their name. California, Colorado, Connecticut, Florida, Illinois, Kentucky, Louisiana, Maine, Minnesota, Nevada, New Hampshire, New Jersey, New York, North Carolina, Oklahoma, Utah, Vermont and Wisconsin provide all their residents with the option of placing a security freeze on their credit files. Hawaii, Kansas, South Dakota, Texas and Washington currently provide this option only to ID theft victims.

A number of state laws also are driving businesses to alert consumers about potential data losses, but legislation being considered on Capitol Hill could soon change that. Ed Mierzwinski, consumer program director of the U.S. Public Interest Research Group, a consumer watchdog group in Washington, said a bill recently passed by the House Financial Services Committee and supported by the major financial institutions would exempt companies from alerting consumers about data thefts or losses if the company does not know whether that loss places the consumer at a direct risk of identity theft. The bill also would reserve credit freezes for ID theft victims only.

Continued in article

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

Update on the dirty secrets of our credit card systems:  A hidden "tax" on those that opt out
Per-transaction "interchange" fees are a silent but very effective tax. And as card issuers continue down the perilous path of not charging their customers anything for the credit cards they use, the thirst for "tax money" becomes ever greater.But the real rub is that retailers will pass along the higher premium-card fees to all customers, including those who don't qualify for a credit card, let alone a premium card. Checks and cash still account for more than 50% of all retail payments, and the sad truth is that it is precisely those who can pay only by check or cash who are footing most of the bill for the costs of these cards. In most tax systems the wealthy pay most of the taxes; in this model, those who can't or don't use credit cards are paying for those who do qualify for them. Here's the real dirty secret of the card-issuing industry: Because card regulations demand that cardholders pay no more for goods and services than cash and check customers, the working poor are subsidizing the vacation points earned by America's top income classes.
"A Dirty Little Secret About Credit Cards," The Wall Street Journal, May 4, 2005; Page A19 --- http://online.wsj.com/article/0,,SB111517843155624225,00.html?mod=todays_us_opinion

From PBS:  Things a Credit Card Holder Should Know (including online tests for students)

Secret History of the Credit Card --- http://www.pbs.org/wgbh/pages/frontline/shows/credit/ 

You can watch the entire Frontline video from the link on the above site.

Should you get a Capital One credit card?

The point is that credit card companies don't care how rich you are or even your liquidity.  It's your payment practice on all your accounts payable that really counts.  Payment history is the main ingredient of a FICO score, but the actual FICO formula is very complex --- http://www.consumeraffairs.com/finance/fico.html

You're a grade C credit card user if you zero out all your accounts payable in less than 20 days.  Good guys don't get an A or a F grade as credit card customers.  Of course the credit card companies still get a percentage of your purchase prices from the vendors who sold you the goods.  Credit card companies always get something (usually around 6% of the price), but vendors can negotiate the rate they pay on their customers' purchases.  Credit card companies don't care as much for C grade customers because they are limited to the what the product vendors pay one time on each purchase.

You're a Grade B card user if you don't (or can't) pay off your entire monthly balances.  A Grade B customer always pays the minimum balance due on each credit card, but never in his lifetime pays off an entire balance due.   That way the credit card companies collect forever (actually only about 35 years if you don't add to your account) from you in addition to what the product vendor initially paid to them for your purchase.

You're a Grade A customer for Visa if you miss one payment on your Discover card but keep on making all minimum payments on your Visa.  That way Visa can jack up your interest rate from 8.9% to 29.9% APR for the rest of your life because your FICO score increased due to one missed payment on any one of your credit cards or other accounts.  The Frontline show has a segment on how one guy's perfect six-year perfect record of making minimum payments did not prevent his interest rate from jumping up by 20% when it was discovered by the FICO folks that he missed one payment on an account six years in the past.  This is funny (sad?) because this guy’s credit card company’s CEO phoned the guy after the Frontline TV show aired and lowered his rate back down to 8.9%.

It's the indexing of your changing interest rates to your increased FICO score that's the biggest "secret" credit card companies don't want consumers to understand.  The Frontline show ("Secret History of the Credit Card") stresses that most consumers don't even know what a FICO score is let alone how it affects their future interest rates on all their credit card unpaid balances.  See http://www.pbs.org/wgbh/pages/frontline/shows/credit/eight/

The main page for downloading details and the free video of the entire Frontline PBS show is at http://www.pbs.org/wgbh/pages/frontline/shows/credit/ 

How can you beat this scam?
Never pay less than the minimum amount due, control your credit addiction, and try to zero out every credit card balance in less than 20 days or whatever the payment cycle is on your card.  If this fails I would not necessarily advise getting a Capital One card.

Capital One now advertises that the bank has changed its ways and doesn’t change credit card  rates in the same way that other credit card companies are bilking the public ---
http://www.washingtonpost.com/wp-dyn/articles/A8200-2005Jan13.html
I would still advise reading the small print even if it’s a Capital One card.

The Minnesota state attorney general’s office has sued one of the nation's largest credit card issuers (Capital One), claiming it is misleading consumers with promises of “fixed“ interest rates, then hiking their rates as much as 400 percent.
Bob Sullivan, MSNBC, "Capital One Sued Over Marketing Practices," January 3, 2005 --- http://www.msnbc.msn.com/id/6781155/  

An entirely new definition of bankruptcy:  What you don't know about a pending bill might hurt you
"Most of the credit cards that end up in bankruptcy proceedings have already made a profit for the companies that issued them," said Robert R. Weed, a Virginia bankruptcy lawyer and onetime aide to former Republican House Speaker Newt Gingrich.  "That's because people are paying so many fees that they've already paid more than was originally borrowed," he said.  In addition, some experts say, the changes proposed in the Senate bill would fundamentally alter long-standing American legal policy on debt. Under bankruptcy laws as they have existed for more than a century, creditors can seize almost all of a bankrupt debtor's assets, but they cannot lay claim to future earnings.  The proposed law, by preventing many debtors from seeking bankruptcy protection, would compel financially insolvent borrowers to continue trying to pay off the old debts almost indefinitely . . . Debate about the bill continued Thursday, with the Republican-controlled Senate refusing to limit consumer interest rates to 30%. The vote was a bipartisan 74 to 24 to kill a proposed amendment by Sen. Mark Dayton (news, bio, voting record) (D-Minn.). Senate passage of the bill is expected next week.
Peter G. Gosselin, "Credit Card Firms Won as Users Lost," The Los Angeles Times, March 4, 2005 --- http://snipurl.com/LAtimesMarch4 
Bob Jensen's threads on credit card company dirty secrets are at http://www.trinity.edu/rjensen/FraudReporting.htm#FICO 

Questions 
Is your university getting credit card kickbacks on student and alumni use of credit cards? 
Did you know that many universities send names, addresses, and social security numbers of students and alumni to a company that solicits them to use a credit card?  

Answers
January 19, 2005 message (re-written by Bob Jensen) from a former high level university administrator

Many, if not most, colleges and universities are doing this. The reason: every time a credit card is used for any purchase, the university gets a percentage (for each purchase transaction) from the credit card company "as a gift." This kind of income is generally not recognized as a gift by the rules of the college and university auditors/business managers (see NACUBO). Why should the university provide any of this information? In addition to not informing people that this information is being "sold," this practice encourages college students and alumni to go into more debt.

Fixed Rate Lures Have a Hook
"Beware of 'fixed rate' lure of credit cards," by Michelle Singletary, Boston Globe, January 26, 2005 --- http://snipurl.com/GlobeJan_23 

'Are you nutso?'

That was a question one reader posed to me recently. He thought I was wrong to advise a young woman not to transfer $13,000 of student loan debt to a credit card offering a very low interest rate.

But I'm not nuts, just realistic. I recommended that the woman with the student loan debt not do it because those low-interest-rate cards come with too many loopholes that allow a credit card company to hike the rate even if you sneeze wrong.

''You give folks far too little 'credit' for being able to monitor their situation," the reader scolded me.

It's not that I don't think people can't handle credit well; it's that folks sign up for these cards without reading or understanding the fine print, which states that minor missteps in the handling of their accounts can trigger increased rates -- significantly higher interest rates (much higher than the 8.25 percent fixed rate the woman in question was paying on her student loan).

Actually, to the dismay of some, you can do everything right and still have your credit card rate increased.

In fact, Minnesota Attorney General Mike Hatch is going after one giant credit card company for what he says is a deliberate attempt to mislead people into signing up for what they think are permanently fixed-rate credit cards.

In a lawsuit filed recently against two subsidiaries of Capital One Financial Corp., Hatch alleges that the company uses false, deceptive, and misleading television advertisements, direct-mail solicitations, and customer service telephone scripts to market credit cards with allegedly ''low" and ''fixed" interest rates that, unlike its competitors, will never be increased.

Capital One said in a statement that it has done nothing wrong.

I do believe that much of the advertising for credit cards doesn't emphasize that special low rates can be taken away for any number of bill-paying infractions -- making a single payment late (even by one day) or exceeding your credit limit.

However, what many consumers don't understand is that the word ''fixed" in the credit card world isn't the same as, for example, a 30-year ''fixed" mortgage loan. You can pay your mortgage late or not at all and your rate will be the same. You might get kicked out of your house or ruin your credit rating, but you won't get kicked up to a higher interest rate.

Not so with credit cards. A fixed credit card rate can be changed.

Hatch's suit alleges that consumers are not adequately informed of what can happen with a low-interest-rate card and cites case histories from several Minnesota cardholders. Here are some examples outlined in the lawsuit:

Nicole Bourgeois opened a credit card account with Capital One in July 2003. Bourgeois had seen a Capital One television ad offering low, fixed-rate credit cards. Based on the ads, she thought fixed meant the rate would not change for the life of the card. Bourgeois and her husband had wanted to consolidate debt from other credit cards into a single joint account with a low interest rate. Bourgeois received a card with a rate of 4.9 percent. But nearly a year after having the card, she noticed one month her rate had been increased to more than 14 percent. She called Capital One and was told that the increase was the result of one late payment.

Robert Stein said he found the prospect of a low fixed-rate card very appealing. He believed that the term ''low fixed rate" meant that the interest rate would stay at 4.9 percent for as long as he had the card. However, Stein's rate increased to 6.9 percent. Why? When he called to inquire, he was told his interest rate was increased because his payment was received two days past the due date.

Betty Ramsland obtained a Capital One credit card in 2002 with a fixed rate of 8.9 percent. Two years later, Ramsland's rate was raised to 14.95 percent. Ramsland said in the lawsuit she asked the company why her rate was increased but didn't receive an explanation.

Sure, some people move around debt from one low-interest credit card to another with no problem. But you're nuts to believe a promise of a forever fixed-rate credit card. Maybe it will stay fixed. Maybe it won't.

Part of a message received from a friend on March 1, 2005

Dear XXXXX

Thank you for your email, and for your consideration of our request to support PAA. The alumni association does receive a percentage of the total amount of charges submitted by our alumni who use the card. We are precluded by contractual arrangements from disclosing the percentages or amount but I can tell you that this is a significant revenue source for the alumni association.

The revenue from this program is used in a variety of ways to support the programs and services offered to our alumni and members. These funds help support our outreach efforts such as alumni clubs, student recruitment events, Purdue on the Road events. In addition these funds help support the Faculty Incentive Grant program to assist in faculty development, Diversity Grants to support diverse programming efforts and Legacy events that highlight Purdue students whose parents are graduates of Purdue as well.

In addition to the financial support is another way to market Purdue throughout the world. Every time someone pulls the card out of their wallet they are marketing Purdue for us.

I am more than happy to answer any further questions you might have and thank you for your email. It is very important for our alumni to be informed about our programs and I appreciate your thoughtful questions.

Best wishes,

YYYYY

Jensen Comment
One of my friends forwarded the above message.  It reflects what is commonplace now among alumni associations of colleges.  These associations promote a particular credit card company and receive revenue for this service on purchases of alumni and students.  I suspect it is not unethical as long as alumni and students are aware of all facts in the situation.  The letter above does not mention that alumni associations generally forward more than names and addresses to credit card companies and possibly other vendors.  I have some concerns when they forward social security numbers without express written consent for alumni.  I also have concerns when alumni are not aware of how or who is receiving confidential information from alumni associations.

I have written previously about this general practice at http://www.trinity.edu/rjensen/FraudReporting.htm#FICO 
I think the credit card companies want the social security numbers of all alumni and students so that FICO ratings can be investigated before inviting an alumnus or student to apply for a University of ZZZZZ  credit card.

Probably the most technical and complete muck raking about credit rating agency conflicts of interest arose in a law paper by Frank Partnoy (my hero) with particular reference to evidence uncovered in the Enron investigation.  It is particularly revealing how the credit rating agencies helped to artificially inflate Enron's credit rating.  Time Magazine reported on this on January 14, 2002.  But the most complete analysis of how rotten these agencies are to the core is in the following reference from my hero:

"The Siskel and Ebert of Financial Matters:  Two Thumbs Down for Credit Reporting Agencies," by Frank Partnoy Washington University Law Quarterly, Volume 77, No. 3, 1999 --- http://www.trinity.edu/rjensen/FraudRottenPartnoyWULawReview.htm 

A recent academic study compared ratings by Moody's with those of Egan-Jones. William H. Beaver, professor of accounting at Stanford's graduate school of business, Catherine Shakespeare, assistant professor at the University of Michigan Business School and Mark T. Soliman, also at Stanford, analyzed ratings on some 800 companies made by both services from 1997 to 2002.  The academics found that Egan-Jones's ratings changes were more timely than those of Moody's, coming up to six months sooner. The study also found much higher stock returns after rating changes by Egan-Jones than by those of Moody's.  "Using several tests we find that the noncertified firm, EJR is more responsive and closely associated with investors," the study noted.
"Wanted: Credit Ratings. Objective Ones, Please," by Gretchen Morgenson, The New York Times, February 6, 2005 --- http://www.nytimes.com/2005/02/06/business/yourmoney/06gret.html?oref=login  

For years, the nation's credit rating agencies have thrived, booking mouth-watering profits from operations that are riddled with conflicts and shielded from competition.

Soon, however, that may finally change. And investors should be better off for it.

Within the next two months, the Securities and Exchange Commission will press a new regulatory framework for the industry to ensure that debt ratings published by the big three - Standard & Poor's, Moody's Investors Service and Fitch Ratings - are a result of thorough analysis, not a desire for fatter profits.

"I think it's fair to say that the oversight of the industry is insufficient," said Annette L. Nazareth, director of market regulation at the Securities and Exchange Commission. "We want the firms to commit to meet certain standards with respect to policies and procedures on conflicts of interest and solicitation of ratings. Right now we don't have that at all."

Now that would be an upgrade, long overdue. Indeed, given how regulators have attacked conflicts of interest among Wall Street firms, insurance companies and other financial services concerns, it's astounding that the ratings agencies have been allowed to go on this way for so long.

Rating agencies play an enormous role in a huge market. After all, far more debt is issued than stock; last year, corporations issued $1.2 trillion in straight debt versus $146 billion raised in common stock, according to Thomson First Call. An additional $1.4 trillion was issued last year in mortgage debt and asset-backed securities.

All that paper needed a rating before it could be sold to the public. As such, the financial markets rely heavily on the companies that rate them.

Since 1931, for example, the Federal Reserve Board, the Comptroller of the Currency and federal and state laws have regulated the debt held by banks and other financial institutions, using credit ratings assigned to the debt. Pension funds, banks and money market funds are barred from buying debt issues that carry ratings below a certain level.

But not just any rating agency's rating, mind you. In 1975, the S.E.C. ruled that the laws relating to debt carried by banks and financial institutions refer only to ratings provided by agencies that it recognizes. Right now, these are the big three and a much smaller fourth, Dominion Bond Rating Service of Canada.

What you have, in other words, is an oligopoly.

Even more troubling, this oligopoly earns its keep from fees charged to the companies whose debt it rates. This conflicted business model means that the paying customers for these agencies are the corporations they analyze, not the investors who look to the ratings for help in assessing a company's creditworthiness.

Other industry practices also lend themselves to producing less-than-rigorous analysis. For example, rating agencies typically receive the largest fees when they analyze an initial bond issue. After that a nominal fee is levied, providing something of a disincentive to do in-depth, time-consuming work.

And because the nation's courts have ruled that the work of these agencies is opinion and therefore protected by the First Amendment, the big three are protected from lawsuits from investors contending defective analysis. Such lawsuits could act as policing mechanisms.

To make matters worse, these companies have recently begun to expand the services they offer to corporations, leading regulators to fear that ratings could be swayed by revenues earned on other products.

These problems are on the agenda for Tuesday, when Senator Richard C. Shelby, the Alabama Republican who is chairman of the Banking, Housing and Urban Affairs Committee, will hold hearings on the state of the rating agencies. Executives from the big three are scheduled to testify.

This is not the first time that Standard & Poor's, Moody's and Fitch have been in the hot seat. When Enron and WorldCom failed, investors were stunned by how long it had taken the agencies to recognize the companies' declining fortunes. For example, all three agencies had rated Enron an investment-grade company until four days before it filed for bankruptcy. They had rated WorldCom similarly until a few months before it collapsed.

The rating agencies stress that they analyze debt issuers' financial positions to try to predict for investors an entity's ability to pay off its debt. They are not in place to audit auditors, they say, and cannot root out fraud. Their mandate is to provide transparency to the financial market.

IN an interview on Friday, Raymond W. McDaniel, Jr., president of the Moody's Corporation, acknowledged the industry's conflicts but said his company manages them effectively. "We do not link analyst compensation, including bonus compensation, to the ratings they have on the companies they follow or to the amount of fees they receive from those companies," he said. "Beyond that, we have a collection of business conduct policies and codes of practice and behavior which the entire Moody's population is required to adhere to." Top executives at Standard & Poor's, a division of the McGraw-Hill Companies, and Fitch, a unit of Fimalac, were not available for comment, but both companies said they were aware of the potential for conflicts and careful to prevent them.

Increased competition would certainly help investors who are troubled by the conflicts. Unfortunately, companies hoping to break into the ratings game must first earn the all-important designation from the S.E.C. Such nods do not come often.

One upstart concern that has applied unsuccessfully to the S.E.C. is Egan-Jones Ratings, of Philadelphia. It rates approximately 800 companies and had warned of problems at WorldCom, Enron and Global Crossing well before other agencies. Egan-Jones does not accept payment from companies it rates; investors who use its services pay the freight.

A recent academic study compared ratings by Moody's with those of Egan-Jones. William H. Beaver, professor of accounting at Stanford's graduate school of business, Catherine Shakespeare, assistant professor at the University of Michigan Business School and Mark T. Soliman, also at Stanford, analyzed ratings on some 800 companies made by both services from 1997 to 2002.

The academics found that Egan-Jones's ratings changes were more timely than those of Moody's, coming up to six months sooner. The study also found much higher stock returns after rating changes by Egan-Jones than by those of Moody's.

"Using several tests we find that the noncertified firm, EJR is more responsive and closely associated with investors," the study noted.

There is no evidence, of course, that Moody's tardiness is a result of a conflicted business model. And Mr. McDaniel maintains that ratings stability and accuracy are what customers want. "The market has become extremely intolerant of false positives or false negatives, and encouraged the ratings to only be moved when there is not a likelihood that they would be reversed," he said.

But Sean J. Egan, managing director of Egan-Jones, said: "Timely, accurate credit ratings are critical for robust capital markets. Investors, issuers, workers and pensioners will continue to be hurt by the flawed credit rating industry until someone addresses the basic industry problems."

Maybe, just maybe, that process has begun.

February 6, 2005 message from Tom Lechner [lechner@oswego.edu]

Thanks for another insightful post.

I assume you mean if your credit score FALLS that Capital One will increase your rate.

Incidentally, MBNA more than doubled my interest rate, even though my score was rising and I never missed a payment.

You say your credit report and score are free. A free credit report is currently only available for those in the west. Those of us in the east have to wait until fall. I do not know of any source of free credit scores. Do you?

Tom Lechner

Dr. Thomas A. Lechner
Dept. Accounting, Finance & Law
SUNY - Oswego Oswego, NY 13126

You can read more about conflicts of interests in credit rating agencies at http://www.trinity.edu/rjensen/FraudRotten.htm#CreditRatingAgencies 

Dirty Tricks the Banks are Trying to Pull on You:  Some Things You Can Do About It

"Bank, ATM Fees Reach Record Highs," AccountingWeb, November 13, 2006 ---
http://www.accountingweb.com/cgi-bin/item.cgi?id=102798

The Fall 2006 Checking Account Pricing Study, a survey conducted by Bankrate.com, found that some customer fees and requirements hit record highs.

"What makes these fees especially irritating is that they're avoidable," according to Greg McBride, senior financial analyst for Bankrate.com. "It's something that pops up and bites you when you're not careful."

Average Automated Teller Machine (ATM) fees charged users of machines at banks where users do not have an account, were a record $1.64, up a dime in a year. Although six banks reduced fees, 22 banks increased the amount, bringing the number of banks with ATMs that charge users to a record 98.3 percent. A lower percentage of banks-77 percent- are assessing fees on their customers who use other bank's ATMs and maintain a minimum balance on an interest account. Using numbers from the General Accounting Office (GAO), Bankrate.com estimated that customers would pay a total of $4.2 billion for non-bank ATM withdrawals in 2006, a slight drop from 2005

There is no better news concerning minimum opening deposits, which rose to record highs on both types of accounts, with interest accounts getting hit the hardest, at a 43 percent increase, up to an average $615.41. Non-interest account opening balances, although only $87.67, still posted a 21 percent increase, with an average $209.72 required minimum balance. This is the second lowest number ever found by the survey. Monthly fees for these accounts are also at a record low.

The balance requirement to earn interest and avoid fees is a whopping $2,660. The recent string of rate hikes is not reflected in the dismal 0.34 percent yield. Bankrate.com states "there is no need to maintain a large balance in a low yielding account when so many checking accounts come without balance requirements or fees."

Fees on bounced checks, non-sufficient fund (NSF) checks, hit a record high average $27.40, with 85 banks posting increases and 32 decreasing account fees. AccountingWEB contacted customer service agents at various banks and discovered that fee policies vary and it is wise to check the policy in the city and state in which the account was opened. If the account remains negative for a certain number of days, either a one time or a daily fee may be assessed, depending on the bank policy.

To earn interest at an online bank and avoid checking fees, it costs about half the balance required at a regular bank, but the initial opening balance is higher, at $605. The monthly service charge is also about half, $5.50 compared to $10.74. Although the online interest rate is higher, Bankrate.com maintains neither rate seems worth tying up the money which could yield more invested in other places.

The general advice to avoid fees is to shop around and check out all of the fees at a bank before opening an account, choose an account that fits individual needs, maintain minimum balances if required and keep track of balances, including checks written and any money withdrawn from the account through ATMs or account debit cards. This way the money will remain in your account and not on the banks profit statement.

The North Palm Beach online financial service surveyed 248 large banks and thrifts offering checking accounts, with 215 non-interest accounts and 247 interest accounts evaluated, using one non-interest and one interest checking account each, in 25 large U.S. markets.

"Enhancing the Role of Competition in the Regulation of Banks," Federal Trade Commission, February 16, 1998 ---
http://www.ftc.gov/bc/international/docs/compcomm/1998--Enhancing the Role of Competition.pdf

The Independent Community Bankers of America is the the best place to search for the dirty decrets of banking, but the ICBA does have some helpful advice for consumers --- http://www.icba.org
Especially note the consumer education resources at http://www.icba.org/consumer/index.cfm?ItemNumber=11331

The American Bankers Association is not the best place to search for the dirty secrets of banking, but the ABA does have some very helpful advice for consumers at http://www.aba.com/Consumer+Connection/default.htm

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

Banks are also victims of fraud. You can read more about fraud on both sides of the teller windows at http://www.crimes-of-persuasion.com/Crimes/Business/bank_fraud.htm

Cheque Fraud

Check fraud accounts for yearly losses of at least $815 million, more than twelve times the $65 million taken in bank robberies annually.

Kiting

Cheque kiting is when in-transit or non-existent cash is recorded in more than one bank account. The crime usually occurs when a bank pays on an unfunded deposit. 

For example, a bum check is deposited into an account. Before the cash is collected by the bank, a check is written against the same account and deposited into a second account, or cashed. The increased use of wire transfers allows this type of scheme to be perpetrated very quickly.

Uninsured Deposits

At least two companies solicit uninsured deposits on the Internet. Netware International advertises itself as a "Constitutional" bank and FocusInternational.com, Ltd., is a West Indies company seeking deposits for an unidentified bank.

They lure depositors by offering high rates of interest, or promising offshore secrecy. Neither company is authorized, supervised, or regulated by any U.S. State or Federal bank or financial institutions regulator. Deposits in these companies do not have the protection of the Federal Deposit Insurance Corporation or any other state or federal deposit insurance.

continue QuickTour

Credit Card Theft and Fraud

One con, while in jail serving a state prison term for credit-card theft, actually perpetrated yet another credit card scam over a seven month period, using a technique that allowed him to hide the fact that he was calling from jail.

He would start off by calling the county-run nursing home saying he was a Bell Atlantic technician and that he needed the person to dial a special code to test the lines. When the person pressed the requested numbers, he would be connected to an outside line that he used to call businesses.

When he called the businesses, he would tell them he was a credit-card representative and that he needed customers' names and phone numbers to verify recent transactions. With that information he then called the cardholders and posed as a credit company employee, saying he needed personal information to check for fraud.

With this personal information and the credit-card numbers, he then requested and received more credit cards with which he made about $25,000 worth of purchases of such things as sports memorabilia, flowers, and gift certificates. He also bought calling cards so he could continue the scam.

Some of the items were given to other inmates in exchange for helping with the fraud while other items were shipped to friends to be held for him until he got out of jail.

Duplication of Card Information

Credit card "double scan" machines can copy info from the magnetic strip of your card and create a new duplicate card for which your account will be billed for any purchases. Try to keep your card in sight when possible to avoid this problem. 

While card issuers have fraud detection software which picks up unusual spending patterns, smaller purchase "skimming" can be subtle and prolonged, compared to the flurry of spending when a card is stolen outright.

• Keep a record of your account numbers, their expiration dates, and the phone number and address of each company in a secure place.
• Void incorrect receipts and destroy carbons.
• Save receipts to compare with billing statements.
• Open bills promptly and report any questionable charges promptly and also in writing to the card issuer.

If you realize they've been lost or stolen, immediately call the issuer. Many companies have toll-free numbers and 24-hour service to deal with such emergencies.

By law, once you report the loss or theft, you have no further responsibility for unauthorized charges. In any event, your maximum liability under federal law is $50 per card. If you suspect fraud, you may be asked to sign a statement under oath that you did not make the purchases in question.

Booster Checks

A booster check is a non-sufficient fund (NSF) check used to make a payment to a credit card account.  One group used "booster checks" to "bust out" legitimate credit cards. They used credit card "convenience checks" issued by the banks and credit card companies to inflate their credit card limits; or to "bust out" the credit card to double or triple the established line of credit.

Because banking laws require financial institutions to immediately post credit payments even before the check has been cleared, they would use the window of time between the posting of the credit card payment and the discovery of the bad check to go on a spending spree and purchase, among other things, large amounts of gold coins from legitimate coin vendors.

They would also go to store owners who knowingly aided the bust out scheme, who would "swipe" the credit cards through point-of-sale credit card terminals located at their businesses. While these transactions would appear to be legitimate, no merchandise would actually be exchanged.

Once a credit card company transfers funds to a store owner's bank account, a collusive merchant is able to dispense funds from the busted out credit card. The merchants in this case allegedly issued kickback checks to the card holder for the amount of the transaction, and they would then receive a kickback from the card holder which would amount to a small percentage of the transaction.

The Secret Service estimates the total loss in this one case is between $10 million and $15 million.

Falsification of Loan Applications

While scheming to defraud four banks and a credit union, one con opened checking and savings accounts using a false name and a fraudulently obtained new social security number. He then applied for seven loans for the stated purpose of financing the purchase of motor vehicles.

He also submitted false documents concerning his employment and income, including fake tax returns. By producing fictitious records including motor vehicle appraisals, insurance documents and invoices he obtained approximately $380,000 in loans for the purchase of a 1976 Rolls-Royce Silver Shadow, a 1978 Ferrari model 308 GTS convertible, a 1992 Mercedes-Benz model 300SE, a 1995 Mercedes-Benz model SL320 and a 1994 Mercedes-Benz model 500SL.

He also applied for and was issued multiple credit cards and charge cards. In just seven months he ran up charges leading to losses of at least $460,000. 

For example, he used an American Express account to pay $27,000 towards the purchase of an item of jewelry, used an MasterCard to place a $5,000 down payment towards the purchase of a 1955 Mercedes-Benz 300SL Gullwing with a purchase price of $203,000 and a 1964 Ferrari 250GT Lusso convertible with a purchase price of $153,000, and then used the American Express account to pay $320,000 towards the purchase of these two antique automobiles. He also used various VISA and MasterCard accounts to obtain substantial cash advances and used the American Express account to pay $93,600 towards the purchase of a Patek Philippe Moon Phase watch with a purchase price of $95,600.

Laxity of Enforcement

One of the problems with enforcing bank fraud laws is that it is often relegated to a low priority, or ignored altogether, because the activity can span several jurisdictions, involve many unidentified subjects, is non-violent and usually there are few leads.

Normally, the typical bank robber nets $700 and is caught within 24 hours, yet the average check scam involves losses of more than $2,000, the perpetrators are seldom caught, and there are more than one hundred times as many cases as bank robberies.  Out of 10,000 cases the losses exceeded $60 million dollars.

Many bank fraud suspects are able to elude arrest by furnishing false identification when cashing stolen, forged, or counterfeited checks. One effort to stop this crime is the "Check Print" program which requires non-bank customers to provide a thumb print, using a clear solution, on the negotiated check for identification purposes. With this positive identification, it has been much easier to identify, arrest, and successfully prosecute bank fraud scams.

Check Security Features

Check manufacturers help deter check fraud by making checks difficult to copy, alter, or counterfeit. Some useful security measures include:

Watermarks. Watermarks are made by applying different degrees of pressure during the paper manufacturing process. Most watermarks make subtle designs on the front and back of the checks. These marks are not easily visible and can be seen only when they are held up to light at a 45-degree angle. This offers protection from counterfeiting, because copiers and scanners generally cannot copy watermarks accurately.

Copy Void Pantograph. Pantographs are patented designs in the background pattern of checks. When photocopied, the pattern changes and the word "VOID" appears, making the copy nonnegotiable.

Chemical Voids Chemical voids involve treating check paper in a manner that is not detectable until eradicator chemicals contact the paper. When the chemicals are applied, the treatment causes the word "VOID" to appear, making the item non-negotiable.

High Resolution Microprinting. High-resolution microprinting is very small printing, typically used for the signature line of a check or around the border, in what appears to be a line or pattern to the naked eye. When magnified, the line or pattern contains a series of words that run together or become totally illegible if the check has been photocopied or desktop scanned.

Three-dimensional Reflective Holostripe. A holostripe is a metallic stripe that contains one or more holograms, similar to those on credit cards. Those items are difficult to forge, scan, or reproduce, because they are produced by a sophisticated, laser-based etching process.

Security Inks  Security inks react with common eradication chemicals. These inks reduce a forger's ability to modify the printed dollar amount or alter the designated payee, because when solvents are applied, a chemical reaction with the security ink distorts the appearance of the check.

Cooperation between Check Manufacturers and Financial Institutions

Participating financial institutions can report all checking accounts "closed for cause" to a central database, called ChexSystems. This program prevents people, who have outstanding checks due to retailers, from opening new accounts.

You can use this information before opening new accounts to spot repeat offenders and you can also use MICR information from a check presented with the applicant's drivers license number to check the SCAN file for any previous fraudulent account activity.

Rental Car and City Tax Rip Offs

Rental car companies have a sorry history for ripping off customers with inflated and/or hidden charges.  The most notorious ripoffs were, and possibly still are, the rates charged for optional collision and comprehensive (theft, storm damage, etc.) insurance.  Renters should always check on whether their credit cards used for renting cars covers this optional insurance for no added fee.  They should also check on whether the company that insures their owned vehicles extends this coverage to cars rented.

The fuel option where renters can pay an up-front fee to avoid having to pay for fuel when returning a car may be a bad deal.  Always compare the up-front fee with what the rental car company charges to fill the tank when you return the car.  Also compare those rates with what it costs to fill the car just before returning the car.

Rip Offs in City Taxes
How cities sock it to visitors:  New Rental Car Taxes
Added Fees Can Double the Price of a car
People who rent cars are getting hit with a host of new taxes that are being used to pay for things like stadiums, museums and alternatives to renting a car, such as monorail systems and rail lines.
The fees are being levied to pay for things like stadiums, museums -- and alternatives to renting a car, such as monorail systems and rail lines. State and local lawmakers, many of whom operate under balanced-budget mandates, got hit hard by the recent economic downturn and have become more creative about looking outside their constituencies for funding. Some of the new taxes are taking effect just as travelers are making plans for the busy holiday season. That means they are likely to sting even more, since many companies raise their rates around this time of year.
Avery Johnson, "Travelers Hit With Slew of New Taxes on Rental Cars:  Added Fees Can Double the Price of an Economy Car," The Wall Street Journal, November 9, 2005; Page D1 ---
http://online.wsj.com/article/SB113150004298391824.html?mod=todays_us_personal_journal

One Way to Possibly Avoid Extra Charges (if you are going to rent for a significant number of days)

Because most of the taxes are being passed at the local level, travelers face a hodge-podge of charges. Some fees, for example, apply at the airport, but not in town. This means that travelers can sometimes avoid taxes -- either by taking a cab across city lines or flying into an airport where the fees are lower. But sometimes the quest to avoid the fees can be more expensive than the charges themselves.

The increased use of rental-car taxes was touched off last year in Kansas City, Mo., when the city passed a new fee of $4 per day on cars rented in the city limits. The money is going to help fund a new sports arena. Then in April of this year, Arlington, Texas, put a 5% tax on cars rented in the city to fund a new stadium for the Dallas Cowboys (Arlington borders Fort Worth). Indianapolis increased its rental car tax from 2% to 4% on rentals within the city limits as of July 1. Last month, Revere, Mass., a town about a mile from Logan Airport outside Boston, added a new $10 tax per rental-car transaction to fund an $18.5 million police-and-fire station. Tom Ambrosino, Revere's mayor, says that rental cars should be taxed because they add wear and tear to the roads and create more traffic and pollution.

David Bach's "Latte Principle" --- Click Here
A Penny Saved Compounds to Much More Than a Dollar Earned
Jim Mahar provided the following two links:

"Penny's Add Up to Millions," Free Money Finance, October 15, 2007 --- http://www.freemoneyfinance.com/2007/10/pennies-add-up-.html

Here's a post from Yahoo Finance that details the author's struggle with her husband to take his lunch to work. But the essence of what she says is really that saving/watching your pennies is the key to wealth. Her thoughts:

I'm convinced that for the average person who wants to build wealth, pennies count.

Pennies have a funny way of snowballing into dollars, and then hundreds, and then thousands, especially if you use them to buy the stocks of well-managed companies. Consider the story of a parking attendant who earns $20,000 a year but has amassed a $500,000 equity portfolio. Or the one about a group of New Yorkers who managed to save for a down payment on a (very expensive, very tiny) piece of the Big Apple. Or the clan of seven dubbed "America's cheapest family," who paid off their mortgage in nine years on a salary of $35,000 a year.

I've seen article after article bashing David Bach's "Latte Principle" -- the idea that if you save on small spending you can amass a large amount of wealth. The main argument against it is that people should be paying attention to large expenditures -- that's where the real difference is made. But Bach isn't saying to ignore the expensive decisions in life. He's just aware that for many of us there are small amounts we spend every day without really thinking about how much they end up costing us. And that if we just limit a few of them and save that money, we can save a good amount throughout the years.

Continued in article

"How to Save a Bundle of Money,"  Free Money Finance, October 15, 2007 --- http://www.freemoneyfinance.com/2007/10/how-to-save-a-b.html

Yahoo Finance has a list of ten money drains along with the annual costs of each of them. I view this as a list of where we all can save a bundle of money. Here's their list as well as the annual amounts spent on each of them (in other words, what you could save if you eliminated them):

1. Coffee -- $360 per year.
2. Cigarettes -- $1,660 a year.
3. Alcohol -- $3,650 per year.
4. Bottled water from convenience stores -- $365 per year.
5. Manicures -- $1,068 per year.
6. Car washes -- $348 per year.
7. Weekday lunches out -- $2,350 a year.
8. Vending machines snacks -- $260 per year.
9. Interest charges on credit card bills -- $4,868 in interest (over time).
10. Unused memberships -- $480 per year.

Now of course I wouldn't suggest that someone cut out everything and eliminate all of life's pleasures. After all, we should use part of our money to enjoy ourselves. But for those people out there looking for a way to save a bit extra, for those who simply "can't make it on what I earn", and for those who would simply like to pay down their debt, this is a pretty good list to consider cutting down on -- even if it's for a short period of time. And you don't have to eliminate each of the items above, simply consider cutting back on them. There's still tons of savings available by cutting your car washes, manicures, or alcohol consumption in half.

And if these aren't enough money saving ideas, check out my list of ways to save money from 2005-2006 as well as my 2007 list.

Jensen Comment
Of course eliminating all the above would not necessarily be wise. If there's five feet of snow on the ground, I'm not about to wash my own car. Yet getting the car washed in winter is more important than in summer if you live where they salt and sand the roads. Spending $358 each winter car washes may well save thousands if you can, thereby, double the life of your car.

New cars lose 60% of value in the first four years. Most people waste more money on cars and interest charges for car financing than any other single cash drain in their lives, including the cost of housing. Cars are a necessity of life for most of us who have no convenient public transportation alternatives. But frequent trading in of good cars for new cars is a monumental mistake in finance. Leasing is also a synonym for stupidity. Insiders call it "fleecing a car." But I'm grateful for ignorant people who are constantly turning in good owned or leased cars. Most of the cars I've owned over the years were turned back leased cars. Great mechanics put my previously-owned or previously-leased vehicles back in top shape, and I save a bundle relative to their prior owners. If you must finance your next vehicle, please be a smart shopper and be informed how dealers cheat --- http://www.trinity.edu/rjensen/FraudDealers.htm

I lived in San Antonio for 24 years where over 500 cars per month are stolen. See the video --- http://www.youtube.com/watch?v=TQPSXCqBqz4
My answer was to buy an old car (usually a station wagon) and make it look even less desirable to the thousands of car thieves cruising about San Antonio by day and by night. Little did thieves know that underneath the hood was a new power train and other features that made my old heaps just like new. I always remember a comedy show that featured a company in Los Angeles that would ghettoize a new or relatively-new car to make it look like a junk yard dog. My city cars were like that. My wife and I were more safe since our cars were of little temptation to carjackers. But my children generally crouched down in the seats or asked to be let out a block away so their friends would not see them in my cars.

Next to car financing, the biggest mistake most people make is credit card financing to a point where they seldom zero out what they owe on credit cards. This is the "dirty secret" of that makes credit card companies suck billions upon billions of dollars out of the economy --- http://www.trinity.edu/rjensen/FraudReporting.htm#FICO
When we're about to go on long trips, I overpay monthly expenses ahead of time so that if we're delayed in returning home we never have to worry about being charged interest or late payment penalties. For example, I put huge credit balances into our credit card accounts before going on a long adventure.

Do I buy into David Bach's "Latte Principle?"
Well yes and no. I do not believe in Spartan living so I can watch my savings grow for the sake of watching my savings grow. I don't drink latte, but I also opt for four-star or five-star hotels or lovely country inns when my wife and I are on adventures. Expensive restaurants are generally wastes of money, but we go to them when the mood is right and/or the friends we're with prefer a top restaurant. Often you can eat just as well in the hotel's lounge as in the expensive restaurant down the hall. There's a huge difference between what you splurge for on daily (like credit card interest and latte) versus what you splurge for infrequently. When I used to come home at night and have a couple of drinks daily, I drank cheap Boca Chico rum in my cubalibras. Now that I don't drink daily, I splurge on fine wine and expensive liquor once in a while.

In the final analysis, I would have to say that I live better in retirement because I pretty much followed the "Latte Principle" before it was called "Latte Principle." Most of my travels in life were financed by others who made me sing (lecture) for my supper, but I enjoyed the fellowship and strokes of these types of trips more than I did boring leisure vacations. I spent as much as I could possibly afford on land and houses, but these generally returned more than I paid for them. I spent as little as possible on cars and preferred to buy finely-tailored suits in upscale second hand shops (look for Second Looks in San Antonio and Austin).. I think most of the former owners of my suits had passed on in life.

I never argue with my wife over money even when she tips almost as much as the check itself.  I never object when she hands out ten dollar bills to receptionists,  postal clerks, trash haulers, window washers, and bell ringers outside the Wal-Mart stores. She's thrifty but likes a lot of new things she generally buys on sale. She seldom shops in stores. But the UPS truck stops up here in the mountains nearly every day. While my wife is wearing the "8" and "0" buttons off on  phone in our den (mostly she orders gifts), I'm on the computer ordering everything from books to groceries to space heaters from Amazon.com (a great, great place to shop). Our UPS driver's name is Joe, and if I'm not at home he comes into the basement and assembles what he's just delivered. Will your UPS driver do that?

I truly got my money's worth out of faculty clubs. I would've joined expensive country clubs but I never had time for a round of golf even once a week. Such is the price one pays for being a workaholic.

It's easier for a workaholic to live by the "Latte Principle." But most of us workaholics are doing what we like best.

October 17, 2007 reply from Barbara Scofield [scofield@GSM.UDALLAS.EDU]

When my husband was in training to be a police chaplain, the trainer began talking about the issue of stolen cars by pointing to my husband and saying, “What kind of car do you drive?” Rob, my husband, responded, “A ’99 Saturn wagon.” The police trainer told him, “You can leave the keys in your car.”

Barbara W. Scofield, PhD, CPA

Hotel Heists

Hotel Heists: Beware of nuisance hotel fees --- http://www.smartmoney.com/dealoftheday/index.cfm?story=20060213

INSTEAD OF LAYING A chocolate on your pillow, many hotels have decided to present you with a markedly more unwelcome treat: sneaky fees that can easily increase your bill by 20% . . . Charges have become a common way to bolster revenues while keeping advertised room rates low, says Robert Mandelbaum, director of research for PKF Consulting, a hotel-industry research firm. "Surcharges of one degree or another have been in the industry awhile now," he says. "It looks better than raising the room rates." Surcharges also tend to move in cycles, says Mandelbaum. "It's supply and demand," he explains. "If you want a room in a market like Manhattan, with an 85% occupancy rate, you basically have to pay whatever the hotel wants you to." In slower markets and off-seasons, hotels are less likely to tack on fees because there's more competition for guests.
"Hotel Heists," by Kelli B. Grant, Smart Money, February 13, 2006 --- Click Here

Academic Conferences that Rip Off Colleges:  Do you really want to participate in these frauds?
 

I've written about this before, but I want to elaborate.  Academics either unwittingly or willingly sometimes allow themselves to get caught up in fraudulent "conferences."  Spam is on the rise for these frauds.  The degree of fraudulence varies.  At worst, there is no conference and organizers merely charge an exorbitant fee that allows the paper to be "refereed"  and published in a conference proceedings, thereby giving a professor a "publication."  See http://lists.village.virginia.edu/lists_archive/Humanist/v18/0633.html

Even when the conferences meet, they may be fraudulent.  Generally these conferences are held in places where professors like to travel in Europe, South America, Latin America, Las Vegas, Canada, the Virgin Islands, or other nice locations for vacations that accompany a trip to a conference paid for by a professor's employer.  The professor gets credit for a presentation and possibly a publication in the conference proceedings. 

But wait a minute!  Here are some warning signs for a fraudulent conference:

1. Even though there is a high registration fee, there are no conference-hosted receptions, luncheons, or plenary sessions.  The conference organizer is never called to account for the high registration fee.  The organizer may allude to the cost of meeting rooms in a hotel, but often the meeting rooms are free as long as the organizer can guarantee a minimum number of guest who will pay for registered rooms in the hotel.
    

2. All or nearly all submissions are accepted for presentation.
    

3. The only participants in most presentation audiences are generally other presenters assigned to make a presentation in the same time slot.  There is virtually no non-participating audience.  Hence only a few people are in the room and each of them take turns making a presentation.  Most are looking at their watches and hoping to get out of the room as soon as possible.
    

4. Presenters present their paper and then disappear for the rest of the conference.  There is virtually no interaction among all conference presenters.
    

5. The papers presented are often journal rejects that are cycled conference after conference if the professor can find a conference that will accept anything submitted on paper.  Check the dates on the references listed for each paper.  Chances are the papers have few if any references from the current decade.
    

6. These conferences are almost always held in popular tourist locations and are often scheduled between semesters for the convenience of adding vacation time to the trip.  They are especially popular in the summer.

August 31, 2006 reply from Bob Jensen to a professor who proposed rating conferences.

Hi XXXXX,

Publishing ratings of conferences will be almost impossible due to endless debates that will arise over defining criteria.

I wish you luck if you carry through with this effort, but I think that it will be very difficult to shut down fraud conferences. Organizers of fraud conferences are very good at their craft, and the professors who attend them are desperate for new lines on dusty old resumes. The professors who attend are often very good teachers frustrated with blank spaces each year by blank spaces for evidence of research in their performance reports.

Hence, the "teachers" who attend fraud conferences will continue to do so even if you take the time and trouble to warn them. These professors want the lines on a resume and an expense-paid vacation in a terrific tourist locale. Interestingly, many of these professors justify this by truly believing that they are badly underpaid and are fully justified for reimbursed travel for R&R if nothing else.

Since you are only listing the good conferences, college deans and administrators will not necessarily be forewarned of the bad conferences since you can't be expected to list 100% of the good conferences in all fields of business, finance, and economics. Most fraud conferences in our discipline are very generic and cover all fields of business and economics. It will be very difficult to track over 1,000 conferences (most legitimate) across such a wide path.

I think the best we can do is plead with the academy, and possibly our reimbursing colleges, to demand accountability of registration fees for conferences. They should be treated a bit like charitable organizations where conference organizers must give an expense accounting and disclose how much of the conference revenues go to personal profit and "administrative expense."

Bob Jensen

Added September 9, 2006 by Bob Jensen

The issue in general is not one of reviewing papers or possibly even acceptance rates.

It is important to provide a listing of the names and affiliations of the reviewers who screen submitted papers. If the reviews are only conducted by the conference organizer, or employees of the organizer, then the review process is highly questionable.

The main issue for all academic conferences should be accountability and transparency of the registration fees and possible sharing in hotel room rates by conference organizers (which is not common). It's common for hotels to provide free meeting rooms if there are a sufficient number of paying guests in the hotel. In fact there are usually no fees for the meeting rooms other than fees for beverages --- some questionable conferences will not even provide beverages for sessions. Without beverage, meal and reception costs, there are very few fees for organizing many conferences other than the cost of the name tags and possibly the cost of having someone register participants (which is often the same person who organized the conference).

It's become much cheaper to advertise conferences in the days of email. If proceedings are published only electronically, the cost of compiling proceedings is minimal for papers submitted in MS Word.

Another issue is audience size. Are there any keynote or plenary sessions with large audiences? Are the concurrent sessions of a decent size or are most audiences comprised mainly of presenters in the same scheduled session? For example, if there are four presenters, is the average audience size larger then eight? How many remain when the last speaker begins to present in most sessions?

How many speakers remain to participate in the conference after they have made their presentations?

How many scheduled speakers don't show up at all? I know of some well known accounting professors who got their travel to Europe or elsewhere paid by their universities and then don't even show up for the conference. They sometimes report to their colleges that plane or train delays prevented them from reaching the conference even though they did manage to visit the homes of their friends or relatives. Often they paid the registration fees in advance which thereby become wasted money.

It's all a matter of personal ethics!

Bob Jensen

Question
Is your academic association negotiating a good deal for conference hotel rooms and airline fares?

"No, No, NACUBO," by Wick Sloane, Inside Higher Ed, August 6, 2007 --- http://www.insidehighered.com/views/2007/08/06/sloane

My name is Wick, and I have been a NACUBO member.

The National Association of College and University Business Officers last week nailed at least $4 million to the fall tuition bills going out to strapped families and students this month. NACUBO gathered more than 1,000 higher education business officers and 200-plus vendors at a Mardi Gras in New Orleans.... I mean, an annual meeting, “Crossroads: New Beginnings Built on Valued Traditions.” Those traditions being, for example, free food, an umbrella from Microsoft in the registration bag and a golf tournament with the Beverage Cart sponsored by Higher One, a cash-card company, I think.

. . .

Did NACUBO negotiate premiums as high as 58 percent for hotel rooms in New Orleans? I was looking up prices on Web hotel sites, and I scrolled down to the featured hotels on the NACUBO pages. I thought I’d made a mistake – NACUBO prices were higher. How hard can negotiating a deal be in Katrina-ravaged New Orleans? Take a look.

	NACUBO Price	Web Price	Difference	Premium
Hilton	$175	$119	$56	47%
Wyndham	$169	$109	$60	55%
W New Orleans	$169	$107	$62	58%
Marriott	$167	$129	$38	29%

. . .

I have yet to meet anyone who accepts accountability for the ever-rising costs of a higher education. As a society, we’ve never known more about the mind and learning and cognitive science. New knowledge and great need in other fields breed innovation. How about a better way to deliver an education? The four-year bachelor’s degree, the big cost driver in higher education, is a construct from the University of Bologna in the 1400s. The pedagogical constraint was the virtual absence of books. Education required gathering students in a room and the professor reading the book to them. I pitched this idea many times to NACUBO chiefs. Not the answer, but let’s tackle the question. No luck, and costs keep rising, and back interest on student loans compounds.

Continued in article

 Jensen Comment
Years ago, a well known academic Association in which I'm a member negotiated airline fares (to a conference in Hawaii) from a Florida travel agency that were much higher than fares available directly from the designated airline (Delta) without going through the Association's "special fare" travel agent. Complaints from the membership subsequently led to various happenings including the dropping of that travel agency used for years by the Association.

Bob Jensen's threads about accountability and conflicts of interest in higher education are at http://www.trinity.edu/rjensen/HigherEdControversies.htm#Accountability 

Product Labeling Frauds

Stop Product Labeling Lies --- http://www.stoplabelinglies.com/

From the Scout Report on June 23, 2006

ConsumerLab.com --- http://www.consumerlab.com/

It may be difficult for the average consumer to evaluate the sometimes grandiose claims that various supplements, vitamins, and other such products make on their labels and such. One way to learn about products is ConsumerLab.com, which provides independent test results and information in order to assist consumers and healthcare professionals to evaluate such products. The casual visitor will want to begin by looking over the "Latest Results" area on the homepage, which provides some information on their recent tests on melatonin sleep supplements and other related nostrums.

Visitors looking for information on specific products will want to direct their mouse to the "Laboratory Test Results" area. Here they can look through a list of product evaluations that include nutrition bars, ginkgo biloba, and the ever-popular echinacea. The site is rounded out by a very nice area on "Recalls and Warnings, which (as its name suggests) includes information on recent notices posted by the Federal Trade Commission and other such agencies.

Peter Cheales' consumer alert site --- http://www.hellopeter.com/

.S. Consumer Product Safety Commission --- http://www.cpsc.gov/cpscpub/prerel/prerel.html

Don't believe the EPA fuel economy reports on cars:  Even the new hybrid cars don't economize so well

"Consumer Reports: Overstating gas mileage [EPA figures on gas mileage are off by huge amounts]," Free Republic, September 20, 2005 --- http://www.freerepublic.com/focus/f-news/1489186/posts

"The EPA tests don't correspond to the way most of us drive," Kleman said. "Their tests represent driving on a 75-degree day on a road with no curves or no hills, which is ideal for maximizing fuel economy."

The EPA tests haven't changed in 30 years, so they don't take into account today's driving conditions. There's a lot more congestion, idling in traffic, and widespread use of air conditioning.

Consumer Reports runs its own fuel economy tests. The engineers say these tests—done outdoors—give a much more accurate assessment of the actual mileage you'll get from a car.

Consumer Reports' tests often turn up results that are substantially different from the EPA's—especially for stop-and-go city driving.

For instance the EPA says you'll get 22 miles per gallon with a Jeep Liberty diesel, but Consumer Reports found you'll get just half that—11 miles per gallon.

With a Chrysler 300 C, the EPA says you'll get 17 miles per gallon, but Consumer Reports' tests get only 10.

As for a Honda Odyssey minivan, the EPA gets 20 miles per gallon; Consumer Reports gets just 12.

The differences Consumer Reports turned up with hybrids in city driving are even greater. The EPA says the Honda Civic hybrid gets 48 miles per gallon; Consumer Reports measured just 26.

Continued in article

Free Lunch, Dinner, and/or Night in a Post Resort

Beware of those offers of a free lunch, free dinner, free night in a condo, etc. that end up being high pressure sales affairs that pray on the elderly and other vulnerable sectors of society.

Who's Preying on Your Grandparents?
Back in February, Jose and Gloria Aquino received a flier in the mail inviting them to a free seminar on one of their favorite topics: protecting their financial assets. As retirees, they were always on the lookout for safe investment strategies as well as tips on how to make sure they didn't outlive their savings. Besides, the flier promised a free lunch for anyone attending the workshop, so what did they have to lose? Potentially plenty, they would soon discover.
Gretchen Morgenson, "Who's Preying on Your Grandparents?" The New York Times, May 15, 2005 --- http://www.nytimes.com/2005/05/15/business/yourmoney/15vict.html?

Protect Yourself From Pretexting

"'Pretexting' is common in business world," by Peter Svensson, Yahoo News, September 13, 2006 --- Click Here

Although the boardroom scandal at Hewlett-Packard Co. made the practice more widely known, buying phone records or other personal information obtained by "pretext" calls appears to have been common in parts of the business world. ADVERTISEMENT

In a letter to the House Energy and Commerce committee, which was investigating the issue this year, data broker PDJ Investigative Services described its customers as "law offices, repossession companies, financial institutions, collection agencies, bail enforcement agencies, law enforcement agencies and various private investigation and research companies."

"Those businesses have a common need. That need is to be able to locate individuals, who do not wish to be found," another data broker, Universal Communications Co., wrote to the committee.

For example, banks sought to find debtors who defaulted on loan payments, and car finance companies traced people who stopped paying their auto loans and disappeared, Universal Communications said.

PDJ sold records of local and long-distance calls as well as non-published phone numbers and home addresses, according to an old price list submitted to the House committee.

In its letter, PDJ said it did not perform pretext calls itself, but paid independent vendors for the information, or searched public databases and the Internet.

Robert Douglas, a privacy consultant in Colorado who closely follows pretexting and other investigatory techniques, said such independent vendors use sophisticated methods to fool customer service representatives into giving out information.

However, the attention given to pretexting in the past two years — the HP scandal is just the latest in a series of revelations — has made data brokers restrict sales of certain kinds of information. Cell phone companies, one of the major targets of pretexters, also have fought back by launching lawsuits.

Continued in article

"Protect Yourself From Pretexting," by Kim Zetter, Wired News, September 13, 2006 --- Click Here

Pretexting has long been a tactic used by private investigators and others to obtain personal information and records about people. Also known as "social engineering" in the hacker realm, it involves using ploys to obtain data and documents.

The ploys range from the creative to the straightforward. In the Hewlett-Packard case, outside investigators hired by the company simply posed as the victims -- HP board members and journalists -- to obtain their phone records from phone companies.

On the more inventive side, Verizon Wireless last year accused online data brokers of making hundreds of thousands of calls to the company's customer service lines posing as fellow Verizon employees with the company's "special needs group," a nonexistent department. The callers obtained customer account information by claiming to be making the requests on behalf of voice-impaired customers.

Against that kind of initiative, it seems like there's little an ordinary consumer, Silicon Valley director or tech journalist can do. But there are some options.

Buy a TracFone. There's a reason law enforcement agencies hate disposable cell phones: They don't keep a call detail record. This solution isn't convenient or desirable for everyone, but if you're concerned about your phone records being obtained fraudulently by third parties, or subpoenaed by authorities, a prepaid phone service offers the best privacy.

Prepaid phones range in cost from $20 to $80 and usually come with a set number of minutes to start, which can be augmented by purchasing prepaid calling cards for $20 to $100.

Naturally, your prepaid phone number will still appear on the calling records of people you call, and who call you. But because the prepaid services don't require you to provide your name, the phone number alone will be of limited use to snoops. Be sure to pay for your phone and prepaid phone cards with cash, and only add minutes through the phone's built-in interface -- don't use the service provider's website, which could track your IP address.

Don't Tell on Yourself. A little bit of information can help scammers get a lot more; in the HP case, the investigators used the last four digits of their targets' Social Security numbers to authenticate themselves to the phone companies they tricked.

That's why the FTC advises consumers to guard personal information such as Social Security numbers, birth dates, account numbers and passwords to prevent someone from using the information to impersonate you and obtain your records. To that end, don't provide personal information over the phone, in an e-mail or in person to anyone unless you initiated the contact. Even then, be guarded about providing legitimate agencies with more information than they need.

Choose Your Own Passwords. Companies love using Social Security numbers and dates of birth as authentication, despite the fact that neither bit of info is very private. Insist that your health insurance provider and phone companies allow you to use a customer-designated password or a unique identifying number instead. Don't let them bully you into using your Social Security number, and use different passwords for different accounts.

Shred It. Cross-shred documents that contain personal information before discarding them, and do not leave such documents lying around where maintenance workers and visitors can see them.

Leave Your Vital Stats Offline. Do not publish your birth date or other personally identifiable information about you or your children on your MySpace or Facebook page. It's obvious, but worth repeating.

Don't Pay Bills Online. Yes, we know it's convenient, and we know that banks and utility companies pressure customers to establish online billing accounts to eliminate the cost of paper records. But resist the urge. Online accounts put you at risk no matter what businesses say.

Websites are seldom as secure as companies insist they are. Even when they are secure, smart people like you can sometimes still get tricked into using a spoof site that looks exactly like the real thing, or wind up with malicious software that records every keystroke on their computer and passes the info on to a hacker.

While we're on the subject, don't file your taxes online either. Yes, it's convenient. No, it's not secure. It's possible that hackers can obtain the same information by hacking a vulnerable data server or stealing an employee laptop, but that's out of your control. How you file is in your control.

See If You've Already Been Hit. In an internal investigation of pretexted records, AT&T identified about 2,500 of its customers as possible victims. And that's just one phone company. To find out if you've already been a victim of phone record pretexting, contact your telephone company in writing to determine if anyone has requested your records. If you've pissed off HP recently, do it today.

Lobby for Change. Pressure your congressional representatives and the FCC into forcing phone companies to improve the security of customer records. The Electronic Privacy Information Center offers a number of suggestions for boosting security, include forcing carriers to maintain an audit trail to track whenever a customer's records are accessed, and by whom.

EPIC also suggests that phone companies be required to notify customers when someone has breached their records. Phone companies, in recent lawsuits against pretexters, have admitted being duped hundreds of thousands of times into handing over customer records to unauthorized people. Yet current breach-notification laws don't cover these records, since they're not considered personally identifiable information.

Additionally, phone companies should be forced to notify customers of changes to their account, such as when someone establishes a new online billing account for their phone number. Many banks already send written verification to customers by mail if the customer or someone else requests a change to their account password or contact information. Had AT&T done this, HP board member Tom Perkins and others caught in the HP investigation would have been alerted back in January that someone was trying to access their records online.

Charity Frauds

International Center for Not-for-Profit Law --- http://www.icnl.org/ 

You can begin with IRS Form 990 disclosures, but these may be more misleading than helpful. You can access them from Guidestar at http://www.guidestar.org/index.jsp

Guidestar also provides salary disclosures for top executives in the charity. However, funds can be diverted by cheats in other ways.

Research Tools
Analyst Reports
Charity Check
Grant Explorer
Data Services
Nonprofit Compensation Reports
Salary Search

"Giving Freely—And Wisely:  One site names preachers who may be misusing money and suggests that you 'prayerfully' consider giving to other ministries instead," Jane Bryant Quinn, Newsweek, December 18, 2006, Page 51 --- http://www.msnbc.msn.com/id/16127630/site/newsweek/
 

Unfortunately, you can't always believe what the (IRS Form) 990 says. It's supposed to show how much the nonprofit spends on actual services, as opposed to fund-raising and administration. But the law isn't much enforced. In a report covering part of the 1990s, the General Accounting Office found that 64 percent of public charities claimed to have zero—zero!—fund-raising expenses. Do you believe that? Neither do I.

Some of the rating services adjust for these problems. Uncharitably, they often slam each other's methods while touting their own. I'm a civilian in these wars, so my advice is to look for good grades from every source. Start your research here:

1. The Better Business Bureau Wise Giving Alliance (Give.org). It currently posts reports on more than 900 nonprofits, testing them by a number of standards including good governance. About 65 percent of them pass. The rest fail, or refuse to be evaluated (a bad sign, no matter what excuse the charity gives).

2. American Institute of Philanthropy (CharityWatch.org). It's the toughest of the bunch, rating more than 500 charities on a scale of A+ down to F. Because it disregards certain, potentially suspect, expenses and donations, it fails some nonprofits that the other raters approve. Readers of this column can get its latest Charity Rating Guide free from AIP, P.O. Box 578460, Chicago, IL 60657.

3. CharityNavigator.org rates 5,100 nonprofits on a scale of zero to four stars. This site draws only from a nonprofit's latest 990 form, which could mislead. But I like its Top Ten lists, such as 10 Charities Overpaying Their For-Profit Fund-Raisers.

4. MinistryWatch.com rates more than 500 evangelical groups on a scale of 1 to 5 stars. It's an ardent advocate for financial disclosure. The site names preachers who may be misusing money and suggests that you "prayerfully" consider other ministries instead. Withholding that advice, says MinistryWatch.com, would be "tantamount to condoning sin." Hear, hear.

5. The Evangelical Council for Financial Accountability (Ecfa.org) accredits Evangelical churches and charities based on such standards as audited financial reports and ECFA's own field reviews. If your group hasn't joined (or is on the lists of those that left) you should ask why. There's no comparable service for Jewish, Muslim or Catholic organizations.

You'll find other sources. GuideStar.org gives no ratings, just access to 990s for nearly 700,000 charities. Pennsylvania's Department of State lists nonprofits that ran into trouble there. They may be fund-raising in other states.

Still, most people donate simply because someone asks them to, says William Meehan, chair of Philanthropic Research, parent of GuideStar. Charity ratings haven't had much impact, because they're flawed and not enough people follow them. Besides, the ratings don't help you choose among similar charities. For that, you need to know how well they do their jobs. That's the next step—and a new Web site should help it along. Watch for GreatNonprofits.org, launching next spring. People familiar with specific charities—clients, donors, staff and volunteers—will be able to post opinions there, for you to read before you decide to give.

Continued in article

Bob Jensen's threads on reporting fraudulent charities are at http://www.trinity.edu/rjensen/FraudReporting.htm#CharityFrauds

FTC Charity Fraud Site --- Search at http://www.ftc.gov/

Make the business of giving your business. If you’re a consumer or a businessperson, it’s important to know where your donation dollars end up. Ask questions about the nature and activities of the organization to which you’re considering donating. That’s the only way you can be sure the money you contribute will support a worthwhile cause. And if you work for a nonprofit organization, you need to know what are acceptable solicitation practices.

This Web site can help. It offers useful tips for consumers, business people and nonprofit organizations. If you – or someone you care about – is considering a charitable donation, first read our Charity Checklist. And if you represent a charitable organization, check out Raising Funds? What You Should Know About Hiring a Professional.

US Postal Inspection Service --- http://www.usps.com/postalinspectors/charity.htm 

Throughout the year, and especially during the holiday season, you probably get appeals in the mail or by telephone urging you to contribute financially to a good cause. But the U.S. Postal Inspection Service warns those who want to give that there are plenty of fraud operators out there who are scheming for your money--and the last thing on their mind is charity. Not only do such come-ons bilk you of your money, but they also put money you intended for the needy into the hands of con artists.

But just how do you know who is legit and who isn't? The Salvation Army and the American Cancer Society--those are among the obviously worthy organizations. But what if you receive a charitable solicitation from an organization you've never heard of? To guard against being taken advantage of, the Postal Inspection Service offers the following guidelines when donating to charities:

Check out organizations you're unfamiliar with, or whose names are similar to well-known charities. You can do this by visiting the Bureau's Wise Giving Alliance Web site, or by contacting them at this address:

BBB Wise Giving Alliance
4200 Wilson Blvd., Suite 800
Arlington, VA 22203

 

• If you're unfamiliar with the charity, ask for its annual report and financial statement. If the organization is not willing to provide these financial documents, you should immediately be suspicious.

   

• Make checks payable to an organization only--never an individual.

   

• Be suspicious of solicitors who say they will accept your donation in cash only. (Con artists want cash so there will be no paper trail for authorities to follow.)

   

• Report any suspicious organizations to your local postmaster or Postal Inspector.

The Postal Inspection Service encourages giving others a helping hand, but cautions those who give to make sure that the organization they're giving to is a legitimate charity, and not one that was set up for the sole purpose of bilking the public.

Cyber-begging is not new, but a free web service called Dropcash has linked data from payment service PayPal with that of blogging system TypePad to make it even easier to create your own fundraising webpage - complete with progress bar.
The Guardian, September 9, 2004

"Checking on Charities A growing number of online resources provide a starting point for evaluating nonprofit groups before you give," by Jaclyne Badal, The Wall Street Journal, December 10, 2007; Page R5 --- http://online.wsj.com/article/SB119679899080713433.html?mod=todays_us_the_journal_report

Here's a guide to finding -- and interpreting -- charity information on the Web.

WATCHDOG SITES

Your first stop when researching a charity should be a watchdog site. These groups offer information about nonprofits and often rate their efforts.

Remember, though, that these sites come with some important caveats. Many of them rely on information in charities' IRS returns, called Form 990s. And that information can be quite old by the time the watchdogs get it. Charities file their returns as much as 11 months after the end of the fiscal year, and then it can take months for the IRS to process the form and make it available. Meanwhile, if the charities aren't forthcoming on their IRS return, the watchdogs' data and analysis will end up skewed.

With that in mind, here's a look at some of the best information sources out there.

CharityNavigator.org, provided by the nonprofit group Charity Navigator in Mahwah, N.J., rates more than 5,000 U.S.-based charities, using information in their Form 990s. The site is free to people who register.

For an idea of how the rankings work, consider the group's take on United Way of America. The charity, which is based in Alexandria, Va., gets three stars out of four for "Efficiency," in part because 90% of its budget went to programs, and it cost only two cents for the program to raise a dollar.

The organization also gets three stars of four for "Capacity," or its ability to sustain itself over time. The group had annualized revenue growth of 21% from 2002 through 2005 and had enough working capital to operate for about eight months without any income.

If you want to look at the raw data, GuideStar.org, a product of Philanthropic Research Inc., in Williamsburg, Va., is the go-to organization for copies of a charity's Form 990. It covers 1.7 million groups and has about 3.1 million Form 990 images, many of which are available free to people who register.

The site makes money from a combination of donations and subscriber fees, so not all of the content is free. For instance, a prospective donor can see that the March of Dimes Foundation wanted to continue a $75 million education, awareness and research campaign on premature birth in 2006, and that it has more than 1,000 employees.

To get other details, such as the charity's income and assets, you need a subscription. That will run either $30 or $100 a month, depending on the depth of information you want and other factors.

Give.org, operated by the BBB Wise Giving Alliance in Arlington, Va., reports on whether the approximately 1,200 charities it has evaluated meet the alliance's 20 "Standards for Charitable Accountability." It doesn't do ratings or rankings.

The group's free reports provide information on who runs a charity and list its income, expenses, assets and sources of income. The reports also describe the group's programs; in some cases, this includes a breakdown of how much the group spent on them.

To meet the alliance's standards, organizations have to do everything from spend at least 65% of total expenses on programs to provide a clear privacy policy online. Charities that come up short will have a report on exactly where they failed.

The NAACP, for instance, fails on three standards, the site says. Its annual report doesn't include the recommended financial information, it doesn't include financial information or a recent Form 990 on its Web site, and it doesn't have a privacy policy with the recommended information on its Web site. Give.org says it was unable to evaluate six other standards, because it's waiting on an information request to the NAACP.

The NAACP says many of the requested items -- like the annual report and privacy policy -- are on the site, even if they lack the level of detail desired by the alliance. It says the group's Web disclosures are in line with its peers and that more specific information, like a copy of the Form 990, can be obtained by contacting the NAACP directly.

Moreover, an NAACP spokesman points out that each watchdog site has its own criteria and agenda, which can make it difficult for nonprofits to satisfy every set of standards. He recommends checking multiple sources to get a more accurate picture of the organization.

FIGURING IT OUT YOURSELF

So, what if the charity you're interested in hasn't been reviewed by a watchdog group?

First, get some information at the IRS site, IRS.gov. Search for Publication 78, which has a list of nonprofit groups that qualify for tax-deductible donations. Next up: Request a Form 990. The IRS return, required by most organizations with annual revenue of more than $25,000, will have much of the financial information you need.

100% of its money on programs isn't likely to have much longevity, but a program that spends too little could be more interested in enriching staffers then helping the underprivileged.

But be careful when weighing ratios, says Charity Navigator President Trent Stamp, since the expected program expenses vary depending on the work that's being done. Food banks, for instance, devote a higher portion of expenses to programs, say 90% or so. Museums, in contrast, spend about 70% of the budget on programs.

So, if you're investigating a charity, compare its numbers with those of another group that's closely related. For instance, you might compare the Committee for Missing Children in Lawrenceville, Ga., with the National Child Safety Council, since the groups do similar work and have similar revenue. You would find that the two have strikingly different spending ratios: The Committee for Missing Children spends 11% of its budget on programs and 87% on fund raising, according to IRS returns, while the National Child Safety Council spends 81% on programs and 7.8% on fund raising.

David Thelen, chief executive of the Committee for Missing Children, says the fund-raising costs seem disproportionately high because the group has to rely on pricey telemarketing. He says the group doesn't have the same cachet as larger organizations, which has made it difficult to get corporate donations or gifts from individuals that aren't solicited by a third party.

It's also important to make sure the IRS return accurately conveys the organization's behavior, and isn't full of one-time expenses. A charity may have low program spending one year because it's investing in a new computer system that is going to make the organization more productive down the road, for instance.

In the case of the Committee for Missing Children, IRS returns for the past three years show that program expenses were less than 10% of the budget in 2005 and 2004. The National Child Safety Council, by contrast, spent just 58% of the budget on programs in 2004, but the number increased to 75% in 2005 and 81% in 2006.

Mr. Thelen at the Committee for Missing Children says that while the program percentages may seem small, it doesn't change the fact that the money is going to good use. That 10% or so distributes pictures of missing children, provides literature on child recovery and connects parents with help here and abroad. Meanwhile, the National Child Safety Council says it understated program spending prior to 2005, due to a misunderstanding of IRS rules.

If the charity seems to be having an off year, call or email to find out why. The nonprofit may have a great reason. But if it answers with a fuzzy explanation or won't take the call, it may be time to move on.

Checking executive salaries, which are listed on the Form 990, can also be helpful. Donors are sometimes dismayed by what they perceive as exorbitant wages, but it's important to take the numbers in context. Many nonprofits are complex, multimillion-dollar organizations that require experienced managers -- a labor pool that isn't cheap.

If a salary seems high, check salaries at charities that are doing similar work and that are a similar size. The alarm bells shouldn't start ringing unless executive compensation is out of line with comparable organizations.

Donors who check the Form 990 may also want to look at the list of "Officers, Directors, Trustees and Key Employees" toward the middle of the form. An organization that has multiple family members on the payroll as directors, or that pays the president a nominal amount but shells out hundreds of thousands of dollars to someone in a lower-level position, deserves some extra scrutiny.

It's also a good idea to do a Web search on the organization and its officers, since the mainstream media -- along with bloggers and forum members -- often flush out problems before the IRS pulls a charity's tax-exempt status.

A short conversation with a staffer can also be helpful. Ask whether the organization has a written privacy policy that's available for review. (Sometimes nonprofits will sell the names of donors who contribute nominal amounts, say $10 or $50.) Also look into progress the organization made the previous year and check its goals for the year to come. Someone in the group should be able to answer those questions in a clear way.

SHARING THE WORK

Vetting a charity may seem daunting, or too time-consuming. But people with charitable inclinations don't have to go it alone. A number of donors are joining "giving circles." Members generally pool money and divide the research among members of the group. The idea has gained popularity in recent years, with the Forum of Regional Associations of Grantmakers in Washington identifying more than 400 giving circles in 2006, up from about 200 in 2004.

The circle investigates charities as a group and then decides how to distribute the money. In some circles, decisions are made by consensus, while others let majority rule or let individual members vote with their dollars.

Margae Diamond, an executive at a donor-advised fund in San Francisco, joined the Traveling Giving Circle to Kenya, a project of the Clarence Foundation, last year. The group went to Africa and visited six charities in six days. The International Child Resource Institute in Nairobi, Kenya, completed some of the background research, but the 19 members of the circle did plenty of reconnaissance on the ground.

They interviewed the program leaders and talked with many of the people receiving services. They also investigated conditions at the charities, which helped them spot larger needs or areas where the charity might have been looking for a quick fix.

Ms. Diamond says the group made better decisions about giving because it was able to draw on the knowledge and input of so many people. "It was very, very thorough," Ms. Diamond says. "We never stopped talking about it."

The Charitable Foundation Scam
Donors get those perks because they agree to relinquish control over the money. But since they appoint the organization's board, they can retain a great deal of influence over it. Regulators and lawmakers suspect that many wealthy people have used these organizations more for tax planning than for any charitable aim and are pushing for tighter rules as part of a broader crackdown on charitable tax exemptions. "I'm deeply disturbed that with a good number of supporting organizations, people are taking multimillion-dollar tax deductions for what they claim are contributions to charity, yet too often the result is a thimbleful of benefit to charity," said Senator Charles E. Grassley, the Iowa Republican who is chairman of the Senate Finance Committee.
Stephanie Strom, "A Tax Benefit for Big Donors Often Bypasses Idea of Charity," The New York Times, April 25, 2005 --- http://www.nytimes.com/2005/04/25/business/25taxes.html?

This comes as no surprise:  Charity has always afforded scam opportunities
The tax laws allow favorable treatment for donations to charity and for institutions ostensibly dedicated to good works. But for every tax break that's legal, there's a scheme to stretch it too far. Abuse in the charitable world is on the rise, IRS Commissioner Mark Everson told the Senate last week. Charitable scams account for part of the billions lost each year in fraudulent deductions, though the IRS can't say exactly how much. The Senate Finance Committee is looking into the abuses, which include people who take inflated deductions for dubious gifts and foundations that squander money on lavish salaries. In either case, the federal treasury is cheated, and other taxpayers must make up the losses. Such charitable scamming turns tax laws on their head: Deductions meant to encourage public good works are being hijacked by cheaters for their own benefit. Leaders in the non-profit world should be the toughest on these scams, which at times have soured the public on giving. Instead, they've acted only after Congress pushed them and have called for only milquetoast reforms.
"As charitable cheating rises, so does cost to taxpayers Non-profits fail to enact tough reforms to root out growing scams," USA Today, April 11, 2005, Page 12A --- http://www.usatoday.com/printedition/news/20050411/edit11.art.htm

Profiteers Heading Legitimate Charities
Charity executives haul home the lion's share striking disparity between what nonprofit fat cats make and industry norms — hundreds of thousands of dollars in many cases — illustrates a troubling lack of city oversight, officials say.  A whopping 200 executives at organizations that provide services for the city's have-nots take home in excess of $150,000 a year. That's more than the salaries of City Council members, the public advocate and all the city's district attorneys.  Another 12 nonprofiteers make more than the top nonprofit earners in the entire state based on the budget size of their groups, according to a survey of 2002 salaries by the nonprofit watchdog Guidestar.org.
"$WEET CHARITY FOR EXECS AT NONPROFITS," New York Post, March 13, 2005 --- http://www.nypost.com/news/regionalnews/42413.htm 

Possible new assurance service clients for CPA firms
A number of major international charities are opening their doors for the first time to outside inspectors, allowing them to certify that donations are spent as advertised.  The charities say they hope thorough inspections and a new industry seal of approval will assuage public fears of donations being misused. The nonprofits are also trying to keep ahead of a movement in Congress to impose regulations on the fast-growing but largely unsupervised world of nongovernmental organizations.
Michael M. Phillips, "Big Charities Pursue Certification To Quell Fears of Funding Abuses," The Wall Street Journal, March 9, 2005; Page A1 --- http://online.wsj.com/article/0,,SB111033202546074217,00.html?mod=todays_us_page_one 

You can read more about assurance services at http://www.trinity.edu/rjensen/ecommerce/000start.htm#AssuranceServices 

Just because a charity Web site looks authentic does not mean it is authentic.  Also, don't fall for telephone solicitations.  These crooks have no conscience!

The FBI is investigating dozens of bogus Web sites that prey on potential tsunami donors by mimicking sites of well-known charities, FBI Special Agent Tom Grasso said Monday.  The fake sites, which have surfaced in recent days, range from crude to accurate replicas that use the charities' logos and photos.
Edward Iwata and Martin Kasindorf, USA Today, January 11, 2005 --- http://www.usatoday.com/printedition/news/20050111/a_emailscam11.art.htm 
Bob Jensen's threads on charity frauds are at http://www.trinity.edu/rjensen/fraudReporting.htm#CharityFrauds 

Question
What's "affinity fraud?"

Answer:  See below

A key fund-raiser for Harvard University used his connection to the school to defraud benefactors out of millions of dollars, showing how sophisticated professional investors can be just as vulnerable as amateurs.

"Harvard Parents Got a Hard Lesson In Investing Perils:  A Key Fund-Raiser for School Is Convicted of Bilking Wealthy Donors, Alumni." by Randall Smith, The Wall Street Journal, June 11, 2004, Page A1 --- http://online.wsj.com/article/0,,SB108690562744434417,00.html?mod=home_whats_news_us 

Karen Fleiss had good reason to trust Gregory Earls.

Both had children at Harvard College and they knew each other as donors to the Harvard Parents Fund, which Mr. Earls headed for a time with billionaire Robert Bass. Mr. Earls was a deal maker with a penchant for high-risk investments; Ms. Fleiss was a hedge-fund manager.

So when he asked her to invest in one of his companies in 1998 -- and intimated that Mr. Bass might, too -- she opened her hedge fund's checkbook, eventually putting almost $1.8 million into the venture.

"He had a Southern accent and a big smile, and he would say, 'Karen, I have a deal for you,' " she recalls. "By the time he was finished, it sounded like the deal of a lifetime."

It wasn't. When she cashed out, all she had to show for her investment was $50,000. Ms. Fleiss was one of three wealthy Harvard parents and alumni who recently testified about being bilked by Mr. Earls. The authorities say he stole much of the money they invested with him, siphoning off cash as he passed it through another company he controlled. In the ledgers, the skimmed funds were camouflaged as legal, management or accounting fees.

All told, prosecutors say, Mr. Earls defrauded more than 100 investors of $13.8 million. They say Mr. Earls diverted $1.2 million to an education trust fund for his own children, and $4.3 million more to other personal accounts.

The Harvard connection and other fund-raising activities gave Mr. Earls "access to a pool of potential investors who were very wealthy, and he knew how to talk those people into investing with him," prosecutor William Stellmach said at the trial.

In April, Mr. Earls was convicted of 22 counts of fraud in Manhattan federal court after one investor took his suspicions to prosecutors. In court, Mr. Earls acknowledged moving investors' money to various accounts he controlled -- which he attributed to "sloppy business practices" -- but denied stealing.

His lawyer, Barry Coburn, said in court that Mr. Earls couldn't have had criminal intent to steal because he kept records of the amounts diverted. The investors "lost their money because the Internet bubble expanded and expanded and popped," Mr. Coburn argued. They didn't have "some kind of money-back guarantee."

Mr. Coburn says his client declines to comment on the details of his case. "Mr. Earls has been convicted by a jury," Mr. Coburn says. "It would not be appropriate in my view for us to respond to particular factual allegations in this context given that Mr. Earls is facing sentencing."

As described by prosecutors, Mr. Earls's scam appears to be a variation of "affinity fraud," in which victims are lulled into dropping their guard by mutual ties to the same religious organization or ethnic group. Mr. Earls cultivated important contacts through his work for the Harvard Parents Fund and the Boys & Girls Clubs of Greater Washington, D.C. -- and used data supplied by Harvard to assess likely investors.

The case shows that sophisticated professional investors can be just as vulnerable as amateurs. Much of the money Mr. Earls stole came from a handful of wealthy Harvard benefactors, including a former aide to junk-bond impresario Michael Milken. Even Harvard found itself short-changed. Mr. Earls reneged on three separate pledges totaling $275,000 that he made while he headed the parents fund, a school official testified at his trial.

Mr. Earls, 59 years old, grew up in Bluefield, W.Va., and attended the University of Virginia. In the 1970s, after stints as a gym teacher, mutual-fund salesman and stockbroker, he recruited others to invest with him in projects including movies, theaters, apartments and microwave-oven retailers. The 1980s saw him organizing investment groups that bought stakes in numerous enterprises.

In the mid-1990s, Harvard's development office took notice of Mr. Earls as a potentially productive fund-raiser for the Harvard Parents Fund. He was a big donor to the school, and three of his four children eventually enrolled there. His lawyer says in an interview that recruiting investors wasn't the principal motive for his unpaid volunteer work.

Harvard fund-raising officials are angry about what happened. "The fact that someone would volunteer their time for a nonprofit and then use that opportunity to line their own pockets is an outrage," says Andrew Tiedemann, communications director for alumni affairs and development at Harvard. "We have never seen anything remotely like this in Harvard history."

One of Mr. Earls's most important fund-raising assignments was Robert Bass, one of the well-known Bass brothers from Texas, who had made numerous high-profile investments in the 1980s. The two men met in connection with Harvard Parents Fund activities, and Mr. Bass's daughter Chandler, who entered Harvard in 1996, became "good friends" with Mr. Earls's daughter Kate, Mr. Bass testified.

Continued in the article

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

Lax Government Agency Oversight

"Lavish Spending, Little Reward D.C. Agencies Gave Contractor Millions for Projects but Scant Oversight," by David S. Fallis and Dan Keating, The Washington Post, November 28, 2005 --- http://snipurl.com/LavishSpending

With the District's approval, he gave himself an $82,000 salary and paid his brother $8,000 as a consultant. He spent $25,000 for signature artwork and a matching stainless steel table. He bought $6,000 chairs, a new blue sport-utility vehicle and a silver van, personalized with vanity tags. He spent $143 to settle debts at a florist and rush a "Happy Birthday" bouquet to the D.C. Council member who approved his grants. He billed taxpayers for it all.

Over seven years, District officials sank nearly $5.4 million into his projects. Three city agencies gave him multiple contracts, and four others had a role in making sure he was paid.

But when Prioleau's foundation collapsed last year, the city's investment evaporated. Most of the furnishings had been sold at public auction after languishing in a warehouse for almost two years. About $195,000 worth of equipment was sold for slightly less than $9,000, just to pay a storage bill. Prioleau closed his training center.

Prioleau defended his work in interviews over the course of a year and reported to the D.C. government that his center had trained thousands of disadvantaged people. But city officials say there are no records to verify that number.

The story of Archie Prioleau and his dealings with the District is one of broader failings -- the propensity across city agencies to violate their policies as they dispense public funds with little attention to how the money is spent.

Continued in article

Corruption is chronic in labor unions

Labor officials doing personal things at an increasing rate
But Mr. Yud said that if the department (Department of Labor) had been doing audits as vigorously as in decades past, it might have prevented corruption like the embezzlement of more than $2.5 million by leaders of the Washington Teachers Union. Among the items bought with the stolen union money were a $57,000 Tiffany tea service for 24, a $13,000 plasma television and a $20,000 custom-tailored mink coat. There were also the 277 checks totaling $41,309 that the secretary of an autoworkers' local wrote to herself over two and a half years, and the dues money stolen by the office secretary of a Minnesota plumbers' local, who, in ultimately pleading guilty, agreed to repay $54,469. Since 2001, department officials say, more than 500 union officials have been indicted on charges including fraud and embezzlement.
Steven Greenhouse, "Labor Dept. Plans Increasing Scrutiny of Union Finances," The New York Times, April 17, 2005 --- http://snipurl.com/NYTlabor

"Fun Union Facts," The Wall Street Journal, September 19, 2006; Page A20 --- http://online.wsj.com/article/SB115862588471466980.html?mod=opinion&ojcontent=otep

This month marks the deadline for the last of the nation's unions to file newly expanded disclosure reports, known as LM-2 forms. LM-2s have been around a long time, though until Labor Secretary Elaine Chao issued a rule requiring an expanded form in 2004, unions got away with providing the skimpiest details. This proved useful to union bosses who wanted to mask their political spending, or in some cases their corruption.

They are now being dragged into the sunshine. Whereas unions used to lump millions of dollars of disbursements into such vague categories as "sundry expenses," the new regime requires them to provide a detailed breakdown of who or what received union money: issue advocacy groups, political consultants, polling outfits, even hotels at which their members stayed.

Hard-working union members deserve to know, for example, that of the AFL-CIO's $82 million in discretionary disbursements from July 2004 to June 2005, only 36% went to representing members in labor negotiations -- which is what unions were created to do. A whopping $49 million, or 60% of its budget, instead went to political activities and lobbying, while another $2.4 million went to contributions, gifts and grants. The National Education Association was even more skewed toward politics, spending only 33% of its $143 million discretionary budget on improving its members' lots.

By our calculations based on the filings, the AFL-CIO spent at least $2.7 million alone on T-shirts, flyers, telephone calls, Web site hosting, and other support for 2004 Presidential candidate John Kerry. Groups that received AFL-CIO money included Citizens for Tax Justice, an organization devoted to higher tax rates; the Economic Policy Institute, a think-tank that campaigns against Social Security privatization and tax cuts; and the Alliance for Justice, a ferocious opponent of President Bush's Supreme Court nominees.

Dues-paying workers of the world might want to ask: Why is Mr. Sweeney spending more of their money trying to raise taxes, or fighting for the cultural left, than he is on collective bargaining?

The IRS may also want to inspect these forms. That's because, prior to the new LM-2 disclosure rules, at least a dozen large unions had told the tax agency that they spent nothing on politics. The National Education Association's 2004 tax return, for instance, left blank the line for "direct or indirect political expenditures." Yet according to its LM-2, the NEA spent $25 million on such activities from September 2004 to August 2005. Eliot Spitzer could sure have fun with that one -- if he didn't have the NEA's endorsement.

The forms also offer a glimpse at union chief salaries. At least three union heads took home more than a million dollars in compensation in their last fiscal year -- though two were admittedly the heads of the NFL and NBA players unions. The third-fattest union cat was Martin Maddaloni, the chief of the Plumbers and Pipefitters, who took home $1.3 million last year. The Plumbers' "director of training" -- a fellow named George Bliss -- somehow managed to make $456,644 in 2005. Now we know why plumbers are so expensive: They have to make enough to pay the dues that keep their union reps in Armani.

The LM-2 forms show that some 1,015 paid union officers and employees devoted more than 90% of their time to political activities. Combined, these folks took home compensation worth nearly $53 million. Some 1,755 union personnel spent at least 50% of their time on political activities and lobbying.

As for financial management, let's just say some of these union chiefs are having fun in their jobs. United Auto Workers Local 14 reported it spent $67,000 at an amusement park. The International Brotherhood of Electrical Workers spent $124,000 at a hotel resort. And the Plumbers forked over $225,000 on Nascar advertising.

A couple of other fun facts: Of the 100 highest paid union executives, 93% are men. We hope some class-action lawyer isn't looking to sue for gender discrimination. And, believe it or not, unions report that they spent $624,000 at largely non-unionized big box retailers across the country, including Target, Wal-Mart, Sam's Club, Costco and K-Mart. They apparently know a low price when they see one. * * *

When Secretary Chao proposed the new rules, unions were furious and came close to getting them blocked on Capitol Hill, and in court. Mr. Sweeney, the AFL-CIO chief, was quoted as saying the rule "will cost union members an estimated billion dollars a year," and that the average union would have to spend $1.2 million. The actual cost of AFL-CIO compliance turned out to be $54,000, so Mr. Sweeney was only off by 96%.

Unions should have the right to spend whatever they want on politics, and we've defended that right against McCain-Feingold and other campaign-finance limits. At the same time, however, union members who don't like the way their coerced dues are spent have the right under the Supreme Court's Beck decision to ask for the political and grant portion of that money back. May these illuminating LM-2 disclosures be spread far and wide.

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