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Professional Corner

Hoaxes and Cons
That Fool Even Savvy People

By Chuck Whitlock, Scambusters

Con artists don’t just prey on the ignorant. Even successful, sophisticated people are victims.

Why? Successful people consider themselves smart enough to recognize a good deal…they are too busy to check details…and they are driven to move forward and to take chances. Most of all, they make juicy targets because they have the most money to steal.

TAX-AVOIDANCE SCAM

Someone you trust – a financial planner, a close friend, or relative – comes to you with a proposition. Put up $25,000 and you can double your money in a month. Sound too good to be true? This trusted person already did it, and it worked like a charm.

Example: You are told your money will be used to buy high-end automobiles in a foreign country and bring them into the US without paying import duties. Because the dealings are under the table, your profits will not be reported to the IRS.

How the con works: The trusted friend probably did double his/her money in a month. The con artist predicted the friend would invest again during the next month and bring in others with him.

This time, the con artist reports that there are problems. Perhaps the shipment was stopped at the border and everyone has to chip in another $10,000 for taxes and penalties. Next, he says the truck driver needs an expensive lawyer or he is going to name names – including yours.

Eventually, you are told there is good news and there is bad news. The money you invested is gone, but the truck driver isn’t talking, so you have no IRS worries. You might walk away relieved despite your financial loss. You won’t go to the police even if you suspect you were duped because you knew you were breaking the law.

Variations on this con use all sorts of illegal activities – from insurance scams to fencing stolen goods to counterfeiting or scalping tickets to sports or entertainment events. One common version is aimed at children of affluent people when they go off to college. The students are told they can make a fortune quickly by fronting money for a campus drug dealer.

Self-defense: Be wary whenever anyone – including a friend – offers an opportunity that bends the law even slightly. Such investments are never worth the risk.

BANK GUARD SCAM

You go to use your bank’s automated teller machine during non-business hours and find an out-of-order sign on the machine. A uniformed "bank guard" holding a clipboard and cash box says he can handle your transaction.

How the con works: Successful people are accustomed to the convenience of 24-hour banking, and they are ready to trust people in uniform. The con takes place in the evening, when victims are tired and anxious to get home. Some victims are depositing their company’s money, not their own.

Don’t think it would work? I simulated this con once for a television program. Among my 25 victims were a congressman, a police officer, and a man responsible for the receipts of 18 pharmacies, totaling $118,000. Only one woman seemed suspicious, and I managed to talk her into leaving her money with me as well.

Even if you do not wish to make a deposit, in exchange for your withdrawal, you would be asked for your name, account number, personal identification number, Social Security number, address and mother’s maiden name. Give out this information, and the con man can clean you out.

MEDICAL QUACKERY SCAMS

People who have a deadly disease that is either incurable or not easily treated my mainstream medicine may fall pretty to medical scams touting medical cures.

Example: You are told you have an inoperable cancer. On the Internet, you learn about a controversial procedure involving an intervenous drip of crushed apricot seeds, often referred to as laetrile. It is not accepted in the US, but doctors in Mexico have achieved remission in many patients. Desperate, you seek it out. These people have found a con so attractive that their victims come right to their door.

Why the con works: The victim is vulnerable due to emotional distress. Based on my research, approximately 17% of all cancer cases go into remission without any treatment, although many later recur. The apricot seeds have no proven positive effect. Nor does the solution similar to toilet-bowl cleanser that one quack labeled Immunostim and, until very recently, injected into cancer patients’ veins.

BUSINESS SCAMS

Any business in which the owner does not directly oversee every transaction is a target for con artists.

Example: An employee might get into your payroll files and arrange for checks to be cut twice a month to non-existent employees. Or issue payments to a phantom supplier for hard-to-confirm services, such as consulting or cleaning, that were never provided.

Self-defense: Your firm is less of a target if certain safeguards are in place…

  • Immediately discontinue computer passwords of ex-employees.
  • Institute cross-training procedures. Require each employee to make a procedure manual for his/her job. Everyone in your company should make at least one colleague familiar with his accounts and files. This makes it less likely that any employee will think he can get away with something.
  • Check the books carefully when someone in payroll or accounting declines to take a vacation. Embezzlers may be hesitant to have someone else look at their books.
  • Institute firewalls around your computer system. Use codes with both numerals and letters to protect against cyber-criminals outside your firm. Do not let employees use names or birthdates as codes.
  • No security system is foolproof, but you can make it harder for high-tech criminals. The right computer security program depends on your system and the sensitivity of your data.
  • Create written procedures for purchasing, expense reimbursement, and payroll functions. These should include supervision by more than one employee.
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Last modified: January 26, 2013