NOTABLE QUOTE- JOHN KENNETH GALBRAITH

"Recessions catch what the auditors miss.”

CRAIGSLIST GETS RELIGION

Craigslist, which has suffered severe reputational risk in the past several months for publishing ads that have turned out to scams or, in a few cases, that have directly linked to stalkers and criminal activity, is getting religion. They are posting tips to avoid scams on their website. That page is reproduced here, under the doctrine of fair use. And especially because people who use Craigslist (which, can often be a valuable service) need to be reminded of the dangers:

CRAIGSLIST WORDS TO THE WISE

You can sidestep would-be scammers by following these common-sense rules:

• DEAL LOCALLY WITH FOLKS YOU CAN MEET IN PERSON - follow this one simple rule and you will avoid 99% of the scam attempts on craigslist.
• NEVER WIRE FUNDS VIA WESTERN UNION, MONEYGRAM or any other wire service - anyone who asks you to do so is a scammer.
• FAKE CASHIER CHECKS & MONEY ORDERS ARE COMMON, and BANKS WILL CASH THEM AND THEN HOLD YOU RESPONSIBLE when the fake is discovered weeks later.
• CRAIGSLIST IS NOT INVOLVED IN ANY TRANSACTION, and does not handle payments, guarantee transactions, provide escrow services, or offer "buyer protection" or "seller certification"
• NEVER GIVE OUT FINANCIAL INFORMATION (bank account number, social security number, eBay/PayPal info, etc.)
• AVOID DEALS INVOLVING SHIPPING OR ESCROW SERVICES and know that ONLY A SCAMMER WILL "GUARANTEE" YOUR TRANSACTION.

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Who should I notify about fraud or scam attempts?

• FTC toll free hotline: 877-FTC-HELP (877-382-4357)
• FTC online complaint form (http://www.ftc.gov)
• Canadian PhoneBusters hotline: 888-495-8501
• Internet Fraud Complaint Center (http://www.ic3.gov)
• Software Piracy (http://www.siia.net/piracy/report.asp)
• Non-emergency number for your local police department.

If you suspect that an item posted for sale on craigslist may be part of a scam, please email the details to "abuse@craigslist.org". Be sure to include the URL (or eight-digit post ID number) in your message.

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Recognizing scams

Most scams involve one or more of the following:

• inquiry from someone far away, often in another country
• Western Union, Money Gram, cashier's check, money order, shipping, escrow service, or a "guarantee"
• inability or refusal to meet face-to-face before consumating transaction

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Examples of Scams

1. Someone claims that craigslist will guarantee a transaction, certify a buyer/seller, OR claims that craigslist will handle or provide protection for a payment.

• These claims are fraudulent, as craigslist does not have any role in any transaction.
• Scammer will often send an official looking email that appears to come from craigslist, offering a guarantee, certifying a seller, providing payment services -- all such emails are fakes!

2. distant person offers a genuine-looking (but fake) cashier's check

• you receive an email (examples below) offering to buy your item, or rent your apartment, sight unseen.
• cashier's check is offered for your sale item, as a deposit for an apartment, or for just about anything else of value.
• value of cashier's check often far exceeds your item - scammer offers to "trust" you, and asks you to wire the balance via money transfer service
• banks will often cash these fake checks AND THEN HOLD YOU RESPONSIBLE WHEN THE CHECK FAILS TO CLEAR, including criminal prosecution in some cases!
• scam often involves a 3rd party (shipping agent, business associate owing buyer money, etc)

3. Someone requests wire service payment via Western Union or MoneyGram:

• Scam "bait" items include apartments, laptops, plasma TVs, cell phones, tickets - but could be almost anything
• Often claim that an MTCN or confirmation code is needed before he can withdraw your money - this is FALSE, once you've wired money, it is GONE.
• Common countries currently include: Nigeria, Romania, United Kingdom, Ukraine, Spain, Italy, Netherlands - but could be anywhere
• Apartment listing may be local, but landlord/owner is "travelling" or "relocating" and needs you to wire money to them abroad
• Deal often seems too good to be true, price is too low, rent is below market, etc

4. distant person offers to send you a money order and then have you wire money:

• this is ALWAYS a scam, in our experience - the cashier's check is FAKE
• sometimes accompanies an offer of merchandise, sometimes not
• scammer often asks for your name, address, etc for printing on the fake check
• deal often seems too good to be true

5. distant seller suggests use of an online escrow service.

• most online escrow sites are FRAUDULENT, operated by scammers
• for more info, do a google search on "fake escrow" or "escrow fraud"

6. distant seller asks for a partial payment upfront, after which he will ship goods

• he says he trusts you with the partial payment
• he may say he has already shipped the goods
• deal often sounds too good to be true

7. foreign company offers you a job receiving payments from customers, then wiring funds

• foreign company may claim it is unable to receive payments from its customers directly
• you are typically offered a percentage of payments received
• this kind of "position" may be posted as a job, or offered to you via email

AND STILL PEOPLE FALL FOR IT

The charity United Way of Central Indiana has been forced to warn people that they have not sponsored a contest and that they are not paying people anything for having supposedly won $150,000 in London.

The scam goes like this. People have received letters announcing that they have won a sweepstakes in England, but need to pay $3750 in tax before they can collect their prize. The checks are supposedly from United Way.

All the supposed winners have to do is deposit the check, wait until it clears, then wire $3750 to London. Of course the checks are bogus and will bounce, but before they do the victim's bank credits the victim with the deposited monies... against collection.

It's like an advance.

The victim wires the money out, the check... which is counterfeit... bounces, and the victim must then pay back the bank for the missing funds.

It's the same scam that fraudsters use for various work at home schemes.

It's perhaps understandable why some people fall for it. Everyone loves free money. But with all the media coverage these days surrounding frauds, it's amazing that people don;t ask themselves a few simple questions:

1 - Did I enter a sweepstakes? If the answer is no, then you couldn't possibly have won anything!

2 - Why would I receive a check from a charity in the United States for a tax liability in England? It doesn't make any sense, no matter what the fraudster claims in his cover letter.

3 - Why should I, essentially, allow anyone to put money into my bank account, then be asked to wire the funds back to them? The answer to that question is the easiest of all... don't.

Never allow anyone access to your bank account. There is no reason why anyone needs access. There is no excuse, ever, to grant it.

Is free money too good to be true? That's why it isn't true.

WHITE COLLAR CRIME STUDY - FRAUD INCREASING

A 2009 study by the Association of Fraud Examiners (AFE) found that more than 55-percent of its members conducted more fraud-related investigations in 2008 than the year before. According to the study, known offenders felt financial pressure before committing the crime.

The study also found:

* Companies tend not to report or prosecute these crimes out of embarrassment that an employee was stealing money under their own nose.

* Employees pose the greatest fraud threat in the current economy. When asked which, if any, of several categories of fraud increased during the previous 12 months, the largest number of survey respondents (48 percent) indicated that embezzlement was on the rise.

* Layoffs are affecting organization's internal control systems. Nearly 60 percent of CFEs who work as in-house fraud examiners reported that their companies had experienced layoffs during the past year. Among those who had experienced layoffs, almost 35 percent said their company had eliminated some controls, while 44.2 percent said the layoffs had no effect on controls and only 3.2 percent said their company had increased controls.

* Fraud levels are expected to continue rising. Almost 90 percent of respondents said they expect fraud to continue to increase during the next 12 months. Additionally, the fraud most expected to increase is embezzlement.

The study can be downloaded at: http://www.acfe.com/occupational-fraud/occupational-fraud.asp

ID THEFT - SOUND ADVICE

Being prepared for a possible ID theft attack is the best way to minimize your losses. Keep credit card numbers, bank account numbers and important phone numbers handy so that you can report problems. If you fall victim to identity theft, immediately contact the three major credit bureaus and tell them you want to have fraud alerts added right away on your files.

You can find them at:

Equifax (www.equifax.com, 888-766-0008),
Experian (www.experian.com, 888-397-3742)
TransUnion (www.transunion.com, 800-680-7289).

CELLPHONES TO BEAT CREDIT CARD FRAUD

Cellphone maker Ericsson is pioneering a security service which will link the use of a credit card with the legal owners geographic location, as detected by the GPS system on his/her cellphone.

The company believes it could cut down on credit card fraud as well as eliminate an inconvenience for travelers using cards overseas.

Banks will no longer have to block card transactions in high-risk countries because they will be able to see from the cellphone location whether or not the card owner is actually there.

Ericsson did not say which banks, if any, have yet signed up, but clearly the technology is now available for this type of service.

FRAUD AGAINST THE ELDERLY ON THE RISE

Fraud against the elderly is on the rise, according to a report by law enforcement officials in North Carolina.

The use of the Internet and increased wealth of retirees has triggered an increase of the elderly being deliberately targeted.

According to the report, these retiree specific frauds include sophisticated, international telemarketing check and sweepstake schemes and Internet based identity theft through spam emails and the illegally acquisition of usernames, passwords, and credit card details by pretending to represent a trustworthy organization.

Other tactics include “sweetheart scams,” where fraudsters befriend a widow or widower and promises love, and local home repair scams where elderly homeowners are convinced they need to undertake needless repairs.

CAMEROON IN BID TO TAKE OVER FROM NIGERIA

The US Embassy in Cameroon is warning that fraudsters and scammers in the West African nation have begun competing with their Nigerian neighbors in trying to defraud westerners, especially Americans.

These schemes, most of them online --- but some still using unsolicited faxes, cold call telephone gimmicks and classified ads --- range from asking for donations for fictitious charities to the usual 419 style fraudulent invoices on corporate or governmental letterhead.

The Embassy has issued this warning: "The Embassy strongly cautions Americans against wiring funds to individuals not known to you personally for goods or services not yet performed or delivered. You may contact the Embassy’s commercial section or consular section before agreeing to send money to Cameroon for any reason."

Included among the scams coming from Cameroon are:

Adoption and wildlife fraud: Involving the adoption of children or animals over the Internet. The scammers claim to be indigent parents unable to care for a child or members of the clergy working at a Cameroonian orphanage seeking a good home for a child. Other versions involve animals --- parrots, dogs and monkeys --- where the victim is asked to give the animal a home, in exchange for a nominal fee to cover the cost of shipping. Once the fee is paid, more charges suddenly arise for "unforeseen expenses" which include court costs, airport fees, customs duties, and medical costs. If they are not paid, the scammers threaten, the animal --- or in the case of child adoption fraud, the baby itself --- will be abandoned at the airport.

According to the Embassy, the competent authorities for inter-country adoption are the Ministry of Social Affairs and the High Court (Tribunal de Grande Instance). Cameroon does not have adoption agencies. Prospective adoptive parents wishing to hire a Cameroonian attorney to assist with adoption, can obtain a list of attorneys from the U.S. Embassy in Yaoundé.

Also on the Embassy list of scams is "the investigation of scam" fraud.

After a victim discovers that he has been scammed, a new e-mail arrives claiming to be from the Cameroonian FBI or other local law enforcement agency. Offering to help the victim recover his funds, the scammers ask for a refundable fee to open the investigation or court files. No such police agency exists in Cameroon.

Typical of other scams, there are a variety that work off the notion that the government has dictated all companies wishing to do business in Cameroon must be registered in Cameroon. The scammer claims to be a government official who can guarantee that a contract will be given to the intended victim’s company. Fees are then negotiated. Of course, no business deals ever follow.

THE FRAUD REPORT AT TWITTER

Don't forget to check out TheFraudReport at:

http://twitter.com/thefraudreport

LATEST SCAM FROM IRAQ

The old ones are the best, so this old one has a new touch. It's an email/letter supposedly from a US soldier serving in Iraq. It says:

"Some money in various currencies was discovered concealed in barrels with piles of weapons and ammunition at a location near one of Saddam’s old palaces during a rescue operation, and it was agreed by all party present that the money be shared amongst us, this was quite an illegal thing to do, but I tell you what? No compensation can make up for the risks we have taken with our lives in this hell hole.”

All you have to do, to share in the wealth, is pay up in advance to help them smuggle it out.

Return address eventually leads to Nigeria. Some surprise!

MORTGAGE FRAUD AND OTHER CRIMES - FINCEN

The Financial Crimes Enforcement Network (FINCEN) reports that mortgage fraudsters are often involved in check fraud, money laundering, stock manipulation, structuring to avoid currency transaction reporting requirements and other crimes. Having identified approximately 156,000 mortgage fraud subjects, FINCEN report shows that 2,360 were involved in suspicious activities that showed up in nearly 3,700 other cases.

Full report: http://www.fincen.gov/news_room/rp/files/mortgage_fraud.pdf

FACEBOOK FRAUD CONTINUES

Facebook, the social networking site, continues to be hit by fraudsters and scammers looking to take advantage of the site's younger subscribers.

The latest ruse is a note asking subscribers to hit the link, FBAction.net.

This link takes you to a page designed to look like a legitimate Facebook page --- classic phishing --- which will then record your login information and, immediately locks you out of your account.

Once inside your account, the scammer sends your friends a message to click on the FBAction link, which records their login details and locks them out.

Facebook is reportedly trying to deal with the problem.

BRITISH SURVEYS SHOW EXPERIENCE COSTS

Two new surveys, just released in the UK, show that experienced investors are more likely to fall victim to a financial scam. It comes down to "overconfidence," according to one report published by Exeter University.

In the other, released by trading standard officers, 35% of people targeted by fraudsters are over 65. And 41% of the people in that age group did not understand how that fraudsters could use personal details in passports, driving licenses and mortgage applications to steal from them.

Two of the most common crimes aimed at this age group are "land-bank purchase" scams, where residents are persuaded to pay large sums for small plots of Green Belt land to be reclassified so that they can be resold as valuable building plots; and "boiler room frauds" where brokers target shareholders who own worthless or high-risk shares.

THE BEST LAID PLANS

Charles Largent of Plumas Lake, California knew a good deal when he saw one.

Logging onto various brokerage sites, such as E-Trade and Charles Schwab, he discovered that, in order to verify his bank account, the brokerages would make a tiny deposit into his account --- anywhere from 1c to $2.

So he began registering fake online accounts in order to pocket those test deposits.

From November 2007 until May 2008, he opened no fewer than 58,000 accounts, all with fake names and supposedly earned somewhere close to $50,000.

He has since been caught, has pleaded guilty to computer fraud and now faces up to five years in federal prison.

SOME MADOFF INVESTORS "MAY HAVE KNOWN"

FROM ATTORNEYATLAW.COM

reprinted as fair use

Some Madoff Investors and Associates May Have Known of Fraud, Prosecutors Say

Authorities working to unravel the $65 billion Ponzi scheme run by former investment advisor Bernard Madoff now say a few high-profile clients and friends may have known of the fraud and assisted in the scheme.

According to a Wall Street Journal report, federal prosecutors are now looking past Madoff and probing at least eight investors and associates, including some well-known names. New York City philanthropists Jeffry Picower and Stanley Chais, who have already been named in a suit by the trustee liquidating Madoff’s assets seeking return of their profits, and Carl Shaprio, a clothing designer and friend of Madoff, are among those under criminal investigation for their alleged roles in the investment fraud, the Journal said.

According to the report, investigators have found evidence that Picower and Chais had told Madoff how much they wanted their investments to yield and that their account balances would reflect that amount. Shapiro reportedly knew that his profits earned on Madoff investments were fraudulent.

Madoff, the 71-year-old former NASDAQ chairman, pleaded guilty in March to running the largest investment fraud in U.S. history. For nearly 20 years, Madoff said he failed to invest client funds and instead bankrolled the money to pay for a lavish lifestyle while paying early investors to his scheme with funds contributed by later investors.

He is to be sentenced in June 2009 and could receive to up to 150 years in prison.

While Madoff has claimed all along that he acted alone and that his wife, two adult sons, brother, and others close to him had no knowledge of or involvement in his fraud, federal prosecutors have been skeptical. The sheer magnitude and depth of the fraud, for example, makes it unlikely to be a one-man job, the feds said.

Madoff’s longtime accountant was charged with lying about having conducted independent audits of the investment firm’s books and “claw back” actions have been filed seeking return of millions that were taken out of Madoff’s empire before the fraud was discovered.

The people behind several “feeder funds” which delivered clients and money to Madoff also have been charged or sued for their alleged roles in carrying out the Ponzi scheme.

SUPREME COURT TO HEAR CONRAD BLACK APPEAL

FROM THE LOS ANGELES TIMES

REPRINTED AS FAIR USE

Conrad Black's anti-fraud case

will go to Supreme Court

Justices have agreed to hear an appeal by the former newspaper executive, who says he was wrongly convicted of failing to provide 'honest services.'

By David G. Savage

Reporting from Washington -- The Supreme Court announced Monday that it would hear an appeal from jailed newspaper executive Conrad Black, who contends he was wrongly convicted under a broadly worded anti-fraud law that makes it a crime to deprive someone of "honest services."

Black, a Canadian-born historian and media magnate, was prosecuted in Chicago for allegedly skimming more than $5.5 million from Hollinger International and the Chicago Sun-Times to finance a lavish lifestyle.

Black said the money was a "management fee," but prosecutors said it had not been approved by Hollinger's board.

A jury convicted him in 2007 on three counts of mail fraud and one count of obstruction of justice, and he was sentenced to 6 1/2 years in prison in central Florida.

In his appeal on Black's behalf, Washington lawyer Miguel Estrada pointed out that his client had been acquitted of charges that he treated his company as his "personal piggy bank," but was convicted of fraud on the grounds that he deprived the company and its shareholders of his "honest services."

Estrada said this "vaguely worded criminal prohibition" allows prosecutors to charge corporate executives and public officials with crimes, even without proving they wrongly took money for themselves.

"This was not fraud in the old-fashioned sense of the term. If the court agrees, he would be at least entitled to a new trial," Estrada said.

Congress expanded the anti-fraud law in 1988 to combat public corruption. Usually, a fraud involves a scheme to deprive someone of their money or property, but the expanded law said it was a fraud to "deprive another of the intangible right of honest services."

The law is aimed at officials who engage in kickback schemes to benefit themselves or their friends. In recent years, this law has been a favorite tool of prosecutors because it permits prosecutions for questionable schemes that do not necessarily result in a loss to the government or a business.

Last year, Robert Sorich, an aide to Chicago Mayor Richard Daley, and two other former city officials who were convicted in a patronage hiring scheme raised the same issue in an appeal to the high court. Their appeals were turned away earlier this year, but Justice Antonin Scalia dissented and said the court should act to clarify the law.

Estrada cited Scalia's dissent in his appeal. Last month, U.S. Solicitor General Elena Kagan urged the court to reject the appeal. Black and his codefendants "had abused their positions with Hollinger to line their pockets with phony management fees," she said.

But on Monday, the court issued a one-line order saying it had agreed to hear the case of Conrad Black vs. the United States during the fall.

If the court were to rule for Black and broadly reject the notion of "honest services" fraud, it could allow persons who have already been convicted under this law to file a writ of habeas corpus to reopen their cases.

Fraud schemes tend to follow economic trends

FROM THE CHICAGO TRIBUNE

reprinted as fair use

Fraud schemes tend to follow economic trends

By Andrew Leckey

With fraud making news seemingly every day, it's important to avoid get-rich-quick schemes, refuse desperation deals, protect personal financial information and research financial decisions.

"Fraudsters always follow the headlines," said Fred Joseph, president of the North American Securities Administrators Association and Colorado securities commissioner. "Last year, high oil prices led to unregistered oil and gas drilling contracts coming out of the woodwork, while in 2009 high gold prices have resulted in the first gold-mining scams since the 1990s."

Partnerships in such drilling and mining ventures are usually worthless paper for non-existent wells and mines with phony extraction technologies, he said. There has been a 20 percent increase in the number of investment scams offering outsized investment returns in 2009, according to the association. "They don't even have to offer a 50 percent return," said Joseph, noting such instruments typically aren't explained in detail. "With a certificate of deposit paying 2 percent, just offering 10 percent is enough to get people really excited these days."

Many are Ponzi schemes that unravel as soon as new money stops and investors seek redemptions. Because it always pays to take your time with any investment, consider it a red flag when someone urges you to invest now or risk losing the opportunity, Joseph said.

Be careful in trying to resolve your debt. Complaints against debt consolidation and negotiation companies rose by 19 percent last year, according to the Better Business Bureau, and matters haven't become any better.

"Beware of credit repair scams in which you're told, `Pay our fee and we'll get rid of your bad credit,' " said Claire Rosenzweig, chief executive of the Better Business Bureau of Metropolitan New York. "No one can get rid of your bad credit, and you'll wind up losing the money you paid and still have the bad credit."

Non-profit credit counseling services requiring no fees or very low fees make more sense because they help you work your way through your debt, she said. If you fear home foreclosure, talk first with your lender rather than bring in third parties offering options to you, Rosenzweig said. If you take investment risks, make sure they are educated ones.

"When you go to Las Vegas, play roulette and bet all your money on red, you fully understand and accept that you could lose 100 percent of your money," said Dominick Tavella, president of Diversified Financial Consultants in Bellmore, N.Y. "Alarm bells should go off if someone is promising more than market rates with little or no risk, because it just doesn't work that way."

Reverse mortgages, which tap the equity in older adults' homes to provide them with monthly payments, are a growing problem because they often exact huge fees, Tavella said. Other issues: "Work at home" offers of flexible, easy, part-time jobs that are ruses by fake employers to steal your identity through job application information and then access your bank account. The same goes for deals supposedly offering grant money from the federal government to help you with your debt.

AARP is warning its members about a growing scam in which "fraud investigators" claiming to be from credit card companies call to tell you your card has been flagged because of an unusual purchase. You're asked to provide your card information and security number--allowing crooks to make purchases.

The Federal Deposit Insurance Corp. recommends that consumers be wary of the following:

-- Requests in e-mails or ads to update or confirm personal information, such as Social Security, bank account and credit-card numbers and security codes.

-- Financial offers from strangers involving a large deposit to your bank or investment account with instructions to then wire any of that money to them.

-- Opportunities for jobs, loans, deposits or investments in which you have not thoroughly researched the people or organizations offering them.

The securities administrators association site, nasaa.org, is the gateway to all the nation's state securities regulators and their information. You can contact the Financial Industry Regulatory Authority at finra.org for broker and firm disciplinary records.

Report suspected cyber-crime to the FBI at ic3.gov/complaint; send investment-related fraud complaints to the Securities and Exchange Commission to enforcement@sec.gov; and forward deceptive spam to the Federal Trade Commission at spam@uce.gov.

PERFECT DEFINITION OF FRAUD

Quoting author and expert on fraud, JEFFREY ROBINSON: "Fraud is a very simple crime to understand. I tell you a lie, you give me money, that's fraud! The machinations the fraudster goes through to make you believe the lie may be complex, but fraud is never more complicated than that.... a lie."

FIRST OF MADOFF REPAYMENTS GOES OUT

The first of the repayment checks from the Madoff court-appointed trustee to victims of his Ponzi scam, have now been mailed. They total about $30 million. That represents about half of the $61.4 million already approved for payment by the federally chartered Securities Investors Protection Corporation, the agency overseeing the liquidation of brokerage firms.

Trustee Irving Picard said 125 claims had been approved, and that the $100 million in claims should be approved by the end of this month. Most checks are for a flat sum of $500,000, which is the maximum protection allowed by the SIPC.

Additional customer losses will come from whatever assets the trustee can reclaim through the liquidation process.

Picard added that has already sued to recover $10.1 billion from six investors who withdrew very large sums from their accounts in the year before the Madoff scam came to light.

Additionally, Picard said, he is trying to negotiate with approximately 100 Madoff family members, former employees and other insiders to recover another $735 million which had been paid them.

So far Picard has managed to find around $1billion but expects that amount to “move up significantly.”

Meantime, Bernie Madoff is sitting in jail, awaiting sentencing. That hearing has now been moved from June 16 to June 29.

Anti Phishing Working Group (APWG) SURVEY

According to net-security.org, the Anti Phishing Working Group (APWG) annual survey on phishing fraud has found:

1. Phishers are increasingly using subdomain services to host and manage their phishing sites. Phishers use such services almost as often as they register domain names. And such attacks even account for the majority of phishing attacks in certain large TLDs. This trend shows phishers migrating to services that cannot be taken down by registrars or registry operators, thereby frustrating some takedowns and extending the uptimes of attacks.

2. Phishers continue to target specific TLDs and specific domain name registrars, and shift their preferences over time. The second half of 2008 demonstrated what can happen to registries and registrars who are not prepared to combat phishing with effective policies and procedures.

3. The amount of Internet names and numbers used for phishing has remained fairly steady over the past two years.

4. Anti-phishing programs implemented by domain name registries can have a remarkable effect on the up-times (durations) of phishing attacks.

5. There are decreases in phishing on IP addresses and the use of brand names in domain names to fool users. Phishers are not using IDNs (Internationalized Domain Names).

CYBER CRIME - $8 BILLION INDUSTRY

A US survey "State of the Net" conducted by Consumer Reports National Research Center, puts the cyber crime industry at $8 billion a year, and notes that there has been a steady annual increase in that number for the past five years.

That's the good news. The bad news is that, Consumer Reports says the problem will worsen as foreclosures and unemployment give rise to online scams. The increasing popularity of social networking creates opportunities for identity thieves. Already 13% of social network users report encountering some sort of fraud

According to Consumer Reports, 3.7 million Internet users did not have any sort of firewall on their home computers to protect them from hackers, while 7 million computer users --- that's one in 13 --- divulged their details to phishers during 2007-08. Among those victims, one in seven lost money.

FTC LISTS 26 "RED FLAGS"

The Federal Trade Commission has issued a list of 26 "red flags" that companies should use to detect credit card fraud.

They are:

1. A fraud alert included with a consumer report.
2. Notice of a credit freeze in response to a request for a consumer report.
3. A consumer reporting agency providing a notice of address discrepancy.
4. Unusual credit activity, such as an increased number of accounts or inquiries.
5. Documents provided for identification appearing altered or forged.
6. Photograph on ID inconsistent with appearance of customer.
7. Information on ID inconsistent with information provided by person opening account.
8. Information on ID, such as signature, inconsistent with information on file at financial institution.
9. Application appearing forged or altered or destroyed and reassembled.
10. Information on ID not matching any address in the consumer report, Social Security number has not been issued or appears on the Social Security Administration's Death Master File, a file of information associated with Social Security numbers of those who are deceased.
11. Lack of correlation between Social Security number range and date of birth.
12. Personal identifying information associated with known fraud activity.
13. Suspicious addresses supplied, such as a mail drop or prison, or phone numbers associated with pagers or answering service.
14. Social Security number provided matching that submitted by another person opening an account or other customers.
15. An address or phone number matching that supplied by a large number of applicants.
16. The person opening the account unable to supply identifying information in response to notification that the application is incomplete.
17. Personal information inconsistent with information already on file at financial institution or creditor.
18. Person opening account or customer unable to correctly answer challenge questions.
19. Shortly after change of address, creditor receiving request for additional users of account.
20. Most of available credit used for cash advances, jewelry or electronics, plus customer fails to make first payment.
21. Drastic change in payment patterns, use of available credit or spending patterns.
22. An account that has been inactive for a lengthy time suddenly exhibiting unusual activity.
23. Mail sent to customer repeatedly returned as undeliverable despite ongoing transactions on active account.
24. Financial institution or creditor notified that customer is not receiving paper account statements.
25. Financial institution or creditor notified of unauthorized charges or transactions on customer's account.
26. Financial institution or creditor notified that it has opened a fraudulent account for a person engaged in identity theft

FROM THE FTC - COMPLAINTS PROCEDURES

Before You Submit a Complaint

The Federal Trade Commission, the nation's consumer protection agency, collects complaints about companies, business practices, identity theft, and episodes of violence in the media.

Why: Your complaints can help us detect patterns of wrong-doing, and lead to investigations and prosecutions. The FTC enters all complaints it receives into Consumer Sentinel, a secure online database that is used by thousands of civil and criminal law enforcement authorities worldwide. The FTC does not resolve individual consumer complaints.

Your Privacy: How much personal information you provide is up to you. To learn how we safeguard your personal information, please read our Privacy Policy. If you don't provide your name and certain other information, it may be impossible for us to refer, respond to, or investigate your complaint.

Getting Started: The complaint assistant will prompt you through several screens.

Paperwork Reduction Statement: The Complaint Assistant entry form is designed to improve public access to the FTC Bureau of Consumer Protection Consumer Response Center, and is voluntary. Through the form, consumers may electronically register a complaint with the FTC. We estimate that it will take, on average, 5 minutes to complete the form. Under the Paperwork Reduction Act, as amended, an agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid OMB control number. The OMB number for this form is 3084-0047.

To find the Complaint Assistant, follow this link:

https://www.ftccomplaintassistant.gov/FTC_Wizard.aspx?Lang=en

DOs AND DONTs - REMINDERS FOR SENIORS

Dos and Don'ts, a reminder for seniors,
comes compliments of
the Cape May County Sheriff's Department, Cape May, New Jersey.

Telephone SCAMS - Do's and Don'ts:

• Do be aware of strangers.
• Do be aware if the caller insists you must act immediately - JUST HANG UP!!!
• Don't be pressured and Don't worry about being polite - JUST HANG UP!!!
• Don't give credit card numbers over the telephone unless you called to order something.

A legitimate business will not hesitate to give you a return telephone number and address. You may ask for this information and tell them you will call them back. This will give you time to verify if the business is real. It will also allow you time to think about their offer without feeling pressured. If the person refuses or hesitates to comply with your request when you ask, then you should hang up, it most likely a SCAM.

Mail SCAMS - Do's and Don'ts:

• Do be aware of offers from strangers.
• Do be aware of anyone offering: Free prizes / Free Services or special promotions.
• Don't accept , return or pay for anything you didn't order.
• Don't send money for any "free" items.
• Don't send money to anyone unless you check validity of the offer - ask your family, friends or senior groups.
• Don't feel obligated or pressured to buy or donate anything. USE YOUR WASTEBASKET !

Door to Door SCAMS - Do's and Don'ts

• Do be aware of strangers.
• Don't let anyone into your house.
• Do ask to see credentials of "inspectors" from City or Utilities, then check with their offices.
• Do be aware of "leftover" or "special promotion" SCAMS involving : driveways, roofs, siding, painting, etc.
• Your best defense is to deal with established local businesses.
• Don't sign anything the first time around.
• Don't pay cash at anytime.

If someone comes to your door and you suspect a SCAM, you can be helpful to your police department by noting a description of the person who came to your door, a description of the vehicle they came in and if possible try to get a tag number off the vehicle. Report it to your police department with the information you noted. It is best not to say anything to the person you suspect. Just tell them you are not interested and close the door.

Other SCAMS on Seniors - Do's and Don'ts

• Do be aware of legal type offerings involving:
• Estate or property changes
• Reverse Mortgages
• Insurance- Nursing Homes
• Wills, Living trusts, Probate

• Do take your time by checking above offerings with:
• Family
• Friends
• Reputable Lawyers
• Department of Aging

• Don't sign anything the first time around.
• Check and calculate your phone bill each month!!

MARC DREIER PLEADS GUILTY - FACES 145 YEARS

New York City lawyer Marc Dreier has pleaded guilty to defrauding hedge funds for more than $400 million. Six months ago, the SEC charged Dreier with several counts of fraud for selling bogus promissory notes. The founder and managing partner of law firm Dreier LLP faces a maximum of 145 years in prison plus forfeiture of all his illegally obtained assets.

See the New York Times report:
http://www.nytimes.com/2009/05/12/nyregion/12dreier.html?em

EMPLOYEES REVENGE? CHECK THAT LAPTOP

From The National Law Journal

reprinted as fair use

Laying Someone Off? Better Check That Laptop

by Tresa Baldas

The company-issued laptop has ignited yet more workplace litigation as a growing number of exiting employees are being sued for swiping or wiping data from their portable computers.

Employment attorneys say that, as layoffs continue to hit the work force, employee laptops are being turned back in with evidence of foul play. According to a recent study by the Ponemon Institute, a Tucson, Ariz.-based research group, nearly 60 percent of employees being laid off or fired, or who quit, admit to stealing company data.

And it's not just rank-and-file employees who are doing it, lawyers note, but executives as well.

In Liska v. Motorola Inc., an Illinois state court case, Motorola Inc. is accusing its former chief financial officer, Paul Liska, of erasing evidence from a work laptop computer after he was let go from his job. Liska is suing the company for alleged retaliation over his firing earlier this year. Motorola is asking a judge to order Liska to reveal what computer evidence he has, with whom he shared it and what he allegedly destroyed.

In Microsoft Corp. v. Mullor, a Washing­ton state court case, Microsoft Corp. is suing a former employee for allegedly stealing trade secrets from a company laptop to help him pursue a patent infringement case against the company. Microsoft alleges the employee downloaded files but used a file-wiping program to cover his tracks.

In Lasco Foods Inc. v. Hall, a federal case in the Eastern District of Missouri, Lasco Foods is suing two regional sales managers, alleging that they refused to return their laptops after leaving their jobs to start their own company and deleted proprietary information from them before turning them in months later.

Anthony Oncidi, a partner in the Los Angeles office of New York-based Proskauer Rose, said he is seeing laptop abuse "with astounding frequency."

"Employees are engaging in self-help by taking documents and data with them on the way out the door," said Oncidi, who believes that the economy is producing more spiteful employees. "The spite-case situation is more common now. They've got something on the employer and take it on their way out to bolster their planned lawsuit."

Oncidi, who handles roughly 10 laptop abuse cases a year on behalf of employers, said employers have the upper hand in these cases. Although an employee may try to use confidential data to prove a wrongful discrimination suit, he said, the employers' subsequent computer fraud and abuse claims are likely to be superior. "You can request documents and you can request data, but you can't, on your way out, just go pilfering documents from your employer," Oncidi said.

But in the heat of the moment, many employees don't realize they're doing something wrong when they take computer data, said Evan Moses, a partner in the Los Angeles office of Chicago's Winston & Strawn. "Particularly in this economy, the temptation is always significant to walk away with electronic information because it's valuable and easy to take. It's a crime of impulse, usually, where employees don't even realize what they're doing," Moses said. "Now that the economy is bad, the temptation is just that much greater."

Moses, who is currently handling a lawsuit alleging laptop abuse by an employee, said it's the tinier gadgets, such as flash drives and iPhones, that have employers especially worried about data leaving with departing employees. "It's that much easier to plug a half-inch device into a laptop and download everything you need," said Moses, who recommends that his employer clients conduct periodic audits of laptops.

David Walton, a partner at Philadelphia's Cozen O'Connor, said laptops are especially vulnerable when employees leave for a competitor. "Most employees cheat when they go from one competitor to another. Anytime you have greater mobility, in good times or bad times, there's greater theft of information on laptops," Walton said. "The vast majority of cases I've been involved in where an employee had a laptop, there was evidence of some wrongful conduct."

Employee-rights attorney Robin Bond, meanwhile, is urging employees to resist using the work laptop for personal use. "Fight that urge to commingle personal information on work PCs -- don't put anything on work equipment or e-mail that you don't want your boss to read," said Bond, a former Philadelphia prosecutor who now has her own employment law firm,

But employers must also take steps to protect laptops from misuse and warn employees up-front about what is and isn't acceptable, Bond said. "When an employee boots up and signs on, a warning screen should pop up that tells the employee that whatever they type on the PC belongs to the employer and that there is no right to privacy," Bond said. "The warning should also advise employees that, yes, Big Brother is watching."

THE FIGHT FOR STANFORD'S $227M IN BACK TAXES

The fight for Allen Stanford's money has begun.

The IRS now says that if Antiguan liquidators are granted US court authority over Stanford's offshore bank, that decision could hinder the agency's efforts to collect the $227 million that they are claiming in back taxes.

Filing papers in US District Court in Dallas today, the IRS claimed that the Antiguan liquidators have already spoiled computer records from the bank's Canadian office.

They are also insisting that Antigua, because it is a well known tax haven that promotes financial secrecy, would not be inclined to divulge whatever irregularities they might find in the financial records of Stanford International Bank. The IRS wants the US appointed receiver to control those records, rather than the receivers appointed by the court in Antigua court.

Stanford and two other bank executives have been accused by the SEC in the States of a massive Ponzi scheme revolving around certificates of deposit. Stanford continues to deny any wrong doing and has not yet been charged criminally. But those close to the case expect that to happen sometime this month.

PRESS ASSOCIATION ON STANFORD - HE WAS DEA INFORMER

The Press Association in Great Britain is report that suspected Ponzi conman, R. Allen Stanford may have been a Drugs Enforcement Administration informant since 1999.

According to the PA, Stanford's status as a CI (confidential informant) is why, despite the evidence against him, he has not yet been criminally charged. "Probes into the financial dealings of the Texan tycoon who bankrolled English cricket," the PA wrote, "were previously dropped because he may have been a US Government informant, an investigation suggests.

The claim is supported by the BBC who have gone on record to say, "Sir Allen Stanford may have been given free rein to run his banking empire as he was working with the American Drug Enforcement Administration."

BBC PANORAMA TAKES A CLOSE LOOK AT ALLEN STANFORD

The Six Billion Dollar Man

To Be Aired on the BBC in the UK on May 11

reprinted here as fair use

BBC - When the people who run English cricket took Sir Allen Stanford's money and allowed him to park his helicopter on their lawn as he arrived amid a frenzy of excitement they said they had checked him out. They thought the tall Texan was perhaps a bit brash for their tastes, but solid and, perhaps most importantly, solvent.

In Panorama: The Six Billion Dollar Man, we find out that Sir Allen was not at all as he seemed. More over, his story appears to be something of a metaphor for what has happened in the wider financial world in recent months - a lack of questions asked at the right time and then, suddenly, reality hits smack between the eyes like a full toss from a fast bowler.

Sir Allen came to prominence last year when he sponsored a high-profile Twenty20 cricket tournament, which culminated in a match between England and an all-stars West Indies team that gave each winning player $1m. But in February of this year, the man who once boasted that "It's fun being a billionaire", saw his empire begin to crumble.

That was when the businessman, who operated mainly out of the Caribbean island of Antigua, stood accused over a multi-billion dollar investment fraud by US financial regulators. The Securities and Exchange Commission (SEC) said the financier had orchestrated "a fraudulent, multi-billion dollar investment scheme".

The SEC said the fraud was "based on false promises and fabricated historical return data" and the Federal Bureau of Investigations seized his passport.

Ten weeks after the SEC filed its civil complaint, no criminal charges have been pressed against Stanford but the FBI is investigating and a criminal case is expected. Meanwhile, off-shore investors around the globe are holding on to near-worthless investment certificates.

This week, Panorama takes us to the place where it all began for Allen Stanford, the Lone Star state of Texas, where his Stanford Group of Companies empire was run.

Reporter John Sweeney notes that every aspect of the business features Sir Allen's eagle and slash logo and the 12 floors of a gleaming Houston office block that his enterprises once occupied smell of money, success and bare-faced front. Sweeney explains how Sir Allen Stanford's considerable assets have been frozen amid accusations that he ran an elaborate fraud or Ponzi scheme - effectively robbing Peter to pay Paul.

“Did this man, this Texan who basically said that our cricket was rubbish land his helicopter here on the nursery ground at Lords? You still have to almost rub your eyes as if it was a very bad dream ”
Jonathan Agnew, BBC Sport cricket correspondent

Sir Allen has vigorously denied the accusations and has insisted in interviews on American television that "It's no Ponzi".

The British receiver, Nigel Hamilton-Smith, called in by the government of Antigua, when asked by Panorama if he has uncovered the $7.2bn (£4.8bn) in deposits recorded in Stanford International Bank's books, says: "Nothing like it."

When John Sweeney asks him outright: "Is Stanford International Bank bust?", Hamilton-Smith responds, "Without a shadow of doubt". The receiver added: "There is a deficiency of $6.7 billion."

Six Billion Dollar Man hears about Stanford's boyhood in the town of Mexia, where he was born and raised in the Baptist church. Stanford's first business was a chain of health clubs called Mr and Mrs Heath Studios in nearby Waco. We meet his father, James Stanford, 88, who still has complete confidence in both his son's abilities, and his innocence.

In 1982 Stanford's health club business was made bankrupt and he declared personal bankruptcy in 1984, owing $13m (£8.6m) at the time. The future billionaire was down, but definitely not out.

In Miami, Rodney Gallagher, who advised the Foreign Office about banking in the Caribbean, tells Panorama that he met Stanford in the 1980s.

"Allen Stanford was very much a marketing man," Mr Gallagher recalls. "The image that comes across is one of a rather brash Texan. He's a man who revels in business success and all its trappings. He saw people who were obstacles as people who should be pushed out of the way."

Sweeney tells us how Stanford the bankrupt transformed into Stanford the banker, setting up shop as Guardian International Bank on the small British colony of Montserrat - best known for its active volcano.

The programme hears from Mr Gallagher that Montserrat was, at that time, the place to be if you were looking for lax banking rules.

"The banking sector in Montserrat in particular was considered to be out of control," he says of the climate at the time. "The overwhelming majority were not banks of the sort that the British government would have liked to have seen on the high street in Guildford."

Panorama obtained details of a secret 1990 Montserrat government report that warns of Sir Allen's bankruptcy and raises suspicions that he may be involved in money-laundering on a substantial scale.

"Alan (sic) Stanford is the prime force behind the bank's operations and it has recently come to our notice that he is also a former bankrupt…Its President has come under suspicion of money-laundering on a substantial scale…a figure of $60 million has been mentioned," the report states.

Stanford has always maintained that his Guardian International Bank did nothing wrong. But, frustrated by the authorities' threats to revoke his license, Sir Allen moved his operations to the next island along, the former British colony of Antigua and Barbuda.

We hear about Sir Allen's close relationship with former prime minister Lester Bird and see how his banking empire bought up large tracts of the tourist paradise.

In 1999, Allen made out a cheque for $3.1m to the US Drug Enforcement Administration, money which had originally been deposited with the Stanford International Bank by agents for the Mexican drug lord Amado Carrillo Fuentes. This is proof that Stanford International Bank did attract Mexican drug money - whether or not Stanford knew about it at the time.

It is thanks to his close ties to former prime minister Bird that Allen Stanford became 'Sir Allen' in 2006 - for his "services to the community and economic development".

As his wealth grew in the Caribbean, his business expanded homeward to America.

Panorama travels back to Houston to meet a former colleague turned critic who resigned from Stanford's company over concerns that the real returns for clients were lagging behind those offered in promotional material - perhaps the clearest early warning sign that all was not as it seemed. From here, Panorama brings it home to Lord's Cricket Ground in London - the ancestral home of cricket - and hear how Sir Allen managed such a slick takeover of the game.

Jonathan Agnew, the BBC's cricket correspondent, describes those heady days when big money from Texas met English cricket.

"Even now there's an air of disbelief about the whole thing. Did it really happen? Did this man, this Texan who basically said that our cricket was rubbish land his helicopter here on the nursery ground at Lord's? You still have to almost rub your eyes as if it was a very bad dream."

Agnew points out that other countries' cricket governing bodies had taken a pass on a deal with Sir Allen. "We thought our administrators had completely lost the plot. What they were doing associating themselves with a man like Sir Allen Stanford who'd already been turned down by South Africa, by India, and by Australia. They didn't want anything to do with him."

WHY THE SEC HAS BEEN FAILING

Having missed the opportunity to stop Bernard Madoff and his Ponzi, and having been asleep at the switch for years over the Allen Stanford affair, a government audit of the Securities and Exchange Commission has outlined several areas where the SEC has, singularly failed, to protect America's interests.

The Government Accounting Office report notes, for example, that enforcement staff fell 11.5% between 2004 and 2008. Coupled with that, vacancies for paralegal and administrative staff went begging, which in turn forced SEC investigators and prosecutors to spend time filing documents, scanning documents and even making their own travel arrangements. According to one SEC attorney, who claimed he spent 2-3 hours a day on administrative chores, he actually had to go to a local photocopy shop himself when he needed documents copied.

The report went on to say that life at the SEC was so dismal under the past administration, it took weeks --- and in some cases, month --- for documents to be downloaded onto SEC computers. Furthermore, investigators did not have access to real-time market information. To get it, they needed to “manually query” brokerage houses. In turn, their data was often incomplete. Finally, the GAO report decided, the culture of risk aversion has been so ingrained at the SEC that investigators tend to spend as much as 40% of their time on internal review. The report cited one case when it took two and a half months to prepare a single paragraph to request permission to send a notice to an offending party to say it faced fraud charges. Once too much time passed, investigators simply dropped the case as too old.

Current SEC chairwoman, Mary Schapiro, has promised to make things right.

ANTI-FRAUD SEMINARS FOR SENIOR CITIZENS

A rash of frauds aimed specifically at senior citizens --- a group particularly vulnerable to fraud --- has prompted the RCMP in various parts of Canada to organize anti-fraud seminars for senior citizens. Any organized group in the US or Canada interested in privately run seminars aimed at helping senior citizens protect themselves, should contact ifitistoogoodtobetrue@gmail.com.

BLACK MONEY SCAM - ALIVE AND SOMETIMES WELL

For years, Nigerian fraudsters followed their 419 scams with a "black money" fraud. Promising to return the money "accidentally" lifted out of a victim's bank account, they showed up with pieces of paper cut into dollar sizes, but overprinted in black ink, claiming that the only way they could have smuggled all this money out of Africa was to overprint it black. The fraudster would then do a sleight of hand trick, take an overprinted bill at "random" and with a special cleaning substance, wipe it. A brand new $100 bill appeared. But, the fraudster would say, in order to clean the entire stack the target would have to buy more cleaning substance. That, the scammer would say, is expensive but, just look at this pile of $100 bills. It's got to be worth it. But as soon as the target would hand over another 10-20-30 grand and the scammer would leave to buy the cleaning substance, that's the last the victim would see of his money or the fraudster. And the pile of black paper would turn out to be just that... worthless black paper.

It's a ruse that has worked for years and, bizarrely, continues to work, despite all of the warnings in print, in blogs like this one, on television and all over the Net. That's what makes the arrest of two scammers last week in Canada all the more satisfying.

The Toronto Sun has reported that a local man looking to sell his business for C$3 million, was contacted by a pair of West African scammers with piles of black money. They claimed they'd smuggled the cash out of Africa, and after working the sleight of hand to produce several clean C$100 bills, asked the man for $120,000 to buy cleaning fluid. The man got suspicious and called the cops, who have now put one man from Zimbabwe and one man from Liberia in handcuffs.

Both have been charged with fraud.

The problem is, most fraudsters get away with their crimes because their victims are foolish enough, gullible enough and/or greedy enough to hand over cash in exchange for a pile of worthless black paper.

FORBES DECIDES SPOKANE IS FRAUD CAPITAL USA

Forbes Magazine has decided that Spokane, Washington is the fraud capital of the United States.
reprinted as fair use

Fraud: Scam Capital of America

William P. Barrett, 05.06.09, 06:00 PM EDT
Forbes Magazine dated May 25, 2009

Rugged individualism often goes hand in hand with cutting corners. Washington State's second-largest city is a prime example.

There's the diploma mill that sold 10,000 phony college degrees to buyers in 131 countries. The $31 million parking-garage bond hustle that snared fund firms Vanguard, Nuveen and Smith Barney. And the many questionable enterprises around the continent that turn for legal and accounting services to firms in the heart of the Pacific Northwest's Inland Empire.

Welcome to Spokane, Wash., a metropolitan object lesson in what can befall the unwary when rugged individualism is revered and consumers unsuspecting. The area's 460,000 residents make it the most populous region in the 1,400 miles between Seattle and Minneapolis. Situated between the Cascade and Rocky mountains, the area enjoys a good climate, great scenery and a colorful tradition. There's some evidence bank robber Butch Cassidy spent his final decades hiding out in Spokane before dying in 1937, the same decade Dashiell Hammett's novel, The Maltese Falcon, had a runaway husband popping up there.

The name (pronounced spo-can) means children of the sun in a Native American dialect. Children of the scam seems equally fitting. Some recent antics: A father and son were sentenced to prison for selling nonexistent railroad engine parts worldwide over the Internet. A Spokane man began serving a five-year federal sentence for his role in a $50 million Colorado Ponzi scheme. The SEC sued Spokanite Craig T. Jolly and his Quest Holdings, alleging Jolly was running a Ponzi scheme that collected $4 million by promising a low-risk return of up to 20% a month. He had no comment.

The SEC won an antifraud injunction against International Broadcasting Corp. (now known as Copper King Mining) amid charges its radio network falsely touted its financial prospects. Another Spokane firm, BlueStar Technologies, settled a securities fraud case in California (without admitting anything) by making refunds to investors and paying $50,000 in penalties.

"It's like a runaway train," sighs Zan Deery, an investigator for the Spokane Better Business Bureau.

Con games are so much a part of the fabric that even an official City of Spokane press release carried a whiff of resignation last November when it warned that "another scam has come" to town. That one involved tricking mail recipients into cashing rubber checks and returning most of the proceeds to the sender.

"There's a lot of fraud here," says Marie M. Rice, head of the 60-member Spokane chapter of the Association of Certified Fraud Examiners.

Spokane has been infused with a Wild West flavor since its founding. The region was explored in the early 1800s and developed amid the gold and silver boom of the 1880s. After that trailed off, logging picked up the slack. Three railroads through town solidified its economy, and cheap electricity from the nearby Grand Coulee Dam encouraged manufacturing.

Dicey stocks are another longtime growth industry. Founded in 1897, the Spokane Stock Exchange was the country's last regional exchange devoted to questionable penny stocks when it was shuttered in 1991 amid SEC pressure.

Not that its demise stopped Spokane's stock touts from plying their trade. In January the SEC suspended trading for ten days in Future Canada China Environment, a Bellingham, Wash. firm whose over-the-counter shares soared from 92 cents to $28.50--a $1 billion market cap--despite the apparent lack of any underlying business. In its going-public prospectus last year, the firm said its legal counsel was Conrad C. Lysiak, a veteran Spokane securities lawyer who once served as the Spokane Stock Exchange's compliance officer.

After leaving the exchange Lysiak was censured, fined and briefly suspended in the 1990s by regulators after he was found to have been compliance officer for a brokerage office that committed fraud on his watch. Lysiak, whose client list has included a number of public companies, declined to comment to FORBES.

Two years ago the Public Company Accounting Oversight Board in Washington censured Spokane accounting firm Williams & Webster and individually suspended both names on the door after charging that they knew of financial problems at Utah insecticide firm Diatect International but provided an unqualified audit opinion anyway. The firm now calls this "past events."

Lysiak and W&W teamed up to work for what became Arctic Oil & Gas. It had all of $155 in the bank, but its stock nevertheless rose 70,000% within weeks to $3.65 a share early last year. Investors, it would seem, were encouraged by the firm's claim of rights to 30% of all energy resources near the North Pole (FORBES, Feb. 11, 2008). In January Arctic, which now lists a California address, changed its name to Placer Gold Corp. Recent price: one cent.

Just what makes Spokane look like an overachiever in dodgy endeavors is a matter of debate. Some say it's the town's remoteness, or its proximity to the Canadian border. Another theory, posited by an academic study from an area college, is that economic success there is "more likely to be seen as an individual or corporate matter." Translation: Mind your own business. Maybe not helping is the century-old economic dominance of the Cowles clan, whose fourth generation runs, among many other things, the only daily newspaper and business weekly, a radio station and the NBC TV affiliate. The parking garage financial scandal, which ended when the city bought out the complaining bondholders without any single party's admission of wrongdoing, was a Cowles project.

"When you're visible, you're visible," says Cowles Co. Chairman Elizabeth A. Cowles. "We're proud of the role we play here."

One thing seems to distinguish Spokane con men from those in Salt Lake City, which likewise shuttered its penny stock exchange and has retained its reputation for chicanery. Spokane's seem to have fewer compunctions about preying on locals. Thus, convicted con man John E. Petersen was returned to prison for stealing from his 95-year-old aunt. Authorities warned about one man soliciting door-to-door for a kids charity but pocketing the proceeds. Suspected embezzlements hit Spokane's Meals on Wheels charity and an area ad agency.

The Internet diploma mill was run by Dixie and Steven Randock, both now serving three-year sentences. Degrees included those purportedly from Harvard University. The ringleaders' partners in crime were, of course, their customers. One was a Spokane deputy federal marshal seeking a promotion who knew what he was getting--and got convicted for it.

SEC DIRECTOR ADMITS FAILURE TO SPOT MADOFF

The new director of the SEC, Robert Khuzami, told a Senate Banking subcommittee hearing that the Commission's failure to spot Bernard Madoff's $65 billion Ponzi is "A wake-up call," and admitted, "There may have been multiple things that contributed to the agency's failure to act timely in the Madoff matter."

Speaking alongside SEC chairman, Mary Schapiro, Khuzami said a change in culture within the SEC's enforcement division has started to occur. He noted that since the end of January, the Commission has opened 287 investigations, a 32% increase over the same period last year. Agency lawyers have won 27 emergency temporary restraining orders from various courts since the end of January, compared with seven in the same period last year.

PHONY FRAUD ALERT SCAMS

One popular way to commit fraud is to announce that you're going to help people avoid fraud. Phony fraud alert scams are now part of the criminal landscape. But there are telltale signs that make these schemes obvious.

Little more than a phishing scam with a twist, they begin with an email or phone call announcing that your credit card... or your bank account... has somehow been compromised by some sort of illegal activity.

These fraudsters deliberately create confusion, then offer to help solve the problem by asking for pin codes, SSNs and other previously secure information. Or they ask you to phone a 1-800 number --- supposedly your bank or credit card fraud department --- and supply your private information to the agent there. Or they ask you to log into a site and send the information electronically.

They way to protect yourself is basic:

*** Never supply credit card or bank account details over the phone.

*** Do not open suspicious email.

*** Never visit sites which are hyper linked on spam emails.

*** Never call phone numbers mentioned in any such spam emails.

STANFORD TROUBLES SPOTTED IN 2002

Reports are now coming out of the SEC investigation into the alleged Ponzi scheme by Texas/Antigua banker R. Allen Stanford, that investors were suspicious as early as 2002. Apparently they made those suspicions known the the SEC, but the government didn't bother acting for another six years.

While the SEC has now levied civil charges, a federal grand jury is studying the possibility of a criminal case against Stanford, his company and his executives for perpetrating what they call an ongoing fraud by selling high-yield certificates of deposit that promised out sized returns.

To date, the only criminal charge in the matter has come down against Stanford's chief investment officer, Laura Pendergest-Holt, for obstruction of justice.

Although the SEC their charges against Stanford and others in February of this year, it now turns out the Commission was alerted to potential fraud as early as October 2002. At that time, a Mexican accountant questioned certain family investments in Stanford's CDs. At a time when prime banks in the States were paying 4%, Stanford was offering 9%. The accountant questioned the legitimacy of those CDs, and also the fact that Stanford's bank, which was American by birth and right, was being audited not in the States but in Antigua.

It is known that the accountant urged the SEC to make certain that investors do not get cheated.

Some 11 months later, a whistleblower --- described as an “insider who does not wish to remain silent, but also fears for his own personal safety and that of his family” --- wrote to the SEC that “Stanford Financial is the subject of a lingering corporate fraud scandal perpetuated as a massive Ponzi scheme that will destroy the life savings of many, damage the reputation of all associated parties, ridicule securities and banking authorities, and shame the United States of America.”

The insider then claimed that the fraud had gone on for 17 years.

Less than two years after that, a disgruntled former employee reported "illegal financial activities.” There were also accusations that the high yield CDs were simply a hedge fund.

In answer to those accusations, an SEC spokesperson issued a statement claiming, "The SEC was unable to obtain detailed information about the offshore CDs in part because of complicating factors involving jurisdiction, including whether CDs issued by a foreign bank are securities covered by the federal securities laws, whether the CDs were covered by U.S. banking laws, and the application of Antiguan laws governing confidentiality."

The administration of George W. Bush, in power during that time, has close ties to the Texas Bankers Association and one of Bush's closest allies in the Senate was Texan Phil Gramm, who not only had close ties to the Texas bankers, but was said to be personally close with Stanford.

LEXIS NEXIS INFILTRATED

Data service LexisNexis has announced that fraudsters have been inside its retrieval service database for more than three years, harvesting information on more than 32,000 people. The data they've gathered has been used to commit credit card fraud.

According to LexisNexis, "These individuals were operating businesses that at one time were both ChoicePoint and LexisNexis customers."

The US Postal Inspection Service, which is lead agency in the case, is looking at a Nigerian scammer as prime suspect. They believe that what he and his associates did was to set up fake mail boxes, then use the names, dates of birth, and Social Security numbers they obtained to apply for credit cards in the victims' names.

Three years ago, ChoicePoint is said to have paid $15 million to settle a lawsuit with the FTC after fraudsters infiltrated the company's data base and used the information they were able to get there to commit ID fraud.

Authgorities say that, in this case, LexisNexis waited a long time before notifying victims, and then only did so at the behest of the Postal Inspection Service. Although the actual fraud was said to have been stopped in October 2007, breach notification letters were not sent out until last week. LexisNexis would not say when it became aware of the data breach.

The company has a history of data breaches, having succumbed to attacks in 2005 and 2006.

OPPORTUNISTIC FRAUD

Call it a new category... opportunistic fraud. It's not a particular scam, but rather a series of scams based on the fact that the economy is bad, the public is worried... some even to the point of panic... and with confusion, comes profit.

For example:

*** A phone call comes in from a car manufacturer or dealer offering you an extended warranty. The problem --- it's coming from someone who is not in the warranty business. Ask them what model and make car you own. If they don't know, they'll hang up.

*** A cold call arrives offering health insurance based on the President's proposals for national health care, offering special introductory prices for those first citizens who sign up. The problem --- the President's national health care scheme is still on the drawing boards and the people cold calling aren't in the health care business.

*** Automobile arson fraud. You can't meet the car payments, so you torch the car to collect on the insurance. The Problem --- insurance investigators know how to spot arson, and insurance lawyers know how to phone the cops.

*** Inflated values on claims for lost, stolen or missing items, like jewelry. The problem - insurance adjusters weren't born yesterday. If you report it stolen, you'd better have a police report that holds up.

*** Medical identity theft. The problem - the patient may be entitled to benefits, but if someone can claim them in his name first, in essence stealing the patient's identity and health, that's fraud. And it's not going to work for long because the patient is going to notice.

MADOFF INVESTOR SHOULD HAVE KNOWN?

Reprinted as fair use

THE NEW YORK TIMES
May 2, 2009

Suit in Madoff Case Says a Manager Was Favored

By DIANA B. HENRIQUES

A court-appointed trustee in the Bernard L. Madoff case has accused Stanley Chais, an investment manager and prominent Los Angeles philanthropist, of routinely getting “implausibly high” returns on his family’s Madoff accounts — profits so high that he should have known they were the product of a fraud.

The trustee also asserted that Mr. Chais and members of his family withdrew more than $1 billion from their Madoff accounts since 1995 and “untold additional funds” in previous years — money that actually belonged to other Madoff investors, who thought their funds were being invested.

Finally, he accused Mr. Chais of benefiting from false tax losses in his Madoff accounts, some of which were apparently created after the losses supposedly occurred.

The accusations were made in a lawsuit filed on Friday in federal court in Manhattan by Irving H. Picard of the law firm Baker Hostetler, the trustee overseeing the liquidation of Mr. Madoff’s brokerage firm.

A lawyer for Mr. Chais, Eugene R. Licker of Loeb & Loeb, noted that his firm had not yet received the complaint. He said, however, “it is important to understand that Mr. Chais and his family have suffered astounding and ruinous losses from the Madoff scheme.”

He added that Mr. Chais was “saddened by the trustee’s suit and outraged by the very public way in which the trustee has proceeded,” specifically by including Mr. Chais’s children and their spouses as defendants and referring to Mr. Chais’s grandchildren, “none of whom had any decision-making involvement in the investments,” he said.

The lawsuit is aimed at recovering at least some of the money paid out to the Chais family to help compensate Mr. Madoff’s victims. His clients saw a total of almost $65 billion vanish when he confessed on Dec. 11 that his money management business was actually a Ponzi scheme.

The complaint said that Mr. Chais was a primary beneficiary of that Ponzi scheme for at least 30 years, reaping annual returns on his family accounts that averaged 40 percent and were sometimes as high as 300 percent.

The various funds he ran for private clients — who ranged from family friends of modest means to Hollywood notables — did not do that well, according to the complaint.

Although supposedly invested in the same strategy as the family accounts, the client funds generated annual returns of 20 to 24 percent, the complaint said. But that was still about twice what most Madoff investors expected.

Taken together, the lack of volatility and the extremely high profits — “whose only common denominator is the unlikelihood that they could result from legitimate trading” — should have made it clear to Mr. Chais that Mr. Madoff was engaged in a fraud, the complaint continued.

The case is the first time Mr. Picard has asserted that a supposed victim of the fraud got such preferential treatment that Mr. Madoff’s misconduct should have been obvious. But similar complaints will be filed against other beneficiaries of the fraud scheme, said David J. Sheehan, a lawyer for Mr. Picard.

The cases are aimed at recovering money paid out to some investors so it can be pooled to help fairly compensate all investors, Mr. Sheehan explained.

Mr. Picard already has sued several banks and institutional investors that withdrew money from their Madoff accounts as the fraud was collapsing. Those lawsuits cited federal bankruptcy code provisions that allow the trustee to challenge payments Mr. Madoff made in the final 90 days of his long-running fraud.

But those so-called preference cases did not accuse the defendants of having any reason to suspect that the money they withdrew was the product of an illegal investment scheme.

The lawsuit against Mr. Chais does that, breaking new ground in the legal strategy the trustee has pursued since his appointment on Dec. 15.

According to people briefed on the litigation, Mr. Chais is one of a handful of favored Madoff investors who appear to have gotten outsize returns over the years.

Mr. Chais, who is 82 and recently relocated to New York City, has already been sued by several former clients, who invested with him through quaintly named partnerships like Popham, Lambeth and Brighton, which he served as general partner.

Like investors in other large feeder funds that invested with Mr. Madoff, the plaintiffs in those cases claim that Mr. Chais negligently ignored a host of warning signals about Mr. Madoff and collected outsize management fees for essentially doing nothing but giving their cash to Mr. Madoff.

But the suit by Mr. Picard goes further. It cited 35 times between 1996 and 2007 when Chais family accounts had annual returns of more than 100 percent, and 125 times when the returns exceeded 50 percent. In 1999, one trust fund had profits of more than 300 percent, it said.

It also asserted that some tax losses reported by various Chais family accounts over the years were fictitious, the product of backdated transactions.

And it claimed that this special treatment and the outsize returns “were a form of compensation by Madoff” to Mr. Chais for steering millions of dollars of other people’s money into the Ponzi scheme.