Susan M. Morgan, CFCS
Extension Agent
Family and Consumer Sciences
Bolivia, NC 28422
May 28, 2003
I. TELEPHONE FRAUD (Listed according to severity of victims’ typical losses)*
Callers claim they will enroll you in the best overseas lottery opportunity each week. Your credit card or checking account will be charged regularly for this service. The scammers will pay out small sums from time to time just to keep you interested. They may collect $10-100/week from you for months. Occasionally they offer you a special opportunity on a “sure bet” lottery package for only $5,000-10,000. They are not enrolling you in any lotteries.
(Targets lower income seniors) Caller advises that you have won a sweepstakes in California. He needs your bank account number to ensure payment of California taxes on the award after you receive it. Your bank account is debited $200 to $400 the following day. Unauthorized debits may occur several more times during the ensuing weeks.
Very elderly citizens are being targeted by young callers who begin the conversation with the exclamation, “Grandmother, it’s me! Don’t you know who this is?” If the targeted senior volunteers the name of a grandchild or great-grandchild, the caller adopts that name and then pretends to be in trouble and in need of assistance. The caller begs the elderly person not to tell the caller’s supposed parents, because the predicament is embarrassing. He or she will send a friend to the elderly person’s house to pick up cash or a check in order to help resolve the predicament. Typical loss: $200-2,000.
Callers claim they will protect you from identity theft and from thieves who might steal your credit card numbers using the Internet and then run up huge debts in your name. They state that you could be liable for hundreds of thousands of dollars if you do not purchase this protection for $200-$600. Federal law protects you from liability for such theft and misuse of your numbers.
For $200-600, scammers promise to list you in an international do-not-call registry which will stop all unwanted telemarketer calls. Offered as an add-on to the preceding service. (Quebec)
This name is used by a well-spoken fraud artist who calls from pay phones and claims to be with the magazine sweepstakes promotion currently airing commercials on TV. He announces that you are the winner. Later he claims that the “prize patrol” will drive past your house and award the prize to someone else if you do not wire him $600 to $6000 to cover taxes on the prize.
Caller informs you that you have won a Cadillac plus $50,000 to $100,000 in cash. You must wire $2,000 to $4,000 to the caller in advance (supposedly for insurance and transportation fees) to receive the car. No prizes are delivered.
The caller claims that you have won a life-interest in a bond issued by a British bank. Monthly income received from the bond will come to $2,000 to $3,000. Bond will be registered in Canada so that it will not be taxed in the US. You must wire $2500 to have it registered in your name.
Caller claims to be an official with, or barrister representing, the Canadian Lottery. You have won second place prize in a large sweepstakes, $300,000 to $500,000, and must forward $30,000 to cover Canadian taxes before prize can be released from the company’s escrow or attorney trust account. If you pay, you can receive a “reload” call informing you that you have actually won first place and need to send more.
Caller claims your prize is in his customs warehouse in New York. You must wire $10,000 to $30,000 to a “bonded customs agent” to cover customs duties before the prize can be released.
Unannounced and via overnight courier, you receive a check for $500,000 drawn on the account of a Canadian corporation together with a cover letter stating you have won a major prize and need to deposit the check with your bank right away. Your bank might even tell you that it appears to be drawn on a valid account. Later that day, you receive a call informing you that a mistake has been made, that taxes were not deducted from the check, and that a stop payment order will have to be placed if you do not wire $20,000 to $30,000 immediately. Days after you pay, your local bank informs you the large check was dishonored because it was counterfeit.
As a “reload” to many of the scams listed above, the caller will claim that your money was never received, that you need to send another payment, and that Western Union will issue a refund for the first wire transmission attempt once the caller sends you a letter.
A caller who knows about your earlier losses asserts that your earlier winnings have been seized pursuant to a court order. You can still receive them if you pay taxes again, and/or the barrister’s retainer fee, usually $10,000 to $30,000.
II. HOME REPAIR FRAUD TARGETING THE VERY ELDERLY
A contractor approaches and claims that your chimney is separating from your house and may soon fall on your neighbor’s house or yard. He offers to secure it. He and his crew simply place a useless metal strap around the perfectly sound chimney. They charge $800 to $2000 and claim the chimney is secure.
A man offers to clean your gutters for a small fee. After he is finished, he pulls pieces of rotten wood out of his pocket. He claims that your entire roof is rotting and needs replacing. Usually he says, “My leg went completely through it.” He says he can have a crew there in minutes to repair the roof. The rotten wood is from the woods nearby. The crew comes and lays new shingles over a perfectly sound roof. They demand $7000 to $8000.
The same crew may present a bag full of mealy worms to the home owner, claim that the worms are consuming the wood in your attic, then recommend that you allow them to spray the attic. The worms, commonly used to feed certain small pets, were purchased at a pet store that morning. The “spray” used by the crew is a concoction of water, kerosine and other smelly substances. Usual charge: $1,000 to $3,000.
The repair crew falsely reports that the repairs to the roof appear to have weakened the rafters in the attic. They offer to brace them up so the roof will not collapse. They hammer two-by-four studs between the rafters and the floor of the attic, then charge $100 for each of these “braces.” The braces, often called “stiff knees,” are not only unnecessary, they can cause damage to the ceilings of rooms below during periods of high wind or heavy snow.
A member of the crew asks permission to use the bathroom. While inside the bathroom, he pours water on the floor around the base of the toilet. Tells the home owner that the toilet has been leaking and might have rotted the wooden sub-floor. After inspecting the crawl space, he informs the home owner that the bathroom floor is rotten, is dangerous and must be replaced. Eventually his crew will charge several thousand dollars for hanging out in the crawl space and pretending to fix the floor, which is perfectly sound.
Crew chief points out that the living room floor vibrates when his largest crewman walks across it. He asks to inspect the floor from below. He emerges from the crawl space or basement and announces that the floor may collapse and needs bracing with heavy jacks. The crew installs several $35 metal “screw jacks” from Lowe’s or Home Depot beneath a completely sound floor. Home owner is charged $500 for each jack installed.
Fraudulent repair crew sends someone to the home pretending to be the quality control inspector. Inspector claims that all of repairs listed above were performed incorrectly and need to be re-done before the local building inspector finds out and condemns the home. He promises to help the home owner sue the scammers and recoup his or her money later. He secures permission and funds to do the above “repairs” again.
This scam is performed by itinerant contractors who strike a victim once and move on quickly, unlike the fraud artists described above. They approach an elderly home owner, state that they have been paving a driveway in the neighborhood, claim that they have unused paving material, and offer what they claim is an excellent deal on paving the elderly home owner’s driveway. The driveway is then coated with an oily substance or a very thin layer of asphalt. The new surface of the driveway crumbles or washes away after a few days. The payment typically demanded ranges from $3,000 to $6,000.
Some of the fraud artists described in the immediately preceding paragraph also like to confront very elderly home owners and angrily demand several thousand dollars for work they supposedly performed several months earlier. Threats of lawsuits, property liens or worse may be conveyed to these very frail home owners. Money is obtained for work which never was performed.
Mortgage lenders offer loans to elderly home owners whose original mortgage loans have been paid off. Loans may be for consolidation of other debts, helping grandchildren go to college, home improvements, etc. Some loans may feature high interest rates and multiple expensive fees for things like credit life or disability insurance, brokerage commissions, “points” and origination costs, etc., all of which are financed as part of the loan. Loan terms may include a “balloon payment” after a few years whereby the entire mortgage loan becomes due and payable. The same lenders may offer to refinance the mortgage loan a few months after it is signed to make payments easier for the elderly home owners. The cycle begins again with the same up-front fees being charged and financed. This may happen several times. Fees for insurance on the earlier 30-year loans may not be refunded or rebated. The end result is that the home owners quickly lose most of the equity in their homes (“equity stripping”) while continuing to pay high payments for what originally might have been a modest mortgage loan.
III. OTHER FRAUDS AND SCAMS
Many major firms have been accused in recent years of creating the false impression that participants in their sweepstakes programs must purchase their products in order to qualify for a prize. Some also have been accused of creating the impression that making more purchases will increase a participant’s chances of winning. Some have been accused of giving individual seniors the impression that the contest is down to them and only a few other contestants. These impressions allegedly have been conveyed by carefully scripted mailings supplemented by expensive TV ad campaigns showing happy winners. Many elderly participants have spent thousands upon thousands of dollars apiece repeatedly purchasing the same products or magazine subscriptions, all in hopes of increasing their chances of securing the multi-million dollar prize. By law, sweepstakes cannot require you to make a purchase in order to enter. Nor can purchasing increase your chances of winning a lawful sweepstakes.
Seniors have been targeted with innumerable misrepresentations about miracle cures and treatments for age spots, arthritis, hearing loss, obesity, vision problems and other physical maladies. Money-back guarantees are common features of these pitches which cause consumers to suspend their skepticism. Terms of the guarantees usually include a requirement that the customer try the product or service for at least four months. The companies often disappear during this period. In addition, most credit card banks will not allow charge-backs for customer dissatisfaction after this amount of time.
Via fax, email or regular mail, you receive an impassioned plea from an individual purporting to be living in a third world country. The stranger claims to be a former high government official, perhaps the family member of a former dictator, seeking to transfer several million dollars to the U.S. The scammer offers a 25% commission for the use of your bank account to effect the transfer. He or she will request absolute secrecy and suggest the funds may not have been obtained legitimately. This is a ploy to secure the numbers of your bank accounts and drain them of funds. The fraudsters may also seek several thousand dollars from you supposedly to bribe a foreign government official who is blocking transfer of the millions into your accounts. Recent variations of this old scam include representations that the money which is being smuggled out of the third world country is slated for orphans or a religious ministry.
This is a variation of the overseas money transfer scam and the sweepstakes scams. The money transfer scammers write/call/email the target and claim that they have received a check for several thousand dollars which they cannot cash in their own country. They ask for the target’s help in cashing it. They endorse and send the check to the target and ask him or her to deposit it, then immediately wire transfer to them 80% of the face amount of the check. The target is assured he or she can keep the balance of 20%. The check appears to be from a U.S. car dealership, a computer company or some other legitimate enterprise, and it will bear a valid account number for that enterprise. Days after the target has wired the 80% overseas, his or her bank reports that the check is counterfeit and will not be honored. Montreal telephone fraud artists employ this tactic as well. (See “Bank of Montreal Scam,” above.)
Female members of some of the above itinerant home repair fraud groups are known to have come to the doors of elderly North Carolina home owners claiming that one of them is about to have a child and otherwise needs assistance. They ask to come inside and use the telephone. While one is on the telephone pretending to call for help, the other one, who pretends to be in distress, asks to use the bathroom . Instead of using the bathroom, she steals money, credit cards, jewelry and other small valuables. Then a male member of the group shows up at the curb and drives them away.
Members of these same itinerant groups, as well as other opportunistic individuals, may befriend an elderly widow or widower and eventually pretend to be in love with them. The immediate goal is to secure gifts and loans from the targeted seniors. The ultimate goal is to secure control of the senior’s estate or financial affairs and divert assets to themselves. The “sweethearts” may accomplish this by convincing the elderly targets to grant them power of attorney or to make them the primary beneficiaries under their wills.
Some clergy members have been accused of exploiting their status and the affections and religious sentiments of very elderly people in order to gain control over their finances. So have some law enforcement officers. A tree service man with no financial training recently obtained a northeastern North Carolina woman’s property by convincing her he could manage it profitably.
At seminars similar to the ones described above, promissory notes for obscure sounding companies may be sold as an investment. They purportedly offer interest rates much higher than the returns on bonds or other investments. The notes and the interest payments supposedly are secured by an insurance policy. The notes may be for a failing company and the insurance policy may be worthless to investors.
Hundreds of North Carolina seniors lost millions of dollars in recent years after an insurance agent allegedly convinced them to invest in payphone leasing contracts in order to secure a steady income stream. The contracts called for the investors to purchase payphones for several thousand dollars apiece. The leasing company which offered the phones supposedly would lease them back, place them in locations throughout the southeast, service them, and make lease payments after deducting their expenses. Cell phones have reduced income from pay phones considerably, so most of the money collected went only to the people who sold the phones and leased them back.
Area seniors recently have received calls or visits from individuals claiming to be with the water, gas or electric company. They claim that the account is past due and that service will be cut off that day. They solicit the senior’s check, credit card number or checking account number so they can obtain payment of the bill and late charges immediately rather than ordering disconnection. In the face-to-face transactions, they seek cash. They are not with the utility company.
Seniors and others struggling to make ends meet may fall prey to road signs, classified ads or mailings offering money for working at home. They are encouraged to pay several hundred dollars to obtain necessary materials so they can get started. The “work” may be stuffing envelopes with mailings inviting others to make money at home. Or it might involve painting or assembling simple items and then returning them for approval and payment. Approval and payment are seldom granted.
Identity thieves target seniors heavily, often because they may have substantial savings, little debt, or property which is unencumbered. Many of the scams and frauds listed above are ploys for securing credit and checking account numbers and stealing from those accounts. In other transactions, identity thieves take over a target’s complete identity. Elderly people have learned of attempts to sell their homes, farms and automobiles out from under them. Some have found that mortgages have been placed on their homes and money disbursed to scammers who used their names. Identity theft is the fastest growing scam in the US and has been the leading consumer complaint category of the Federal Trade Commission for the past two years. Always check all bills and account statements carefully for unusual charges and activities. Contact the bank or creditor immediately if you notice something suspicious. Check your credit report annually. Contact the North Carolina Attorney General’s Office (tel. 919-716-6000) or the Federal Trade Commission (1-877-ID THEFT) for an Identity Theft Victim Kit if you find you have been victimized by this crime.
IV. OTHER TROUBLESOME OR DECEPTIVE BUSINESS PRACTICES
Seniors and others have been discovering unordered merchandise or services charged to their credit card accounts following a regular face-to-face or telephone purchase transactions. They find that the merchant or its affiliate has charged the account separately for a “credit card protection” plan, a discount buying service, or a travel program. Sometimes these charges have been inserted onto the account with absolutely no authorization or discussion by the customer. At other times, the merchant or telemarketer actually mentions the extra service or product to the customer almost in passing as he or she processes the regular transaction, then charges for it without getting the customer’s clear consent. Always dispute these charges promptly with your credit card issuer and the merchant.
Many legitimate charities and fraternal groups utilize professional fund raisers to raise money for their operations. These professional fund raisers can take a significant percentage of the funds collected. The U.S. Supreme Court has declared that the solicitors do not have to disclose this arrangement or their commission structure to you unless you ask. Some telephone solicitors keep up to 90%, so feel free to ask. This issue is now before the U.S. Supreme Court in a case involving the State of Illinois, which brought fraud charges against telephone solicitors who represented that most of the donors’ funds would go to programs for a Vietnam veterans group. In reality, almost all of the money was retained by the solicitors.
Many charity groups like to adopt names which resemble those of well-known charities. Others may adopt a name that sounds like an official law enforcement agency. Telephone solicitors like to use police-sounding names because they know people support law enforcement and may be intimidated by a call from someone who appears to be representing a police organization.. Always check out such groups (and ask how much of your money will go to a professional solicitor) before contributing to them.
Marketers of time shares, campground memberships and resort property shares often try to convince seniors that purchasing their product will be a good investment and something they can leave to their children and grandchildren. Rather than leaving their children something that will appreciate in value, purchasers may leave their children with something they do not want and cannot sell easily, and which will saddle them with years of expensive maintenance, homeowner and membership dues. Always avoid sales pressures to close such a deal and make a purchase immediately. Ask to take materials home for careful review. Review the materials with your adult children if leaving such property to them is a consideration for purchasing.
Many estate planning seminars touted in newspaper ads and mailings are legitimate. Others do not deserve that status. Many of the questionable ones employ names which make them sound like non-profit organizations for seniors. In reality, they may be insurance salesmen seeking to push unneeded insurance policies, annuities, or “trust” programs. They may be members of the securities industry pushing a certain kind of investment. The risk is that their approaches to planning your estate may result in huge commissions for them and expensive problems for you or your heirs down the road.
Susan Morgan is Extension Agent, Family and Consumer Sciences for the North Carolina Cooperative Extension Service in Brunswick County. For more information or questions, contact Susan at (910) 253-2610 or P. O. Box 109, Bolivia, NC 28422.
Please e-mail Susan Morgan,
Extension Agent, Family and Consumer Sciences, CFCS, for
further information or assistance.
The information presented is for educational purposes only. References to trade names is made with the understanding that no discrimination is intended and no endorsement by North Carolina Cooperative Extension Service is implied.
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Date Created 6/20/2003