Jonathan Warren's Scam Scope

Duty Free Incarceration Scam

2011-07-21T22:28:00.000-07:00

This brings "buyer beware" to a new level.

Reports are coming in from consulates around the world of a scam perpetrated by international airport duty free shops and local cops. Here's how it works:

While awaiting your international flight at the gates of an international airport, you go shop in a duty-free store. These are common and popular because they do not charge sales taxes to those immediately leaving the country with the goods.

You buy an expensive perfume, a box of chocolates and a carton of cigarettes. In a duty free shop, the clerk has to take your name and ticket information, as well as your passport number so that you do not have to pay the taxes. In a few airports, they event put your duty free goods in sealed bags on the ramp, so that nothing can be added to the bags before boarding. The problem is in the majority of airports, where they let you walk out carrying your goods.

The scam begins, as is so often the case, with the cashier. She either (a) adds something to your bag, such as an additional bottle of perfume, or a second carton of cigarettes. These items can easily be mistaken for promotional, as duty free stores often engage in this kind of marketing.

Next, after you have left the store and are walking around the gate area or to your flight, the sales clerk calls her accomplice, the local cops. The clerk provides your complete information and says you stole the extra bottle of perfume. The cops have an easy job of finding you at the international terminal, especially when you need your passport to get on the plane.

The finale is when they stop you, and you happily show the receipt for your goods. They then point out that you have a stolen bottle of perfume, and you are held - incarcerated.

Next comes the jail hustle, whereby, depending on the location, you are charged for air conditioning, water, a bed, visitors, phone calls, etc. You can easily spend a few thousand dollars before you get free, and even then it may be only by admitting guilt and branding yourself a thief.

This tactic has been reported in parts of east and central Asia, and Central America, but it could happen anywhere a cop can take a bribe. Because it is so clean, easy, predictable, safe for the conspirators and profitable, I expect it could spread like wildfire.

How to stop this from happening to you:

Don't leave the duty free store unless your receipt matches exactly the items in your bag. If there are legitimate gifts, they must also be identified as such on the receipt.

Nevada Resident Agent Scam

2010-09-10T18:34:00.000-07:00

A resident agent is simply a company or individual who acts as the resident representative of a corporation or similar entity, in the jurisdiction of incorporation. Until now.

For example, if you reside in California but you are incorporated in Nevada (as is often the case for tax and other reasons), your corporation has a resident agent. It might be your attorney, or it might be any of the many corporate services firms in the resident agency business. Typically, they will charge a fee ranging from $100 to $300 per year to act as Resident Agent.

Legally, there isn't much they have to do. The resident agent is just the person or company of record to which anyone can serve papers or formal notices meant for the corporation represented. Being available for such service, and passing on these communications, are basically all the R.A. has to do by statute. Most charge the fee and barely provide any service at all. Recently, some have become less than useless. They've begun running a scam.

There are approximately 322,000 corporations resident in the State of Nevada, each paying fees to the various service providers. Apparently, some R.A. firms have decided they needed a bigger slice of that pie - whether they are actually asked to do it, or not. Their methods are bold and simple.

1. The Clawback

Usually when you incorporate in Nevada, you might use a service which does little else. They tend to charge much less than attorneys, and their focus on the single activity of incorporation often makes them better and more efficient at the task than is a typical law firm. Incorporation firms also act as resident agent for the companies they start, which is the real source of profits and ongoing income. Because a company has to pay a state fee to change its registered agent, the R.A. firm can count on continued business once they have it.

The claw back comes when you have replaced the R.A. firm with your own R.A, as is often the case with people who live in Nevada. Some firms are using the credit card on file for the original incorporation, and charging a resident agent fee and resident agent change fee. They are even filing the forms without any further consent of the corporation. They usually point to their original agreement to act as R.A, typically for the first year or six months, as cover for the scam.

By keeping the credit cards on file, they 'claw back' the R.A. position by billing you later without your consent. Try to cancel, and your bank will likely not believe you, as they see that the firm is in fact the R.A. for the corporation after the billing. Banks are notoriously wilfully blind.

2. The Renewal Hustle

Some firms are enjoying a tremendous business by calling on corporate officers when their company is close to, or past its due date for filing of the annual list of officers required by the state. These R.A. firms take advantage of the situation by knowing that most of the corporations are small, closely held companies and LLC's controlled by one or two people. They call from a boiler room and use official-sounding names, often with the name of the State or County in the name of their private firm. They tell you that you are "in default" or "in violation" and that you will be fined an additional fee by the state of Nevada unless you renew right away. They quote you a price which includes the renewal (list of officers filing fee) and their own fee. You provide your credit card information, and they have you.

Once they have attain the position of R.A, you can't get away from them without paying another $60 fee to the State of Nevada. This helps keep them in the game. Unless you have someone to perform the service in Nevada for less, why would you change once they've already grabbed your cash? They bank on the confusion, misdirection, state fee structure and inept credit card banks.

The Solution - Free Resident Agent Service

In an effort to bring transparency and clean business to this service as an industry in Nevada; to expose what little value it brings in its current form to Nevada business in general, and also for the self-serving purpose of possibly generating more consulting business, in cooperation with the Legal Attache of the Consular Chamber of Commerce, I am offering to act as Resident Agent for your Nevada corporation, LLC, LLLP, Business Trust or other entity, for free.

This is not a limited time or limited term offering. You will pay nothing to have me serve as your resident agent. So now you can afford to fire the old R.A. company and have a real, live person, with a real profile in Nevada, be your resident agent.

If you need help getting your money back from your credit card company for a bogus resident agent payment, I'm happy to help with that too.

For details, please see http://www.motiongranted.us/

Please comment with your own experiences regarding resident agent scams, whether in Nevada or any other state or country. We want to hear about it.

Bank Instrument Leasing and Letter of Credit Scams

2010-08-22T20:27:00.000-07:00

This one has been a long time coming.

If you have paid money to anyone for a service like this, and are still waiting for the desired result, call me in complete confidence. I can usually help if you move quickly enough.

Bank instrument scams are usually offered to any of the following

Those looking for large project financing for which they can not qualify
Those in control where large sums of cash are held on deposit (e.g: escrow companies, corporate treasurers, etc)
Those who think they may have influence on those who control where large sums are held on deposit, or;
Those who hold themselves out to be any kind of financial broker
Legitimate investors seeking high returns

Bank instrument leasing scams come in a variety of looks, shapes, sizes and descriptions. The verbiage used to hook the mark into the scam can vary as well. Typical examples include:

HYIP or High Yield Investment Programs
HYTP or High Yield Trading Programs
Platform trading programs
MTN or Medium Term Note trading programs
Bank instrument trading programs
Credit enhancement programs
Sinking fund programs

These programs represent the most sophisticated misdirection techniques I have ever seen, as well as what I suspect are the most successful in history. Virtually all of them involve duping the mark, and often the brokers too, into believing that a balance showing on a statement is something more than what it is. Various real bank instruments are used for this con. Some of these instruments are:

SWIFT MT799
SWIFT MT760
Letter of Credit or LC
Standby Letter of Credit
Medium Term Banknote
Bank Instrument

By some estimates, this scam has existed for 30 years. I first saw it 15 years ago, and have been approached with more of them every year since. By now it has developed its own vernacular. Some of the terms used by the practitioners of these scams are:

"Top 25 bank"
"Trader"
"Platform Trader"
"High Yield Investment Program"
"Show Money"

The specifics of each of the scams included in this breed is a thick book I've yet to write. Let's hope it becomes history before I ever have the chance. I will summarize for your here.

If you have paid any funds whatsoever toward the objective of leasing a bank instrument, you won't see it again. If you see anything, it is the proceeds of others who bought into the same scam, and a perpetrator paying you to keep you quiet while he does it again.

It's a scam.

If you have paid funds for such a service, and are getting delay after delay, call me immediately at 702-714-0059 for a free evaluation of the likely situation.

Don't be embarrassed. Some very sophisticated people have done the same.

If there is any potential of getting your funds back, I can help. Move quickly!

I offer no legal advice and charge no fee. Nothing herein shall be considered an offer of any legal service whatsoever.

Tax Prep Identity Thieves Filed for $4 Million in Tax Refunds Using Names of Living and Dead

2010-04-14T11:02:00.000-07:00

“I am probably the single biggest threat to the U.S. government currently living and they don’t even know it.”

“I can do things to the government that will make all these terrorist organizations look like sewing circles.”

- Arizona Tax Preparer

1900 fake tax returns

$4 million in stolen refunds
170 bank accounts
175 different IP addresses
2 guys
1 still at large

Some of us never stop to think about the fact that a tax preparer has all of our critical, personally identifiable information. It's time we took notice.

Read the full story:

Identity Thieves Filed for $4 Million in Tax Refunds Using Names of Living and Dead | Threat Level | Wired.com

Uncompetitive RFID Policy Leads to Cottage Industry

2009-11-03T09:34:00.000-08:00

The race is on. With the near complete failure of authorities to recognize the security risks inherent in the prolific use of RFID chipping in everything from credit cards to passports, the private sector has found a cottage industry in making up the lapse in attention.

One firm leading the pack is DIFRWear. Founded in 2005, the Company's Mission is "Our mission is to give individuals the ability to maintain privacy and ensure security in a world of insecure contactless devices." Their products are designed to facilitate just that.

We invite other firms to share their approach to RFID protection as well.

RFID NIGHTMARE BEGINS: The SunBreak | News | Business | Cyberthieves are Picking Pockets with RFID

2009-10-09T17:57:00.000-07:00

My earlier blog entery regarding RFID:

http://jonathan-warren.blogspot.com/2009/07/chips-in-official-ids-raise-privacy.html

has seen the predicted eventuality:

The SunBreak News Business Cyberthieves are Picking Pockets with RFID

Fed chairman victim of identity fraud ring: Newsweek - Yahoo! News

2009-08-27T09:19:00.000-07:00

No one is immune!

Yet another demonstration that ID theft is done at the document level, not so much in cyberspace. The most proficient of these criminal types have figured out that they can do all of this without even stealing the purse, by just cell-phone photographing the data needed in a few seconds.

Here's the latest victim:

Fed chairman victim of identity fraud ring: Newsweek - Yahoo! News

Be careful showing your ID to that cash register clerk - always at least cover your postal code.

CARS.gov Site Accused of Government Takeover of Consumer PC's

2009-08-06T18:06:00.000-07:00

This blog is edited as non-partisan as possible. For that reason we try to stay away from political editorials offered by either the left or the right, and I would normally not quote anything from such programs.

In this case, however, Glen Beck of Fox News did seem to break this story. The CARS.gov website, which facilitates the Cash for Klunkers federal government program, requires that dealers who use it literally allow it to take over the PC of the visiting user, and turn over ownership of all content of the PC to the federal government or its assignees.

Beck is alarmist, acting like this is what consumers agree to, rather than dealers, which is not the case. But if I was a dealer, I would be alarmed!

Consumers should be alarmed as well, however, as their own information is on the Dealer's computer, and therefore becomes the property of the federal government - right down to the credit report. As the consumer isn't the one who agrees to this, it is even more sneeky.

SEE BECK'S STORY:
http://www.youtube.com/watch?v=oy8wgS69xjI

Where is the Privacy Czar? This would appear to be nothing but a scam to collect other monies owed. CARS.gov appears to be a ploy by the Treasury to find tax debt, and scoop it from the program. Let's hope we hear some inteligent explanation from the Administration.

US Falls Below Russia, Moldova, Belarus in reported corrupton rankings

2009-08-06T09:37:00.000-07:00

Transparency.org has issue its lates Corruption Barometer, whereby citizens polled rate various categories of corruption in their countries.

In the categories of Political Parties, Legislature, and Private Sector the US rated worse then Russia, Moldova, Belarus, Azerbaijan and Armenia, among others.

See the entire report at:

http://media.transparency.org/fbooks/reports/gcb_2009/

Feds at DefCon Alarmed After RFID’s Scanned | Threat Level | Wired.com

2009-08-04T10:39:00.000-07:00

Follow up to http://jonathan-warren.blogspot.com/2009/07/youtube-how-to-hack-rfid-enabled-credit.html:

Feds at DefCon Alarmed After RFID’s Scanned Threat Level Wired.com

The very proponents of RFID chip usage have had the tables turned on them, as one might expect, in Las Vegas.

At the DefCon hacker convention taking place now, attendees set up an RFID scanner which photographed chip carriers. These of course included various feds - under cover and not - in attendance.

The amiable scanner owners were kind enough to destroy the data in public view, after letting the "Meet the Fed" panel drop jaws when they heard the news. Lucky for the feds it was such a friendly environment. Is everyone else who scans for RFID's so friendly?

False Alarm? - ‘Credit Hackers’ Win the Credit Card Game … Legally | Threat Level | Wired.com

2009-08-02T13:41:00.000-07:00

This article in wired purports to expose a new form of "credit hacking". However, the activity described is NOT hacking, NOT illegal, NOT able to take undo advantage of creditors and NOT considered any threat by the banking industry.

The tone of the article seems to seek to create a buzz around nothing, and generate sympathy for the credit card industry. One has to wonder the true motives and backing of the person supposedly calling himself "anonymous". Could this be the credit card industry laying cover?

Read the article:

DefCon: ‘Credit Hackers’ Win the Credit Card Game … Legally Threat Level Wired.com

YouTube - How to hack RFID-enabled Credit Cards for $8 (BBtv)

2009-07-16T00:26:00.000-07:00

Hacker demonstrates exactly how easy it is to obtain RFID data.

Click here:

YouTube - How to hack RFID-enabled Credit Cards for $8 (BBtv)

Please comment.

RFID Chips in New Forms of ID Facilitate Massive Scams, Security Breaches

2009-07-11T17:58:00.000-07:00

Nightmare security issues with the new US Passport and e-Passport (Passport Card) call into question the compliance of these documents with even the most basic security issues.

Chips in official IDs raise privacy fears - Yahoo! News

The U.S. Dept. of Homeland Security did much to avoid risk of hackers getting in to the database, by making the number a mere pointer to their own files grounded in DHS computers. But the very function of the RFID chip, broadcasting an ID number, is easily co-opted by the private sector (retailers), and combined with the other information the retailer collects.

No need to obtain the government's data file, just about anyone can buy the data collected by the retailer, including your identity, all of your buying habits and payment options, demographics information, etc. The data then is neatly wrapped up and tied together with your RFID number, then sold, legally, to any number of buyers.

Now you walk through the mall, with your new drivers license, passport or passport card in your wallet, and that Israeli chick at the kiosk with the Dead Sea soap calls you by name - from 30 feet away.

Worse, some creepy guy likes what he sees when you pull up next to him in traffic. He inputs your RFID on his mobile, and gets everything about you, including address. He may even add your license plate number to the database app on his iphone.

Worse again, you can be completely watched on cameras which turn on only when you are within 30 feet, anywhere in the world. You might not be worried about that at home, but what about when you are at a foreign airport, or in a foreign city? How about when you are crossing between two foreign countries?

you can remedy the problem at http://jonathanwarren.wordpress.com/privacy-services/, but should you have to?

It seems that RFID has no redeeming value. Please comment.

Hospital Billing Scam: Ignoring Health Insurance, Billing Taxpayer Instead

2009-07-09T11:29:00.000-07:00

U.S. hospitals fraudulently writing off huge "losses" after inflating prices beyond insurance approval limits.

Health services networks collecting full retail prices from federal government by writing off bad debt of three to six times the billing amounts approved by health insurers.

TYPICAL SCENARIO

You are injured in an auto accident. An ambulance takes you to a hospital, where you are admitted. The hospital collects your insurance data, and provides service.

Your auto insurance, and/or that of the other driver(s), is billed for it's medical coverage, typically in the range of $15,000 to $30,000.

Three months later you get a bill from the hospital for the remainder of your hospital costs, which may be in the hundreds of thousands of dollars. You tell them to bill your health insurance, but the hospital shows you that your health insurance finally declined your claim, 4 months later. They seek a statement from you that you can not pay the bill. They then write it off as bad debt, and assign it to collections.

You file a "medical bankruptcy", just like over half the consumer bankruptcies filed.

WHAT HAPPENED?

Your health insurer is tough for the hospital to deal with. The insurer holds down the price of services by not allowing the hospital and health care providers and suppliers to overcharge. The hospital would rather not deal with this.

Instead, the hospital bills the auto insurance for the limited medical coverage. This insurance does not fight the hospital on the overcharging. The hospital can therefore bill you 3-6 times what your health insurance would pay for the same services.

The hospital ignores the health insurance for (in most states) three months, beyond which time the health insurance will deny the claim by expiration clause.

The hospital then simply writes off the bill, at an average of 3-4 times the amount they would have collected from the insurer. The write-off credits back the hospital about 1/3 of the amount written off, in taxes.

The end result is that the hospital is paid 100% or more of the amount it could have collected from the insurers, and they do not have to invoice or negotiate. The government pays the bill. the debt is simply passed on to the tax payer.

800,000 personal bankruptcies were filed in 2007. Medical bankruptcy accounted for 62% of personal bankruptcies filed in 2007, with a national average of $26,971 included in bankruptcy filings, for each uninsured person, and $17,749 for each insured person.

If half of the filers were insured and half were not, then the total discharged debt is just under $25 Billion for 2007 alone, not including those who did NOT file bankruptcy and did not pay the medical bill.

Industry estimates are that 66-90% of charged-off medical bills are not included in any bankruptcy filings. This would bring the total to between $75 billion and $250 billion in medical receiveables written off by healthcare providers in the US, in 2007 alone.

These writeoffs gave $25 billion to $83.3 billion to the healthcare providers, directly from the federal government- no billing, no negotiating, no oversight, no customer service to have to bother with. The present system might be considered the wost government-paid health care system in the world.

This ripoff bilks everyone, in favor of the institutional health care provider and the insurance company which typically owns it.

Cyber Attacks Clobber USA

2009-07-08T09:24:00.000-07:00

Sustained attack closes off many sites:

http://news.yahoo.com/s/ap/20090708/ap_on_go_ot/us_us_cyber_attack

I noticed this when for the past few days the FTC website would not load. It is not much better as of this writing. Security professionals please comment.

Social Security Numbering System Is Vulnerable to Fraud, Researchers Say - NYTimes.com

2009-07-07T13:52:00.000-07:00

The system has been cracked. This of course is nothing new. Those who manufacture false ID's, including false social security cards, have known this for years.

Social Security Numbering System Is Vulnerable to Fraud, Researchers Say - NYTimes.com

pissedconsumer.com, ripoffreport.com, complaintsboard.com Extort, Facilitate Identity Theft, Potential FTC violations

2009-07-06T10:13:00.000-07:00

The new, for-profit model of consumer complaint websites have left the old BBB in the dust, generating tremendous profits with which they have successfully combated nearly every legal challenge to their bold-faced facilitation of slander and libel.

Complainsboard.com, ripoffreport.com and pissedconsumer.com (formerly pissedcustomer.com, before they lost their old domain) have all jumped to the top of the Google pile whenever a search is done on the name of a person or company who has been bashed on their servers. Their successful trade in advertising to all who search the web using the name of their mark has been second only to the thinly-veiled blackmail perpetrated by their offer of "Reputation Management" services to those who have suffered form the illegitimate complaints.

Hiding behind the Right to Freedom of Speech, these clowns openly refuse to remove any posting, true or not. Unlike the Better Business Bureau, this new model is closed, and offers no third-party arbitration. Rather, these new 'slander sites' allow you to post your rebuttal. This of course is of no use when the damage is done by the illegitimate initial report, which remains in the initial search results, which show that the mark is perhaps the next Charles Manson or Bernard Madoff.

The so-called "reputation management" services offered by these anonymous providers will charge the mark about $2,000. typically to remove the damage from the site of the "reputation manager". Sound familiar?

This is a protection racket. Pay up, or we 'facilitate' the first amendment rights of anonymous people to slander you. It easily crosses the line to organized conspiracy to extort; blackmail.

The perpetrators have weathered many lawsuits attempting, for the most part, to have the name of the mark removed from the URL generated by the services. These suits have failed due to the strength of the right to free speech.

THE WEAKNESS

It appears that these sites, do not well police their own postings. Many seeking vengeance simply slander individuals as best they can put a sentence together, and post anything they can which they feel will embarrass, humiliate or endanger the mark. Herein lies your ability to combat the scam.

Many complainants have posted personally identifiable information (PII) on their marks, in hopes of doing them damage. This could include combinations of name, address, birth date, telphone number, financial information, social security number, family member names and family member financial information. Slander sites gulp the information in, without regard for the liability of posting it, because they sell the ads viewed by the many who seek the information posted by the conspirators.

But The FTC may not like that. Personally identifiable information about you can't be traded in without your consent. By posting it on ad-supported sites and not allowing you to remove it, they are certainly trading in your PII. That's an FTC violation.

With enough complaints to the FTC, this practice may be quashed. Let's try it, shall we? If you or someone you know has been a victim of some one posting your personally identifiable information on any of these slander sites, post your complaint here: https://www.ftccomplaintassistant.gov/

If you would like help with the wording, I offer my assistance free of charge. It is critical to keep the complaint honest and accurate. Just email me the links to the PII posted, and I'll draft your complaint for you to post if it meets your approval. Again, free of charge.

ID Theft: Corporate ID Theft, Case 1

2009-07-04T16:24:00.000-07:00

If you think it's easy to steal some one's ID, you'll be really surprised how simple it is to steal the identity of a corporation. For this one, I'll bring in some personal experience.

One day, while in Washington, D.C. for an embassy party, I got a call from an FBI agent who said he needed some information on a borrower client of mine, from a few years earlier. The client had caused someone to wire my firm "some money", and he was investigating where it gone from there. I asked him to fax me his subpoena for my record, and to please give me the names by phone so I could begin the investigation.

The names associated did not sound familiar. "How much money was wired to us?" I asked.

"Nine hundred thousand dollars." His reply made no sense. I knew I would remember clients of such size. I told him I was suspicious.

The agent was quite seasoned, and knew enough to confirm the bank name bank account number of my operating account. I provided this, and he realized the account number had not matched. It was however, the a different branch of the same bank, in the same city as my branch. My company name and address had been used. I later double checked, to find I had no record of ever having received any such wire, and had no involvement with the named individuals.

So what happened?

Quite simply, someone had obtained a copy of the address articles of incorporation of my firm from public records, faked a list of officers, opened a bank account in the company name, pretended to be the company in offering like services, and got a client to wire them $900,000. for nothing. My corporate identity had been assumed. Their client (the mark) never saw the benefit of his $900,000. He thought he had been talking to the company, was made who-knows-what promises, wired money to the sammer when he thought he was wiring it to the real company, the rest is history.

Bank Fraud Scam: The "Who's Who"

2009-07-04T15:50:00.000-07:00

This US-only, 3-victim scam is designed to allow the perpetrator to spend small amounts of money from one victim's checking account, while convincing him or her that it was done by another victim. The money is paid to a third victim who has to refund it.

Imagine you get a phone call from a vendor telling you your check bounced, and demanding payment. Only you never heard of the vendor. Or perhaps you see some small checks clearing your bank account that you didn't write. You might be a vendor who gets checks from a local company which don't clear, and the vendor seems to be playing dumb to the fact.

All of these could be victims of this scam.

Scammer obtains banking ID numbers of an existing valid account of Victim 1. This is usually done just by seeing the check. Any cashier can easily obtain the data, especially if they are using a mobile phone camera. The information needed is only the account number and routing number at the bottom of the check. This information is of course also available to anyone to whom you write a check.
The scammer obtains the name and address of a valid company, which will become Victim 2. This can be as easy as going to the phone book or the internet. Just about any company will do.
Scammer prints checks (easily done on any computer, no special ink necessary) which shows the routing and bank numbers of Victim 1 at the bottom of the check, and the company name and information of victim 2 at the top left of the check.
Scammer then goes pays for services or goods from just about any retailer (victim 3) using the checks he has created. He signs his own name, or the name of any fake or stolen ID he has. The amounts of each check are usually under $100.
The check confirms, because the numbers read by the cash register at the bottom are valid, and the balance is sufficient. The ID matches perfectly and signatures are spot-on. The name of the account is usually a corporation, and no retailer has a way of verifying if the signer is a signatory to accounts for the corporation.
The check clears the account of Victim 1, who may or may not notice the small amount missing. If Victim 1 catches the bogus check, they notify the bank, which then closes the account and returns the check to the retailer or payee's bank.
Victim 3, The retailer or payee, then gets notice that the check is returned. Naturally they contact the Victim 2, the company who's name was used at the top of the check. The company denies all knowledge. If it is a small company, Victim 1 probably won't believe them, and will pursue them with bad check laws, only to find out they never wrote the check.
Unkown perpetrator gets away with paying bills with other's names, addresses, bank accounts, etc.

How to Protect Yourself

Write checks as seldom as you possibly can.
Don't send checks bearing a signature to vendors you don't know. Use a credit card or online bill pay service instead.
As soon as you hear something that sounds like any of the above, file a police report to protect yourself from further action done in your name.

Double Factor Fraud

2009-06-28T19:38:00.000-07:00

This scam is designed for a merchant to rip off its factor. Amazingly simple, incredibly effective.

Narrative:

Merchant creates a factoring agreement to sell & its accounts receivable to a factoring house (a form of financing).
The factor records a UCC-1 financing statement to secure its position as holding the primary claim on all accounts receivable of the Merchant.
Merchant sells receivabes to factor, receiving cash up front. Factor bills the customers.
Suddenly, the Factor stops receiving payments on the invoices.
Factors contacts invoiced customers to attempt to collect, finding that they claim to have already paid.

What Happened?

The Merchant set up a second company, with a similar or the same name as the Factor.
Merchant has the new 'fake factor' company bill his customers immediately following the real Factor's bill, as an address correction. He might even offer a discount.
Customers pay the new fake factor, thinking they have paid the correct party.

Result:

Merchant has received the advance from the first factor, and the payment from the customer, getting paid 75%-80% more for each invoice, until he is found out. This is often done when the Merchant is on his way out of business.

Prevention:

Contact each customer prior to purchase. Make sure they understand that there is to be no assignment without your involvement. If you learn of one customer paying an imposter factor, the rest are too. Contact authorities and file a criminal scam report. You will likely be told to file a civil action to get an injunction.

Negotiated, Willful Blindness Scam

2009-06-27T00:43:00.000-07:00

This is a commercial finance scam designed to either create a fall guy for an intentional default, or a fall guy for an exhorbitant amount of risk.

A retail lender seeks an investor to purchase or expand its business. The value of any retail lender depends on the its own credit. The more money the lender is able to move, the more valuable it is.

The retail lender locates a wholesale line of credit provider. This wholesale lender wants to issue the line of credit, as its value is determined by the amount of "assets" it has. Since each issued line of credit is considered an "asset" they are anxious to get the line of credit on the books. This is especially the case in hot market scenarios.

The wholesale lender requires that the retail lender provide audited financials from a CPA firm. These of course transfer liability to the CPA firm if the financial information provided is not accurate. However, most applicants can not provide financials substantial enough to qualify for the wholesale line of credit. This leads to a notorious game of willful blindness.

CPA firms make the bulk of their income by charging the fees for audited financial statements in situations like these. The younger, newer accountants are hungry for the new accounts of smaller companies getting their first sets of audited financials.

With all three parties motivated toward exactly the same result, the situation is ripe for a classic case of willful blindness. The result causes the CPA firm and the wholesale lender to begin direct communications. The result is negotiated financials and other qualifications, in which all three parties negotiate directly with eachother to produce qualifying documents, despite the lack of real qualification of the retail mortgage company.

Each party to the negotiation seeks to interject what it sees as necessary to provide for plausible deniability later. The CPA wants bank statements to read as they need them to read. The wholesale lender wants the CPA to produce audited financials which they can point to later as proof that the retail lender is financially qualified. The retail lender desperately wants the line of credit, and may create false documents to fulfill the requirements set forth by the CPA.

Finally, the retail lender produces false statements, so that the CPA can produce blindly audited financial statements, so that the wholesale line of credit provider can issue its line of credit to the unqualified retail lender.

When the line of credit goes into default, the wholesale lender attempts to collect from the retail lender, which often declares bankruptcy. This brings the audited financials into question, and the CPA firm. This brings into the arena the errors and omissions insurance of the CPA firm itself.

In some cases, even the institutions providing the bank or other statements used in the preparation of the audited financials, are accused by the wholesale lender of collusion.

The entire objective is to get an outside party to cover the debt. Either the errors & omissions insurance of the retail lender or the CPA firm, or the financial institution which provided statements, will have to pay up for the scam of the three in collusion.

Once the line of credit is provided by the wholesale lender to the retail lender, there is a great increase in market value of the retail lender. They then attempt to obtain an investor or sale of the firm before the resulting default takes place.

This is a method of conspiracy to defraud a lender or an investor, but it is seldom caught or prosecuted.

Overpayment-Refund Check Scam

2009-06-26T22:49:00.000-07:00

Also known as the Cashier's Check Scam, the latest iteration is slightly more sophisticated than predecessors.

Here's how it happens:

You advertise something for sale. It could be an item or a service. You advertise it on the internet, usually somewhere with no ID checking capacity, such as craigslist.
A potential buyer contacts you and expresses interest in your offer.
The buyer explains that they will provide a cashiers check or corporate check to pay in full.
To put you at ease, the buyer gives you all of the details of the cashiers check, or of the corporation and its corporate check on the way.
If you call the issuing bank to confirm the validity of the check, it may be validated. This only means that the check bears a real account number, routing number, and matching issuer name.
The buyer then tells you they have sent, or are sending an amount greater than the price of your offering. The overpayment, and that they need you to send the difference back to them, or pay it to a person affiliated with them, such as a son or daughter in your local area.
The check arrives as promised, for a larger amount than required.
You deposit the check as expected.
You wait for the check to clear. It does.
You refund the overpayment to the buyer.
The check later is returned by your bank, leaving your without the funds you sent to the buyer as overypayment.
The buyer is nowhere to be found.

What happened?

The "buyer" is a scammer, who had obtained the information on the check provided by copying it from an actual check, viewed by the scammer at sompoint.
The scammer then goes fishing for anyone who will accept the check of an overpayment.
With a "mark" in his sites, the scammer then forges the check or cashier's check. This is easily done with standard desktop publishing.
When you deposit the check, it clears the account of the unsuspecting owner of the account.
The company on who's bank account the check was drawn (the "maker") reports the fraudulend check to their bank.
The maker's bank retracts the payment, charging your bank for the amount cashed. Your bank then charges you.