Old-Fashioned Scams | Scams and Frauds Series by Larry Goldsmith – Part Five

As tax season progresses, we wanted to share a NEW Info-Series with you highlighting some of the scams and frauds that are running rampant in today’s day and age. We hope this series, written by Larry G. Goldsmith, will help raise your awareness to these scammers’ newest tactics and provide you with tips to avoid being their next victim. 

Each week, Larry will share a story or two about a specific type of scam or fraud, as well as what you can do about it if you suspect you’ve already been a victim. We hope you find this series helpful and insightful. Stay safe out there! 

[Larry G. Goldsmith, JD, CPA, MAFF is a financial forensic accountant as well as a published author, licensed attorney, and certified public accountant.]

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With many of us buying and selling things online, person-to-person, there is ample opportunity to be robbed and cheated. I once had a client who had planned to buy a car from an online seller. He went to meet the seller and sat in his car for half an hour before the scheduled meeting. As he sat there, he noticed another car carrying a group of thugs drive up and hide around the corner from the car that was listed for sale. Thankfully, he decided not to wait for the seller and left the area.

It’s not an experience unique to buyers, though. I have also heard stories of sellers who were mugged, their merchandise stolen—including one individual who received a bogus cashier’s check after transferring valuable collectibles to a buyer.

These old-fashioned scams are not limited to the transferring of goods for money. You’ve probably heard of “Ponzi schemes,” right? Well, Charles Ponzi became so famous that certain types of investment fraud bear his name. Around 1920, Ponzi discovered that if you sell investments with unbelievable financial returns people will flock to throw money at you. He created the appearance of profits by distributing the money he collected from subsequent investors to pay dividends to the first investors. Ultimately, his plan was to disappear before anyone realized that the only one actually getting rich was Ponzi.

I have also seen oil investments where the promoter drilled 10 oil wells with the first 5 for the investors being dry holes and the subsequent 5—the ones he drilled for himself—being gushers. I’ve seen real estate investments where the promoter secretly used investor monies for properties he owned, while the investors’ properties had cost overruns and lost money. I’ve seen Ponzi schemes where the investment sold to the victims never really existed. There were times when I, too, was tempted by the allure of fast money and allowed my emotions to be swept into an investment that wasn’t good. We can all fall victim to these old-fashioned “get-rich-quick” schemes. Ultimately, though, if it sounds too good to be true, it probably is.

As if adding insult to injury, the latest version of the old-fashioned “bait and switch” comes in the guise of the helpful “professional”. This is when a company offers to assist you in recovering your stolen money. Desperate to recover their funds, the victim is either contacted by an unsolicited party or has found a website promising help. In the case of scammers, the offer for help is often accompanied by a request for upfront payment and a requirement for you to give them your bank account numbers, passwords, and login information. The scammers will typically explain that they need to have access to your bank accounts so that they can trace the stolen monies. Once they have this information, they will steal whatever is left in your account.

So, how do you avoid being taken advantage of in these and other situations?

1. Have your attorney or CPA critically review any investment you want to make before you invest.
2. If you are selling or buying from a stranger, make the exchange at the police station or in the police parking lot, and notify the police in advance that you are exchanging goods in their lot. Generally, a thief will not risk being arrested by committing a crime at a police station.
3. If you receive a check or cashier’s check, before surrendering the goods to the buyer, call the bank and verify that a) the payment is legitimate, and b)there are funds in the account to cover the payment amount.
4. When dealing with fraud in your bank account, trust no one but the bank fraud department, and only call them using the number on your statements, bank card, or the actual bank website. Do NOT use contact numbers from an email or a website sent to you from anyone else. Criminals are getting good at masking websites and email addresses. Again, trust nobody except your actual bank.

Finally, if you are a victim of a fraud, contact the FTC (Federal Trade Commission) at: www.reportfraud.ftc.gov. Also, contact your local police department, and if the fraud committed crossed state lines, contact the FBI.

Everyday there is someone out there thinking of a new angle to take money from others to get rich. Be smart, keep yourself protected, and if there’s any doubt, reach out to professionals, such as your bank, your attorney, or your CJBS team member for assistance.