In 2017 my Website was migrated to
the clouds and reduced in size.
Hence some links below are broken.
One thing to try if a “www” link is broken is to substitute “faculty” for “www”
For example a broken link http://faculty.trinity.edu/rjensen/Pictures.htm
can be changed to corrected link http://faculty.trinity.edu/rjensen/Pictures.htm
However in some cases files had to be removed to reduce the size of my Website
Contact me atrjensen@trinity.eduif
you really need to file that is missing
2018: The US Financial Crimes Enforcement Network (FinCEN) receives more than 1,500
cryptocurrency-related suspicious activity reports every month ---
Click Here
2021 Video Link on Scam
Protection (Forwarded by Tina)
Jim
Browning (his alias) is a software expert who spends time in the evenings
thwarting scammers. The article is a real eye opener, his work is
outstanding and has aided in arrests and/or shutdowns as well as being able
to stop a scam in its tracks while aiding the victim-to-be.
He has a Youtube website that you may be interested in checking out:
2 - Simply delete suspicious pop-ups or phone messages (one thing you can
try if you get pop-ups that concern you, is to power your computer off, wait
a few seconds, then restart)
3 - If on the phone, ask for info in writing, then hang up
4 - Do not allow anyone remote access to your home computer and don't
download software unless you are absolutely sure it is from a reputable
source
Top 10 Scams of 2016 ---
https://www.scamguard.com/list-of-scams/?gclid=CIni6KfGhM8CFVVahgodlRoFCA
Jensen Comment
I get hit with the computer repair scam phone call several times a week that is
not a recording. Sometimes the scammers even pretend to be from Dell or
Microsoft. The best way to get them to swear out loud at you (with an India
accent) after you've humored them along for 15 minutes with questions is to
insist that they give you a phone number so you can call them back. You will
hear four letter words I did not think people used in India.
One of the top USA top scams are also those
IRS threatening phone calls (usually recorded messages) warning you that the
law will soon knock at your door if you don't make an IRS settlement now ---
http://www.local10.com/news/florida/beware-of-aggressive-irs-impersonators-telephone-scam-
I get one of these phony calls at least weekly. The IRS will not contact you by
telephone or email to warn you of a an issue with your return. The warning will
come by US mail. You may be invited to respond by telephone, but usually the IRS
likes to communicate by postal service mail or office visits.
We got hit as grandparents by a phony call from a supposed grandchild
allegedly arrested outside the USA. As luck would have it we did not fall for
it, although this is a very convincing scam for grandparents who do not talk
with a grandchild frequently on the telephone and are not quite fine tuned in to
voice recognition like we are with our children ---
"Grandparent
scam" explained: What you need to know ---
http://www.cbsnews.com/news/grandparent-scam-explained-by-former-scammer-what-you-need-to-know/
These days it's often more common for grandparents and some of their
grandchildren to communicate via email rather than telephone. If you get an
emergency request from a grandchild don't fall for it immediately unless you are
100% certain that the call is genuine. You can ask a grandchild a question that
a scammer cannot answer such as what did we do together during our most recent
visit. If you send money send it via something like a postal money order or
certified check rather than give out a credit card number or checking account
number.
My name is Pat and I am emailing you to highlight a number of useful
resources on the topic of fraud, you might like to share these with your
visitors:
Tax
practitioners and their clients are concerned about the growing epidemic of
tax-related identity theft in America - both refund theft and employment
theft. At the end of fiscal 2013, the IRS had almost 600,000 identity theft
cases in its inventory, according tothe IRS National Taxpayer Advocate.
The AICPA shares
members' concerns about the impact of identity theft and offers the
resources below to help them learn more about this issue and advise clients.
We have provided recommendations to Congress and the IRS Oversight Board on
ways to further protect taxpayers and preparers.
Good Morning Dr. Jensen,
Hope you had a nice memorial weekend. I wonder whether you receive my email
sent to you on the 23rd? Did you have a chance to review our site reviewandjudge.org?
Perhaps it is a valuable resource to your visitors in your page
www.trinity.edu/rjensen/fraudreporting.htm
I don't know just why, but this site also has a link to having any
Website you choose evaluated for age, popularity, and a Google love rating.
For example, I keyed in my home page at
http://www.trinity.edu/rjensen/
Note that for some reason you have to delete the http:// part of the above
URL to get this to work. Thus to make it work I key in only www.trinity.edu/rjensen
I got 5.0/5.0 stars for age of the Webpage (I've been maintaining this page
for over 15 years), 3.5/5.0 stars for popularity, and 3.5/5.0 stars for a
Google love rating.
A Multiple Choice Test
"What's Your Fraud IQ? Do you know how to prevent fraud? Test your basic
understanding of ways to protect personal and corporate information," by
Dawn Taylor and Andi McNeal, Journal of Accountancy, November 2011
---
http://www.journalofaccountancy.com/Issues/2011/Nov/20114391.htm
Tax
practitioners and their clients are concerned about the growing epidemic of
tax-related identity theft in America - both refund theft and employment
theft. At the end of fiscal 2013, the IRS had almost 600,000 identity theft
cases in its inventory, according tothe IRS National Taxpayer Advocate.
The AICPA shares
members' concerns about the impact of identity theft and offers the
resources below to help them learn more about this issue and advise clients.
We have provided recommendations to Congress and the IRS Oversight Board on
ways to further protect taxpayers and preparers.
IRS Identity Protection
Specialized Unit at 800-908-4490
The Investor Protection Trust provides independent,
objective information to help consumers make informed investment decisions.
Founded in 1993 as part of a multi-state settlement to resolve charges of
misconduct, IPT serves as an independent source of non-commercial investor
education materials. IPT operates programs under its own auspices and uses
grants to underwrite important initiatives carried out by other
organizations.
The Investor Protection Trust provides independent,
objective information to help consumers make informed investment decisions.
Founded in 1993 as part of a multi-state settlement to resolve charges of
misconduct, IPT serves as an independent source of non-commercial investor
education materials. IPT operates programs under its own auspices and uses
grants to underwrite important initiatives carried out by other
organizations.
Nobel
Prize-winning psychologist Daniel Kahneman addresses the
Georgetown class of 2009 about the merits of behavioral
economics.
He deconstructs the assumption that people always act
rationally, and explains how to promote rational
decisions in an irrational world.
Topics Covered:
1. The
Economic Definition Of Rationality
2.
Emphasis on Rationality in Modern Economic Theory
3. Examples of Irrational Behavior (watch this part)
4. How
to encourage rational decisions
Speaker Background (Via Fora.Tv)
Daniel
Kahneman - Daniel Kahneman is Eugene Higgins Professor
of Psychology and Professor of Public Affairs Emeritus
at Princeton University. He was educated at The Hebrew
University in Jerusalem and obtained his PhD in
Berkeley. He taught at The Hebrew University, at the
University of British Columbia and at Berkeley, and
joined the Princeton faculty in 1994, retiring in 2007.
He is best known for his contributions, with his late
colleague Amos Tversky, to the psychology of judgment
and decision making, which inspired the development of
behavioral economics in general, and of behavioral
finance in particular. This work earned Kahneman the
Nobel Prize in Economics in 2002 and many other honors
Video 2: Nancy Etcoff is part of a new vanguard of cognitive
researchers asking: What makes us happy? Why do we like beautiful things? And
how on earth did we evolve that way? Simoleon Sense, June 10, 2009
http://www.simoleonsense.com/science-of-happiness/
All Homeowners Should Take Note of This Likely Change in Their Homeowners'
Insurance Policies
Higher Deductibles Sting Homeowners ...more insurers change how they calculate
deductibles, especially for damage caused by windstorms and other natural
events. The newer method of figuring deductibles is based on a percentage of the
insured value of your home -- typically between 1% and 5%, and even higher in
earthquake zones. With home prices having soared in many areas in recent years,
this often works out to be far more costly to the homeowner than the traditional
flat-dollar method of figuring deductibles, by which you pay the first $1,000 or
so of home repairs. "Higher Deductibles Sting Homeowners," The Wall Street Journal via
Market Watch, August 1, 2007 ---
Click Here
Banking Online Safer Than Checks: Why you need a Uni-Ball pen! Phoenix is the city most at risk for identity fraud,
according to the Identity Theft Resource Center. Their new survey shows writing
a check is not safer than banking online because of a scam called "check
washing." The thief erases the ink on a check, fills in whatever he wants, and
cleans out your bank account. But never fear. Where there's a scam like check
fraud, there's sure to be a company with a profitable solution. Uni-Ball makes a
pen filled with a specially formulated ink that can't be washed off. It comes in
several elegant designs, for the sophisticated check-writer.
"Banking Online Safer Than Checks," NPR, October 5, 2007 ---
http://www.npr.org/templates/story/story.php?storyId=15027414
Jensen Comment
It might be a good idea to simply carry a Uni-Ball or similar "unwashable" ink
pen with your check book.
The Uni-Ball home page is at
http://www.uniball-na.com/
I think these pens or comparable pens are now carried in most office supply
stores.
From Smart Stops of the Web, Journal of accountancy, October 2008 ---
FRAUD / FORENSIC ACCOUNTING
HAVE FRAUD FEARS?
http://fvs.aicpa.org/Resources/Antifraud+Forensic+Accounting
Search no further than the AICPA’s offering of
antifraud and forensic accounting resources. Click “Tools and Aids”
to download Managing the Business Risk of Fraud: A Practical
Guide, which outlines principles for establishing effective
fraud risk management. The paper was released jointly by the AICPA,
the Association of Certified Fraud Examiners and The Institute of
Internal Auditors (see “Highlights,”
page 16). The site also offers fraud detection and prevention tips,
including an “Indicia of Fraud” checklist and case studies. There’s
also information on the newly created Certified in Financial
Forensics (CFF) credential (see “News
Digest,” Aug. 08, page 30) and upcoming Web seminars.
BE CRIME SMART www.fbi.gov/whitecollarcrime.htm
Think of the most outrageous business fraud
scheme you’ve ever heard of— you’re likely to find it, plus hundreds
of other white-collar crime cases—at this site from the FBI. Look
under “Don’t Be Cheated” for a fraud awareness test or click on
“Know Your Frauds” for access to the FBI’s analysis of common fraud
schemes, including the prime bank note scheme, telemarketing fraud
and up-and-coming Internet scams. CPAs and financial professionals
can access details on options backdating, securities scams and
investment fraud under “Interesting Cases” or learn about the FBI’s
major programs involving corporate, hedge fund and bankruptcy fraud.
SURF THE FRAUD NET
www.auditnet.org/fraudnet.htm
Jim Kaplan, a government auditor and author of
The Auditor’s Guide to Internet Resources, 2nd Edition,
hosts this Internet portal for auditors, which provides fraud
policies, procedures, codes of ethics and articles on a range of
topics, including internal auditing, fraud risk mitigation and
preventing embezzlement. The site also features a newsfeed, piping
in daily fraud news from around the world..
The Investor Protection Trust provides independent,
objective information to help consumers make informed investment decisions.
Founded in 1993 as part of a multi-state settlement to resolve charges of
misconduct, IPT serves as an independent source of non-commercial investor
education materials. IPT operates programs under its own auspices and uses
grants to underwrite important initiatives carried out by other
organizations.
As a college president, I ask students and
graduates what are we doing correctly and what can we improve upon. The
typical responses to how we can improve are not surprising — more parking
and more financial aid (often in that order). Lately the most common answer
from recent graduates as to how we can improve has been surprising — more
education about financial literacy and the practical aspects of living in
today’s world.
I hear the following comments with increasing
frequency, particularly since the Great Recession of 2008:
had no idea of the impact of my student debt
and credit card debt on my ability to live a comfortable life after
college.
Living in the residence halls and dining at
the college, I didn’t need to know about budgeting and renting an
apartment. I had no idea how to create a budget so I could live
responsibly and comfortably on my salary.
In college I learned how to cultivate a
pointed argument, but quickly learned that in the workplace an
aggressive argument can get you fired. No one told me about how to
disagree with your boss and not have your job threatened.
Faculty and administrators at liberal arts colleges
do not shy at complex thinking. We tend to scrutinize the details even as we
comprehend the big picture. We look for connections among areas of thought,
and revel in a multitude of perspectives. By the end of their four years on
campus, our students have benefited from a well-rounded, richly layered
education. I believe most even recognize what it means to be liberally
educated. Having learned to "turn the crystal" as they develop their views
and goals, they are confident and able to find success on many levels.
Why then do so many recent graduates seem unable to
demonstrate sound decision-making in an area as fundamental as finances and
entering the work world?
Is it possible that in our efforts to foster
creative and critical problem solving, we neglect the basics of responsible
day-to-day living and working? As we carefully engage students in discerning
shades of gray, is it at the expense of black and white?
Two events have led me to ask these questions.
First is the number of conversations like those described above, with
graduates who confided to me their frustrating lack of “real-world”
financial knowledge. The second is the fact of the high loan default rate
among recent college graduates, which is 7 percent nationwide (Augustana’s
rate is 4.2 percent). I know I am not alone in asking the question: What
should we do?
Personal Prosperity and the Common Good
Jon Meacham, the former editor of Newsweek,
addressed the 2011 Council of Independent College Presidents Institute.
Meacham praised the role of liberal education, noting that "people who know
about Shakespeare tend to create the Internet." But if appreciating
Shakespeare and other skills common to a liberal education is viewed by most
as "quaint and quirky," liberal education will not survive. Instead, he
argues that liberal education must be "vital and relevant" by "training
young minds to solve problems and to see what others have yet to see and to
think energetically about creating jobs and wealth," which Meacham calls the
"oxygen of democracy."
I'd go one step further than Meacham. Our graduates
can’t create wealth and jobs if they don’t have the ability to balance a
checkbook, or the skills to hold a job.
When asked to define "personal success," I think it
is fair to suggest that most college freshmen would put "financial success"
toward the top of their list. As they begin taking liberal arts courses,
they connect their learning to other aspects of their lives, and many begin
to think of a career as something more than just a paycheck. They develop
meaningful working relationships with faculty members and other students,
and may experience some peaks in their education — whether through an
internship, international study, research with faculty or other achievements
in their major studies. Their definition of success develops more facets.
At Augustana College, we have long promoted
high-impact learning experiences as well as the close relationships that
allow integrated and collaborative learning to flourish. Recently we have
begun to take new steps toward teaching certain life skills fundamental to
ensuring success of all kinds.
Leadership about financial literacy must come from
the top. I remind our students that if they live like college graduates with
good jobs while they are students, their debt levels will cause them to live
like students when they graduate. Going out to a mid-priced restaurant twice
a week for four years could easily cost $8,000. Putting those charges on a
credit card and carrying the balance over four years tips the cost to well
over $10,000.
Five years ago, before the severe economic
downturn, we introduced a class on personal finance. Offered each spring and
fall term, the class is packed with seniors and some juniors. Having read
Plato and Neruda, spent hours upon hours working in our human cadaver or
volcano lab, or climbed Machu Picchu, these students suspect they must
improve their financial literacy before they graduate.
Their instructor, an alumnus retired banker, begins
by teaching how to use financial templates. The students create a personal
profile and then produce a cash flow statement for the previous year. After
clarifying their own understanding of their financial history, which
generally is filled with gaps until this class, they work with their
instructor on the process of creating a budget for the next year. Taking
into account three to four personal financial goals (e.g., paying for
students loans, emergency funds, etc., and even retirement), the students
lay their financial path for the future. At all times throughout the class
they keep in mind their current net worth, and how that value should affect
their financial decisions. The course is such a success that, given the
financial illiteracy demonstrated by too many young alumni, we now are
offering a free three-hour seminar as a "crash course" in personal finance
for our graduating seniors.
Sharing Responsibility
Augustana is not the only liberal arts college to
offer such a class, and there is more we all can do. Many liberal arts
colleges are adding majors that address personal financial viability in a
changing world and also attract prospective students in an increasingly
competitive market.
Augustana’s newest majors — which extend from
traditional majors — include graphic design, neuroscience, environmental
studies, multimedia journalism and engineering physics, among others. While
some of our faculty state concerns that our college’s liberal arts
foundation might be shaken by the contemporary and perhaps more fiscal focus
of these programs,
most see the new majors as logical progressions of
traditional fields and therefore deeply related to our college’s mission.
Every night at
bedtime, former Celtic Ray Williams locks the doors of his home: a
broken-down 1992 Buick, rusting on a back street where he ran out of
everything.
The 10-year NBA
veteran formerly known as “Sugar Ray’’ leans back in the driver’s seat,
drapes his legs over the center console, and rests his head on a pillow of
tattered towels. He tunes his boom box to gospel music, closes his eyes, and
wonders.
Williams, a
generation removed from staying in first-class hotels with Larry Bird and
Co. in their drive to the 1985 NBA Finals, mostly wonders how much more he
can bear. He is not new to poverty, illness, homelessness. Or quiet
desperation.
In recent weeks, he
has lived on bread and water.
“They say God won’t
give you more than you can handle,’’ Williams said in his roadside sedan.
“But this is wearing me out.’’
A former top-10 NBA
draft pick who once scored 52 points in a game, Williams is a face of
big-time basketball’s underclass. As the NBA employs players whose average
annual salaries top $5 million, Williams is among scores of retired players
for whom the good life vanished not long after the final whistle.
Dozens of NBA
retirees, including Williams and his brother, Gus, a two-time All-Star, have
sought bankruptcy protection.
“Ray is like many
players who invested so much of their lives in basketball,’’ said Mike
Glenn, who played 10 years in the NBA, including three with Williams and the
New York Knicks. “When the dividends stopped coming, the problems started
escalating. It’s a cold reality.’’
Williams, 55 and
diabetic, wants the titans of today’s NBA to help take care of him and other
retirees who have plenty of time to watch games but no televisions to do so.
He needs food, shelter, cash for car repairs, and a job, and he believes the
multibillion-dollar league and its players should treat him as if he were a
teammate in distress.
One thing Williams
especially wants them to know: Unlike many troubled ex-players, he has never
fallen prey to drugs, alcohol, or gambling.
“When I played the
game, they always talked about loyalty to the team,’’ Williams said. “Well,
where’s the loyalty and compassion for ex-players who are hurting? We opened
the door for these guys whose salaries are through the roof.’’
Unfortunately for
Williams, the NBA-related organizations best suited to help him have closed
their checkbooks to him. The NBA Legends Foundation, which awarded him
grants totaling more than $10,000 in 1996 and 2004, denied his recent
request for help. So did the NBA Retired Players Association, which in the
past year gave him two grants totaling $2,000.
Jensen Comment
When I was teaching the mathematics of finance one of my favorite illustrations
was not mentioned in the above "scams." Scam 22 should be understating the
annual percentage rate (APR) of a car financing contract. My bottom line advice
to my students is to never, never indicate that the purchase will be anything
other than a cash purchase until the very last moment before signing the
purchase contract.
Presumably a buyer is shrewd enough to have negotiated a rock-bottom cash
price. For new cars this is easy since there are various Web sites for comparing
new car purchases. It's bit more difficult for used cars since every used car is
unique.
Are you compatible with your car? A new site set to
launch in a few days called
Carzen
(http://new.carzen.com/)
aims to help you find the car that is perfect for you. The main feature of
the site is a car consulting tool that asks you basic questions about the
qualities you are looking for in a car (price, size, fuel economy,
reliability) and then spits back a list with the best matches
CarZen is extremely detailed. You can narrow your
search by brand, options (sunroof, power seats), cargo capacity, safety, or
performance characteristics. Looking for a car with a high baby-seat score
or on ethat is particularly easy to park in tight city spots? No problem.
Once you finish answering the questions, which at times seem more like a
personality test, the site generates a list of cars that can be sorted by
best match, price, miles per gallon, or brand.
If you are looking for a new car and don't already
know what you want, it is a good way to generate an initial list. You can
drill down to get more details for each car. There is even a button to get a
price quote, although that doesn't seem to be working at the moment.
(Nevertheless, the business model is to create a trusted research tool for
car buyers and generate lead-generation fees). The site is still in private
beta, but you can check it out by clicking on the "learn more" button in the
widget below and then clicking through to the site.
Jensen Comment
There is also a page entitled "Advice" for advice on such things as lease vs.
buy ---
http://www.carzen.com/advice
After negotiating the rock-bottom cash price is the time to then ask about
financing alternatives. Devious dealers who report low APR financing rates often
do so on the basis of a car price higher than the rock-bottom cash price. Shrewd
car buyers will whip out a financial calculator, tablet computer, or laptop and
then verify the true annual percentage rate of the car dealer's financial deal.
This is important in accountancy, because all organizations need internal
controls to detect counterfeit currency
Read more about counterfeit currency from a very good module at
http://en.wikipedia.org/wiki/Counterfeit
Probably the biggest fear of worldwide criminals is that world economies will go
cashless.
TEN MOST EFFECTIVE RESPONSES TO TELEPHONE SOLICITORS:
10. You sound very sexy! What kind of underwear do you have on?
09. Oh, I'm so glad you called! My niece is selling Girl Scout cookies.
How many boxes would you like?
08. Who's your long_distance carrier? I think I can save you money!
07. You sound gay. Did you know that through the love of Our Savior,
Jesus Christ, you can give up that lifestyle?
06. Do you hear voices, like I do, telling you to buy lots of guns?
05. Are you a non_smoker, 55 or under? Let me tell you about whole life.
04. You seem pretty smart, so maybe you know: How long do you think it
would take to get a whole body down a garbage disposal?
03. If Superman and the Power Rangers got into a fight, who do you think
would win?
02. Do you take credit cards? I have one here that I don't think has been
reported.
And my number one best response to that pesky caller is...
01. What do you think of my sex change?
Forwarded by Paula
What do you say to a telemarketer?
The phone rang as I was sitting down to my
evening meal, and as I answered it I was greeted with, "Is this Karl
Brummer?" Not sounding anything like my name. I asked, "Who is calling?"
The telemarketer said he was with The Rubber
Band Powered Freezer Company or something like that. Then I asked him if
he knew Karl Brummer personally and asked why he was calling this
number.
I then said (off to the side), "get some
pictures of the body at various angles and the blood smears", I then
turned back to the phone and advised the caller that he had just called
a murder scene and must stay on the line because we had already traced
his call and he would be receiving a summons to testify in this murder
case.
I questioned the caller at great length as to
his name, address, phone number at home, at work, who he worked for, how
he knew the dead guy and could he prove where he had been about one hour
before he made this call.
The telemarketer was getting very concerned and
his answers were given in a shaky voice. I then told him we had located
his position and the police were entering the building to take him into
custody. At that point I heard the phone fall and the scurrying of his
running away.
My wife asked me as I returned to our table why
I had tears streaming down my face, and so help me, I couldn't tell her
for about 15 minutes. My meal was cold but it was the best meal in a
long, long time.
More serious responses are shown below
What to say when they call if you don't want junk calls
Before hanging up, check you have all their answers written down, then say
goodbye. Add the date and time to your record. (Is it between
8 a.m.
and 9 p.m.?$)
How many telemarketing firms cheat the public and even the charities with
distorted accounting ploys
"Misreporting Fundraising: How Do Nonprofit Organizations Account for
Telemarketing Campaigns? Elizabeth K. Keating Boston College Linda M. Parsons
The University of Alabama Andrea Alston Roberts Boston College, The Accounting
Review, Volume 83, No. 2, March 2008, pp. 417-446 ---
http://www.atypon-link.com/AAA/doi/pdf/10.2308/accr.2008.83.2.417
The purpose of this study is to examine the
frequency, determinants, and implications of misreported fundraising
activities. We compare state telemarketing campaign reports with the
associated information from nonprofits’ annual Form 990 filings to directly
test nonprofits’ revenue and expense recognition policies. Using a
conservative approach that understates the extent to which nonprofit
organizations violate the reporting rules, our study indicates that 74
percent of the regulatory filings from nonprofit organizations fail to
properly report telemarketing expenses. Smaller nonprofits, less monitored
firms, and those with less accounting sophistication are more likely to
inappropriately report telemarketing costs as a component of net revenues
rather than as expenses. Nonprofits that use external accounting services
are more likely to properly classify the cost of their telemarketing
campaigns as professional fundraising fees.
. . .
Prior research has supported a concern
by regulators and donors that nonprofits have incentives to understate
fundraising costs and may inappropriately allocate these costs to other
activities. Additionally, a number of studies provide evidence that donors
direct their charitable gifts to nonprofits that report higher program
ratios and lower fundraising ratios. With more than 76 percent of the more
than $240 billion in annual contributions to nonprofits in the U.S. coming
from individual donors (American Association of Fundraising Counsel [AAFRC]
Trust for Philanthropy 2003), misreporting by nonprofits can potentially
have a large effect on the distribution of donations among nonprofit
organizations.
Our study provides empirical evidence
of how frequently fundraising costs are misreported, and examines the
methods used and the factors associated with these decisions. This study
directly tests the veracity of nonprofits’ reporting practices by comparing
federally mandated nonprofit financial reports to disclosures of revenues
and costs of telemarketing campaigns filed by telemarketing solicitors in
certain states. Additionally, it is the first paper to specifically consider
the effect of accounting sophistication on nonprofit reporting practices.
We design our tests to produce
conservative estimates of telemarketing revenue and expense by using only
the single largest reported telemarketing campaigns conducted each year for
a nonprofit by each of its telemarketing solicitors. These estimates of
total annual telemarketing revenues and expenses are then compared to the
nonprofit’s annual IRS informational filing. Because our design biases
against incorrectly labeling a nonprofit a misreporter, we may not have
fully detected net reporting, particularly by organizations with
contributions raised without the assistance of professional solicitors. This
is particularly a concern for the larger organizations in our sample as they
are more likely to generate contributions from multiple sources. Thus, we
may have underestimated the degree to which misreporting occurs.
Despite our conservative test design,
we find that over 74 percent of the organizations in our sample fail to
properly report telemarketing expenses. Twenty-seven percent of firm-years
contain misreported revenues. Of the remaining 73 percent, a majority
misclassify their reported costs in a category other than professional
fundraising fees, and 9 percent engage in cost allocations, meaning that not
all telemarketing costs are reported as fundraising expenses. Using an even
more conservative design that compared a single year ofcampaign revenue and
expenses to the sum of three years of firm-wide contributions and
fundraising expenses, 14 percent of this sample is misreporting revenues. Of
the remaining sample, 53 percent report telemarketing expenses as other than
professional fundraising fees and, at least, another 4 percent is allocating
telemarketing costs to an expense category other than fundraising.
Our results provide strong evidence
that nonprofits misreport telemarketing fees, which affects how program and
fundraising ratios are reported. The effect on reported ratios of
misreporting is substantial. We find that by misreporting telemarketing
expenses the nonprofits in our sample could understate the fundraising ratio
by as much as 15 percent. Of the misreporting we detect, most occurs among
small nonprofits that have limited accounting sophistication. Our findings
suggest that nonprofits that have greater accounting sophistication and
those likely to be subjected to greater external monitoring are less likely
to be classified as a misreporting firm. We find that the factors associated
with the more prevalent activity of misreporting revenue differ from those
related to expense classification and allocation. Higher accounting
sophistication and more external monitoring appear to play a greater role in
moderating revenue misreporting. Only the use of professional outside
accountants appears related to proper classification of telemarketing costs
as professional fees. We interpret these results as suggesting that
misreporting decisions may be driven either by incentives to improve
reported results or a lack of familiarity with accounting. Prior research
has implicitly or explicitly attributed misreporting to managerial
incentives. Our study is the first to specifically consider accounting
sophistication as a factor inmisreporting.
SOP 98-2 requires nonprofit
organizations to allocate costs incurred jointly for fundraising and program
activities to several expense categories. However, the occurrence of expense
allocation should be related to the joint activity, not systematically
associated with organizational characteristics. Allocation of telemarketing
costs to an expense category other than fundraising is less often associated
with larger organizations and those that have relatively higher levels of
debt. This finding implies that allocation may occur more often in small
organizations in order to improve reported fundraising ratios, or is more
prevalent in organizations that have less accounting sophistication or fewer
monitoring mechanisms.
These findings can inform the current
debates by state and federal regulators as they search for ways to improve
the quality of nonprofit financial reports. In particular, we provide
evidence to policy makers that, in addition to regulation and monitoring,
educating Form 990 preparers can improve accounting quality.
Question:
What vexing problems do Wikipedia Authority and Online Product Reviews share in
common?
Simson Garfinkel takes a look at
authority and sourcing in Wikipedia world with an
article in the latest edition of Technology Review. He focuses on
Wikipedia’s requirement to cite published sources in adding information to
Wikipedia articles. Yes, with a mob-written encyclopedia, a requirement for
citing published, vetted sources makes sense, he writes.
“But there is a problem with appealing to the
authority of other people’s written words: Many publications don’t do any
fact checking at all, and many of those that do simply call up the subject
of the article and ask if the writer got the facts wrong or right,” Mr.
Garfinkel writes. “For instance, Dun and Bradstreet gets the information for
its small-business information reports in part by asking those very same
small businesses to fill out questionnaires about themselves.”
This policy is particularly problematic if you are
the authority on a particular topic, but you can’t use your own base of
knowledge. Jaron Lanier, a futurist, had problems changing a statement on
the Wikipedia entry about himself that said he was a filmmaker. He wasn’t a
filmmaker, yet every time he removed that non-fact, someone put it back in.
He finally got the item changed, but was then
criticized for editing his own wikientry. (PR directors who maintain their
college Wikipedia pages, take note.)
Comments
Doesn’t the problem of unreliability of other sources apply to
any secondary or tertiary work? ;) (…and on that note, I suggest
reading the Wikipedia page
Wikipedia:Reliable sources …)
"Online User Reviews: Can They Be Trusted? They're all over the Web.
Everybody reads them. But are reader reviews reliable enough to depend on when
it comes to spending your cold, hard cash?" by Robert Luhn, PC World via
The Washington Post, October 23, 2008 ---
Click Here
Anyone can write a product review, and everybody
reads them. But can you trust them? I refer, of course, to reader or user
reviews, the kind you find on Amazon, Buy.com, Epinions, PC World, Yelp, and
even the sites of tech product manufacturers, such as Dell. They're
everywhere.
But it's the fraudulent reviews--positive reviews
contributed by "readers" paid by the company being evaluated--that worry
critics and advocates alike.
In an October 2007 poll conducted by the PR firm
Burson-Marsteller, 1000 savvy Web consumers (dubbed "e-fluentials" by some
wordsmith who evidently was unfamiliar with the term " effluent") were
clearly convinced that fake reviews are endemic--and could result in a
backlash from online consumers.
The numbers tell the tale: 48% (up from 39% in
2001) believe that fake reviews are being planted on consumer sites. 57% say
they won't buy a product if the reader reviews seem suspect. And a whopping
76% claim to double-check what they read online. All are signs of a healthy
skepticism.
So, how pervasive are falsified reviews?
Beau Brendler, Director of Consumer Reports'
WebWatch site, says that the bottom line is: "[Fake reviews] happen all the
time--but proving it, quantifying it--is very hard."
WebWatch--whose motto is "Look Before You Click"--
says on its site that its credibility campaign has led more than 170 sites,
including CNN, CNet, The New York Times, Travelocity, and Orbitz to agree to
uphold WebWatch's credibility guidelines.
Barbara Kasser, author of Online Shopping Directory
For Dummies and Internet Shopping Yellow Pages, says: "There's no way to
check the reviewer's veracity or if they're on the take--they're anonymous."
Another concern: the reviewer might not be competent. "How did [the
reviewer] use the product? Did they use it properly? Did they follow the
manufacturer's directions? There's no way to know," she points out.
Why So Enticing?
Many ordinary people consider reviews written by
consumers to be more reliable, more critical, and ultimately, more useful
than many other sources of information. At least that's what they told The
Nielsen Company in a survey conducted in April 2007. The top three most
trusted sources: "Recommendations from consumers" (78%), "Newspapers" (63%),
and "Consumer opinions posted online" (61%). (In a story that PC World
posted in 2003, we generally agreed with the above perceptions--but we're a
bit more cynical now.)
Certainly, reader reviews have come a long way
since the era of Usenet and reader forums. Depending on the site and its
readers, you may find pithy commentary, long-winded rants, numeric ratings,
pros and cons, graphs, and even reviewer videos.
But Mitch Meyerson, author of the book Guerilla
Marketing on the Internet, thinks that "influenced" reviews (paid for or
not) are pretty common. For example, says Meyerson, "authors often enlist
friends, colleagues, and clients to review their books on Amazon."
According to Blogging Tips founder and Web
developer Kevin Muldoon, "tech sites usually have fair, accurate [reader]
reviews...but there are definitely more fake reviews [on sites] covering
cosmetics and hotels." Read Muldoon's blog entry on his own guidelines for
how he reviews products.
How to Opt Out of Credit Card Offers That You Do Not Solicit
I received the
following from a close personal friend who is also the Director of Instructional
Services at Loyola College in Maryland.
I elected to opt
out using the Consumer Reports Web address given near the bottom of his message.
You have to feed in the information to get a form that you then mail in via the
postal service. The form is automatically filled in from the information that
you typed in earlier. All you have to do is sign and date the form.
I sent in a
second form in my wife’s name.
By the way, have
you ever had troubles with forms that seem to do things like automatically
change your state initials in a list box? The trick to avoid this is to not
leave your cursor in that list box when you submit an electronic form. Click on
some open-ended box such as your name box or a comment box before submitting the
form.
From:
AECM, Accounting Education using Computers and Multimedia [mailto:AECM@LISTSERV.LOYOLA.EDU]
On Behalf Of Barry Rice Sent: Thursday, July 05, 2007 1:26 PM To:
AECM@LISTSERV.LOYOLA.EDU Subject: Fed up with shredding credit card offers?
[The following was written
for my family members, most of whom are not technically sophisticated. Feel
free to share this information with YOUR family.]
I was just looking at a
credit card offer before shredding it and noticed an 888 toll-free number
where I could opt out of getting such junk mail. When I searched for more
information about this in Consumer Reports, I found a free article that says
you can "Remove your name from preapproved offers for credit or insurance by
going to
www.optoutprescreen.com or calling 888-5-OPT-OUT. And if
you're willing to deny yourself unsolicited catalogs and junk mail, opt out
at the Direct Marketing Association site (
www.the-dma.org/cgi/offmailinglist) ."
The 888-5-OPT-OUT number
above is the same one on the bottom of my credit card offer. However, I
choose to use the
www.optoutprescreen.com Web site for my own opt out. It requires
you to enter your name, address, Social Security number and date of birth. I
am convinced it is safe to do so because of the Consumer Reports
recommendation and because the above link takes you to
https://www.optoutprescreen.com/?rf=t which is secure since it has the
"s" after "http." The page also has information about how your information
is secure.
Barry Rice
AECM Founder
_________________________
E. Barry Rice, MBA, CPA
Director, Instructional Services
Emeritus Accounting Professor
Loyola College in Maryland
BRice@Loyola.edu
410-617-2478
www.barryrice.com
What mobile phone companies don't want you
to know
A Verizon Wireless
effort change your cell phone Terms of Agreement and give out your privacy
information.
You can read more about CPNI at
http://www.fcc.gov/eb/CPNI/
If you are a
Verizon Wireless customer, you may know that Verizon does
some shady things to make their revenue streams fatter. This
morning I got a letter from Verizon Wireless telling me that
they will start putting ads on my phone. Lucky for me they
are required to have some manner of opt-out functionality in
place. When I looked inside the pamphlet, I saw the number
for the opt-out. It is 1.800.333.9956. I called that number
and got a very nice automated option to opt out.
I encourage
all of my fellow Verizon Wireless customers to send a VERY
strong message to the folks at One Verizon Way and opt out.
Opt out even if you’re not a Verizon Wireless customer. Send
letters to the address “One Verizon Way, Basking Ridge, NJ
07920-1097″ and tell them how disgusted you are with this
new practice.
It is not
okay for Verizon Wireless to put these ads on our personal
property, and if we stand silent while they do it we will be
in a world of hurt. But act fast, because according to these
terms, Verizon Wireless will only give you 30 days to opt
out.
UPDATE:
So, I’ve got some more info for you. Verizon Wireless, in
their agreement, says that you have the right to cancel your
service with them without paying early
termination fees for cancelling.
Turns out all they want to do is sell the “routine”
data they collect through my day to day use of my cell phone. If I decided
to opt out, they warned that I would be denying myself the benefit of their
benevolent oversight of my information and their ability to make the
cell-phone-using portion of my life downright super-duper
puppies-and-unicorns AWESOME. I’d rather not have Verizon selling my info to
every company that would want to buy it, so I opted out by calling this
number:
1 800 333 9956
You may want to give it a ring, too, if you have
Verizon Wireless and you don’t trust them to keep your personal information
in your best interest. Best part? If you don’t call 1 800 333 9956 you’re
automatically opted-in, so you may have been boned already. Give the number
a call if you’d like to keep your information out of the hands of any
douchetastic company that throws a fistful of dollars at Verizon.
Jensen Comment
Breaking your wireless agreement may depend a lot upon the small print in the
agreement you got in writing when you purchased your phone. If you cannot get
out of your early termination fees, wait your time and change from Verizon
Wireless as soon as you get with a more honest company that does not make you
waste a lot of time and trouble to keep your private information private.
People who visit www.intelius.com
can enter a person's name to get a cell phone number, or do the reverse by
entering a number to get the subscriber's name. Each search costs $15. They can
also download a raft of personal information about the subscriber. This was a
feature on ABC evening news, August 14, 2007.
There are many
cell phone numbers, however, that do not make it into the Intelius database,
especially numbers of subscribers who never gave their phone numbers out to any
organization or dialed up a 911 emergency.
"Free Cell Phone Number Search - How To Find Free Cell Phone Numbers," ---
Click Here
The freebies are not really very worthwhile relative to the fee-based services.
Jensen Comment
This will be terribly frustrating if telemarketers and crank callers begin to
use up your allotted free minutes of cell phone time each month.
You may enter your cell phone numbers into the "Do Not Call" registry the
same as you probably did for your landline phone ---
https://www.donotcall.gov/default.aspx
However, telemarketers are not supposed to call cell phones with automatic
dialers ---
https://www.donotcall.gov/default.aspx
This is no protection, however, from crank callers or telemarketers who take the
trouble to dial in your cell phone number. Of course, being in the "Do Not Call"
registry does not protect you from telemarketing charitable organizations that
are typically the biggest nuisance these days. Also the "Do Not Call Register"
provides no guarantee that you will not get calls from commercial telemarketers,
especially those who fly by night.
It might just pay to get the cell phone numbers of your state Senators and
local Congressional representative and call them late at night at home on their
supposedly "personal" cell phones. Better yet, call their children and ask them
to tell their parents how you got their phone numbers.
Note that if you've never given a cell phone number out to any organization
other than your phone company, Intelius may not have your cell phone number in
its dastardly database. You should make your children aware of this. Even
emergency calls to 911 may result in Intelius getting your cell phone number
according to the fine print in my Verizon Wireless contract.
To my knowledge there's no unlisted phone service for cell phones like the
one that you can pay for monthly on your landline number
"An
Oregon woman who is out $400,000 after falling for a well-known Internet scam
says she wasn't a sucker or an easy mark." Fox News, November
17, 2008 ---
http://www.foxnews.com/story/0,2933,453125,00.html
Janella Spears of
Sweet Home says she simply became curious when she received an
e-mail promising her
$20.5 million if she would only help out a long-lost relative identified as
J.B. Spears with a little money up front.
Spears told
KATU-TV about the scammers' ability to identify her relative by name was
persuasive.
"That's what got
me to believe it," She said. "So, why wouldn't you send over $100?"
Spears, who is a
nursing administrator and CPR
teacher, said
she mortgaged the house and took a lien out on the family car, and ran
through her husband's retirement account.
"The retirement he
was dreaming of — cruising and going around and seeing America — is pretty
much gone for him right now," she said.
Her family and bank officials told her it was all a
scam, she said, and begged her to stop, but she persisted because she became
obsessed with getting paid.
The scheme is often called the "Nigerian scam" and
it's familiar to many people with e-mail accounts. It still exists and it
still works.
Spears first sent $100 through an untraceable wire
service as directed by the scammers. Then, more multimillion dollar promises
followed so long as she sent more money.
The scammers sent Spears official-looking documents
and certificates from the Bank of Nigeria and the United Nations. President
Bush and FBI Director Robert Mueller were also involved, the e-mails said,
and needed her help.
They sent official-looking documents and
certificates from the Bank of Nigeria and even from the United Nations,
saying her payment was "guaranteed."
But it wasn't and now Spears is paying the price
for her costly lesson.
"The hope is [other people] are not going to fall
as hard as I fell," Spears said.
Jensen Comment
Even the familiar Nigerian-type scams are still enormously
successful. These scams are the second most lucrative export (oil is
number one) from Nigeria, and Nigeria is only one of many places in
the world where such scams originate. Many also come from Eastern
Europe where technology geniuses are always miles ahead of law
enforcement and vendor security protection upgrades ---
http://faculty.trinity.edu/rjensen/FraudReporting.htm#NigerianFraud
Who are these perpetrators of Nigerian frauds? A good cyber-scammer can make up to $7,000 a month
- 22 times the average Nigerian wage - from milking gullible Westerners. His
controlling boss, with an army of trained scammers under his wing in both
America and Europe, will be raking in many times more. Though the fraud is
apparent to many, some people think they have stumbled on a once-in-a-lifetime
deal, and scammers can string them along for months with mythical difficulties.
Some victims eventually contribute huge sums of money to save the deal when it
is suddenly "at risk". Samuel is 19, handsome, bright, well-dressed and
ambitious. He has a special flair for computers and until he quit the game last
year was one of Festac's best-known cyber-scam champions.
Robyn Dixon, "Run-down town where scammers target the West,"
Scotsman,
October 30, 2005 ---
http://news.scotsman.com/international.cfm?id=2168172005
New Scam on eBay and Craig's List: Overpayments When is a “cleared
check” not necessarily a good check?
Selling something on eBay or Craig's List? Watch
out for who's signing the check to buy it.
Tens of thousands of Americans are being targeted
by the latest scam sweeping America, many of them targeted online through
Craig's List and eBay.
Scammers overpay with counterfeit checks that look
so good most banks accept them. It's only after victims have sent the
overpayment amount back to the scammers that they learn the checks are no
good, and they are out the money.
U.S. Postal Service officials say they have seized
more than $2 billion worth of high-quality counterfeit checks coming from
Nigeria, England, the Netherlands and Canada.
But, they say, many more phonies are still getting
through. . That's the kind of check Jill Parker, a pharmaceutical company
manager in Richmond, Va., got in the mail.
Using Craig's List to rent an apartment she owned
in Chicago, she was contacted by someone moving from London.
"He was going to send me a check for $25,000," she
told ABC News. "I was to deduct what he owned me for the first month's rent
and the security deposit, and I was to wire the balance back to his agent,
who was handling his furnishing."
She took the check to her bank and called a few
days later to see if it had cleared. Told that it had, Jill, as agreed upon,
wired the remaining $21,000, thinking she was ahead $4,000.
"Everything looked great; everything went fine
until about a week later," she said.
The bank informed her that the check was no good
and had been returned not paid. And Jill, not the bank, was out the money.
American banks say they are required by law to make
the money available well before a final determination is made as to whether
the check is good.
"Certain funds, for example, have to be available
on the day after deposit," Nedda Feddis, senior federal counsel for the
American Bankers Association, told ABC News. "And the fraudsters are taking
advantage of that rule."
Good Morning America Video: Phony Check Scam
Hitting America There have been tragic consequences.
Chris Soens, suffering from health problems,
thought she got a dose of good news in the mail when she won $90,000 in a
supposed European lottery.
Once the check had been deposited and posted to her
account, Chris wired back $40,000 for what she was told were fees and taxes.
When the check was discovered to be a phony, the
bank told Chris she had to repay the entire amount.
Her sister, Rebecca Woodworth, says it led to
suicide.
"I think she was devastated," she said. "I think
she was plunged into depths of despair knowing that everything she had was
gone."
The problem has grown so large that the U.S. Postal
Service is launching a nationwide TV campaign starting tomorrow to warn
Americans about the dangers of the bad check scam. The Postal Service has
also set up a new Web site to educate the public on check fraud:
www.fakechecks.org
.
The general pitch may be built around a sob story, a
promise of lottery winnings, a foreign business offer or a work-at-home
opportunity. But the bottom-line offer is the same: We'll send you a check, you
cash it at your bank, and you keep a portion and send the rest back to us.
Americans appear to be increasingly susceptible to such scams, according to U.S.
Postal Inspection Service investigators, who yesterday announced a crackdown.
They said they intercepted 540,000 checks worth more than $2.1 billion mailed to
U.S. residents in the first eight months of the year. They said 77 people had
been arrested in connection with the schemes -- 60 in the Netherlands, 16 in
Nigeria and one in Canada. Aided by authorities in those countries and in
Britain, investigators said, they had traced many of the come-ons to a shifting
network of Nigerians who, with a few computers, cellphones and bank routing
numbers, have been cashing in on the naivete, goodwill or complicity of Internet
users. Anita Huslin, "Crackdown Takes Aim At Check-Cashing Scams," The
Washington Post, October 4, 2007, Page D02 ---
Click Here
They pilfer nearly $200 million from Americans
annually and drive some of their victims to suicide, but Nigeria's notorious
e-mail scam artists may finally have met their match -- and the results can
be hilarious.
British online vigilante
"Shiver Metimbers" is leading tens of thousands of "scambaiters" in a
crusade to shut down
advance-fee fraudsters, grifters who spam
unwitting victims with elaborate, e-mailed sob stories promising a share of
nonexistent fortunes in return for upfront payments.
So-called 419 scams, named after the section of
Nigeria's criminal code that covers the conduct, are the most common type of
con; victims are sometimes left penniless.
But
Metimbers and crew turn the tables on scammers one
by one, boomeranging the tricksters' own tactics to entice them into
performing outlandish tasks in desperate pursuit of cash -- then trumpeting
evidence of the con artists' naïveté for the online world's amusement.
A 43-year-old, self-employed computer engineer from
Manchester, England, Metimbers has most recently spun counter-yarns that
have compelled 419ers to make elaborate
wood
carvings, pose for
comical photos
and
fly
from London to Scotland. In one episode, which
concluded in March after a five-month exchange, he succeeded in having a
Nigerian fraudster
tattoo
"Baited by Shiver" on his body in order to claim a
fictional $46,000 prize.
"Another time, the scammer thought he was going to
get $18,000 out of me, but I actually got the guy to send me $80," said
Metimbers, who started the
419 Eater
community site almost three years ago after receiving
a wave of spam in his inbox.
"I've got between five and 10 on the go at any one
time," Metimbers said. "The worst thing that could possibly happen to these
guys is they get their photo slapped on a website. I feel like a
cybervigilante, doing my bit for the public."
Metimbers, whose real forename is Mike and who
spends up to seven hours a day scambaiting, is team captain in a growing
internet blood sport, in which photographic evidence of competing baiters'
successes constitute
trophies.
419 Eater alone numbers more than 20,000
participants around the world.
Other initiatives
have also surfaced in the anti-scam resistance movement, including
Artists
Against 419, which kills criminals' online
accounts with a deluge of traffic. Baiters delight in convincing
correspondents to be photographed with embarrassing and lewd Western banners
-- like Metimbers, they operate using aliases to protect themselves against
the death threats issued by disgruntled scammers upon realizing they have
been had.
"Shiver is exceedingly creative in getting scammers
to allow their greed to override their judgment," said one disciple
nicknamed
mrsbean, a 29-year-old female IT worker from
Kentucky who claims to have wasted months of organized scammers' time.
"It is equal parts theater, chess game,
psychological study, crime prevention, education and vigilante justice; it's
a battle of the wits," said mrsbean. "Internet scams are unique in that they
offer you an opportunity to personally combat them without compromising your
own safety; the same is just not true of most crime -- one wouldn't take on
the drug dealers in a local neighborhood, for instance.
"The threat of jail certainly doesn't deter these
people, but being humiliated in front of their peers just might cost them
some reputation. It's likely the only punishment most scammers get."
Advance-fee fraud boomed in Nigeria as government
corruption and an economic downturn during the 1990s fueled poverty and
disillusionment in the country, said
Insa
Nolte of the University of Birmingham's Centre of
West African Studies.
To some, internet scams looked like an easy way to
bag some quick cash.
"The availability of e-mail helped to transform a
local form of fraud into one of Nigeria's most important export industries,"
Nolte said.
Some law enforcers trying to shut down 419 scammers
now look on scambaiters' brand of Schadenfreude with envy. The
419legal.org
message board was started by a South African antifraud
officer to gather intelligence from worldwide combatants, while London's
Metropolitan Police said it began a "coordinated approach" this month to get
tips directed from baiter sites to
proper channels. But investigators warn the
counter-criminals are walking a fine line.
"People do it as a hobby or a part-time
occupation," said detective Sgt. Stephen Truick of the Met's
Economic and
Specialist Crime Operational Command Unit. "But
what they often don't realize is that, while they are baiting, these
criminals' accounts are left open and other people are still getting
scammed.
"We are taking down around 200 sites and up to
2,000 e-mail accounts per month -- we are turning the tide," said Truick.
"We've seen our traffic from sites like these increase -- that's been
brilliant, but I could never condone some of their actions."
Although Internet scams and fraud can be found in almost sector on the
Internet, some common scams include: Internet auction fraud, emails with
foreign officials asking for money, miracle health claims, and credit card
and identity theft.
Fraud Tips
Many people encounter problems with online auctions, often bidding on an
item on a popular auction site, making a payment when they win, but never
receiving what they bought. In other cases, people buy something but when
the item gets to their home, it’s not what they paid for. In other
instances, some people receive mysterious emails claiming that someone needs
to move a large amount of money into the US, but they can’t do it themselves
so they need help from a third party. They tell people to deposit a check
with a big figure and send back a small percentage of the total amount.
Then, the check will bounce and the person will be cheated out of their
money. It’s also common for personal information like credit card
information or social security numbers to be stolen when hackers hack
shopping sites. Here’s a look at more Internet scams.
Avoiding Fraud: Discusses the best ways to avoid becoming a victim.
Auction Tips: More tips for preventing fraud in Internet auctions.
Fraud Agencies
Internet fraud has become so prevalent that many established
organizations now have divisions that are designed to exclusively target it.
The Department of Justice, FBI, and FTC all have special sectors devoted to
fighting Internet fraud. Many consumer protection agencies also have special
Internet fraud sections including the Federal Trade Commission, National
Consumers League, and even the US Postal Inspection Service.
Department of Justice: Department of Justice page that discusses
Internet fraud and agencies to contact.
The government actually set up a special website where you can file a
complaint online. It’s quick and easy. This organization is known as the
Internet Fraud Complaint Center. All you have to do is go to the website,
fill out the complaint form with accurate information and submit it. The
IFCC then conducts an investigation and decides if it has to be turned over
to the authorities.
Read the Fine Print in Your Life Insurance Policy and Its Amendments Many life insurers, including Allstate Corp., AXA
Equitable Life Insurance Co., Fidelity Investments, Lincoln Financial Group,
MetLife Inc., New York Life Insurance Co. and Prudential Financial Inc., use
customers' overseas-travel plans as a factor in making underwriting decisions,
and some may deny a policy or increase premiums to customers going to countries
deemed dangerous. Some companies even deny coverage based on previous travel to
a dangerous region. The countries that trigger denials are often on the State
Department's travel warning list, which includes popular destinations such as
Israel, Indonesia and Kenya.
Rachel Emma Silverman, "Life Insurers Face Backlash Over Policy on Foreign
Travel: New Laws Curb Practice Of Denying Coverage to People Who Visit
Certain Countries," The Wall Street Journal, May 4, 2006; Page D1 ---
http://online.wsj.com/article/SB114670871469043437.html?mod=todays_us_nonsub_pj
Purportedly (no guarantees) these are ways to to straight to humans in place
of threading through computer voices on telephonesGetHuman ---
http://gethuman.com/us/
At one time or another, all of us have been handed
a Christmas or birthday gift list that includes seemingly simple items such
as "coffee maker," "luggage," or the most dreaded item of all, "TV." But
choosing the right one is no easy task. Once you're actually in the store,
surrounded by options, it's easy to buy the worst brand of coffee maker, or
the luggage that is infamous for wearing out too soon, or the overly
expensive television set.
Wouldn't it be easier if you had some independent
help, right there in the store, to make the best choice and resist the often
bad information provided by salespeople?
Consumer Reports certainly thinks so. This week, it
introduced a cellphone application, ShopSmart, that allows you to carry the
magazine's famous product comparisons and ratings with you while shopping,
right on your mobile phone. Available for Verizon Wireless and Sprint Nextel
customers just in time for the holiday shopping season, this new service
costs $3.99 a month. Cingular will start carrying ShopSmart next month.
The idea is that, while you're in a store, dazed by
a row of similar-looking products like digital cameras, you can just whip
out your cellphone, launch ShopSmart, and see which camera Consumer Reports
recommends, or how it rates the particular camera you're holding.
We love and trust Consumer Reports, which runs a
very successful and useful paid Web site in addition to its legendary print
magazine. But we were dubious. How well would a cellphone handle such an
application? Would it be easy for last-minute shoppers to rapidly receive,
read and use the data provided by ShopSmart? So, we tested this new
application using a Verizon LG VX8100 cellphone -- a newer phone that runs
on Verizon's ultrafast EV-DO network, which downloads data at about the
speed of a low-end home DSL connection.
(Consumer Reports has a content-sharing
relationship with The Wall Street Journal Online.)
Overall, we were impressed by ShopSmart's
straightforward and easy-to-use approach. Each screen was simple to read at
a glance, and browsing from one screen to the next took just a couple of
seconds. We especially liked the program's ability to add certain products
to a "Favorites" list, for accessing later, and a feature that lets you
email the ShopSmart data to yourself, or anyone else, for later perusal.
There are a couple of downsides. For now, ShopSmart
covers only three categories of products -- electronics, appliances, and
home and garden. It omits important categories Consumer Reports covers in
print and online, including cars, personal finance, food and travel. So it
won't help you to buy that luggage, even though the magazine reviewed it.
And people who already subscribe to the magazine and/or the Web site don't
get it free. Like everyone else, they have to pay the $3.99 monthly fee.
Also, while performance was very good on our test
phone running on the fast EV-DO network, the product-information downloads
would be much, much slower at the typical network speeds most people use.
The program is updated weekly. It uses Yahoo
Shopping to provide up-to-date price ranges for each product, listing prices
from online stores as well as retail chains, so you can find where each
product is sold for the lowest cost.
After downloading ShopSmart through your phone
carrier's built-in online store -- our phone used Verizon's Get It Now -- it
can be opened by pressing just a few keys. This might be particularly useful
for shoppers who use this program only once in a while, so they don't easily
forget how to get started.
To make the best use of the phone's small display,
ShopSmart is simply organized into different sections using five tabs
labeled Ratings, Search, Favorites, Articles and About. The products
themselves are divided into three main categories: Appliances, Electronics,
and Home and Garden. Product types are listed alphabetically within each
category, 10 per screen. Under the Search tab, we found that the Appliances
category included 20 different types, starting with air conditioners and
ending with washing machines, including coffee makers and gas ranges along
the way.
Continued in article
Help for
victims of investment fraud ---
http://www.helpforinvestors.org/ Think you're a victim of investment fraud? Want to
check out your financial adviser? Need to report identity theft? A new
streamlined Web site from the Alliance for Investor Education,
www.helpforinvestors.org,
provides direct links to the right government agencies, regulators, and
trade groups.
Lauren Young, "A Tool for Investors in Distress: The new Web site from
the Alliance for Investor Education offers lots of help, including for those
who may have been duped," Business Week, June 15, 2005 ---
http://www.businessweek.com/bwdaily/dnflash/jun2005/nf20050615_4371_db035.htm?chan=tc
What should I do if my
wallet or purse is lost or stolen?
Immediately contact all three
credit reporting agencies -- Equifax, Experian and
TransUnion -- and have them place a fraud alert on your
account. This means that companies issuing new credit
accounts in your name will have to call you to obtain
permission first. The alert will last for 90 days only.
You can extend the alert to seven years, but only if
you've been a victim of identity theft and can provide a
police report.
In addition to contacting the
credit reporting agencies, you should file a police
report if your property was stolen. Close any accounts
that you think may have been compromised by the loss or
theft. The FTC provides
more information and a chart
to tick off steps you should take.
What can I do to
prevent myself from becoming a victim?
There isn't really anything you
can do to prevent identity theft. As long as Social
Security numbers are used for purposes other than Social
Security, you are at risk of having your identity stolen
any time someone has access to documents that carry your
number and other personal data. There are, however,
things you can do to lower your risk of becoming a
victim.
Review monthly financial
statements carefully for fraudulent activity.
Request a free copy of
your credit report from a credit-reporting agency
once a year to examine it for fraudulent activity. A
new law requiring credit reporting agencies to
provide a free annual report goes into effect
nationwide in September. Until then, it's in effect
only in western and Midwestern states. The credit
report will show who requested access to your credit
record. Look for requests from companies you haven't
done business with and tell credit-reporting
agencies if you see credit accounts that you didn't
open or debts you didn't incur. Check to see that
your name and address are correct.
Don't give your Social
Security number to any business that doesn't really
need it.
Cross shred sensitive
documents. Thieves have been known to piece together
strips of paper that are shredded only once.
Cross-shredders double-shred documents.
Shred pre-approved
credit-card offers before tossing them in the
garbage.
Don't store sensitive
personal information, such as bank account numbers
and passwords, on home computers or handheld
devices.
Install a firewall and
anti-virus software on your computer and keep the
virus definitions up to date to prevent viruses and
Trojan horses from infecting your computer and
feeding personal information back to hackers.
Don't fall for phishing
scams. Phishing occurs when someone sends you an
e-mail purporting to be from your bank or other
company you do business with and requesting you to
update your account information.
Use specially designed
software programs to clean data from your computer
before you sell or discard it. Simply deleting files
will not remove data from the memory.
Don't carry any documents
in your wallet that have your Social Security number
on them, including your medical card or military ID,
on days when you don't need the card.
Opt-out when your bank or
other financial institution requests permission to
share information about you with other businesses.
Close all credit-card
accounts except the one or two that you really need.
If you are an identity
theft victim and live in one of ten states,
including California, Colorado, Louisiana, Maine,
Texas, Vermont or Washington, consider placing a
"freeze" on your credit report so that no one can
access it without your permission. More than 20
additional states are considering passing similar
legislation. Creditors need to look at your report
before granting you credit. By freezing your report,
it will prevent unauthorized people from seeing your
personal data and it will prevent creditors from
opening a new credit account in your name for an
impostor. Some states only let victims of identity
theft freeze their records. Other states allow
anyone to freeze their record. The State Public
Interest Research Groups maintains
a list of states with
freeze laws.
The Fraud Detectives
Consultant Network --- http://www.frauddetectives.com/ This is a helpful site, although I
might add that accountants, attorneys, and others can list themselves free at
this site with no filtering with regard to skills and experience.
America's seniors are being cheated of their life's
savings by securities Broker/Dealers.
SENIORS AGAINST SECURITIES FRAUD http://seniorsagainstsecuritiesfraud.com
offers supportive educational links and solutions. Please consider linking.
Most Sincerely,
Joanne Tweed
Occupational Fraud Report
In 2003,
occupational fraud is estimated at $660 billion.
Occupational
fraud and abuse is a widespread problem that affects every entity,
regardless of size, location or industry. The ACFE has made it a
goal to better educate the public and anti-fraud professionals about
this threat.
The 2004
Report to the Nation is based on a survey that began in late
2003 and ran through the early months of 2004. Certified Fraud
Examiners throughout the US were asked to provide detailed
information on one fraud case he or she had personally investigated
that met the following criteria:
The case
involved occupational fraud;
The fraud
occurred within the last two years;
The
investigation of the fraud was complete; and
The CFE was
reasonably sure that the perpetrator had been identified.
The end result is a
comprehensive report that sheds light on occupational fraud and abuse while
offering stark lessons and valuable insights about its prevention and
detection.
Important Links for Reporting Frauds and
Important Things to Know in Avoiding Fraud (including
ID theft)
Purportedly (no guarantees) these are ways to to straight to humans in place of
threading through computer voices on telephones GetHuman ---
http://gethuman.com/us/
Question
What should you do if you think you're a possible victim of ID theft?
Answer
There are a number of things to do, especially the following:
Fill out an identity theft report with your local, state or federal law
enforcement agency. It's unclear if the mere loss or theft of personal
information constitutes identity theft, but filing a report may offer additional
protections. The FTC makes an affidavit available at
http://www.consumer.gov/idtheft/pdf/affidavit.pdf
When your credit card is lost or stolen, first
notify your credit card company. You should always carry the 800 phone number
that appears on the back of you card in some location other than relying only on
the card for the phone number.
A new program being spearheaded by Microsoft Corp.
is designed to provide a trusted way for researchers to report stolen credit
card numbers and other data they've found in the dark corners of the
Internet.
Establishing that link is important because when a
researcher finds stolen data, it can be hard to convince a bank or another
affected institution that the data is legitimate. The lost time can mean the
difference between someone's identity being used for fraud, and stopping a
fraud before it occurs.
The program Microsoft is spearheading could greatly
help researchers deal with data they've found online and submitted to
affected companies, said Dan Clements, former president of CardCops, which
specializes in tracking down stolen payment card numbers online.
When researchers find card numbers being sold or
hawked online, "We send it to everybody immediately. We send it to
companies, the government, the consumer -- it's a blitzkrieg. That way they
have all the intel and can act accordingly," he said. "You could call it
scattershot. It's the only way you can assure that we've done our job. But
we have no way of knowing it's effective."
Clements said the speed of the new program -- how
quickly it leads to notifications for affected institutions and consumers --
will be key to whether it is successful.
Some merchants and gambling websites have tried
similar programs in the past. They created databases of stolen cards against
which they'd check transactions, Clements said. But the programs fell apart,
partly because the companies didn't work well together without a middleman,
he said.
The new program is being managed by the National
Cyber-Forensics & Training Alliance, a nonprofit organization focused on
cybercrime. Other participating organizations include the American Bankers
Association and eBay Inc.
More banks, retailers and Internet security firms
will be added as they sign up and are vetted by a third party.
Nancy Anderson, Microsoft's deputy general counsel,
said in an interview that the idea for the program came from problems
Microsoft security researchers encountered in their attempts to alert banks
and online retailers to fraud they've discovered.
"When these kinds of credentials are stolen, they
may not get used immediately, so the goal here is to get the information to
the institutions quickly, quickly, quickly, so the appropriate action can be
taken before the damage is done," she said.
Clements said that one weakness of Microsoft's
program is that it won't allow people to anonymously submit what they've
found, which could discourage whistleblowers from coming forward.
He cited an example from CardCops that involved an
insider at an e-commerce company who discovered his company was hacked and
lost 50,000 credit card numbers. The employee said management threatened to
fire him if he disclosed the breach. Clements said CardCops allowed the
employee to disclose the breach anonymously and sent the information to the
banks and the government.
To date Nadine has eight modules on accounting fraud plus more modules on
other types of fraud
A woman known as "Fraud Girl" ran a series of weekly columns in Simoleon
Sense. Now Fraud Girl has her own blog called Sleight
of Hand--- http://sleightfraud.blogspot.com/
Her real name is Nadine Sebai
Now I have two women to stalk in Chicago ---
Francine ---
http://retheauditors.com/
Nadine ---
http://sleightfraud.blogspot.com/
"Tips for Preventing or Catching Identity Theft: Contacting one of
three credit reporting agencies is the key to monitoring possible fraud," MIT's
Technology Review, May 24, 2006 ---
http://www.technologyreview.com/read_article.aspx?id=16923
Consumer advocates have some advice for the 26.5
million veterans whose personal information was stolen from the home of a
Veterans Affairs employee: Don't panic.
Identity theft may be a growing problem that
affected 9.3 million Americans last year, according to Javelin Strategy and
Research. But consumer advocates say a few precautions can lessen the
chances of becoming a victim, even for people whose personal information has
been stolen.
The first thing to do if you think your Social
Security number, birth date or other sensitive data has fallen into the
wrong hands is to place an initial fraud alert on your credit reports. There
are three major credit reporting agencies, but a call to one -- for
instance, Equifax at 800-525-6285 -- will ensure the other two are notified.
A fraud alert entitles you to a free copy of your
credit report from each of the three companies. Order one from each and
scrutinize them carefully for accounts you didn't open or debts you don't
recognize. Also, make sure that information such as your Social Security
number and employer are correct on each report.
If you discover accounts or transactions you didn't
authorize, call and speak with someone in the fraud department of each
company involved. Keep a log of each person contacted, along with the date,
time and topics discussed on each call.
An initial fraud alert also requires businesses to
take additional steps to confirm your identity before issuing loans or
opening accounts in your name. Be prepared for loan and credit card
applications to take slightly longer to be processed.
It's important to understand that an initial fraud
alert, as the name implies, is only a temporary fix. That's because it
remains in effect for only 90 days. To prevent becoming a victim after the
three months are up, you'll need to take additional steps.
Next, fill out an identity theft report with your
local, state or federal law enforcement agency. It's unclear if the mere
loss or theft of personal information constitutes identity theft, but filing
a report may offer additional protections. The FTC makes an affidavit
available at
http://www.consumer.gov/idtheft/pdf/affidavit.pdf
Ask each of the three credit reporting companies to
place a freeze or extended alert on your account. Seventeen states have
enacted laws that require the reporting companies to block access to your
files in most instances. Check with the Consumers Union Web site or attorney
general in your state to see if this is available where you live.
Even if your state doesn't offer this protection,
ask Equifax, TransUnion and Experian to give you an extended alert anyway.
This option will entitle you to two free credit reports per year, and it
will also require the credit reporting companies to remove you from lists
marketers use to send prescreened credit offers for five years.
To qualify for an extended alert, the reporting
companies will require you to prove you've been the victim of identity
theft, even though it is not always clear how the law defines a victim in
this case. Be sure to include the FTC affidavit or other law enforcement
report you filed. It is legal documentation that your personal
identification has been stolen.
Finally, recognize that safeguarding your privacy
is a never-ending task, even for people who have no reason to believe their
personal information has been stolen. A little education and prevention, say
consumer advocates, can go a long way.
''You need an ongoing vigilance,'' says Paul
Stephens, a policy analyst with the Privacy Rights Clearinghouse in San
Diego. ''We want people to be proactive, to be vigilant, but we also don't
want to have people panicking.''
Organizations and government agencies featured in this section are listed
alphabetically.
Better Business Bureau Online
The Better Business Bureau Online, the electronic arm of the Better Business
Bureau, offers consumers the opportunity to file a complaint against
e-commerce sites as well as offline businesses. The Better Business Bureau
was founded in 1912 and seeks to create a more fair marketplace through
consumer education and voluntary self-regulation on the part of companies.
http://www.bbbonline.org/consumer/complaint.asp
Consumer Sentinel
Consumer Sentinel is a complaint database designed to provide law
enforcement agencies with information on Internet cons, telemarketing scams
and other consumer fraud-related complaints. The database, which is
maintained by the Federal Trade Commission, is available to 40 federal law
enforcement organizations, more than 200 state and local fraud-fighting
agencies, and every state attorney general in the United States. You may
register a complaint
here.
http://www.consumer.gov/sentinel/index.html
econsumer.gov
This international site, launched by a coalition of 13 nations, registers
cross-border e-commerce complaints and offers tips for safe shopping online.
It utilizes the Consumer Sentinel's network of Internet fraud complaint data
and shares it in several languages with consumer protection law enforcers in
countries that belong to the International Marketing Supervision Network.
http://www.econsumer.gov
Internet Fraud Complaint Center
The Internet Fraud Complaint Center enables consumers to log online fraud
complaints. The center is the result of a partnership between the FBI and
the National White Collar Crime Center (NW3C), a nationwide support network
for enforcement agencies involved in the prevention, investigation, and
prosecution of economic and high-tech crime. NW3C is funded through a grant
from the Bureau of Justice Assistance, Office of Justice Programs, and the
U.S. Department of Justice.
http://www.ic3.gov/default.aspx
National Fraud Information Center
The National Fraud Information Center (NFIC) was established in 1992 by the
National Consumers League and continues to be funded by the organization.
NFIC offers an online form for consumers who are interested in registering
an Internet fraud complaint. http://www.fraud.org/
State Attorneys General
Contact your state attorney general if you feel you have been a victim of
consumer fraud on the Web. Consult individual state sites for telephone or
electronic contact information for filing complaints. U.S. Securities and
Exchange Commission The U.S. Securities and Exchange Commission offers tips
on avoiding Internet fraud when investing, and a mechanism to register
Internet fraud or spam complaints for investigation.
http://www.naag.org/ag/full_ag_table.php
The Securities and Exchange Commission says it
has set aside about $450 million for payments to outside whistleblowers
whose information results in successful cases and penalties collected
from companies or individuals.
The SEC set up the program in accordance with
the financial overhaul law enacted in July. It follows intense public
criticism of the agency for the breakdown that allowed Bernard Madoff's
multibillion-dollar fraud to go undetected for 16 years, despite
numerous red flags raised by whistleblowers.
A report issued Friday by the SEC shows it has
put $451.9 million into a new fund to pay whistleblowers, which must
have a minimum $300 million.
The Securities and Exchange Commission says it
has set aside about $450 million for payments to outside whistleblowers
whose information results in successful cases and penalties collected
from companies or individuals.
The SEC set up the program in accordance with
the financial overhaul law enacted in July. It follows intense public
criticism of the agency for the breakdown that allowed Bernard Madoff's
multibillion-dollar fraud to go undetected for 16 years, despite
numerous red flags raised by whistleblowers.
A report issued Friday by the SEC shows it has
put $451.9 million into a new fund to pay whistleblowers, which must
have a minimum $300 million.
Dirty Tricks Played on Job Seekers Job hunters using Monster.com, the employment Web site
owned by Monster Worldwide, received fake job offers by e-mail that asks for
their Bank of America account information. The e-mail contains personal
information collected when hackers tricked Monster.com customers into
downloading a virus in a fake job-seeking tool, according to researchers at
Symantec, the world's biggest maker of security software.
Rochelle Garner, "Monster.com Users Get Fake Offers And Request," The
Washington Post, August 23, 2007, Page D04 ---
Click Here
Yeah, these "phishing" scams have netted crocks
over $2.8 billion this past year according to an article I read recently. I
thought the number sounded high, but they are bombarding people with genuine
looking requests from PayPal and Amazon.com saying that your account has
been restricted, charged for something you didn't buy, or is being
investigated for account tampering by their security staff. A lot of people
panic apparently when they see this stuff and reply with personal account
information. I feel sorry for them so every time I get one for PayPal I
reply by sending it to
spoof@paypal.com and they supposedly
investigate them. If anyone has a similar email address for Amazon, please
let us know. Just using Amazon's customer service form is not enough. The
whole message has to be forwarded to them, so they can investigate the
source of the illegal message.
John Schatzel
November 14, 2006
Snopes has a pretty good page for identifying phishing spoofs. Enter "phishing"
into the search box at
http://www.snopes.com/
Also see what you get when you enter "Nigerian" into the search box.
December 21. 2009 message from George Wright
[Geo@LOYOLA.EDU]
Experienced eBay users swear by it, as one has more
recourse in the event of problems.
An experienced friend also tell me that it's a good
idea to open a new bank account specifically for PayPal purposes. The reason
is that you can move newly deposited funds to an account beyond PayPal's
reach. I'm told this prevents PayPal from sequestering your funds in the
event of a late protest by the source of the funds.
The Fraud Detectives
Consultant Network --- http://www.frauddetectives.com/
This is a helpful site, although I
might add that accountants, attorneys, and others can list themselves free at
this site with no filtering with regard to skills and experience.
Warning to retirees: Beware of your families Financial swindles are one of the fastest-growing forms
of elder abuse. By some estimates, as many as five million senior citizens are
victimized each year, says Sara Aravanis, director of the nonprofit National
Center on Elder Abuse, which provides information to federal and state policy
makers. Because of the problem's spread, "many states have laws authorizing
financial institutions to report suspicions of elderly abuse," says Bruce Jay
Baker, general counsel for the Illinois Bankers Association. Earlier this
summer, the Securities and Exchange Commission hosted a Seniors Summit to
highlight the issue, with SEC Chairman Christopher Cox noting that protecting
seniors' pocketbooks "is one of the most important issues of our time."
Jeff D. Opdyke, "Intimate Betrayal: When the Elderly Are Robbed by Their Family
Members," The Wall Street Journal, August 30, 2006; Page D1 ---
http://online.wsj.com/article/SB115689331870748918.html?mod=todays_us_personal_journal
America's seniors are being cheated of their life's
savings by securities Broker/Dealers.
SENIORS AGAINST SECURITIES FRAUD http://seniorsagainstsecuritiesfraud.com
offers supportive educational links and solutions. Please consider linking.
The purpose of the Government Accountability Office's
FraudNET
is to facilitate the reporting of allegations of fraud, waste, abuse, or
mismanagement of federal funds.
If you want to report such allegations, you may do so
by filling out a FraudNET
Form or by using one of these other methods:
GAO FraudNET
441 G Street NW
Washington, D.C. 20548
A FraudNET
Form requires a web browser that supports forms, HTML 3.0 tables and 128
bit encryption.
In all cases, please provide as much detail as
possible concerning the who, when, where, what, how and how much. You do not
need to provide your name. The information you submit will be entered over a
secure connection. All information submitted is safeguarded against
unauthorized disclosure.
Free Corporate Fraud Hotline Initiated February 2003: 888-622-0117
2,000 calls logged within eight months.
Callers can be anonymous
Several new cases opened based on caller information
Welcome
to the Forensic Group LLC, host of the FraudDETECTIVES Consultant
Network, the premier Web source for locating leading Forensic CPAs, Certified
Fraud Examiners, Certified Turnaround Professionals, Crisis Managers, Litigation
Specialists, and Bankruptcy Professionals.
What Is Fraud?
Do you realize how much fraud costs organizations
annually? Read What
Every CEO Should Know about fraud.
KnowFRAUD?
Take A
Short Quiz just for fun to test your knowledge of fraud.
Comment from Bob
Jensen
This is a helpful site, although I
might add that accountants, attorneys, and others can list themselves free at
this site with no filtering with regard to skills and experience.
Title Washing: How Car Titles Get Laundered
Unsuspectingly you may be purchasing a car that was flooded during a hurricane Thousands of vehicles that sat in the murky waters
left by hurricanes Katrina and Rita are starting to show up on the used-car
market. Most states require that flooded cars be labeled as such on the title.
But scam artists have found loopholes in the system. They re-register cars in
states with looser title laws -- sometimes two or three states -- until the
warning that the car was flooded is gone. This fraudulent practice is known as
"title washing."
Jeff Brady, "Holes in Monitoring System Let Lemons Get Resold," NPR,
January 31, 2006 ---
http://www.npr.org/templates/story/story.php?storyId=5173717
Americans lost at least $548 million to identity
theft and consumer fraud last year as the Internet provided new victims for
age-old scams, according to government statistics released Tuesday.
The U.S. Federal Trade Commission said it received
635,000 consumer complaints in 2004 as criminals sold nonexistent products
through online auction sites like eBay Inc. or went shopping with stolen
credit cards
Identity theft -- the practice of running up bills or
committing crimes in someone else's name -- topped the list with 247,000
complaints, up 15 percent from the previous year.
Fraud and identity theft cost consumers at least $437
million in 2003.
Internet-related fraud accounted for more than half
of the remaining complaints as scammers found victims through Web sites or
unsolicited e-mail, the FTC said.
Auction fraud was the most common Internet scam, the
FTC said in its annual fraud report, followed by complaints about online
shopping and Internet access service.
The number of incidents was up across nearly every
category from 2003, but it was unclear whether that represented an actual
increase in fraud or simply a greater awareness of the FTC's Consumer Sentinel
fraud program.
Consumers likely lost significantly more than the
amount reported, as fewer than half were able to pin a dollar figure on their
losses.
The median monetary loss reported was $259, though 41
consumers reported losses of $1 million or more.
The FTC did not specify how many identity-theft
incidents took place online. A recent report by the Better Business Bureau
found that most cases of identity theft occurred through the theft of a
checkbook or other offline methods.
Question
What should you do if you think you're a possible victim of ID theft?
Answer
There are a number of things to do, especially the following:
Fill out an identity theft report with your local, state or federal law
enforcement agency. It's unclear if the mere loss or theft of personal
information constitutes identity theft, but filing a report may offer additional
protections. The FTC makes an affidavit available at
http://www.consumer.gov/idtheft/pdf/affidavit.pdf
"Tips for Preventing or Catching Identity Theft: Contacting one of
three credit reporting agencies is the key to monitoring possible fraud," MIT's
Technology Review, May 24, 2006 ---
http://www.technologyreview.com/read_article.aspx?id=16923
Consumer advocates have some advice for the 26.5
million veterans whose personal information was stolen from the home of a
Veterans Affairs employee: Don't panic.
Identity theft may be a growing problem that
affected 9.3 million Americans last year, according to Javelin Strategy and
Research. But consumer advocates say a few precautions can lessen the
chances of becoming a victim, even for people whose personal information has
been stolen.
The first thing to do if you think your Social
Security number, birth date or other sensitive data has fallen into the
wrong hands is to place an initial fraud alert on your credit reports. There
are three major credit reporting agencies, but a call to one -- for
instance, Equifax at 800-525-6285 -- will ensure the other two are notified.
A fraud alert entitles you to a free copy of your
credit report from each of the three companies. Order one from each and
scrutinize them carefully for accounts you didn't open or debts you don't
recognize. Also, make sure that information such as your Social Security
number and employer are correct on each report.
If you discover accounts or transactions you didn't
authorize, call and speak with someone in the fraud department of each
company involved. Keep a log of each person contacted, along with the date,
time and topics discussed on each call.
An initial fraud alert also requires businesses to
take additional steps to confirm your identity before issuing loans or
opening accounts in your name. Be prepared for loan and credit card
applications to take slightly longer to be processed.
It's important to understand that an initial fraud
alert, as the name implies, is only a temporary fix. That's because it
remains in effect for only 90 days. To prevent becoming a victim after the
three months are up, you'll need to take additional steps.
Next, fill out an identity theft report with your
local, state or federal law enforcement agency. It's unclear if the mere
loss or theft of personal information constitutes identity theft, but filing
a report may offer additional protections. The FTC makes an affidavit
available at
http://www.consumer.gov/idtheft/pdf/affidavit.pdf
Ask each of the three credit reporting companies to
place a freeze or extended alert on your account. Seventeen states have
enacted laws that require the reporting companies to block access to your
files in most instances. Check with the Consumers Union Web site or attorney
general in your state to see if this is available where you live.
Even if your state doesn't offer this protection,
ask Equifax, TransUnion and Experian to give you an extended alert anyway.
This option will entitle you to two free credit reports per year, and it
will also require the credit reporting companies to remove you from lists
marketers use to send prescreened credit offers for five years.
To qualify for an extended alert, the reporting
companies will require you to prove you've been the victim of identity
theft, even though it is not always clear how the law defines a victim in
this case. Be sure to include the FTC affidavit or other law enforcement
report you filed. It is legal documentation that your personal
identification has been stolen.
Finally, recognize that safeguarding your privacy
is a never-ending task, even for people who have no reason to believe their
personal information has been stolen. A little education and prevention, say
consumer advocates, can go a long way.
''You need an ongoing vigilance,'' says Paul
Stephens, a policy analyst with the Privacy Rights Clearinghouse in San
Diego. ''We want people to be proactive, to be vigilant, but we also don't
want to have people panicking.''
I am really glad to see the Digital Duo return to PBS television.
Back in the 1990s I loved this show as a helper to those of us struggling to
learn new computing and networking technologies. The most important
attribute of this show is the willingness of the Duo to criticize the products
or services that they are evaluating. The Duo is consumer-oriented.
Unlike its counterpart Computer Chronicles, the Digital Duo are probably not
especially popular among vendors who supply the products and services.
The main site for the Digital Duo
http://www.pcworld.com/digitalduo/index/0,00.asp
The Digital Duo is the independent, irreverent video
review of all things digital. Hosted by Stephen Manes and Angela Gunn.
More about PC
World's Digital Duo
The weekly shows are probably listed in your television guide for your local PBS
channel. I suggest you record each show and then
save the recordings that you think will be helpful to your students or your
family in the future.
One of the features that I watched this weekend featured free access to
credit reports. The Duo pointed out how the majority of the sites that now
offer free credit reports should be avoided. They recommended using
https://www.annualcreditreport.com/cra/index.jsp
I think this is good advice, but I have some other recommendations below.
Online Education for Managers www.bettermanagement.com CPAs and business managers can brush up on the basics of fraud
as well as learn detection and prevention strategies from articles and case
studies at this Web site. Titles include “Business Intelligence in the
Financial Services Industry.” Fraud investigators can explore the library
section to read related content on money laundering, regulatory compliance and
risk management and also “solve business problems” with
anti-money-laundering and financial services solutions.
Fraud or Frivolity? www.stockfraudlawyersnetwork.com CPAs acting as financial consultants will want to visit this
e-stop to find out about broker misconduct and what distinguishes a securities
fraud case from a frivolous claim. Users also can locate a securities fraud
lawyer in their area and get a free consultation.
Fraud Is… alextalksbusiness.com Alex Kwechansky, public speaker and author of the book Never
Underestimate Who Can Cheat You, gives users a better understanding of
fraud in publicly and privately owned companies and how to spot and,
hopefully, thwart it at this Web site. The section Dirty Deeds defines
different fraud concepts including embezzlement, insider trading and skimming,
while the section Here’s the Point outlines some of fraud’s early warning
signs.
Insure Against Fraud www.insurancefraud.org CPAs looking to advise clients on insurance fraud will find
legislative news, the Fraud Case of the Month and the Fraud Hall of Shame at
this Web site, first listed as a Smart Stop in April 2002 in response to
fraudulent 9/11 claims. Visitors to the Coalition Against Insurance Fraud’s
Web stop also can receive a free sample of Insurance Fraud Weekly ePort.
Worth Revisiting www.ifccfbi.gov The Internet Fraud Complaint Center (IFCC) Web site, another
Smart Stop worthy of more than one mention and first listed in the November
2001 JofA, now offers users IFCC Warnings, which address credit card
and identity theft, employment scams and Internet auction fraud. The section
Internet Fraud Preventive Measures offers tips on recognizing and preventing
online fraud.
We have designed our toll free reporting
service specifically to provide employees an anonymous communication channel
to bring forth Code of Conduct concerns and establish a protected platform for
on-going communications with your company.
Code Orange: CyberCrime Center --- http://www.eweek.com/article2/0,3959,1104230,00.asp
It's gotten so bad that even the feds are worried. So the Department of Homeland
Security plans on opening a Cyber-Security Center in DC to address the problem.
We're not just talking about nabbing script-kiddies, either—big-time criminals
are flocking to the Web. But one key piece is missing—and our experts think
the new center will flop until it's addressed. Find out what the fatal flaw is
and learn details of this new government bureaucracy in our special coverage.
How to Blow the Whistle at Trinity University
Until I recently ran into Gary Tanner, Trinity University's head of internal
auditing, I was not aware that Trinity had a fraud hotline for anonymous
(although it does not have to be anonymous) reporting suspected frauds, sexual
abuse, or other bad things that happen on campus. Scroll down to the
"Fraud Hotline" button at http://www.trinity.edu/gtanner/
If you don't have an immediate need for this hotline button, I suggest you
scroll back to the top of
Gary
's page just to smile at the really cute animation of the Trinity Tiger spotting
his tail and then commencing to chase the tail. Of course
Gary
never runs around in circles like that.
February 24, 2004 reply from Bill Spinks
Being curious, I went to the website and our
"community" might find this statement interesting:
The management of Trinity University does have the
right to review any and all university computer activities including e-mail,
key strokes and uses that do not coincide with the mission of Trinity
University. (emphasis mine)
So remember when you type those "key
strokes" you are not alone. Big Northrup loves you and watches over
you.... ................
A new invention that makes a person
feel full while eating less food is being tested as an alternative to surgical
treatments for morbid obesity. The pill expands in the stomach after being
swallowed --- http://www.wired.com/news/medtech/0,1286,58705,00.html
Do you suppose there will be
alternative models giving us choices?
Paris - Doctors who have grown penile tissue in animals to demonstrate the
possibility of organ replacement have now gone one better - they have added
nerve cells --- http://www.news24.com/News24/Technology/News/0,,2-13-1443_1353789,00.html
Class Action Securities Fraud Lawsuits up in
2004
While the number of federal securities fraud class actions filed in 2004
increased only moderately from 2003 levels, rising to 212 companies sued from
181, the decline in stock market capitalization corresponding to these actions
increased dramatically, according to a report released today by the Stanford
Law School Securities Class Action Clearinghouse in cooperation with
Cornerstone Research. The total decline in the market capitalization of
the defendant firms from the trading day just before the end of the class
period to the trading day immediately after the end of the class period, or
the "Disclosure Dollar Loss (DDL)," nearly tripled from $58 billion
in 2003 to $169 billion for cases filed in 2004. This 192 percent increase in
the DDL index is attributable entirely to eight filings, in which each
defendant firm experienced disclosure dollar losses in excess of $5 billion.
In sharp contrast, there was only one filing with losses that large in all of
2003. AccountingWeb, January 6, 2005 --- http://www.accountingweb.com/cgi-bin/item.cgi?id=100321
Questions
What do airline fares and Congressional legislation have in common?
Answer
There are a lot of surprises that are revealed only after you're struck with the
deceptions (especially about baggage fees in both instances).
What you end up with is not necessarily what you'd planned on getting.
In 2009 the airline seat demand is expected to drop off
a cliff for a variety of reasons, not the least of which is the economy.
Beware of increasingly deceptive ticket deals.
Travel companies say that by
the end of this year, consumers will be able to comparison shop for airfares
that for the first time will include the fees airlines have been tacking on to
advertised fares only after you hit the "buy" button. AlreadyTripAdvisor.com and
FlyingFees.com
offer elementary tools for calculating fees, and advanced
technology that can fold fees into fare quotes at travel agencies, online
vendors and airline Web sites is likely to hit the market later this year.
"Airfare Quotes That Lay Bare Hidden Fees: Sites Build Tools to Compare
the Actual Costs of Flights; When Baggage Tips the Scale," by Scott Macartney,
The Wall Street Journal, March 10, 2009 ---
http://online.wsj.com/article/SB123664662318478683.html?mod=todays_us_personal_journal
Shop for airline tickets online or through a travel
agent and the price quotes you get don't tell the whole story these days.
But that's about to change.
Travel companies say that by the end of this year,
consumers will be able to comparison shop for airfares that for the first
time will include the fees airlines have been tacking on to advertised fares
only after you hit the "buy" button. Already TripAdvisor.com and
FlyingFees.com offer elementary tools for calculating fees, and advanced
technology that can fold fees into fare quotes at travel agencies, online
vendors and airline Web sites is likely to hit the market later this year.
"This has tremendous
potential to turn air-travel shopping on its end," said Kyle Moore, vice
president of product marketing for Sabre Travel Network.
A $200 ticket on one airline
may look like a good deal, but could ultimately be more expensive than a
$250 ticket on another carrier if that first airline charges fees for
checking baggage, transporting pets or unaccompanied minors. Even perks like
seats with extra legroom, priority security-line privileges or one-day
passes to an airport lounge can significantly boost the price of a ticket.
Airlines have found customers willing to pay more at the airport when fees are separate from fares. Folding fees into fares could limit airlines' ability to dig deeper into traveler wallets.
Sabre Holdings Corp. and Amadeus IT Group SA, two leading airline booking companies, say they'll have tools out to travel agents, Web sites and airlines beginning later this year that will add fees consumers plan to use into ticket prices, showing bottom-line prices much as car-rental companies were pressured into showing the total price of a rental with all fees, taxes and surcharges included.
Rough early attempts to fold fees into prices give travelers a better idea of the fees they may incur, but still leave a lot of the math to travelers. TripAdvisor, a company owned by Expedia Inc. that built a following collecting travelers' hotel and destination reviews, added airline ticket search capabilities to its site on Feb. 27 and unveiled a "fee estimator" that can re-rank prices based on how many bags you plan to check. The fee estimator, developed in-house by TripAdvisor, can also calculate expected fees for each flight for meals, drinks, snacks and
"Customers are looking for
clarity in pricing," says Bryan Saltzburg, general manager of new
initiatives for TripAdvisor.
Without fees, a
$193 round-trip fare between New York and Fort Lauderdale for travel later
this month on US Airways Group Inc. looks cheaper than a $197 fare at
JetBlue Airways Corp., for example. But if you're checking two bags, you'll
pay $80 in fees on US Airways and only $40 on JetBlue.
The fee estimator takes into account whether you
have elite status at an airline that may exempt you from some fees. But
there are lots of limitations. TripAdvisor's estimator only works for
domestic flights and does not price out the costs of overweight or oversized
luggage, priority seating, pets, unaccompanied minors or other charges.
TripAdvisor says it concentrated on the most frequently incurred fees; more
fees may be coming.
Jensen Comment
Add-on fee collecting greatly complicates product costing since most of these
fees are in essence for separate products. But the products are in no way
independent since the all depend on the purchase of the main ticket. Also these
products share many common fixed costs such as the cost of baggage handling. The
airline needs a baggage system to serve both the "free baggage" that is part of
the ticket price and the "fee baggage" that is charged baggage not covered in
the price of a ticket. Cost accounting and pricing decisions are very
complicated and offer an opportunity for new case studies in cost and managerial
courses. Add this to the problem of frequent flier liabilities and you may write
up a case that nobody can solve. Those incomprehensible telephone bills
demonstrated that consumers really hate complicated billings with lots of hidden
surprises in the fine print.
Report to the Nations on Occupational Fraud and Abuse, 2010 Global
Fraud ---
http://www.acfe.com/rttn/rttn-2010.pdf
Thanks to Jim McKinney for the heads up.
The first list reflects the most called or inquired about industries. The
second lists the industries which received the most complaints during the
year.
Top Ten Inquiries
1. Home Improvement Contractors
2. Mortgage Companies/Brokers
3. Residential Roofing Contractors
4. Residential Heating & A/C Companies
5. Window Companies
6. Home Builders
7. Plumbing Contractors
8. Franchised Car Dealers
9. Tree Cutting/Trimming Companies
10. Charities
Top Ten Complaints
1. Mortgage Companies/Brokers
2. Home Improvement Contractors
3. Franchised Car Dealers
4. Credit Card Offers & Plans
5. Financial Services
6. Residential Roofing Contractors
7. Residential Heating & A/C Companies
8. Tree Cutting/Trimming Companies
9. Home Furnishing Stores
10. Work-At-Home Offers
Auto Repair - Mechanical
Financial services is new to the top ten lists with a dramatic 900% increase
in complaints. The 90 complaints in this industry can all be contributed to one
company in our service area, which does business nationwide. The complaints
against this company concern a wide variety of issues, including advertising,
sales, delivery, repair or service, guarantee or warranty, product quality,
refund or exchange, contract, customer service and credit or billing issues.
Donna Childs, CAE, BBB President & CEO, says, "It is vital that
consumers read contracts and ask questions. If you don't know what something
means, ask for clarification. And, always read the fine print."
Mortgage companies and brokers continue to be high on both lists. This can be
contributed to the fact that interest rates are still attractive. The 36%
increase in inquiries on companies in this industry is due to consumers checking
around to find reputable companies to do business with. Unfortunately,
complaints are up 50% in this industry also. This increase may be attributed to
a high demand in this industry. Companies are having a difficult time keeping up
with the volume of business.
The home improvement industry and related industries like heating & A/C,
windows, plumbers and roofing contractors continue to be among the most
complained and inquiried about industries. Though they are still on the top ten
lists, some of these industries have seen a decrease in activity. Donna Childs
says, "Roofing contractors have seen a 29% decrease in the number of
complaints filed in their industry and a 33% decrease in the number of
inquiries. This can be attributed to the fact that the majority of roofing jobs
generated from the 2001 hail storms have been completed and the activity in this
industry is falling back to normal levels."
Work-at-home offers were new to the top ten complaint list. Again, this was
due to one company operating in our service area. The company involved has a
pattern of unanswered complaints concerning unfulfilled contracts, selling
practices and advertising practices.
Donna Childs says, “Ads promoting assembly work, chain letters, envelope
stuffing, multi-level marketing, online business and medical insurance claims
processing are tempting, but many people are victimized by work-at-home schemes
like these and are losing more money than ever. In fact, the Federal Trade
Commission reports work-at-home schemes were one of the top ten consumer frauds
that it received complaints about in 2002." She continues, "It’s
important to keep in mind that any work-at-home offer requiring an upfront fee
or purchase is probably not legitimate. If you send money to one of these, you
will probably never see your money again or earn money by working at home.
Avoiding work-at-home opportunities is the easiest way to save your money. But,
if you are considering an offer, investigate before you commit or pay fees. Ask
questions and get ten references from people successful in the venture in your
area. Don’t feel pressured to make a decision."
Also new to the lists are tree cutting and trimming companies and home
furnishing stores. Complaints against tree cutters and trimmers varies from
missed appointments, incomplete work and failure to call customers back. Donna
Childs says, "One of the common complaints the BBB hears involves stump
removal. One of these contractors may cut down a tree in a yard and promise to
come back and take out the stump. Time goes by, call after unreturned call, the
stump is still in the yard, leaving a frustrated consumer."
Home furnishing stores complaints involve warranty issues. For example, a
customer has a couch delivered and the customer notices it is ripped upon
arrival. The customer is upset because instead of replacing the couch the
company sends someone out to fix it. This action may be covered by the warranty,
but the consumer is upset because they wanted a new couch, not one that has been
repaired.
Donna concludes, “The bottomline is you need to know who you are doing
business with. So, before you do business with a stranger, check with a
friend…your Better Business Bureau." Put the BBB to work for you by
visiting www.dayton.bbb.org or calling
(937) 222-5825 or (800) 776-5301, 24/7.
Additional information about the industries on the Better Business Bureau's
top ten follows.
Better Business Bureau Top Ten Inquiry List
2003 Ranking
Number Of Inquiries
In 2003
2002 Ranking
Increase (Decrease)
Over 2002 Numbers
1. Home Improvement Contractors
8,975
2
(1%)
2. Financial - Mortgage Companies/Brokers
7,420
4
36%
3. Roofing - Residential Contractors
7,068
1
(33%)
4. Heating & A/C - Residential - Install/Service
5,746
3
5%
5. Windows - Installation/Service
4,417
5
27%
6. Home Builders/Contractors
3,109
6
6%
7. Charities
2,622
8
20%
8. Auto Dealers - Franchised - New & Used
2,431
10
21%
9. Garden/Lawn-Tree Cutting/Trimming
2,349
NEW
22%
10. Charities
2,320
7
5%
Better Business Bureau Top Ten Complaint List
2003 Ranking
Number Of Complaints
In 2003
2002 Ranking
Increase (Decrease)
Over 2002 Numbers
1. Financial - Mortgage Companies/Brokers
117
5
50%
2. Home Improvement Contractors
110
2
12%
3. Auto Dealers - Franchised - New & Used
102
4
19%
4. Credit Card - Offers/Plans
91
3
(4%)
5. Financial Services
90
NEW
900%
6. Roofing - Residential Contractors
83
1
(29%)
7. Heating & A/C - Residential - Install/Service
61
6
39%
8. Garden/Lawn-Tree Cutting/Trimming
57
NEW
63%
9. Home Furnishing Stores
53
NEW
51%
10. Work-At-Home Offers
44
NEW
193%
Auto Repair -
Mechanical
44
9
16%
2003
2002
Increase (Decrease)
Over 2002 Numbers
Instances of Service
314,624
232,456
35%
Total Complaints
2,876
2,808
2%
The Better Business Bureau of Dayton/Miami Valley, Inc. is a private,
nonprofit association founded in 1925. The Bureau serves the Miami Valley,
including Montgomery, Greene, Clark, Darke, Miami, Preble, Shelby and northern
Warren Counties.
Scam Warning
Denny Beresford sent me a message about the latest
Social Security email scam. Always remember that government agencies like the
IRS and the Social Security Administration, along with banks credit unions, do
not send you email messages out of the blue seeking your privacy information or
your money. These messages come from crooks, most of whom reside outside the
legal jurisdiction of the United States. I don't even open email messages from
these institutions.
The sad part is that these scams work so
successfully!
I'm receiving social security benefits now and I
have to say that the email I received earlier this morning looked fairly
official. However, it seemed unlikely that Social Security would make such a
notification by email. So I found the announcement on the official Social
Security site. While I'd bet that most people don't fall for the "wife of
the former president of Nigeria" type of scam, this looks like one that
might have a higher degree of success.
It's mind boggling that anyone would believe that
someone they don't know would share millions of dollars with them for
helping transfer out (mostly stolen) money from wherever. Does anyone on
this list know of any good psychological studies on this phenomenon? It
would be fascinating to understand it better.
It's been a few years, but my only two personal
experiences with these scam letters came close together.
One was a call from a woman wanting to know how
much income tax she would owe if she was paid $6M to arrange a funds
transfer. I only had one contact with that person. The other call was from a
former client who was in desperate financial straits over an illness in his
family, after several conversations and showing him the results of research
I convinced him it wasn't a real offer.
The thing that was common to both situations was
that the people were in desperate need, so they were willing believers. It's
something like the lottery mentality - where they think there is one big
deal, a home run play, that will fix everything that is wrong.
If there were a study on this kind of thing, I
think it would include mention of suspension of disbelief.
It's especially enlightening when the victims turn the tables on the
scammers. The huge underlying reason why these schemes are successful is
that far too many people are willing to bend ethics one time when the
promised payoff is enormous.
When I was at FSU I raised horses. Across the road at the time were
100,000 undeveloped acres (mostly pine forest) where occasional drug deals
were made --- at least I assumed so since the setting was so perfect for
privacy. I used to ride horseback for miles on dirt roads through those
woods wondering (actually daydreaming) what I would do if I stumbled on two
drug dealers who killed each other and left a million dollars of cash laying
there for the taking.
It would be tempting to load up my saddlebags before returning to the
barn to report the shootings. (In those days there were no cell phones such
that I could not phone in the crime until I returned to the barn).
Can't say whether it was good news or bad news that I never encountered
such an opportunity in real life. Hypothetically I insist that I would take
the high road! That's the beauty of fiction!
Bob Jensen
The holiday season brings out more scam artists from all over the world
This is an interesting set of links from the Federal Trade Commission
Jensen Comment
Even the familiar Nigerian-type scams are still enormously successful. These
scams are the second most lucrative export (oil is number one) from Nigeria, and
Nigeria is only one of many places in the world where such scams originate. Many
also come from Eastern Europe where technology geniuses are always miles ahead
of law enforcement and vendor security protection upgrades ---
http://faculty.trinity.edu/rjensen/FraudReporting.htm#NigerianFraud
Beware of Counterfeit U.S. Postal Money Orders In the last six months, the F.B.I. and postal
inspectors say, international forgers - mostly in Nigeria, but also in Ghana and
Eastern Europe - appear to have turned new attention to the United States postal
money order. More than 3,700 counterfeit postal money orders were intercepted
from October to December, exceeding the total for the previous 12 months,
according to postal inspectors. Moreover, 160 arrests have been made in the
United States since October in cases where people have been suspected of
knowingly receiving fraudulent postal money orders or trying to cash them, Paul
Krenn, a spokesman for the United States Postal Inspection Service, said.
Tom Zeller Jr., "Authorities Note Surge in Online Fraud Involving Money Orders,"
The New York Times, April 26, 2005 ---
http://www.nytimes.com/2005/04/26/business/26forgery.html?
When I visited Fe-International.com -- the
investment site Johannes mentioned -- the toolbar popped up a warning:
"The page you are trying to visit has been blocked
by the Netcraft Toolbar because it is believed to be part of a fraudulent
phishing network. Do you still want to go there?"
I clicked "Yes" because I wanted to poke around
some more (for the record, unless you really know what you're doing, it is
best just to avoid known or suspected scam sites altogether.) Netcraft dug
up a bunch of information on the site, including records indicating that the
site domain name was associated with a host named "got.raped.org." (Nice
touch, I thought. Gee, no, that's not phishy at all.)
With a few hours of research, I soon discovered
that there are literally hundreds if not thousands of these sites online at
any given time, advertising high-yield investment plans (HYIPs) that claim
to offer quick profits through a variety of poorly explained methods usually
related to day-trading or buying foreign currencies or stocks.
The advertised rate of return varies by site, but
the rates offered usually are far in excess of what most legitimate
investment vehicles offer, promising anywhere from 1 to 2 percent per day to
130 percent over 30 days.
I suppose it's possible some of these sites are
legit, but it appears that most are little more than old-fashioned Ponzi
schemes gone virtual. The funds may pay out in the beginning, but eventually
they will attract more investors than they can reasonably pay off with the
money they're taking in. When that happens, the fund inevitably closes down
and lots of investors are left without anything.
All of the funds require investors to make their
deposits via some type of virtual gold-backed currency like eGold or
E-Bullion. Such payment methods are largely outside the control of U.S.
financial regulators and are "non-repudiable," meaning once money has been
sent there is no way to reverse the transaction.
Most of the sites allow people to invest anywhere
from $1 to $10,000, with claims of "guaranteed payouts." But from browsing
one of many HYIP forums dedicated to tracking the lifespan and performance
of these high-risk investments, it seems the majority pay back only a
fraction of what people pay into them.
You write that check
to your favorite charity, send it off and feel pretty good about your
philanthropic gesture, right? Federal and state regulators are taking steps to
make sure that tax-deductible donation is being used properly by the nonprofit
receiving it. Following the firestorm that erupted in corporate America in the
wake of numerous accounting scandals, some are wondering if enough is being
done to regulate the nonprofit sector, with Massachusetts Attorney General
Thomas F. Reilly leading the charge.
"We are seeing
more mischief in this area than I think we've seen before," Reilly told
the New York Times. He is calling for legislation in his state to tighten
controls over charities.
New York Attorney
General Eliot Spitzer proposed a series of laws to tighten up regulation of
the nonprofit sector last summer, but the bills have stalled in the
legislature. "When his efforts didn't go anywhere, I think some charities
decided it was just a fad," Michael W. Peregrine, a lawyer in Chicago who
represents many nonprofit groups, told the Times. "But the confluence of
high-profile, notorious developments among charities is giving these attorneys
general and congressmen the ammunition they need to push these measures
through."
Senator Charles E.
Grassley (R-IA), chairs the Senate Finance Committee and told the Times his
committee’s staff would be looking at charitable issues "over a long
period of time." He added that there may be hearing held in the matter,
which the charities had hoped wouldn’t be necessary.
"In Congress, we
legislate so much and delegate, but we need to do more oversight to make sure
checks and balances work and supervise the tax credits we're giving,"
Grassley told the Times. "We give tax deductions for charitable giving,
so there's a public policy interest in how the money gets used."
Rep. Bill Thomas
(R-CA), chairman of the Ways and Means Committee, sent shock waves through the
nonprofit sector earlier this month when he said his committee would be
questioning the benefit taxpayers receive when a hospital or credit union is
nonprofit as opposed to for-profit.
"They're in
direct competition with institutions that pay taxes, and what is the good and
worthy cause for which they were given the nonprofit, therefore tax-preferred,
status?" he asked, referring to credit unions in a speech to the
Federation of American Hospitals, reported by the Times. "I think some of
it's gotten murky or lost in their attempt to build and grow and provide
services to the point that if I put one down on paper and said profit or
nonprofit, you couldn't tell the difference."
FBI: Don’t be Fooled by Work-at-Home Scams The FBI and the Internet Crime Complaint Center
(IC3) continue to receive numerous complaints from individuals who have fallen
victim to work-at-home scams and remind consumers to be vigilant when seeking
employment online. These work-at-home schemes are designed by criminals to gain
the trust of job seekers in order to take advantage of working relationships to
further illegal activity. Most victims do not even realize they are engaging in
criminal behavior until it is too late. In many of the reported scams, victims
are often hired to “process payments,” “transfer funds,” or “reship products.”
However, these scams exploit unwitting employees by having them cash fraudulent
checks, transfer illegally obtained funds for the criminals, or receive stolen
merchandise and ship it to the criminals. Other scams entice victims to sign up
to be a “mystery shopper,” receiving fraudulent checks with instructions to cash
the checks and wire the funds to “test” a company’s services. Victims are told
they will be compensated with a portion of the merchandise or funds. Free Republic, February 4, 2009 ---
http://www.freerepublic.com/focus/f-news/2178604/posts
Beware of the So-Called Investor Education Programs (especially beware
of infomercials)
"I don't see frankly much out there that really does
the job, and that's partially because investors are their own worst enemy," says
former SEC Chairman Arthur Levitt. "They refuse to invest skeptically, and are
too easily seduced by all the purveyors of financial products that prey upon
their worst instincts." "Investor Education 101: How to Avoid Scams: Outreach Programs
Target Most-Vulnerable Americans, But Success Is Hard to Assess," By Lynn
Cowan, The Wall Street Journal, May 9, 2006; Page D3 ---
http://online.wsj.com/article/SB114713241888747241.html?mod=todays_us_personal_journal
An onslaught of investor education is being
unleashed, thanks to an ever-growing stockpile of money set aside for this
purpose by regulators.
Senior-citizen investors being preyed upon? The
nonprofit Investor Protection Trust is financing a Florida state program
that teaches retirees to identify and report suspected scams.
Military families feeling pressured into buying
unnecessary financial products? The National Association of Securities
Dealers' Investor Education Foundation has launched a specialized Web site:
saveandinvest.org.
Auto workers receiving lump-sum retirement buyouts
in coming months? There is a new Securities and Exchange Commission
publication that warns that they could be prime targets for fraud.
There seems to be no end to the list of
publications, public-service announcements and seminars being funded in the
wake of a landmark settlement in 2003 between regulators and Wall Street
over stock analysts' conflicts of interest. The settlement provided $80
million in investor-education funds, and regulators add to that amount every
year with more penalties for new securities-industry transgressions.
Unfortunately, there's also a seemingly infinite
trove of outright hucksters and smooth marketing materials bombarding
investors every day, say regulators and observers. And no one knows how
effective investor-education programs are in combating them.
"I don't see frankly much out there that really
does the job, and that's partially because investors are their own worst
enemy," says former SEC Chairman Arthur Levitt. "They refuse to invest
skeptically, and are too easily seduced by all the purveyors of financial
products that prey upon their worst instincts."
There's also little information available about
what kinds of programs really work to educate and protect investors.
Regulators and investor-education specialists say they are working hard to
expand their materials beyond brochures with basic information to encompass
interactive games for students, television programs and in-person seminars.
But regulators add that they are also fighting
against strong forces in their battle to educate and protect investors from
scam artists, their own emotions and a legacy of conflicts of interest in
the brokerage industry.
Scam artists are the most easily identified
investor-protection issue: Often organized in pyramid, or "Ponzi,"
structures, the schemes promise outsized returns and can exist for years
before collapsing. Investor-protection programs can easily focus on warning
about this kind of threat because it has some obvious hallmarks.
Regulators' second villain is trickier: investors'
own inertia and greed. Getting most people in the U.S. to learn the basics
of a careful investing strategy is akin to asking them to read a legal
footnote, but there is no shortage of people willing to sign up for the
chance to earn 130% on ersatz securities.
Possibly the most innovative investor-education
program in existence today targets investors who are drawn to these
get-rich-quick scams. The SEC runs several Web sites that pose as can't-fail
investment schemes. One,
growthventure.com,
outlines the business dealings of a fake
construction-supply company, Growth Venture, which invites viewers to invest
and receive returns of 350% a year. Anyone falling for the bait is linked to
an SEC page that gently chides them and describes how to avoid scams.
But such educational tools aren't as easy to
construct for one of the thorniest issues facing investor-education
programs: teaching people about protecting themselves in daily interactions
with the legitimate brokerage industry.
Although larger Ponzi scams, such as the Financial
Advisory Consultants bust in California in 2004, are headlined for bilking
investors out of as much as $300 million, industry wide brokerage scandals
involving well-known firms have surpassed $1 billion apiece. From Prudential
Securities' abusive sales of limited partnerships in the early 1990s to the
conflicts of interest in analyst research in the late 1990s, major Wall
Street firms appear to be struggling with improper systematic conduct every
decade.
Yet investor educators often express concern about
finding the right balance between warning investors and condemning a highly
regulated industry that provides legitimate advice and services.
Continued in article
Jensen Comment
Also be careful what mutual fund or brokerage firm you deal with. My advice is
to avoid high-commission brokerage firms. My advice is to also compare the
mutual fund expense rates with benchmark rates of Vangaard and Fidelity.
The Securities and Exchange Commission says it has
set aside about $450 million for payments to outside whistleblowers whose
information results in successful cases and penalties collected from
companies or individuals.
The SEC set up the program in accordance with the
financial overhaul law enacted in July. It follows intense public criticism
of the agency for the breakdown that allowed Bernard Madoff's
multibillion-dollar fraud to go undetected for 16 years, despite numerous
red flags raised by whistleblowers.
A report issued Friday by the SEC shows it has put
$451.9 million into a new fund to pay whistleblowers, which must have a
minimum $300 million.
Some people are impulsive and impatient; they
prefer a dollar or a donut today far more than a dollar or a donut tomorrow,
so much so that they’re willing to give up shocking amounts of dollars and
donuts tomorrow for just one today. This is one reason, some say, that we
see such high interest rates for short-term borrowing, from New York to
Calcutta.
Some people are not only impulsive and impatient,
but inconsistently so. they care a lot about a dollar today versus tomorrow,
but could care less between getting a dollar either 10 or 11 days from now.
Economists call this ‘hyperbolic discounting’.
Both behaviors–impatience and time inconsistency–could be a source of
persistent poverty.
Or not. Abhijit Banerjee
presented
a new paper here yesterday, written with MIT
colleague Sendhil Mullainathan. They look at a number of seemingly unusual
behaviors by the very poor–from exorbitant rates of short-term borrowing to
the low take-up of small, high-return investments. Impatience cannot explain
the patterns, they say. The impatience approach also requires the poor think
differently than the rest of the population.
Another view: we’re all impulsive and impatient in
the same way, but over a narrow range of goods that are quickly and cheaply
satisfied. If you’re poor, these temptations are a big fraction of your
income. If you’re even somewhat wealthy, they are not. Temptations are
declining in income.
The paper runs through half a dozen perplexing
patterns of behavior, and shows that these simple assumptions can explain a
great deal.
This approach has a great deal in common with
hyperbolic discounting, but is empirically distinct (and has very different
policy implications). Parsing out and testing these subtleties strikes me as
one of the most important frontiers in the study of poverty. Declining
temptation, if true, could explain all sorts of odd behaviors. With more
than a few Uganda and Liberia surveys on the horizon, I’m now scheming ways
to test whether it’s true.
It’s a difficult paper, especially for
those uninitiated in micro-economic theory. Even if that sounds like you:
the subtle points are worth the slog.
78% of former NFL players have gone
bankrupt or are under financial
stress because of joblessness or divorce.
Championship Rings in pawn shops, IRS vaults, Ponzi schemer stashes offshore, or
in the clutches of ex-wives
What on earth did athletes learn in college?
Pros seem especially susceptible to Ponzi schemes. Some recent examples ---
Click Here
By the time they have been retired for two
years, 78% of former NFL players have gone
bankrupt
or are under financial stress because of joblessness or divorce.
Within five years of retirement, an estimated
60% of former NBA players are broke.
Numerous retired MLB players have been
similarly ruined.
If that's not bad enough, the
recession
has made things even worse. Too much money in real estate; investments in
Ponzi schemes; and poor financial advising have been exposed with the down
economy.
A sign
of the times? More former stars are
selling their championship rings for money than ever.
"It's amazing that I heard the recession was over,"
says Timothy Robins, owner of
Championshiprings.net,
who buys bling from current and former pros and has
seen a 36% increase in sales during the past year. "I'm getting more calls
from players than ever. They're having a really hard time."
While just about everyone has
lost
money over the past year, athletes
tend to make particularly bad financial decisions, and it's not just
reckless spending.
Avoid hucksters that try to sell you knowledge of how to take
advantage of naive investors in inefficient equity markets!
Especially avoid those high pressure "FREE workshops" in posh hotels that try to
sell books, software, and schemes for beating the market.
The Securities and Exchange Commission has filed
civil fraud charges against two promoters who illegally made millions
selling a get-rich-quick stock trading system they touted on TV and at
investor workshops at hotels in dozens of cities nationwide.
The Commission's complaint alleges that Linda Woolf
and David Gengler, both of Utah, duped seniors and others who had attended
free introductory seminars into believing they would make extraordinary
stock market profits if they bought expensive "Teach Me to Trade" (TMTT)
classes, mentoring, and computer software.
In order to con victims into paying as much as
$40,000 for TMTT products and services, the Commission alleges that Woolf
and Gengler lied about their success with the trading system, when in truth
neither Woolf nor Gengler ever purchased TMTT's products or became
successful traders.
"The allegations depict a cold-hearted scheme that
preyed on the elderly, the desperate, and even the unemployed by promising
financial security while instead robbing victims blind," said SEC Chairman
Christopher Cox. "The Commission's charges should send a warning to all
those who would masquerade as successful traders on TV while prowling the
country for victims."
Linda Chatman Thomsen, Director of the SEC's
Enforcement Division, added, "The evidence shows they callously urged
customers to go into debt to purchase expensive products and services.
Today's charges make clear that we will hold accountable those who prey on
seniors and other investors."
The Commission's complaint alleges that at their
workshop presentations between 2003 and 2006, Woolf and Gengler made false
and misleading statements to sell TMTT packages of personal mentoring,
software and classes ranging in price from approximately $11,000 to $40,000.
According to the Commission's complaint, Woolf and Gengler also appeared in
television infomercials portraying themselves as successful former TMTT
customers, with Woolf targeting retirees, among others. In his workshops,
Gengler urged investors to borrow against their retirement accounts to
follow TMTT strategies.
Through false stories of their own trading success
and bogus claims of a 96.5 percent success rate for TMTT students who
purchased personal mentoring, courses, and software, Woolf and Gengler
convinced attendees that they, too, would make extraordinary profits in the
stock market if they followed TMTT's trading strategies that emphasized
options trading and short-term swing trading.
In one infomercial, for example, Woolf told how she
used to be an elementary school teacher and was able to replace her entire
income after attending TMTT workshops. "I had no idea it was that easy to
learn how to make money in the stock market," Woolf said. In another
infomercial, Gengler claimed, "If you can simply follow steps and follow our
principles, you'll make money. It's that simple."
Instead, the Commission alleges, Woolf and Gengler
are unsuccessful traders, with Woolf having never declared a trading profit
on her federal tax returns and Gengler typically declaring losses, or no
profits. However, Woolf reaped approximately $4 million in commissions from
selling TMTT packages, and Gengler made approximately $2.25 million,
according to the Commission's complaint.
The Commission's complaint against Woolf and
Gengler seeks disgorgement of their ill-gotten gains, civil money penalties
and permanent injunctions enjoining the defendants from violating the
antifraud provisions of the federal securities laws.
In a related action, the U.S. Attorney's Office for
the Eastern District of Virginia has announced the filing of an indictment
against Woolf and Gengler.
The Commission acknowledges the assistance of the
U.S. Attorney's Office for the Eastern District of Virginia, the U.S. Postal
Inspection Service, the Federal Bureau of Investigation and the Florida
Attorney General's Office.
The Commission's investigation is continuing.
Questions
Should you believe these many claims that the equity capital markets are
inefficient and that it's worth investing the time and money to beat the market?
Answer
A Dartmouth College finance professor would have us conclude that in recent
years the equity markets are a bit like Las Vegas. It's possible to leave Las
Vegas more than a million dollars ahead if you take high risks, but the odds are
decidedly in favor of the casinos. Similarly, it's possible to beat the stock
index funds if you take the risks, but the odds are definitely against beating
the index funds.
This we return to the age old paradox. It's rather useless to carefully
conduct a financial analysis of audited accounting reports in an effort to gain
superior knowledge to take advantage of more naive investors. On the other hand
if a sufficiently large number of investors did not make a sufficient number of
"sophisticated-knowledge" buys and sells the equity markets might be less
efficient. Even in efficient markets we must remain diligent in restraining
earnings management and other types of creative accounting ploys that mislead
sophisticated investors.
Sophisticated investors (apart from insiders) cannot take advantage of naive
investors because there are so many sophisticated investors. Of course insiders
can exploit efficient markets, but the SEC spends most of its budget trying to
prevent insider trading. If the SEC was not successful in this effort by and
large, the equity capital markets would cease to exist. This is why corporate
executives turned more to stealing from their own companies (e.g., outrageous
salaries, kickbacks and options backdating) rather than in exploiting inside
information for direct buying and selling of their (or their sex partners and
family) own shares at timely points in time.
"Can You Beat the Market? It’s a $100 Billion Question," by Mark Hulbert,
The New York Times, March 9, 2008 ---
Click Here
The study, “The Cost of Active Investing,” began
circulating earlier this year as an academic working paper. Its author is
Kenneth R. French, a finance professor at Dartmouth; he is known for his
collaboration with Eugene F. Fama, a finance professor at the University of
Chicago, in creating the Fama-French model that is widely used to calculate
risk-adjusted performance.
In his new study, Professor French tried to make
his estimate of investment costs as comprehensive as possible. He took into
account the fees and expenses of domestic equity mutual funds (both open-
and closed-end, including exchange-traded funds), the investment management
costs paid by institutions (both public and private), the fees paid to hedge
funds, and the transactions costs paid by all traders (including commissions
and bid-asked spreads). If a fund or institution was only partly allocated
to the domestic equity market, he counted only that portion in computing its
investment costs.
Professor French then deducted what domestic equity
investors collectively would have paid if they instead had simply bought and
held an index fund benchmarked to the overall stock market, like the
Vanguard Total Stock Market Index fund, whose retail version currently has
an annual expense ratio of 0.19 percent.
The difference between those amounts, Professor
French says, is what investors as a group pay to try to beat the market.
In 2006, the last year for which he has
comprehensive data, this total came to $99.2 billion. Assuming that it grew
in 2007 at the average rate of the last two decades, the amount for last
year was more than $100 billion. Such a total is noteworthy for its sheer
size and its growth over the years — in 1980, for example, the comparable
total was just $7 billion, according to Professor French.
The growth occurred despite many developments that
greatly reduced the cost of trading, like deeply discounted brokerage
commissions, a narrowing in bid-asked spreads, and a big reduction in
front-end loads, or sales charges, paid to mutual fund companies.
These factors notwithstanding, Professor French
found that the portion of stocks’ aggregate market capitalization spent on
trying to beat the market has stayed remarkably constant, near 0.67 percent.
That means the investment industry has found new revenue sources in direct
proportion to the reductions caused by these factors.
What are the investment implications of his
findings? One is that a typical investor can increase his annual return by
just shifting to an index fund and eliminating the expenses involved in
trying to beat the market. Professor French emphasizes that this typical
investor is an average of everyone aiming to outperform the market —
including the supposedly best and brightest who run hedge funds.
Professor French’s study can also be used to show
just how different the investment arena is from a so-called zero-sum game.
In such a game, of course, any one individual’s gains must be matched by
equal losses by other players, and vice versa. Investing would be a zero-sum
game if no costs were associated with trying to beat the market. But with
the costs of that effort totaling around $100 billion a year, active
investing is a significantly negative-sum game. The very act of playing
reduces the size of the pie that is divided among the various players.
Even that, however, underestimates the difficulties
of beating an index fund. Professor French notes that while the total cost
of trying to beat the market has grown over the years, the percentage of
individuals who bear this cost has declined — precisely because of the
growing popularity of index funds.
From 1986 to 2006, according to his calculations,
the proportion of the aggregate market cap that is invested in index funds
more than doubled, to 17.9 percent. As a result, the negative-sum game
played by active investors has grown ever more negative.
The bottom line is this: The best course for the
average investor is to buy and hold an index fund for the long term. Even if
you think you have compelling reasons to believe a particular trade could
beat the market, the odds are still probably against you.
Avoid hucksters that try to sell you knowledge of how to take
advantage of naive investors in inefficient equity markets!
Especially avoid those high pressure "FREE workshops" in posh hotels that try to
sell books, software, and schemes for beating the market.
The Securities and Exchange Commission has filed
civil fraud charges against two promoters who illegally made millions
selling a get-rich-quick stock trading system they touted on TV and at
investor workshops at hotels in dozens of cities nationwide.
The Commission's complaint alleges that Linda Woolf
and David Gengler, both of Utah, duped seniors and others who had attended
free introductory seminars into believing they would make extraordinary
stock market profits if they bought expensive "Teach Me to Trade" (TMTT)
classes, mentoring, and computer software.
In order to con victims into paying as much as
$40,000 for TMTT products and services, the Commission alleges that Woolf
and Gengler lied about their success with the trading system, when in truth
neither Woolf nor Gengler ever purchased TMTT's products or became
successful traders.
"The allegations depict a cold-hearted scheme that
preyed on the elderly, the desperate, and even the unemployed by promising
financial security while instead robbing victims blind," said SEC Chairman
Christopher Cox. "The Commission's charges should send a warning to all
those who would masquerade as successful traders on TV while prowling the
country for victims."
Linda Chatman Thomsen, Director of the SEC's
Enforcement Division, added, "The evidence shows they callously urged
customers to go into debt to purchase expensive products and services.
Today's charges make clear that we will hold accountable those who prey on
seniors and other investors."
The Commission's complaint alleges that at their
workshop presentations between 2003 and 2006, Woolf and Gengler made false
and misleading statements to sell TMTT packages of personal mentoring,
software and classes ranging in price from approximately $11,000 to $40,000.
According to the Commission's complaint, Woolf and Gengler also appeared in
television infomercials portraying themselves as successful former TMTT
customers, with Woolf targeting retirees, among others. In his workshops,
Gengler urged investors to borrow against their retirement accounts to
follow TMTT strategies.
Through false stories of their own trading success
and bogus claims of a 96.5 percent success rate for TMTT students who
purchased personal mentoring, courses, and software, Woolf and Gengler
convinced attendees that they, too, would make extraordinary profits in the
stock market if they followed TMTT's trading strategies that emphasized
options trading and short-term swing trading.
In one infomercial, for example, Woolf told how she
used to be an elementary school teacher and was able to replace her entire
income after attending TMTT workshops. "I had no idea it was that easy to
learn how to make money in the stock market," Woolf said. In another
infomercial, Gengler claimed, "If you can simply follow steps and follow our
principles, you'll make money. It's that simple."
Instead, the Commission alleges, Woolf and Gengler
are unsuccessful traders, with Woolf having never declared a trading profit
on her federal tax returns and Gengler typically declaring losses, or no
profits. However, Woolf reaped approximately $4 million in commissions from
selling TMTT packages, and Gengler made approximately $2.25 million,
according to the Commission's complaint.
The Commission's complaint against Woolf and
Gengler seeks disgorgement of their ill-gotten gains, civil money penalties
and permanent injunctions enjoining the defendants from violating the
antifraud provisions of the federal securities laws.
In a related action, the U.S. Attorney's Office for
the Eastern District of Virginia has announced the filing of an indictment
against Woolf and Gengler.
The Commission acknowledges the assistance of the
U.S. Attorney's Office for the Eastern District of Virginia, the U.S. Postal
Inspection Service, the Federal Bureau of Investigation and the Florida
Attorney General's Office.
The 2013 list is little changed from a year earlier and
for a second year is headed by:
1. Identity theft: The IRS spotlighted
its measures, including its new
Identity Protection web portal, to prevent and combat the growing
problem of tax fraud involving stolen identities, which it called one of its
top priorities. During 2012, the IRS prevented issuance of $20 billion in
fraudulent refunds including those related to identity theft, up from $14
billion in 2011, it said. The IRS also noted that its
identity theft enforcement sweep in January led to nearly 300
indictments, complaints, and arrests, on top of thousands of enforcement
actions against identity theft tax fraud in 2012. (See “Dozens
indicted on stolen identity tax refund fraud charges.”)
2. Phishing: The IRS again this year
warned against fake electronic communications designed to obtain recipients’
information, reminding that the IRS does not initiate contact with taxpayers
by email, text messages, or social media to request personal or financial
information.
3. Return preparer fraud: In addition to
suggesting taxpayers make sure paid preparers sign returns and enter their
preparer tax identification number (PTIN), the IRS this year included
information about using Form 14157, Complaint: Tax Return Preparer,
to report abusive tax preparers.
4. Hiding income offshore: This warning
also updated the number of participants in the IRS’s Offshore Voluntary
Disclosure Program to 38,000 and its collections to $3.4 billion from the
2009 program alone (March 23, 2009, through Oct. 15, 2009) and $1
billion so far in “up-front” payments from the 2011 program (Oct. 16, 2009,
through Sept. 9, 2011). In
2012, the program was extended indefinitely. (See “IRS
announces third offshore voluntary disclosure program.”
5. “Free money” from the IRS and tax scams
involving Social Security: With fliers and advertisements
“appearing in community churches around the country,” promoters of schemes
promising refunds for returns with little or no documentation have enticed
“unsuspecting and well-intentioned” victims, some of whom have spread the
word to friends and relatives, the IRS said. One scheme falsely advises
taxpayers to claim the American opportunity tax credit even if they have no
current qualifying educational expenses.
6. Impersonation of charitable organizations:
Some fraudsters have doubly victimized people hit by a natural disaster by
claiming to be working on behalf of the IRS to help them claim a tax
casualty loss but instead steal their financial and personal information.
This replaced “abuse of charitable organizations and deductions” from the
2012 list.
7. False/inflated income and expenses:
Exaggerating wage or self-employment income is a common ploy by some
unscrupulous preparers to inflate refundable credits, including the earned
income tax credit, by more than any additional tax.
8. False Form 1099 refund claims: One
scheme involves issuing a bogus information return, often Form 1099-OID,
Original Issue Discount, to the IRS. A refund is then claimed on a
corresponding tax return. The IRS says this is based on the theory that “the
federal government maintains secret accounts for U.S. citizens and that
taxpayers can gain access to the accounts by issuing 1099-OID forms to the
IRS.”
9. Frivolous arguments: The IRS maintains
a webpage describing some of the more common and legally fanciful of
these theories.
10. Falsely claiming zero wages: A Form
4852, Substitute Form W-2, or “corrected” Form 1099-MISC,
Miscellaneous Income, is fraudulently filed to reduce or eliminate
income on a legitimate information return. Sometimes it is accompanied by a
frivolous argument regarding the income.
11. Disguised corporate ownership: The
IRS said it works with state authorities to identify entities by which
taxpayers underreport income, claim bogus deductions, and engage in other
misconduct.
12. Misuse of trusts: The IRS said it has
seen an increase in improper use of private annuity trusts and foreign
trusts to shift income and deduct personal expenses.
Jensen Comment
To this we will soon add underreporting of income for fraudulent claims to
Medicaid and health care subsidies ---
http://faculty.trinity.edu/rjensen/Health.htm
The sad thing is that the IRS refuses to enforce rules against such fraud. For
example, half the Medicaid recipients in Illinois purportedly are not eligible
for such free medical care and medications. As far as I can tell nobody is doing
anything to prevent this type of fraud.
This type of celebrity bankruptcy that frequently happens to professional
athletes should not be happening to the likes of Diane Warwick with assets of
$25,500 and debts of more than $10,700,000.
The
IRS yesterday released the
2012
IRS Data Book, which contains a wealth of statistical information for
the IRS's Oct. 1, 2011 - Sept. 30, 2012 fiscal year. Here are the
statistical tables:
Returns Filed, Taxes Collected, and Refunds Issued
Taxpayers beware: Scammers are out there and
they're digging for your personal information and for money.
The IRS is reporting an increase in tax return
related scams that typically involve taxpayers who normally do not have to
file federal taxes. The scammers con the taxpayers into believing they
should file a return with the IRS for tax credits, refunds or rebates for
which they are not entitled.
Some unscrupulous tax return preparers have been
deceiving people into paying for advice about how to file false claims and
some charge unreasonable amounts for preparing legitimate returns that could
have been prepared for free by the IRS or by IRS sponsored Volunteer Income
Tax Assistance partners.
Many of the scammers are targeting taxpayers in the
Midwest and in the South, according to Sue Hales, spokeswoman for the IRS
for Illinois. Some are stealing the identities of conned taxpayers and they
most often prey on low income individuals and the elderly.
Taxpayers should be wary of any of the following
claims:
-- Fictitious claims for refunds or rebates based
on excess or withheld Social Security benefits;
-- Claims that Treasury Form 1080 can be used to
transfer funds from the Social Security Administration to the IRS, enabling
a payout from the IRS;
-- Unfamiliar for-profit tax services teaming up
with local churches. Flyers and advertisements for free money from the IRS,
suggesting the taxpayer can file with little or no documentation, have been
appearing in community churches around the country. Promoters are targeting
church congregations and exploiting their good intentions and credibility.
These schemes often spread by word of mouth among unsuspecting,
well-intentioned people telling friends and relatives;
-- Home-made flyers and brochures implying credits
or refunds are available without proof of eligibility;
-- Promises of refunds for "Low income -- No
Documents Tax Returns."
-- Claims for the expired Economic Recovery Credit
Program or Recovery Rebate Credit;
-- Advice on using the Earned Income Tax Claims
based on exaggerated reports of self-employment income;
-- In some cases, non-existent Social Security
refunds or rebates have been the bait used by the con artists. In other
situations, taxpayers deserve the tax credits they are promised but the
preparer uses fictitious or inflated information on the return which results
in a fraudulent return.
Continued in article
Unfortunately there's not much you can do personally to protect yourself
on this one other than to file your tax return early, and it's a little late for
that!
"A Call for Action On Tax Scams," by Stephen Barr, The Washington Post,
April 14, 2008; Page D01 ---
Click Here
The scam goes like this:
A bogus tax return using a stolen Social Security
number is submitted to the Internal Revenue Service early in the tax-filing
season. Because the IRS does not know the return involved identity theft, it
sends a refund.
When the real tax return is filed, it gets flagged
as a duplicate, freezing any refund. It sometimes takes months for the
innocent, legitimate taxpayer to sort it all out with the IRS.
Filings of fictitious tax returns to steal refunds
have jumped dramatically, perhaps because con artists can file them
electronically and get a direct-deposit refund long before the real taxpayer
finds out.
From 2002 to 2007, the number of fraudulent tax
return complaints to the Federal Trade Commission jumped to 20,782, from
3,061, according to a report by the Treasury Inspector General for Tax
Administration, or TIGTA.
The rise in fraudulent tax returns was an issue at
a Senate Finance Committee hearing last week called by the committee
chairman, Sen. Max Baucus (D-Mont.). "I am disappointed that the IRS does
not notify a taxpayer when someone else has filed a return using the
victim's Social Security number," he said.
Nina E. Olson, the national taxpayer advocate, who
provides an independent voice on behalf of taxpayers, told the committee she
is concerned the IRS does not know how many taxpayers are affected by
identity theft and said the problem may be more widespread than IRS data
suggest.
Another witness, J. Russell George, the inspector
general for tax administration, said the IRS "processes and procedures have
been inadequate in reducing the burden for taxpayers who have been
victimized. When the IRS becomes aware of employment-related identity theft,
it does not take action unless the case relates to a substantive tax or
conspiracy violation."
Unless the IRS acts to address identity theft and
related computer security issues, George said, "there is no deterrent to
keep the problem from spreading."
Olson, in additional testimony submitted to the
committee, said her staff is receiving calls from senior citizens who filed
for this year's tax rebate after not filing returns for several years and
who have discovered that someone else has been using their Social Security
numbers on tax returns.
She and George also described another common scam
involving tax returns.
These cases often involve illegal immigrants and
undocumented workers who use another person's identity -- name, Social
Security number or both -- to obtain employment. The employer files a wage
and tax statement, the W-2, under the stolen identification information, and
the IRS computers attribute the earnings according to the Social Security
number. Then the IRS levies an additional tax on the lawful owner of the
Social Security number, creating consequences for the innocent person.
There are thousands of commercial taxpayer assistance companies,
attorneys, and accountants that charge fees and deal with varying levels of
tax problem complexities. Be sure to investigate the credentials and
reputations of these service providers. There are many fraudulent taxpayer
serivice firms ---
http://faculty.trinity.edu/rjensen/FraudReporting.htm#TaxScams
Unless the provider has an established reputation, don't deal over the phone
or the Internet. A local provider should have an office and an address other
than a postal box. Taxpayer assistance is an area where you may not get what
you pay for.
The IRS warned taxpayers Wednesday not to be duped
by scammers posing as private debt collectors the agency has hired to chase
unpaid tax debts.
The Internal Revenue Service designed the debt
collection program to minimize that risk "because we know what it's like out
there with regard to identity theft nowadays," said Brady Bennett, IRS
director of collection.
But some critics of the program see so many
pitfalls that they're urging debtors to insist on negotiating payment
directly with the IRS.
The National Treasury Employees Union, which
represents IRS employees and opposes the program, has even drafted a sample
letter that taxpayers can send to opt out of the private collection program
and demand that the IRS handle their case.
The IRS plans to assign 12,500 accounts with unpaid
tax debts to three private agencies beginning Sept. 7. About 40,000 accounts
will be turned over by the end of the year. The IRS chose taxpayers who owe
less than $25,000 and don't dispute the debt.
Anyone contacted by a private collection agency has
the right, among others, to insist that only the IRS deal with their
account. Bennett said he hoped few taxpayers with debts sent to private
collectors would opt out.
"The purpose of this program is to provide value to
the American taxpayer. Those who don't pay have an impact on everybody else
who does," he said.
More tax preparers indicted over telephone tax refund scams "We saw limited but serious instances of abuse," said
IRS Acting Commissioner Kevin M. Brown. "We used our enforcement resources to
move swiftly and decisively to protect this valuable refund for the vast
majority of taxpayers and tax preparers who are requesting it properly. We want
everyone who is eligible for the telephone tax refund to get it but not to
inflate the amount requested." The IRS has been monitoring telephone excise tax
refund requests for potential problems. Shortly after the tax-filing season
opened in early January, the agency observed problems with returns from some tax
preparers that indicated possible criminal intent. Along with the search
warrants carried out by the IRS, other tax preparers across the nation who
prepared questionable telephone tax refund requests received visits from IRS
revenue agents (auditors) and special agents. The IRS has advised taxpayers to
stay away from unscrupulous promoters and tax preparers who make false claims
about the telephone tax refund and suggest that many, if not most, phone
customers can get hundreds of dollars or more back under this program.
AccountingWeb, June 2007 ---
http://www.accountingweb.com/cgi-bin/item.cgi?id=103623
The Internal Revenue Service learned late Friday of
a new tax scam on the Internet that lures taxpayers into filing tax
information on a site masquerading as a member of the Free File Alliance.
The latest twist on tax scams involves tax
preparation Web sites that inaccurately say they are part of the Free File
Alliance, a partnership between 19 tax software companies and the IRS, for
taxpayers with an adjusted gross income of $52,000 or less.
The IRS said it is working with the Treasury
Inspector General for Tax Administration to look into allegations that the
Web sites -- which were not identified -- accepted tax information from
taxpayers, changed the taxpayers’ bank account numbers to their own and then
filed the return through a legitimate Free File partner.
The IRS reminded taxpayers the only place to access
the Free File program is through the official IRS.gov Web site.
Seventy percent of the nation's taxpayers are
eligible to use the free electronic filing system, although the IRS says few
taxpayers take advantage of the program.
Question
What are the "dirty dozen" things that bad guys might try to do to you in
tax season? The answer comes from IRS Commissioner Mark V. Everson
Two new schemes have joined
the Internal Revenue Service’s (IRS’) list of most noxious tax scams this
filing season. Several usual suspects also remain on the list, which was
released earlier this week. The IRS reminds taxpayers and tax preparers that
involvement with tax schemes can lead to fines and even imprisonment.
“When it comes to
taxes, everyone has to pay their fair share,” IRS Commissioner Mark V.
Everson said in a prepared statement detailing the 2006 list. “I urge
taxpayers not to be taken in by hucksters who promise to lower or eliminate
taxes. Getting caught up in the Dirty Dozen or similar schemes can lead to
big headaches.”
The Dirty Dozen
List
Zero Wages
NEW! A taxpayer attaches either a Form 4852 (Substitute Form W-2) or a
“corrected” Form 1099 showing no or very little wages or other income. A
statement indicating the taxpayer is rebutting information submitted to
the IRS by the payer, a reference to the paying company’s refusal to
issue a corrected Form W-2 for fear of IRS retaliation or an explanation
on Form 4852 citing the “statutory language behind Internal Revenue Code
(IRC) 3401 and 3121,” may also be included when the tax return is filed.
Form 843
Tax Abatement NEW! This faulty interpretation of the IRC involves
the use of Form 843 by the taxpayer to request abatement of previously
assessed tax. Form 843 is used to provide a list of reasons for the
request, which often includes “Failed to properly compute and/or
calculate IRC Section 83 – Property Transferred in Connection with
Performance of Service.” This scam is most frequently used by those who
have not previously filed tax returns in an attempt to abate tax
assessed by the IRS through the Substitute for Return Program.
Phishing
Identity thieves, posing as financial institutions or even the IRS
itself, attempt to acquire personal information and financial data that
can be used to access the financial accounts of consumers. Ficticious
e-mail messages, phone calls and other correspondence, solicit taxpayer
Social Security Number, credit card number, PIN number and other data,
by pretending to notify them of suspicious activity on their account or
that their account is under audit/review. NOTE: The IRS DOES
NOT use e-mail to initiate contact with taxpayers about issues related
to their accounts. Taxpayers can confirm authentic IRS contact by
calling 800-829-1040.
Zero Return
Taxpayers enter all zeros or enter zero income, their withholding and
write “nunc pro tunc” (“now for then” in Latin) on their federal tax
return. This is also done with amended returns in hope that the IRS will
disregard the original return on which they reported wages and other
income. This is similar to the “Zero Wages” listed in Number 1 above.
Trust
Misuse Taxpayers are encouraged, with promises of reducing the
income subject to tax deductions for personal expenses and reduced
estate or gift taxes, to transfer assets into trusts. Some trusts,
however, do not deliver the promised tax benefits. The IRS is actively
examining these arrangements, with more than 200 active investigations
currently underway, as well as three dozen injunctions obtained against
the promoters of non-performing trusts since 2001.
Frivolous
Arguments Promoters of this tactic have been known to make wild
claims including: the Sixteenth Amendment, concerning the power of
Congress to lay and collect taxes, was never ratified; wages are not
income; filing returns and paying taxes is voluntary; being required to
file Form 1040 violates the Fifth Amendment right against
self-incrimination or the Fourth Amendment right to privacy; and more.
These arguments are false and have been thrown out of court.
Return
Preparer Fraud Dishonest return preparers, who derive financial gain
by skimming a portion of their clients’ refunds and charging inflated
fees for return preparation services, cause many headaches for taxpayers
lured in by the promise of big refunds. Since 2002, the courts have
issued injunctions ordering dozens of individuals to cease preparing
returns. The Department of Justice has filed complaints against dozens
of others. More than 110 tax preparers were convicted of tax crimes
during fiscal year 2005.
Credit
Counseling Agencies The IRS Tax Exempt and Government Entities
Division is in the process of revoking the tax-exempt status of numerous
credit counseling organizations that operated under the guise of
educating financially distressed consumers with debt problems while
charging debtors large fees and providing little or no counseling.
Taxpayers are encouraged to exercise caution when considering utilizing
the services of credit counseling organizations that claim they can fix
credit ratings, push debt payment plans or impose high set-up fees or
monthly service charges that may increase existing debt levels.
Abuse of
Charitable Organizations and Deductions Tax-exempt organizations are
being increasingly used to improperly shield income or assets from
taxation. According to the IRS this can occur when a taxpayer moves
assets or income to a tax-exempt supporting organization or
donor-advised fund, but maintains control over the assets or income,
thereby obtaining a tax deduction without transferring commensurate
benefits to charity.
Offshore
Transaction Taxpayers continue to try to avoid U.S. taxes by
illegally hiding income in offshore bank and brokerage accounts, or
using offshore credit cards, wire transfers, foreign trusts, employee
leasing schemes, private annuities or life insurance policies, despite
crackdowns by the IRS and state tax agencies, which yielded 68
convictions on charges of promotion and use of abusive tax schemes
designed to evade taxes during fiscal year 2005.
Employment
Tax Evasion A number of illegal schemes, based on an incorrect
interpretation of Section 861 and other parts of tax law, instruct
employers not to withhold federal income tax, or other employment taxes,
from wages paid to their employees. The IRS has observed an increase in
activity in the area of so-called double dip parking and medical
reimbursement issues lately and courts have issued injunctions against
more than a dozen persons, ordering them to stop promoting the scheme.
More than 50 individuals were sentenced to an average of 30 months in
prison for employment tax evasion during fiscal year 2005. Employers can
also be held responsible for back payments of employment taxes, plus
penalties and interest. Employees who have nothing withheld from their
wages are still responsible for payment of their personal taxes.
”No Gain”
Deduction Taxpayers attempt to eliminate their entire adjusted gross
income (AGI) by deducting it on Schedule A by listing their AGI in the
section labeled “Miscellaneous Deductions” and attache a statement to
the return referring to court documents and including the phrase “No
Gain Realized.”
Report Suspected
Tax Fraud Activity
Suspected tax
fraud can be reported to the IRS using
IRS Form 3949-A, Information Referral
or by sending a letter detailing the alleged fraudulent activity to the
Internal Revenue Service, Fresno, CA 93888. The letter should contain
specific information regarding who is being reported, the activity being
reported, how the individual reporting the activity gained knowledge of it,
when the activity took place, the amount of money involved and any
additional information that might be helpful in an investigation. The person
reporting the alleged violation are not required to identify themselves,
although it is helpful and their identity can be kept confidential. The
individual may also be entitled to a reward.
The two scams that
dropped of the “Dirty Dozen” list this year were the “claim of right” and
“corporation sole”. IRS personnel have noticed less activity using these
scams over the past year as a result of court cases against a number of
promoters.
IRS "Member Satisfaction Survey" is a Scam The Internal Revenue Service has issued a consumer
alert regarding a new, two-step e-mail scam that falsely promises recipients
they will receive $80 for participating in an online customer satisfaction
survey. In the scam, an unsuspecting taxpayer receives an unsolicited e-mail
that appears to come from the IRS. The e-mail contains a URL linking to an
online "Member Satisfaction Survey." AccountingWeb, August 31, 2007 ---
http://www.accountingweb.com/cgi-bin/item.cgi?id=103950
Today I received an email asking me to log on to a
site in order to claim my income tax "refund"...$109.30! Just for fun, I
clicked on the link given and was taken to a screen that asked for my name,
SSN, birthdate, debit card number, PIN, expiration date and secret 3-digit
code on the back of the card! :)
Of course, if you put your cursor over the link
given in the scam email message, you can see the underlying "fake" web site
location.
The FDA today
strongly cautioned
consumers about
purchasing drugs
from 24 web sites
that may be involved
in the distribution
of counterfeit
drugs.
The FDA links two of
the 24 web sites to
counterfeit versions
of the weight loss
drug Xenical.
The FDA says that
Xenical's maker, the
drug company Roche,
tested three phony
Xenical pills
obtained from
brandpills.com and
pillspharm.com.
One phony Xenical
pill contained the
active ingredient in
another weight loss
drug. The two other
fake Xenical pills
contained only talc
and starch,
according to the
FDA.
The FDA has
previously linked
four of the 24 web
sites to counterfeit
versions of the flu
drug Tamiflu and
counterfeit versions
of the erectile
dysfunction drug
Cialis.
Overseas Web Sites
The web sites, which
the FDA says appear
to be operated
outside the U.S.,
are:
AllPills.net
Pharmacy-4U.net
DirectMedsMall.com
Brandpills.com
Emediline.com
RX-ed.com
RXePharm.com
Pharmacea.org
PillsPharm.com
MensHealthDrugs.net
BigXplus.net
MediClub.md
InterTab.de
Pillenpharm.com
Bigger-X.com
PillsLand.com
EZMEDZ.com
UnitedMedicals.com
Best-Medz.com
USAPillsrx.net
USAMedz.com
BluePills-Rx.com
Genericpharmacy.us
I-Kusuri.jp
The 24 web sites
appear on
pharmacycall365.com
under the "Our
Websites" heading,
the FDA notes.
FDA's Advice to
Consumers
The FDA says
consumers using
online pharmacies
should be wary if
there is no way to
contact a web site
pharmacy by phone,
if prices are
dramatically lower
than the
competition, or if
no prescription from
your doctor is
required.
The FDA's web site
includes these
safety tips for
people buying
prescription drugs
online:
Make sure the
web site
requires a
prescription.
Make sure the
web site has a
pharmacist
available for
questions.
Buy only from
licensed
pharmacies
located in the
U.S.
Don't provide
personal
information such
as credit card
numbers unless
you're sure the
web site will
protect that
information.
The FDA urges
consumers to visit
www.fda.gov/buyonline
for more information
before buying
prescription drugs
over the Internet.
Oxymoron: Medical Ethics Two drug companies are paying doctors millions to
prescribe anemia drugs, which regulators now say may be unsafe.
Alex Berenson and Andrew Pollack, "Doctors Reap Millions for Anemia Drugs,"
The New York Times, May 9, 2007 ---
Click Here
Wow! It's hard to believer PayPal will go this far in protecting eBay
customers
Can PayPal continue to afford this kind of protection? On June 20, eBay announced that it will fully
reimburse buyers and sellers when transaction problems arise, providing they
use eBay’s PayPal payment service. That means eBay will foot the bill when,
say, a buyer purchases an item that was misrepresented on the site or not
sent. So, if that too-good-to-be-true bargain Gucci bag turns out to be a
cheap knockoff, eBay will give the buyer a refund. The additional
protections will go into effect this fall. “We’re combining the power of
eBay and PayPal to give all buyers and sellers more confidence and trust,”
said Lorrie Norrington, eBay’s president of Marketplace Operations in a
statement. “Buyers who pay with PayPal on eBay will be covered, with no
limits, on most transactions.” Catherine Holahan, Business Week, June 19, 2008 ---
http://www.businessweek.com/the_thread/techbeat/archives/2008/06/post_7.html?link_position=link3
December 21. 2009 message from George Wright
[Geo@LOYOLA.EDU]
Experienced eBay users swear by it, as one has more
recourse in the event of problems.
An experienced friend also tell me that it's a good
idea to open a new bank account specifically for PayPal purposes. The reason
is that you can move newly deposited funds to an account beyond PayPal's
reach. I'm told this prevents PayPal from sequestering your funds in the
event of a late protest by the source of the funds.
Geo
How to proceed if you're taken by a fraudulent eBay seller While eBay officials say the vast majority of
transactions take place without a hitch, company spokesmen acknowledge that the
growth in online buying has been accompanied by a growth in online disputes,
from simple disagreements over a sweater's color to more serious allegations.
And, says eBay spokeswoman Catherine England, fraud also occurs against sellers,
when buyers don't pay up as agreed. Cracking down on such problems has been a
hot topic at the annual "eBay Live!" gatherings of buyers, sellers and company
executives. This year's, in Las Vegas in June, was no exception: EBay president
and chief executive Meg Whitman in her keynote speech ticked off a number of
improvements in eBay's online dispute-resolution process.
Kathleen Day, "Self-Defense For EBay Buyers Avoiding Unpleasant Surprises On
World's Biggest Auction Site," The Washington Post, July 2, 2006 ---
Click Here
Here's an eBay auction with a difference: an
apparently innocent-looking punt of a Sony VAIO VGN-NR21J/S laptop:
There then follows the usual item description, but
what makes this particular sale a little more interesting is the vendor's
candid purchasing advice for users of the world's favourite tat bazaar:
DIFFERENT WAYS YOU CAN STEAL THIS LAPTOP OFF ME:
PAYPAL:
Paypal is currently ebays preferred method of
stealing high value electrical items off sellers. There are a number of
various ways you can use to steal this laptop using paypal.
1: A Fake “Item Not Received” (I.N.R) Claim – All
you simply have to do here is purchase my item using an unverified paypal
account. Then when you receive the laptop, simply claim that you didn’t
receive it at your registered (credit card) and paypal will give you all
your money back !
2: A Fake “Item Significantly Not As Described” (S.N.A.D)
This is a great way to steal items off sellers. Simply start a dispute after
you get the laptop making up some lie about the item being damaged etc – You
could use Photoshop to make up fake pictures of damage. Paypal will ask you
to send the item back to me, but don’t bother – they never enforce that on
buyers and after a short wait you will get all your money back and you will
still have the laptop.
3: A fake “Unauthorised Use” Claim – This is a
super way of stealing items on ebay and is widely used. Simply claim that
someone hijacked your account (paypal & ebay) and that you didn’t order the
laptop. Then in conjunction with a fake I.N.R claim you can simply steal the
laptop and of course, get your money back.
4: A Stolen Credit card – Of course, ebay make no
real attempt to vet any of its buyers, so hey, just register a new ebay
account using fake ID information and link it to a paypal account set up
with a stolen credit card – and hey presto – A free laptop.
WESTERN UNION
Although officially banned on ebay, fake western
union payments are the preferred way for Nigerian Scammers to steal high
value electrical items. Simply email me (using pigeon English) telling me
that you would like to buy this item using Western Union – Tell me that you
would be happy to pay over the odds for the laptop and that it is a present
for your mother in law. Then send me a fake western union payment
notification and I send you the laptop – Perfect. This method of stealing
items off sellers is very widely used on ebay and of course, as ebay do not
properly verify buyers its easy to do. Make sure you use Pigeon English as I
am really really stupid and it’s bound to fool me.
MUGGING
If you are a traditionalist like me you may prefer
a good old mugging. Simply offer to meet me on some dodgy housing estate
somewhere and have a load of you mates hiding behind a hedge with a few iron
bars. Again, offer to pay me over the odds as there is nothing better than
using a sellers greed to bait them into a scam. I would be grateful if you
could avoid killing me as this will cause bad publicity for ebay which would
be terrible.
GENUINE BUYERS
In the unlikely event that you are actually a
genuine buyer then you really should be shopping in a real shop and not this
scammers paradise. However this laptop does really exist and is really for
sale. You can email me or skype me with suggestions on how we may actually
transact this item to both our satisfaction – with both our safety in mind.
Don’t even think of buying it using paypal. I’ve only listed it as accepted
because ebay run a protection racket that means I have to accept it. If you
do pay by paypal I will simply refund your payment and give you a nice new
shiny NEG.
FEEDBACK BLACKMAIL
Of course you will no doubt be aware that from May
onwards you will be able to blackmail sellers into giving you free P&P /
discounts etc. You will be able to give them neg feedback and they will not
be able to give you any.. I regret to advise you that because this rule does
not come in until May this option of scamming me is not open to you yet.
AUCTION WRECKING
I would grateful if some sad failed traffic warden
could report this auction for two reasons
1: Ebay will see this listing and will hopefully
close my account, saving me a 180 days wait to do it myself.
2: You will save me listing fees, making this a
free advert.
Happy Bidding!
Continued in article
Overpayment Scam on eBay and Craig's List When is a “cleared
check” not necessarily a good check?
Selling something on eBay or Craig's List? Watch
out for who's signing the check to buy it.
Tens of thousands of Americans are being targeted
by the latest scam sweeping America, many of them targeted online through
Craig's List and eBay.
Scammers overpay with counterfeit checks that look
so good most banks accept them. It's only after victims have sent the
overpayment amount back to the scammers that they learn the checks are no
good, and they are out the money.
U.S. Postal Service officials say they have seized
more than $2 billion worth of high-quality counterfeit checks coming from
Nigeria, England, the Netherlands and Canada.
But, they say, many more phonies are still getting
through. . That's the kind of check Jill Parker, a pharmaceutical company
manager in Richmond, Va., got in the mail.
Using Craig's List to rent an apartment she owned
in Chicago, she was contacted by someone moving from London.
"He was going to send me a check for $25,000," she
told ABC News. "I was to deduct what he owned me for the first month's rent
and the security deposit, and I was to wire the balance back to his agent,
who was handling his furnishing."
She took the check to her bank and called a few
days later to see if it had cleared. Told that it had, Jill, as agreed upon,
wired the remaining $21,000, thinking she was ahead $4,000.
"Everything looked great; everything went fine
until about a week later," she said.
The bank informed her that the check was no good
and had been returned not paid. And Jill, not the bank, was out the money.
American banks say they are required by law to make
the money available well before a final determination is made as to whether
the check is good.
"Certain funds, for example, have to be available
on the day after deposit," Nedda Feddis, senior federal counsel for the
American Bankers Association, told ABC News. "And the fraudsters are taking
advantage of that rule."
Good Morning America Video: Phony Check Scam
Hitting America There have been tragic consequences.
Chris Soens, suffering from health problems,
thought she got a dose of good news in the mail when she won $90,000 in a
supposed European lottery.
Once the check had been deposited and posted to her
account, Chris wired back $40,000 for what she was told were fees and taxes.
When the check was discovered to be a phony, the
bank told Chris she had to repay the entire amount.
Her sister, Rebecca Woodworth, says it led to
suicide.
"I think she was devastated," she said. "I think
she was plunged into depths of despair knowing that everything she had was
gone."
The problem has grown so large that the U.S. Postal
Service is launching a nationwide TV campaign starting tomorrow to warn
Americans about the dangers of the bad check scam. The Postal Service has
also set up a new Web site to educate the public on check fraud:
www.fakechecks.org
.
Man Sold Goods on EBay, Never Delivered A 37-year-old man was found guilty Tuesday of
collecting more than $90,000 in payments for Rolex watches and sports tickets
through eBay but never delivering the merchandise to customers. A federal court
jury convicted him of 12 counts of mail fraud. Vartanian faces a maximum penalty
of 20 years in prison. He was arrested earlier this year in Fremont.
PhysOrg, August 8, 2007 ---
http://physorg.com/news105770216.html
Question
What can you do to prevent being taken on eBay?
(Word of Caution: Never open an email message that pretends to be from
Pay-Pal)
Two brothers have published a book of "true tales of
treachery, lies and fraud" from eBay. "Dawn of the eBay Deadbeats" contains
stories written by eBay buyers and sellers. From stories of disappointing
purchases to out-and-out fraud, the book is a manual of what can go wrong when
buying and selling on auction sites. Brothers Stephen and Edward Klink co-wrote
the book, illustrated by Clay Butler. The idea for the book sprung from a
website Stephen Klink had created. A New Jersey police office, he founded
eBayersThatSuck.com - a site that aims to help people avoid auction scams -
after he himself was ripped off online.
Ina Steiner, "Dawn of the eBay Deadbeats: New Book Uncovers Online Auction
Treachery," AuctionBytes.com, December 28, 2005 ---
http://www.auctionbytes.com/cab/abn/y05/m12/i28/s01
Imagine buying vintage Spiderman
comics for $16,000 and receiving instead, a box of printer paper or
losing a whopping $27,000 in purchasing a big rig that didn't exist in
the first place. These are just many of the online auction fraud horror
stories that brothers Edward and Steve Klink compiled from their eBay
watchdog Web site eBayersThatSuck.com (E.T.S.).
In their book "Dawn of the eBay Deadbeats," some
70 strange-but-true stories were collected and retold with the help of
illustrator Clay Butler.
The December 2005 publishing of the book comes just in time as the
online auction giant has been criticized by consumer groups, most
recently by the U.K. magazine "Computing Which?" for its passive and
sometimes delayed approach in handling fraud reports.
At any given time, the site has 78 million listings, and 6 million new
listings are added each day.
And while, eBay maintains that less than .01 percent of all listings end
in a confirmed case of fraud, that could mean that of the 1.9 billion
listings reported by eBay in 2005, that 190,000 cases were confirmed
frauds in the last year.
Currently there are almost 900 horror stories from eBay fraud victims
are on the E.T.S. site whose motto is "Winning the war on deadbeats."
And already the brothers are working on the next volume of horror
stories, encouraging victims who want to get their tales to be told to
get into contact with them.
United Press International spoke with Edward Klink about the recent
book, their watchdog
Web site, and the current state of eBay.
"We had collected hundreds of stories
on the Web site
and figured it was time to take these stories to a wider audience and
let the victims have their say," Edward Klink said. "Plus with our
combined backgrounds, Steve is a police officer and I'm a
business writer,
we felt we were ideally suited to get the job done."
Fraud on eBay can take on many forms including items paid for that vary
from the description in the sale, unpaid items, and spoof eBay or
Pay-Pal e-mails.
And like the many victims on their site, the brothers too have
encountered the problem of auction fraud.
In 2003, Steve, a New Jersey police officer, won a set of "new"
speakers, only to find that it looked as if they were "gnawed on by a
wild animal."
"The seller said they weren't that way when mailed, and eBay said there
was nothing they could do," Klink said. "Annoyed that he was stuck with
the merchandise and given no recourse, Steve started
www.ebayersthatsuck.com and stories began pouring in from around the
world."
And the site has received a positive response since it's been up and
running.
"People love it," Klink said. "On eBay, their official boards are
closely monitored and talk about problems and scams and eBay's failings
are not generally tolerated. So E.T.S. gives them an outlet. When it
first came out Ebayersthatsuck.com was featured on Courttv.com and
newspapers as far away as South Africa."
According to Klink, while eBay has what could be considered --"the
ultimate
business model" -- of collecting fees and
delegating the marketing, selling, packaging, shipping, and
customer service
to eBay users, it's very easy for these same users to fall victim to
fraud.
"I think consumers let their guard down when they are sitting at home
and surfing the Web with their coffee," he said. "If a stranger offered
them a $1,400 antique vase on the street they'd most likely walk away,
but when that same vase is on
the Internet for some reason the reaction is
more, 'Say, now that looks interesting.'"
And have the brothers seen any improvements in eBay's handling of the
fraud issue?
"eBay says it is a tiny fraction of all auctions," Klink said, "but the
hundreds of people who told us their stories hate being in that tiny
group and never thought they would be. Lots of fraud is underreported,
too. EBay encourages users to settle it among themselves, and if they
can't, then they are directed to pay $20.00 to have SquareTrade, a third
party, mediate the dispute. But it's not often a scammer shows up for
mediation!"
. . .
"We want people on eBay to have a good buying and
selling experience - transparent, well-lit, and safe," the spokesperson
said. "Fraud on all levels is something we take seriously."
The company also has a team dedicated to working
with law enforcement rather it be educating them on fraudulent cases and
working proactively taking information on specific cases to them or
cooperating with investigations.
"We would invite anyone to visit the site and read
more," said the spokesperson, who also emphasized that the no. 1 issue for
online shoppers is to pay safely using Pay-Pal or a credit card than any
other form of payment.
In many cases, consumers are able to get their
money back, Pay-Pal offers up to $1,000 back with buyer protection and
credit card programs usually have a pay back program in cases of fraud. In
many cases, Pay-Pal offers a way for consumers to make purchases without
providing personal information and at the same time protecting money.
"Dawn of the eBay Deadbeats" ($12.95) is
available on Amazon, eBay, and in select bookstores.
"The Ol' Bait and Click: Devices Meant to Reassure Online Buyers Are
Often Used to Swindle Them," by Alan Sipress, The Washington Post,
March 16, 2007, Page D01 ---
Click Here
The eBay vendor had a glowing record -- more than
900 successful sales, with only a single complaint amid a long series of
positive testimonials from customers. So when a Georgia bidder won the
seller's auction for an Olympus digital camera in January, there seemed
little reason to worry about dispatching almost $700 into cyberspace.
But the camera never arrived.
"I don't think I will ever buy anything over the
Internet again," the conned bidder lamented in a posting on an eBay
discussion board. "I am not a wealthy person, had saved long and hard for
this camera for my business, and don't know when, or IF EVER I will see my
$700 again."
Ever since the early days of the Internet, Web
sites have struggled to find ways of reassuring users that a stranger could
be as honest as a well-known local merchant, as knowledgeable as a respected
teacher or as insightful as a wise grandparent. With Internet commerce now
estimated to exceed $100 billion a year and greater numbers of people
turning to the Internet for products, advice and love, Web sites are
crafting more elaborate rating and feedback systems -- reputation monitors
of sorts -- to help people evaluate whom they can trust. But the cheats have
also noticed the unprecedented chance for ill-gotten gains. This has set off
a high-stakes game of cat and mouse as Web sites spend more time and money
to secure their systems against those trying to game them.
"We are increasingly living in a mobile, virtual
world," said Chrysanthos Dellarocas, a professor of information systems at
the University of Maryland business school. "To retain some form of social
fabric in this world, we need some reputation mechanism."
One of the best-known reputation systems is the one
used by Amazon.com, which provides user-written reviews of the books and it
sells and then allows other users to rate the reviewers. Slashdot, a popular
technology and current affairs Web site, developed what it calls a "karma"
system for evaluating contributors. One of Yahoo's fast-growing features,
Yahoo Answers, now boasts 75 million users who ask and answer each other's
online questions about nearly any subject, with greater weight accorded to
those who earn expert ratings from other users.
"Reputation is key to it all," said Bradley
Horowitz, Yahoo's vice president of product strategy.
EBay established its position as the Web's premier
auctioneer in part by pioneering a system to allow buyers and sellers to
rate each other and comment on the quality of their transactions.
"It has been essential for eBay's success. It
increased trust in the marketplace and created a community," eBay chief
executive Meg Whitman said in an interview.
But users have repeatedly found ways to inflate or
wholly fabricate their reputations. The online encyclopedia, Wikipedia, was
thrown into turmoil late last month after users learned that one of the
site's major editors was not a tenured university religion professor as he
claimed in his online profile but a 24-year-old college dropout. At Amazon,
a computer glitch three years ago inadvertently exposed the real names of
reviewers writing under pseudonyms. Some turned out not to be disinterested
literary judges but authors giving their own books glowing reviews to boost
sales.
The scams take countless and ever more ingenious
forms. These include intimidating other users who give negative ratings by
threatening to retaliate with negative feedback of their own. Some con
artists also create false secondary accounts, known as "sock puppets," that
a cheat can use to give himself fake positive feedback. It also includes
piling up legitimate positive reviews and then closing in for the kill as an
eBay seller from New Jersey called "malkilots" did to nearly three dozen
would-be camera buyers, including the bidder from Georgia.
That scheme -- according to feedback, discussion
boards and auction descriptions on the eBay site -- went down like this:
Malkilots built a sterling track record by selling memory cards for digital
cameras for as little as $20 each. The vender sold them by the hundreds,
delivering them as promised and accumulating page after page of positive
feedback from satisfied customers.
Then, in late January, malkilots switched to
offering the cameras themselves, which regularly fetched more than $650. In
one auction, the Georgia bidder -- who communicated and did business only
under a user name and did not respond to e-mails -- put in the highest of 37
offers for an Olympus SLR professional camera, paying for it online. Instead
of receiving the camera, the buyer got a cheap camera bag.
"I had checked out the seller, all positive
feedback going back several years," the buyer wrote. "What I didn't check
out was WHAT kind of item that feedback was for."
Other successful bidders reported they also got
cheap bags instead of cameras -- if they got anything at all. With losses
totaling about $25,000, the bidders complained to eBay, which shut down the
vendor's account. Negative feedback streamed into the site calling malkilots
a fraud.
EBay did not return calls requesting comment on the
case.
Continued in article
Jensen Comment I've never purchased anything on eBay. But I do almost all my shopping (even
grocery shopping) on Amazon these days. I cannot say enough good things about
the product selections, prices, and service. I have an Amazon Visa for such
purposes that gives me lower prices, and I often get free shipping. For example,
Erika needed an extra-wide wheel chair because of her brace. At the moment we
use a wheel chair to carry her up and down the front porch steps. Her Boston
doctor wrote a prescription for temporary rental of the chair, but the price was
about $120 per week. I purchased a great one through Amazon for $138 that
included free shipping. The new high quality chair was here in the boonies in
less than five days.
It was the scandal that rocked
the internet. A seemingly worthless painting sold on
eBay in early 2000 for $135,805 -- all because
buyers believed it might be the work of the
20th-century abstract painter Richard Diebenkorn.
It wasn't.
Nor was the story behind
the painting true.
In fact, Sacramento,
California, lawyer
Kenneth Walton had forged
the suspiciously Diebenkorn-esque signature, which
appeared in an auction photograph, and concocted the
hokey yarn about finding it at a garage sale some
years back. Some of the highest bids, it turned out,
came not from serious art-buyers but from Walton's
eBay business partner, Ken Fetterman.
Before long the tangle of
deceits that led to the historic sale began to
unravel on the front pages of newspapers around the
country. Walton and another business partner, Scott
Beach, pled guilty to federal felony charges. After
three years as a fugitive, Fetterman was finally
arrested while on his way to a Frisbee golf
tournament in Kansas.
Walton tells his side of
this true internet crime story in his new memoir,
Fake: Forgery, Lies, & eBay. Wired News
spoke to him about the book and his experiences as
an online outlaw.
Carnegie Mellon University researchers are relying
on an old adage to develop anti-fraud software for Internet auction sites:
It is not what you know, it is who you know.
At sites like eBay, users warn each other if they
have a bad experience with a seller by rating their transactions. But the
CMU researchers said savvy fraudsters get around that by conducting
transactions with friends or even themselves, using alternate user names to
give themselves high satisfaction ratings -- so unsuspecting customers will
still try to buy from them.
The CMU software looks for patterns of users who
have repeated dealings with one another, and alerts other users that there
is a higher probability of having a fraudulent transaction with them.
''There's a lot of commonsense solutions out there,
like being more careful about how you screen the sellers,'' said Duen Horng
''Polo'' Chau, the research associate who developed the software with
computer science professor Christos Faloutsos and two other students. ''But
because I'm an engineering student, I wanted to come up with a systematic
approach'' to identify those likely to commit fraud.
The researchers analyzed about 1 million
transactions involving 66,000 eBay users to develop graphs -- known in
statistical circles as bipartite cores -- that identify users interacting
with unusual frequency. They plan to publish a paper on their findings early
next year and, perhaps, market their software to eBay or otherwise make it
available to people who shop online.
Catherine England, an eBay spokeswoman, said the
company was not aware of the research and would not comment on it. But
England said protecting the company's more than 200 million users from fraud
was a top priority.
Online auction fraud -- when a seller does not
deliver goods or sells a defective product -- accounted for 12 percent of
the 431,000 computer fraud complaints received last year by Consumer
Sentinel, the Federal Trade Commission's consumer fraud and identity theft
database. Auction fraud was the most commonly reported computer-related
fraud in the database.
And the scams run the gamut.
Last year, a federal grand jury indicted an Ohio
man on charges he sold hundreds of thousands of dollars of stolen Lego
merchandise on the Internet. Earlier this year, a New Mexico woman was
sentenced to nine years in federal prison for selling forged hunting
licenses on eBay, over the phone and by e-mail, and then not delivering
trips paid for by out-of-state hunters.
Earlier this month, a man who failed to deliver
tickets to the 2005 Ohio State-Michigan football game to 250 online auction
customers was sentenced to 34 months in federal prison.
Johannes Ullrich, an Internet fraud expert with the
SANS Institute in Bethesda, Maryland, said the CMU research ''sounds like a
credible way to detect fraud.''
''Essentially, what they're trying to do is find
these extended circles of friends who make positive recommendations to each
other,'' said Ullrich, the chief technology officer of SANS' Internet Storm
Center, which tracks viruses and other Internet problems.
But Ullrich said the CMU researchers must find a
way to screen out false positives. He said a small group of users -- such as
baseball card collectors -- might repeatedly buy from one another and could
be flagged as high-risk.
Faloutsos said the researchers have thought of that
in developing the software called NetProbe -- short for Network Detection
via Propagation of Beliefs.
''We're not just looking at your neighbors (on the
auction site),'' Faloutsos said. ''We're looking at the neighbors of your
neighbors, and the neighbors of your neighbors' neighbors.''
Question
Should there be a doughnut hole in the Medicare D coverage under Medicare's new
drug plan?
"Medicare Beneficiaries Confused and Angry Over Gap in Drug Coverage," by
Robert Pear, The New York Times, July 29, 2006 ---
Click Here
Tens of thousands of Medicare beneficiaries who
signed up for prescription drug coverage are paying monthly premiums, but
Medicare is not paying any of their drug costs because they have reached a
gap in their coverage.
The gap, the notorious “doughnut hole,” is
upsetting many beneficiaries, and it has become a potent symbol as
politicians debate the merits of the new program.
Federal officials and outside experts say that 3
million to 3.5 million people may fall into the gap this year, about half
the number predicted. While lawmakers and lobbyists were well aware of the
problem, it is attracting fresh attention because many beneficiaries are
just now discovering it.
The original estimates assumed that people would
sign up for drug coverage in January, but many waited until April or May.
They will file fewer claims than expected and are therefore less likely to
reach the gap in coverage this year.
Poor people eligible for Medicare and Medicaid have
no gap in the benefit. In addition, many retirees found that
employer-sponsored health plans provided better drug benefits than Medicare,
so they stayed in those plans, which rarely have a gap in coverage.
Beneficiaries often learn about the doughnut hole
when they try to refill prescriptions. They may be asked to pay $75 to $125
or more for a drug they had been receiving for a co-payment of $20 to $30.
Marcella Crown, 80, of Des Plaines, Ill., near
Chicago, takes Lipitor for high cholesterol, Diovan for high blood pressure,
Synthroid for thyroid disease, Fosamax for osteoporosis, Nexium for
heartburn and several other drugs.
Mrs. Crown signed up in November for a drug plan
offered by Blue Cross and Blue Shield of Illinois. Her coverage began in
January, and she reached the coverage gap in April.
Her husband, David F. Crown, a retired mechanical
engineer, said: “Blue Cross is saying that even though she will get no
benefit, she must still pay the premiums. That’s outrageous. We have never
had insurance policies that gave us no benefit yet required us to pay
premiums.”
Melvin A. Kinnison, 65, of Huntington Beach,
Calif., a retired deputy sheriff with diabetes and prostate cancer, said:
“The drug benefit was fine for a while, until the doughnut hole came around.
It was a total surprise. Nobody ever explained it to me.”
Mr. Kinnison said he reached the coverage gap in
June. The cost for a month’s supply of Cymbalta, which he takes for diabetic
nerve pain, jumped to $104, from $20.
Former Senator Dave Durenberger, a Minnesota
Republican who runs a national health policy forum, said, “The doughnut hole
could have negative repercussions for Republicans in the November midterm
elections.”
Democrats hope that is the case. The coverage gap
is “a goofy idea,” said Senator Byron L. Dorgan, Democrat of North Dakota.
Administration officials play down such concerns.
Dr. Mark B. McClellan, administrator of the Centers
for Medicare and Medicaid Services, said beneficiaries had already saved
about $1,500 by the time they reached the coverage gap. Beneficiaries
concerned about the gap, Dr. McClellan said, can often reduce their costs by
switching to generic drugs and by taking advantage of assistance programs
offered by many states and by drug manufacturers. Next year, he said, they
can switch to plans that offer some coverage in the gap.
While beneficiaries are generally responsible for
all drug costs in the gap, they do have access to discounts negotiated by
their plans.
Many beneficiaries, like Mr. and Mrs. Crown, had
heard about the coverage gap but did not fully understand how it worked.
Under the standard drug benefit defined by Congress
in the 2003 Medicare law, the beneficiary pays a $250 deductible and then 25
percent of drug costs from $251 to $2,250. When total yearly drug costs,
paid by the beneficiary and the plan, reach $2,250, the coverage stops, and
the beneficiary pays 100 percent of the cost of each prescription, until the
person’s out-of-pocket costs reach $3,600. At that point, insurance resumes,
and the beneficiary pays about 5 percent of the cost of each drug. The
tabulation of costs begins anew each year.
Wen A. Daniels of California Health Advocates, an
insurance counseling organization, said she had clients who reached the gap
in January or February because they were taking high-cost drugs like Avastin,
Gleevec and Iressa for different types of cancer; Pegasys for hepatitis;
Betaseron for multiple sclerosis; and Tracleer for a life-threatening lung
condition.
UnitedHealth, the largest sponsor of Medicare drug
plans, with 4.5 million members, said that 45,000 of them had reached the
point where the coverage gap begins.
Continued in article
Under no circumstance should
anybody sign up for a plan with a stranger over the telephone even if that
person claims to be a Medicare representative or a licensed insurance agent who
phoned out of the blue.
Government and
consumer watchdogs are bracing for the marketing scams likely to
spring up alongside the long-awaited Medicare drug benefit.
Already, the
Centers for Medicare and Medicaid Services, the federal agency
overseeing the new drug program, says it has enlisted help from
law-enforcement officials to investigate two possible scams in which
beneficiaries were asked for bank-card numbers and other personal
information.
Enrollment for
the plans starts Nov. 15, and coverage begins Jan. 1. Drug-plan
marketers are allowed to make calls to describe benefits and offers,
and to solicit requests for pre-enrollment information.
Yet it's
illegal for marketers of Medicare drug plans to visit your home
unless you invite them in advance, or to send you unsolicited
emails, says Deane Beebe, spokeswoman for the Medicare Rights
Center, a New York advocacy group. Although marketers can make
unsolicited phone calls, they aren't allowed to sign you up during
those calls.
Several advocacy groups, including the
National Consumers League (www.fraud.org/tips/internet/medicare.htm),
are offering tips for protecting yourself from being victimized by a
Medicare-related scam. Among the tips:
Check the list
of Medicare-approved prescription plans by calling the Centers for
Medicare and Medicaid Services at 800-633-4227. If you're contacted
by a plan that isn't on the list, it could be a scam.
Make sure the plan is licensed. Call your
state insurance department; there's a directory of these departments
at
www.naic.org/state_web_map.htm.
Guard
personal information, such as Social Security or bank-account
numbers. Legitimate plans may ask for a Social Security number --
but not until you actually enroll. And they can't ask for your
credit-card or bank data unless you're arranging automatic payments.
No one can
enroll in a drug plan before Nov. 15, though the plans can start
advertising this month. If a plan asks for payment before that date,
it could be fraudulent.
Enrolling in a drug plan is voluntary. If
someone says you must join a plan to avoid losing your other
Medicare benefits, you're getting false information. For free
advice, call your State Health Insurance Program or your local area
agency on aging. For a state-by-state directory of state programs,
visit
www.medicare.gov/contacts/Static/SHIPs.asp
or call Medicare's hotline. To find your local aging agency, go to
eldercare.gov
or call 800-677-1116.
Even with
legitimate plans, advocates for Medicare recipients urge seniors to
study and compare several drug plans before choosing. "What
incentive does a salesperson have to inform a senior that a
competitor's plan might be better for them?" asks Shannon Benton,
executive director of the TREA Senior Citizens League, an
Alexandria, Va., advocacy group.
The Medicare Rights Center developed a flow
chart to help sort through drug-benefit options. To use it, go to
medicareinteractive.org/aarp, then click
on the yellow box on the right side of the screen labeled "New!
Medicare Drug Coverage Information."
Jensen Comment:
Note that the traditional Medicare Supplement Plans (e.g., Plan J) are going
to cease to exist. The trusted place to start for information about new alternative
is
http://www.cms.hhs.gov/default.asp?
Oxymoron: Medical Ethics Two drug companies are paying doctors millions to
prescribe anemia drugs, which regulators now say may be unsafe.
Alex Berenson and Andrew Pollack, "Doctors Reap Millions for Anemia Drugs,"
The New York Times, May 9, 2007 ---
Click Here
Widespread price scanner fraud and errors
Please verify that your cash register receipt records the prices promised.
You may be getting unknown charges to your credit card account.
I wonder if they ever undercharge? I doubt it!
It's called scanner scamming. The price on the
scanner doesn't match the price on a store shelf, and consumers get
overcharged.
As CBS 2's Suzanne Le Mignot explains, Illinois
Lt. Gov. Pat Quinn is proposing a new retail consumer act that hits
stores with a steep penalty if they are caught making a scanner error.
Bob Hinde reported that he bought two tomatoes
at a Dominick's food store in Des Plaines, and he said he was charged a
lot more than the tomatoes cost.
"This was so egregious," Hinde said. "It was a
clerical error of $102.15."
Hinde added: "They were very embarrassed. They
gave us our money back immediately. But this is a mistake easy to
catch."
Hinde happens to be the former consumer
protection administrator in Des Plaines. In that position, he was
responsible for making sure the prices on store shelves matched those at
the register.
"The ones you don't catch are the 50 cents. The
dollar and a half. The $3," he said. "Today, mothers and fathers are
both working -- (they) dash into stores, boom, pay, out again."
The Internal Revenue Service has canceled the
tax-exempt status for some of the nation's largest educational credit
counseling services after audits revealed they exist mainly to prey on
debt-ridden customers, Commissioner Mark Everson said Monday.
"These organizations have not been operating for
the public good and don't deserve tax-exempt status," Everson said. "They
have poisoned an entire sector of the charitable community."
A two-year investigation of 41 credit counseling
agencies resulted in the revocation, proposed revocation or other
termination of their tax-exempt status, he announced.
Everson said that many of those groups,
representing more than 40 percent of the revenue in a $1 billion industry,
offered little, if any, counseling or education as required of groups with
tax-exempt status.
Other such agencies will be required to report on
their activities. The IRS is sending compliance inquiries to each of the
other 740 known tax-exempt credit counseling agencies not already under
audit.
"Depending on the responses received, additional
audits may be undertaken," the agency said.
Everson said groups looking to make a profit would
secure tax exempt status and make cold phone calls to people in desperate
financial straights. They would use scare tactics to sell the people
"cookie-cutter" debt management plans that often were not geared toward
reducing the consumers' debt and often were too costly to pay.
Administrative fees, he said were sometimes collected by third parties
handling the paperwork for a profit.
Everson recommended that consumers pick one of the
150 consumer counseling organizations approved by groups like the Better
Business Bureau. But bad actors may exist even among those, because
guidelines for approval differs between agencies, he said.
Everson added that the agency is following up the
revocations with some criminal investigations, but would not detail them.
The IRS also is issuing new guidance on how to
comply with federal law to legitimate organizations which educate people on
how to maintain good credit.
The agency in recent years has tightened up its
review of new applications by credit counseling firms for tax-exempt status.
Since 2003, the IRS has reviewed 100 such applications and approved only
three.
The actions come consumers and the counseling
industry are having to learn to live under a new and more restrictive
federal bankruptcy law.
Congress last year gave the financial counseling
sector a new role in the nation's bankruptcy system by making it harder for
people to wipe out debt and requiring consumers to consult with an approved
credit counselor before they seek the protection of a bankruptcy court.
Exploiting the Poor
Inside U.S. companies' audacious drive to extract more
profits from the nation's working poor
In recent years, a range of businesses
have made financing more readily available to even the riskiest of
borrowers. Greater access to credit has put cars, computers, credit
cards, and even homes within reach for many more of the working poor.
But this remaking of the marketplace for low-income consumers has a dark
side: Innovative and zealous firms have lured unsophisticated shoppers
by the hundreds of thousands into a thicket of debt from which many
never emerge.
Federal Reserve data show that in
relative terms, that debt is getting more expensive. In 1989 households
earning $30,000 or less a year paid an average annual interest rate on
auto loans that was 16.8% higher than what households earning more than
$90,000 a year paid. By 2004 the discrepancy had soared to 56.1%.
Roughly the same thing happened with mortgage loans: a leap from a 6.4%
gap to one of 25.5%. "It's not only that the poor are paying more; the
poor are paying a lot more," says Sheila C. Bair, chairman of the
Federal Deposit Insurance Corp.
Once, substantial businesses had
little interest in chasing customers of the sort who frequent the
storefronts surrounding the Byrider dealership in Albuquerque. Why
bother grabbing for the few dollars in a broke man's pocket? Now there's
a reason.
Armed with the latest technology for
assessing credit risks—some of it so fine-tuned it picks up spending on
cigarettes—ambitious corporations like Byrider see profits in those thin
wallets. The liquidity lapping over all parts of the financial world
also has enabled the dramatic expansion of lending to the working poor.
Byrider, with financing from Bank of America Corp. (BAC ) and others,
boasts 130 dealerships in 30 states. At company headquarters in Carmel,
Ind., a profusion of colored pins decorates wall maps, marking the 372
additional franchises it aims to open from California to Florida.
CompuCredit Corp., based in Atlanta, aggressively promotes credit cards
to low-wage earners with a history of not paying their bills on time.
And BlueHippo Funding, a self-described "direct response merchandise
lender," has retooled the rent-to-own model to sell PCs and plasma TVs.
The recent furor over subprime
mortgage loans fits into this broader story about the proliferation of
subprime credit. In some instances, marketers essentially use products
as the bait to hook less-well-off shoppers on expensive loans. "It's the
finance business," explains Russ Darrow Jr., a Byrider franchisee in
Milwaukee. "Cars happen to be the commodity that we sell." In another
variation, tax-preparation services offer instant refunds, skimming off
hefty fees. Attorneys general in several states say these techniques at
times have violated consumer-protection laws.
Some economists applaud how the spread
of credit to the tougher parts of town has raised home- and
auto-ownership rates. But others warn that in the long run the
development could slow upward mobility. Wages for the working poor have
been stagnant for three decades. Meanwhile, their spending has
consistently and significantly exceeded their income since the
mid-1980s. They are making up the difference by borrowing more. From
1989 through 2004, the total amount owed by households earning $30,000
or less a year has grown 247%, to $691 billion, according to the most
recent Federal Reserve data available.
"Having access to credit should be
helping low-income individuals," says Nouriel Roubini, an economics
professor at New York University's Stern School of Business. "But
instead of becoming an opportunity for upward social and economic
mobility, it becomes a debt trap for many trying to move up."
HAPPY AS SHE WAS with the Saturn (GM )
she bought in December, 2005, Roxanne Tsosie soon ran into trouble
paying off the loan on it. The car had 103,000 miles on the odometer.
She agreed to a purchase price of $7,922, borrowing the full amount at a
sky-high 24.9%. Based on her conversation with the Byrider salesman, she
thought she had signed up for $150 monthly installments. The paperwork
indicated she owed that amount every other week. She soon realized she
couldn't manage the payments. Dejected, she agreed to give the car back,
having already paid $900. "It kind of knocked me down," Tsosie says. "I
felt I'd never get anywhere."
The abortive purchase meant Byrider
could dust off and resell the Saturn. Nearly half of Byrider sales in
Albuquerque do not result in a final payoff, and many vehicles are
repossessed, says David Brotherton, managing partner of the dealership.
A former factory worker, he says he sympathizes with customers who
barely get by. "Many of these people are locked in a perpetual cycle" of
debt, he says. "It's all motivated by self-interest, of course, but we
do want to help credit-challenged people get to the finish line."
Byrider dealers say they can generally
figure out which customers will pay back their loans. Salesmen, many of
whom come from positions at banks and other lending companies, use
proprietary software called Automated Risk Evaluator (ARE) to assess
customers' financial vital signs, ranging from credit scores from major
credit agencies to amounts spent on alimony and cigarettes.
Unlike traditional dealers, Byrider
doesn't post prices—which average $10,200 at company-owned
showrooms—directly on its cars. Salesmen, after consulting ARE,
calculate the maximum that a person can afford to pay, and only then set
the total price, down payment, and interest rate. Byrider calls this
process fair and accurate; critics call it "opportunity pricing."
So how did Byrider figure that Tsosie
had $300 a month left over from her small salary for car payments?
Barely a step up from destitution, she now lives in her own cramped
apartment in a dingy two-story adobe-style building. Decorated with an
old bow and arrow and sepia-tinted photographs of Navajo chiefs, the
apartment is also home to her new husband, Joey A. Garcia, a
grocery-store stocker earning $25,000 a year, his two children from a
previous marriage, and two of Tsosie's kids. She and Garcia are paying
off several other high-interest loans, including one for his used car
and another for the $880 wedding ring he bought her this year.
Asked by BusinessWeek to review
Tsosie's file, Byrider's Brotherton raises his eyebrows, taps his
keyboard, and studies the screen for a few minutes. "We probably should
have spent more time explaining the terms to her," he says. Pausing, he
adds that given Tsosie's finances, she should never have received a
24.9% loan for nearly $8,000.
That still leaves her $900 in
Byrider's till. "No excuses; I apologize," Brotherton says. He promises
to return the money (and later does). In most transactions, of course,
there's no reporter on the scene asking questions.
A QUARTER-CENTURY ago, Byrider's
founder, the late James F. Devoe, saw before most people the untapped
profits in selling expensive, highly financed products to marginal
customers. "The light went on that there was a huge market of people
with subprime and unconventional credit being turned down," says Devoe's
38-year-old son, James Jr., who is now chief executive.
The formula produces profits. Last
year, net income on used cars sold by outlets Byrider owns averaged $828
apiece. That compared with only $223 for used cars sold as a sideline by
new-car dealers, and a $31 loss for the typical new car, according to
the National Automobile Dealers Assn. Nationwide, Byrider dealerships
reported sales last year of $700 million, up 7% from 2005.
"Good Cars for People Who Need
Credit," the company declares in its sunny advertising, but some law
enforcers say Byrider's inventive sales techniques are unfair. Joel
Cruz-Esparza, director of consumer protection in the New Mexico Attorney
General's Office from 2002 to 2006, says he received numerous complaints
from buyers about Byrider. His office contacted the dealer, but he never
went to court. "They're taking advantage of people, but it's not
illegal," he says.
Officials elsewhere disagree.
Attorneys general in Kentucky and Ohio have alleged in recent civil
suits that opportunity pricing misleads customers. Without admitting
liability, Byrider and several franchises settled the suits in 2005 and
2006, agreeing to inform buyers of "maximum retail prices." Dealers now
post prices somewhere on their premises, though still not on cars. Doing
so would put them "at a competitive disadvantage," says CEO Devoe. Sales
reps flip through charts telling customers they have the right to know
prices. Even so, Devoe says, buyers "talk to us about the price of the
car less than 10% of the time."
Tsosie recently purchased a 2001
Pontiac from another dealer. She's straining to make the $277 monthly
payment on a 14.9% loan.
Nobody, poor or rich, is compelled to
pay a high price for a used car, a credit card, or anything else. Some
see the debate ending there. "The only feasible way to run a capitalist
society is to allow companies to maximize their profits," says Tyler
Cowen, an economist at George Mason University in Fairfax, Va. "That
will sometimes include allowing them to sell things to people that will
sometimes make them worse off."
Others worry, however, that the
widening income gap between the wealthy and the less fortunate is being
exacerbated by the spread of high-interest, high-fee financing. "People
are being encouraged to live beyond their means by companies that are
preying on low-income consumers," says Jacob S. Hacker, a political
scientist at Yale.
Higher rates aren't deterring
low-income borrowers. Payday lenders, which provide expensive cash
advances due on the customer's next payday, have multiplied from 300 in
the early 1990s to more than 25,000. Savvy financiers are rolling up
payday businesses and pawn shops to form large chains. The stocks of
five of these companies now trade publicly on the New York Stock
Exchange (NYX ) and NASDAQ (NDAQ ). The investment bank Stephens Inc.
estimates that the volume of "alternative financial services" provided
by these sorts of businesses totals more than $250 billion a year.
Mainstream financial institutions are
helping to fuel this explosion in subprime lending to the working poor.
Wells Fargo & Co. (WFC ) and U.S. Bancorp (USB ) now offer their own
versions of payday loans, charging $2 for every $20 borrowed. Based on a
30-day repayment period, that's an annual interest rate of 120%. (Wells
Fargo says the loans are designed for emergencies, not long-term
financial needs.) Bank of America's revolving credit line to Byrider
provides up to $110 million. Merrill Lynch & Co. (MER ) works with
CompuCredit to package credit-card receivables as securities, which are
bought by hedge funds and other big investors.
Once, major banks and companies
avoided the poor side of town. "The mentality was: Low income means low
revenue, so let's not locate there," says Matt Fellowes, a researcher at
the Brookings Institution in Washington, D.C. Now, he says, a growing
number of sizable corporations are realizing that viewed in the
aggregate, the working poor are a choice target. Income for the 40
million U.S. households earning $30,000 or less totaled $650 billion in
2004, according to Federal Reserve data.
John T. Hewitt, a pioneer in the
tax-software industry, recognized the opportunity. The founder of
Jackson Hewitt Tax Service Inc. (JTX ) says that as his company grew in
the 1980s, "we focused on the low-hanging fruit: the less affluent
people who wanted their money quick."
In the 1990s, Jackson Hewitt
franchises blanketed lower-income neighborhoods around the country. They
soaked up fees not just by preparing returns but also by loaning money
to taxpayers too impatient or too desperate to wait for the government
to send them their checks. During this period, Congress expanded the
Earned-Income Tax Credit, a program that guarantees refunds to the
working poor. Jackson Hewitt and rival tax-prep firms inserted
themselves into this wealth-transfer system and became "the new welfare
office," observes Kathryn Edin, a visiting professor at Harvard
University's John F. Kennedy School of Government. Today, recipients of
the tax credit are Jackson Hewitt's prime customers.
"Money Now," as Jackson Hewitt markets
its refund-anticipation loans, comes at a steep price. Lakissisha M.
Thomas learned that the hard way. For years, Thomas, 29, has bounced
between government assistance and low-paying jobs catering to the
wealthy of Hilton Head Island, S.C. She worked most recently as a
cashier at a jewelry store, earning $8.50 an hour, until she was laid
off in April. The single mother lives with her five children in a dimly
lit four-bedroom apartment in a public project a few hundred yards from
the manicured entrance of Indigo Run, a resort where homes sell for more
than $1 million.
Thomas finances much of what she buys,
but admits she usually doesn't understand the terms. "What do you call
it—interest?" she asks, sounding confused. Two years ago she borrowed
$400 for rent and food from Advance America Cash Advance Centers Inc. (AEA
), a payday chain. She renewed the loan every two weeks until last
November, paying more than $2,500 in fees.
This January, eager for a $4,351
earned-income credit, she took out a refund-anticipation loan from
Jackson Hewitt. She used the money to pay overdue rent and utility
bills, she says. "I thought it would help me get back on my feet."
A public housing administrator who
reviews tenants' tax returns pointed out to Thomas that Jackson Hewitt
had pared $453, or 10.4%, in tax-prep fees and interest from Thomas'
anticipated refund. Only then did she discover that various services for
low-income consumers prepare taxes for free and promise returns in as
little as a week. "Why should I pay somebody else, some big company,
when I could go to the free service?" she asks.
The lack of sophistication of
borrowers like Thomas helps ensure that the Money Now loan and similar
offerings remain big sellers. "I don't know whether I was more bothered
by the ignorance of the customers or by the company taking advantage of
the ignorance of the customers," says Kehinde Powell, who worked during
2005 as a preparer at a Jackson Hewitt office in Columbus, Ohio. She
changed jobs voluntarily.
State and federal law enforcers lately
have objected to some of Jackson Hewitt's practices. In a settlement in
January of a suit brought by the California Attorney General's Office,
the company, which is based in Parsippany, N.J., agreed to pay $5
million, including $4 million in consumer restitution. The state alleged
Jackson Hewitt had pressured customers to take out expensive loans
rather than encourage them to wait a week or two to get refunds for
free. The company denied liability. In a separate series of suits filed
in April, the U.S. Justice Dept. alleged that more than 125 Jackson
Hewitt outlets in Chicago, Atlanta, Detroit, and the Raleigh-Durham
(N.C.) area had defrauded the Treasury by seeking undeserved refunds.
Jackson Hewitt stressed that the
federal suits targeted a single franchisee. The company announced an
internal investigation and stopped selling one type of
refund-anticipation loan, known as a preseason loan. The bulk of refund
loans are unaffected. More broadly, the company said in a written
statement prepared for BusinessWeek that customers are "made aware of
all options available," including direct electronic filing with the IRS.
Refund loan applicants, the company said, receive "a variety of both
verbal and written disclosures" that include cost comparisons. Jackson
Hewitt added that it provides a valuable service for people who "have a
need for quick access to funds to meet a timely expense." The two
franchises that served Thomas declined to comment or didn't return
calls.
VINCENT HUMPHRIES, 61, has watched the
evolution of low-end lending with a rueful eye. Raised in Detroit and
now living in Atlanta, he never got past high school. He started work in
the early 1960s at Ford Motor Co.'s hulking Rouge plant outside Detroit
for a little over $2 an hour. Later he did construction, rarely earning
more than $25,000 a year while supporting five children from two
marriages. A masonry business he financed on credit cards collapsed.
None of his children have attended college, and all hold what he calls
"dead-end jobs."
Over the years he has "paid through
the nose" for used cars, furniture, and appliances, he says. He has
borrowed from short-term, high-interest lenders and once worked as a
deliveryman for a rent-to-own store in Atlanta that allowed buyers to
pay for televisions over time but ended up charging much more than a
conventional retailer. "You would have paid for it three times," he
says. As for himself, he adds: "I've had plenty of accounts that have
gone into collection. I hope I can pay them before I die." His biggest
debts now are medical bills related to a heart condition. He lives on
$875 a month from Social Security.
Question
If you lost your hotel room's magnetic strip card that opens the door, I'll
just be you thought your were free of all worries when you simply got a
replacement card with a changed code that unlocks the hotel room door. Could
anybody who found or stole your original card still take advantage of you?
"Street-Level Credit Card Fraud,"
by Brian Krebs, The Washington Post, March 6, 2006 ---
Click Here
Until recently, Las Vegas police
officers couldn't figure out why some of the prostitutes and drug addicts
they arrested were found carrying multiple hotel room keys and slot machine
player's club cards. When confronted, the suspects said they kept them as
souvenirs or found them on the sidewalk. The cops initially assumed that the
cards were stolen, or -- in the case of the prostitutes -- perhaps belonged
to some of their more frequent clients.
"It was getting fairly regular that in post-arrest
inventory, we would find eight to 10 room key cards ... all from different
hotels," said
Dennis Cobb, deputy chief of the
Las Vegas Metropolitan Police Department's Technical Services
Division.
The mystery began to unravel when a LVMPD officer
slid one of the keys through a machine that reads the data stored on the
card's magnetic stripe. Each swipe revealed a 16-digit credit number, a
date, a person's name and the name of a bank. That's right, the keys
functioned exactly like credit cards, allowing the carrier to pay for
merchandise at any store or market where customers do their own swiping.
"The people who had these cards on them were using
them in transactions with local businesses," Cobb said.
The revelation is hardly a surprising one for a
city that had
the nation's second highest rate of identity-theft complaints
to the Federal Trade Commission last year. Cobb said the
stolen card data comes from a variety of sources, but he said it is not
unusual for service-industry workers who owe money to a drug dealer or a
bookie to be handed a handheld magnetic stripe "skimmer"
and ordered to periodically collect up to 100 accounts as a means of erasing
their debt.
The discovery led Cobb's division to team up with
researchers from the Identity Theft and
Financial Fraud Research and Operations Center
(IFFROC) at the University of Nevada, Las Vegas to
devise technologies that police could deploy in the field to detect various
types of fraud.
Hal
Berghel, the center's director, said the
people who are usually caught with key cards use them primarily at
convenience stores, gas stations and other places where purchases are less
than $20, which is below the scrutiny threshold for most fraud-detection
technologies.
"By the time the bottom feeders get the cards, the
data on them has already been shared with the organized criminals, who will
bang on a credit card though mail-order and Internet purchases," Berghel
said. At that point the cards are "throwaways that can only be used a couple
of times before they're canceled."
Last year, Berghel filed a patent application on
behalf of IFFROC for a technology called "Cardsleuth," software he demoed
for me when we met up last week in Washington. He hopes that one day a
pen-sized device will be used to read magnetic stripes and alert the user
when unexpected data is found. Berghel and his team are working on a
prototype, which he said could be updated periodically via a USB-based
docking station.
Berghel said the technology could be especially
useful in the case of a 9/11-type emergency by helping authorities
distinguish first responders from those individuals -- be they terrorists or
merely looters -- who might take advantage of a chaotic environment.
"There is still a need for on-the-spot validation
of credentials where you have a convergence of emergency workers, many of
whom have never seen each other before," he said.
Update, 11:45 a.m. ET: Apparently,
I didn't make it clear enough what is really going on here. This post is not
suggesting that hotel room keys are being encoded with credit card
information by the hotels, which has always been something of an urban
legend/e-mail hoax (see
Snopes and
previous discussions on Slashdot.) The folks I
interviewed for this piece said the encoding was being done by the criminals
(or more specifically, fraud rings who sold them to street hustlers who
would wring every last dollar out of the cards before they were cancelled).
From the crooks' perspective, the idea behind this is to be able to
anonymously use someone else's credit card at a physical location; someone
who got arrested holding someone else's actual credit card would have a lot
of explaining to do, but hotel room keys are likely to be overlooked or set
aside for what they appear to be.
School Tax Scams
Organized Crime is Stealing From Your Children (With the
Help of Top School Officials) The last thing people want to hear in a high-tax state
notorious for political corruption is that their tax dollars are being
mismanaged. But according to a two-year probe of school superintendents by New
Jersey's State Commission of Investigation, that's exactly what's going on in
Tony Soprano country. No wonder there's a property-tax rebellion brewing there
as in many places around the country.
"Jersey School Scam," The Wall Street Journal, March 21, 2006; Page
A14 ---
http://online.wsj.com/article/SB114290632601803676.html?mod=opinion&ojcontent=otep
The report -- "Taxpayers Beware: What You Don't
Know Can Cost You" -- sampled 71 of New Jersey's more than 600 school
districts and found a pattern of "questionable and excessive" practices that
included boosting salaries and padding pensions surreptitiously and in ways
that have cost unsuspecting taxpayers millions of dollars. A school chief in
Ocean County was paid nearly $350,000, or 65% more than he reported to the
Department of Education. A Camden official received $223,000, which included
$43,000 in undisclosed bonuses, car expenses and an annuity. And a Bergen
County superintendent received more than a half-million dollars in extra pay
for unused sick time and other benefits.
According to the report, if these perks were
disclosed at all they were in the minutiae of contracts rather than in
reported salaries. "If a school board wants to pay a superintendent
$300,000, fine," wrote the Newark Star-Ledger, a paper that typically favors
higher taxes and spending. "But taxpayers shouldn't be told the salary is
$200,000 and given no clue that the total package makes the compensation 50
percent higher."
That outrage is welcome, if also belated given that
schools in New Jersey are mostly financed with local property taxes, which
are among the highest anywhere and nearly double the national average.
According to the latest Census data, average New Jersey property levies were
$1,908 in 2002, well ahead of second-place New York ($1,760). They've since
risen rapidly along with the real-estate boom -- enough so that both
candidates in last year's race for governor promised to cut property taxes.
But Jerseyites shouldn't spend their refund checks
anytime soon. New Governor Jon Corzine promised to increase property-tax
rebates, but he's already backtracking. He's suddenly using phrases like
"shared sacrifice," which means higher taxes for as many people as possible.
Only two years ago, former Governor James McGreevey raised the top marginal
income-tax rate to 8.97% from 6.37%, making it the fifth-highest in the
country. New Jersey's revenues have grown by an average of more than 8%
annually since 2002, but the politicians keep spending more: $28 billion
last year, up from $20 billion in 2000 and $12 billion in 1990.
By the way, those absurd superintendent contracts
were negotiated by school board members chosen in elections held in April,
when no one votes. "If you think the superintendent contracts are bad," says
Gregg Edwards, a former school board member who now runs New Jersey's Center
for Policy Research, "wait until you get into the teachers contracts. And
it's not just the money. It's the work rules."
The few who do bother to vote for school board
members -- typical turnout is 10% -- tend to be union activists and others
who have direct connections to the bureaucracy and no incentive to clean up
this mess. If New Jersey is looking to reform, a good first step might be to
elect school board members in November. The alternative is to keep getting
scammed by these public-sector union contracts.
Consumers Beware of Unsuspected Automatic Billings
From The Wall Street Journal Accounting Weekly Review of February 24,
2006
SUMMARY: The article describes issues consumers face in stopping automatic
payment arrangements. "...Consumers don't always know and follow the rules for
recurring payments, and banks say they aren't able to cancel recurring
credit-card charges when a consumer has signed a long-term contract with a
merchant..." In addition, consumers must devote significant time to resolving
issues. Accounting topics arise because the article uses the terms debit and
credit; questions ask students to understand the use of these terms in banking
transactions.
QUESTIONS:
1.) The article differentiates between debit card or bank account transactions
and credit card transactions. What is the difference between a debit card and a
credit card? How is a debit card similar to a checking account?
2.) What are the issues in resolving payment disputes on automated payment
plans? Why do the issues differ between debit cards or bank accounts used for
automated payments and automated charges to credit cards?
3.) The article uses the terms credit and debit in the title and other
places, such as the statement that "Nancy Burleson's checking account was
debited an extra week's mortgage payment..." Do these uses of the terms debit
and credit correspond to the use of those terms in the balance sheet equation?
Support your answer.
4.) Refer again to the statement quoted in question 3 about debiting a
checking account. Describe how a customer checking account is classified on a
bank's balance sheet, including a definition of the term "demand deposit."
Explain how a demand deposit account is increased (with a debit or a credit?)
and decreased (again, with a debit or a credit?).
5.) How is a customer credit card account balance (say, on a MasterCard or
Visa account) classified in a bank's balance sheet? Explain how the account
balance is increased (with a debit or a credit?) and decreased (again, with a
debit or a credit?)
Reviewed By: Judy Beckman, University of Rhode Island
Dirty Secrets of Credit/Debit Card
Companies, Banks, and Credit Rating Agencies
Tens of millions of Americans with checking, savings
and credit card accounts are learning first-hand the meaning of what MSNBC.com
columnist Bob Sullivan calls “gotcha capitalism.” It’s a modern variation on the
Chinese “death by a thousand cuts.” Banks and other financial institutions in
recent years have raised existing fees to dramatic heights, imposed a broad
range of new fees, doubled and even tripled interest rates on credit cards
without prior warning and otherwise put the squeeze on unsuspecting customers .
. . Capitalism’s superiority over socialism by now ought to be an accepted fact.
An economy only can function under a system of contractual exchange between
buyer and seller, a relationship that socialism at best grudgingly concedes or
denies altogether. Yet for precisely this reason, capitalism can be sustained
only through a high degree of public trust. When trust breaks down, offending
firms and industries must rebuild their reputation to remain competitive. The
banking industry, to make a long story short, has a credibility problem right
now. Carl Horowitz, "Banks Go 'Gotcha!'," FrontPage, August 1, 2009 ---
http://townhall.com/columnists/CarlHorowitz/2009/08/01/banks_go_gotcha
Wow! It's hard to believer PayPal will go this far in protecting eBay
customers
Can PayPal continue to afford this kind of protection? On June 20, eBay announced that it will fully
reimburse buyers and sellers when transaction problems arise, providing they
use eBay’s PayPal payment service. That means eBay will foot the bill when,
say, a buyer purchases an item that was misrepresented on the site or not
sent. So, if that too-good-to-be-true bargain Gucci bag turns out to be a
cheap knockoff, eBay will give the buyer a refund. The additional
protections will go into effect this fall. “We’re combining the power of
eBay and PayPal to give all buyers and sellers more confidence and trust,”
said Lorrie Norrington, eBay’s president of Marketplace Operations in a
statement. “Buyers who pay with PayPal on eBay will be covered, with no
limits, on most transactions.” Catherine Holahan, Business Week, June 19, 2008 ---
http://www.businessweek.com/the_thread/techbeat/archives/2008/06/post_7.html?link_position=link3
December 21. 2009 message from George Wright
[Geo@LOYOLA.EDU]
Experienced eBay users swear by it, as one has more
recourse in the event of problems.
An experienced friend also tell me that it's a good
idea to open a new bank account specifically for PayPal purposes. The reason
is that you can move newly deposited funds to an account beyond PayPal's
reach. I'm told this prevents PayPal from sequestering your funds in the
event of a late protest by the source of the funds.
Geo
There is a long history of questions about university sponsorship of
credit and/or debit cards with alumni and students, sponsorships with
kickbacks such as a percentage kickback on purchases
WASHINGTON -- The Consumer Financial Protection
Bureau announced Thursday that it was beginning an
inquiry into the arrangements between colleges,
banks and debit card companies. The announcement is the latest indication
that federal agencies and Congress are taking an increased interest in how
debit cards are used to access federal financial aid.
The bureau is asking for input on a few separate
topics: debit cards supplied by companies like Higher One, which give
students the money left over from grants and loans after paying tuition;
arrangements between colleges and banks that allow student identification
cards to be used as debit cards; and college-affiliated bank accounts.
College business officers say those products are
quite different from one another. Preloaded debit cards have caught on in
recent years as a method of giving college students access to federal grants
and loans for living expenses. While they have come under scrutiny for high
fees, they are a way to give money to students without using paper checks,
and do not require a bank account. Critics say students would be better off
opening a bank account than relying on preloaded cards.
Higher One has dominated the debit card market for
years, and has come in for much of the criticism for swipe fees, ATM fees
and other charges that can chip away at students’ financial aid. As the
cards have grown more popular, other banks, including Sallie Mae, have
entered the market place.
Agreements between colleges and banks are more
common at larger universities, unlike the debit cards, which are more
popular at community colleges, said Anne Gross, vice president for
regulatory affairs at the National Association of College and University
Business Officers. Under the agreements, banks offer benefits to colleges,
such as additional scholarship money. In exchange, the colleges offer
students the option of using their ID cards as a debit card, encouraging
them to use that bank for their checking accounts.
The consumer protection agency appears concerned
that those arrangements can stop students from shopping around for bank
accounts that might offer a better deal. Past investigations, including one
by New York Attorney General (now Governor) Andrew Cuomo in 2007, found that
"preferred
lender" arrangements between colleges and student
lenders (until the conversion away from bank-based lending in 2010)
sometimes led to deals that included benefits for colleges but weren't the
best option for students.
Anyone who has recently applied for a mortgage
knows that lenders are already looking much more closely at your financial
affairs. But soon, they’ll be able to easily delve into the deepest recesses
of your financial life, accessing information that never before appeared on
your credit report.
This week, a company called CoreLogic introduced a
new type of credit file, which is based on the giant repository of consumer
data it maintains on just about everything that most of the traditional
credit bureaus do not: missed rental payments that have gone into
collection, any evictions or child support judgments, as well as any
applications for payday loans, along with your repayment history.
The new report also includes any property tax liens
and whether you’ve fallen behind on your homeowner’s association dues. It
may reflect that you now owe more than your house is worth or if you own any
other real estate properties outright. It also is supposed to catch
mortgages made by smaller lenders that the big credit bureaus may have
missed.
The idea, CoreLogic says, is to provide lenders
with more details about prospective borrowers, supplementing what they
already know through the more traditional credit reports furnished by the
big three credit bureaus, Equifax, Experian and TransUnion. Moreover,
CoreLogic has formed a partnership with FICO — the provider of one of the
most popular credit scores used by lenders — which will formulate a new
consumer score based on the new data.
Perhaps it’s not surprising that a company decided
to pull together this information, since much of it is already publicly
available. But because it comes on top of all the other information that’s
being collected about you — your exact location at every minute, where
you’ve been on the Web — you can’t help but feel that some of these
companies know more about your activities than your spouse.
While the CoreScore credit report became available
to all types of lenders on Wednesday, the actual score, which will be ready
in March, is being created specifically for mortgage and home equity
lenders, though it could eventually be developed for other types of credit.
For many consumers, the files are likely to reveal
black marks that previously went undetected, which may damage an otherwise
clean record. But the companies contend that it works both ways: The added
information could help consumers with thin credit files by illustrating
positive behaviors elsewhere, say making timely rent payments.
So why now? Clearly, the two companies saw a
business opportunity. Lenders, who just a few years back looked the other
way, remain particularly skittish about mortgage lending and are looking for
more information about prospective borrowers’ ability to pay their debts.
“Lending is very constrained and origination
volumes need to grow to make for a profitable mortgage business,” said
Joanne Gaskin, director of product management global scoring at FICO. “So
lenders are looking for ways to expand, but to expand safely.”
An estimated 100 million American consumers will
have a CoreScore credit report, while more than 200 million people have
traditional reports from the big three bureaus. Though the new information
can influence a lender’s decision, the new score isn’t replacing the classic
scores used in the automated mortgage underwriting systems kept by Fannie
Mae, Freddie Mac or the Federal Housing Administration, which buy or back
the vast majority of mortgages (though CoreLogic said it has let the
agencies know what it is doing). But the added information may sway a lender
to charge you more (or less) in interest on a mortgage. Lenders of all
stripes, including auto lenders, have access to the reports, and they will
be marketed to employers and insurers, too.
Ms. Gaskin said that FICO was still tweaking the
credit score’s formula. But the next step is to build something that will
try to get even deeper inside your financial mind: The company plans to
create a more sophisticated tool that will predict how you might behave
under different loan terms.
The reason all of this is such a big deal,
according to John Ulzheimer, president of consumer education at
SmartCredit.com, is that CoreLogic already has major inroads with many
lenders. When lenders want to pull your credit file, they go to a company
like CoreLogic, which collects all three reports from the traditional
bureaus, cleans them up a bit and merges them into a more user-friendly
report. “They already have this massive market of mortgage companies that
buy these credit reports from them,” he said. “It’s not like they have to go
out and convince the companies to work with them.”
I stumbled upon your list of threads on Trinity's website about frauds and
scams... WOW, what a valuable collection of info you have assembled over the
years!! I actually
own and
operate a message board that has a large chunk
dedicated to dealing with credit card fraud and financial ripoffs and I was
wondering if you would consider including CreditCardForum as a resource on
your list? In addition to the fraud section on my forum, you will see that I
blog frequently on there about credit scams and sneaky marketing. For
example,
here's a recent post I wrote highlighting the
shady practices behind the govt mandated AnnualCreditReport website.
Thanks and I hope life is treating you well since retiring to NH... a
beautiful area for sure!
Mike
The WSJ is often my best source when I look for fraud reports and fraud
warnings.
Although Paul Williams likes to put down the Wall Street Journal, I
like to give some credit where credit is due.
The WSJ is making money at a time when most other newspapers are failing, and
this allows the WSJ to afford some of the best reporters in the world, many of
whom pride themselves on their independence and integrity.
Here is an old example followed by a new example.
Old Example
A dogged WSJ reporter deserves credit for the the first public arrow that
eventually brought down Enron's house of cards. If the WSJ was overly concerned
about the welfare of the largest corporations in the U.S., this reporter or his
employer would've buried this report. A WSJ reporter was the first to uncover Enron's secret "Related Party
Transactions." What reporter was this and what are those transactions that
he/she investigated?
Answer ---
http://faculty.trinity.edu/rjensen/FraudEnronQuiz.htm#22
New Example "By pushing professional cards to consumers who
otherwise wouldn't want them, card issuers can get around some of the provisions
of the Card Act," says Josh Frank, a senior researcher at the Center for
Responsible Lending, a consumer group.
"Beware That New Credit-Card Offer," by Jessica Silver-Greenberg, The Wall
Street Journal, August 28, 2010 ---
http://online.wsj.com/article/SB10001424052748704913704575454003924920386.html?mod=WSJ_hps_sections_personalfinance
Amid all the junk mail pouring into your house in
recent months, you might have noticed a solicitation or two for a
"professional card," otherwise known as a small-business or corporate credit
card.
If so, watch out. While Capital One Financial
Corp.'s World MasterCard, Citigroup Inc.'s Citibank CitiBusiness/AAdvantage
Mastercard and the others might look like typical plastic, they are anything
but.
Professional cards aren't covered under the Credit
Card Accountability and Responsibility and Disclosure Act of 2009, or Card
Act for short. Among other things, the law prohibits issuers from
controversial billing practices such as hair-trigger interest rate
increases, shortened payment cycles and inactivity fees—but it doesn't apply
to professional cards (see table).
Until recently professional cards largely had been
reserved for small-business owners or corporate executives. But since the
Card Act was passed in March 2009, companies have been inundating ordinary
consumers with applications. In the first quarter of 2010, issuers mailed
out 47 million professional offers, a 256% increase from the same period
last year, according to research firm Synovate.
The Card Act's strictures have squeezed banks'
profits and their ability to operate freely. By moving cardholders out of
protected consumer cards and into professional cards, banks might recoup
some of the revenue they have lost.
"By pushing professional cards to consumers who
otherwise wouldn't want them, card issuers can get around some of the
provisions of the Card Act," says Josh Frank, a senior researcher at the
Center for Responsible Lending, a consumer group.
Several solicitations from J.P. Morgan Chase & Co.
have ended up in the mailbox of John and Gloria Harrison, a retired military
couple who live in Destrehan, La., outside New Orleans. Mrs. Harrison says
she gets an offer for an Ink From Chase card, geared toward small
businesses, almost every month. She says she finds this puzzling because her
husband retired in 1986 and doesn't own a business.
Don't Believe Everything Advertised Widely on TV
FreeCreditReport.com is a Scam! ---
http://www.consumerismcommentary.com/2006/11/16/freecreditreportcom-is-a-scam/ This isn’t the first time, but now the State
of Florida Office of the Attorney General is investigating FreeCreditReport.com.
You’ll notice I don’t link to the site. This site, run by credit reporting
agency Experian is taking advantage of the ruling that anyone can receive a free
annual credit report from each of the three major agencies. FreeCreditReport.com
is not the website that offers free credit reports in conjunction with this
directive. It’s misleading, and here’s the fine print on the site:
When you
order your free report here, you will begin your free trial membership in
Triple AdvantageSM Credit Monitoring. If you don’t cancel your membership
within the 30-day trial period, you will be billed $12.95 for each month
that you continue your membership. If you are not satisfied, you can cancel
at any time to discontinue the membership and stop the monthly billing;
however, you will not be eligible for a pro-rated refund of your current
month’s paid membership fee.
Below I show you the legitimate place to go for a free credit report.
Your
FICO credit score is crucial to your credit to your good name. It can
be altered without your knowing it due to fraud and errors. Getting a
free credit report may not give you a FICO scores as well. The main
advantage of the
from
http://www.myfico.com/ is that it will give you your FICO score from
each of the three major credit reporting agencies. Consumer Reports
(August, 2005, Page 18) notes that credit scores nearly always differ
between the three major credit reporting agencies. You may miss
something if you only get one agency’s score.
To
monitor your FICO score, Consumer Reports (August 2005, Page 17)
recommends that you get the $44.85 package from
http://www.myfico.com/
That
some bankers have ended up in prison is not a matter of scandal, but what is
outrageous is the fact that all the others are free. Honoré
de Balzac
I’m
certain that most of you were overjoyed that you no longer have to pay to track
your credit ratings and your FICO scores. In
the past few weeks I’ve stressed the bad things credit card companies are
doing with FICO scores and the misleading advertising funded by credit card
companies.
Capital
One is the worst abuser with misleading advertising and was so noted in a CBS
module on 60 Minutes.Capital One advertises a fixed rate or a variable rate pegged to the
prime rate.But either original rate
will more than double with an epsilon increase in your FICO score.Or as one reporter put it, your Capital One rate will double if you
sneeze.Another Capital One TV
advertisement that irks me is the one that promises “no blackout dates” for
airline free miles when you use a Capital One card.Blackout dates are an insignificant problem when cashing in frequent
flyer miles.The problem is that
literally all flights have a limited number of seats (usually less than 7% of
the seats on any flight) allocated for frequent flyer redemption.Your Capital One card will not give you priority when fighting for one of
the very limited number of seats, but Capital One does not tell you this unless
it is in such small print that you couldn’t read it with the Hubble telescope.
'You might have less-than-perfect credit and we're
OK with that," read an October credit-card solicitation from South
Dakota-based First Premier Bank. The interest rate, however, will strike
some as usurious: 79.9%. That's a more than eightfold increase from the 9.9%
the bank previously collected for a similar card.
Wait, wasn't Congress supposed to have passed
legislation against predatory lending? As a matter of fact, yes. The
whopping rate increase is First Premier's way of complying with the Credit
Card Accountability, Responsibility and Disclosure Act of 2009. Among other
provisions, that law prohibits fees of more than 25% above a card's credit
limit. First Premier has been offering an account with a $250 limit and
annual fees of $256. By law the latter figure must come down to $75. To
compensate for the lost $181 in fees, the bank is raising the rate by 70% of
$250, or $175, a year.
If it sounds like a rotten deal either way, it
is—if you have good credit. But if you don't, the cost may be worth it to
re-establish your rating. Banks that lend money to customers with poor
credit histories have to charge more to cover the extra risk. If Congress
makes this impossible, banks will respond by refusing to lend to such
customers, so that it will be harder for them to re-establish their
creditworthiness.
Banks can't be expected to give money away, even if
Congress is in the habit of doing just that. Unlike lawmakers, banks and
other businesses can collect revenues only by offering something of value in
return.
Jensen Comment
There are no easy answers to this dilemma. Having national FICO credit scoring
made it "nearly impossible" for persons with bad credit scores to borrow money
from anybody other than loan sharks (who sometimes break knee caps to collect).
The one exception was when borrowers and their brokers submitted falsified
credit applications such as in the case of subprime home mortgages where poison
loans were passed on to Fannie Mae and Freddie Mack, but for those exceptions
the mortgage brokers had to lie about borrower income, property values, and
credit history of the borrower.
And now borrowers with bad FICO scores find themselves in Catch 22 situations
when trying to reestablish higher credit scores. There are all sorts of
unfavorable consequences such as mortgage foreclosures, divorce, sending
children to foster homes, gambling, prostitution, robberies, suicides, seeking
out loan sharks, etc.
The Next Meltdown: Credit-Card Debt:
Chase Bank raised my rate from 8.99 to 30% for no
reason—my reward for being a pristine customer. These are the same bullies that
used to take your lunch money in first grade. Jessica Silver-Greenberg, "The Next Meltdown: Credit-Card Debt:
Rising rates are accelerating credit-card defaults and soured debt could further
undermine the financial system," (video included), Business Week, October
9, 2008 ---
http://www.businessweek.com/magazine/content/08_42/b4104024799703.htm
The troubles sound familiar. Borrowers falling
behind on their payments. Defaults rising. Huge swaths of loans souring.
Investors getting burned. But forget the now-familiar tales of mortgages
gone bad. The next horror for beaten-down financial firms is the $950
billion worth of outstanding credit-card debt—much of it toxic.
That's bad news for players like JPMorgan Chase (JPM)
and Bank of America (BAC) that have largely sidestepped—and even benefited
from—the mortgage mess but have major credit-card operations. They're hardly
alone. The consumer debt bomb is already beginning to spray shrapnel
throughout the financial markets, further weakening the U.S. economy. "The
next meltdown will be in credit cards," says Gregory Larkin, senior analyst
at research firm Innovest Strategic Value Advisors. Adds William Black,
senior vice-president of Moody's Investors Service's structured finance
team: "We still haven't hit the post-recessionary peaks [in credit-card
losses], so things will get worse before they get better." What's more, the
U.S. Treasury Dept.'s $700 billion mortgage bailout won't be a lifeline for
credit-card issuers.
The big firms say they're prepared for the storm.
Early last year JPMorgan started reaching out to troubled borrowers, setting
up payment programs and making other adjustments to accounts. "We have seen
higher credit-card losses," acknowledges JPMorgan spokeswoman Tanya M.
Madison. "We are concerned about [it] but believe we are taking the right
steps to help our customers and manage our risk."
But some banks and credit-card companies may be
exacerbating their problems. To boost profits and get ahead of coming
regulation, they're hiking interest rates. But that's making it harder for
consumers to keep up. That'll only make tomorrow's pain worse. Innovest
estimates that credit-card issuers will take a $41 billion hit from rotten
debt this year and a $96 billion blow in 2009.
Those losses, in turn, will wend their way through
the $365 billion market for securities backed by credit-card debt. As with
mortgages, banks bundle groups of so-called credit-card receivables,
essentially consumers' outstanding balances, and sell them to big investors
such as hedge funds and pension funds. Big issuers offload roughly 70% of
their credit-card debt.
But it's getting harder for banks to find buyers
for that debt. Interest rates have been rising on credit-card securities, a
sign that investor appetite is waning. To help entice buyers, credit-card
companies are having to put up more money as collateral, a guarantee in case
something goes wrong with the securities. Mortgage lenders, in sharp
contrast, typically aren't asked to do this—at least not yet. With consumers
so shaky, now isn't a good time to put more skin in the game. "Costs will go
up for issuers," warns Dennis Moroney of the consultancy Tower Group.
Sure, the credit-card market is just a fraction of
the $11.9 trillion mortgage market. But sometimes the losses can be more
painful. That's because most credit-card debt is unsecured, meaning
consumers don't have to make down payments when opening up their accounts.
If they stop making monthly payments and the account goes bad, there are no
underlying assets for credit-card companies to recoup. With mortgages, in
contrast, some banks are protected both by down payments and by the ability
to recover at least some of the money by selling the property.
THE BIG BOYS' BURDEN Making matters worse, the
subprime threat is also greater in credit-card land. Risky borrowers with
low credit scores account for roughly 30% of outstanding credit-card debt,
compared with 11% of mortgage debt. More than 45% of Washington Mutual's
credit-card portfolio is subprime, according to Innovest. That could become
a headache for JPMorgan Chase, which agreed on Sept. 25 to buy the troubled
thrift's credit-card business and other assets for $1.9 billion. Says a
JPMorgan spokeswoman: "
The Latest Target of Thieves When Brad Lipman took
his family out for dinner in July 2006, he had no idea it would end up
costing him $1,800. Lipman paid for the $60 meal with his debit card. After
the waiter took the card, someone swiped it through a portable "skimmer."
This handheld electronic device allowed the thief to copy Lipman's account
information and security codes, and clone his card.
Over the following week, the culprit drained
Lipman's checking account and tapped into his overdraft line. He didn't
realize anything was amiss until his credit union called him about some
unusual charges. "It's hard to explain the feelings of violation," says
Lipman, 40, owner of a lending company in Thousand Oaks, California.
"Someone had their hand directly in my money."
Many people wrongly assume that debit cards offer
the same protection against fraud as credit cards. But when a debit card is
stolen or copied, there's no grace period while you contest the charges.
Your cash has already been electronically zapped from your checking account.
And if it falls short, as Lipman's did, you could face expensive overdraft
charges that your bank isn't required to repay.
Debit cards have overtaken credit cards as
Americans' plastic of choice for in-store transactions—33 percent debit,
compared with 19 percent credit. Financial experts often recommend them as a
money-management tool. Three years from now, debit card use will account for
more than half our retail purchases, according to the Nilson Report, a
payment-systems industry publication.
Debit cards have become the latest target of
thieves, and it's not just random cases like Lipman's. In early 2007,
hundreds of customers of a national chain restaurant in Sioux City, Iowa,
learned their debit card numbers had been stolen. Thieves made cloned cards
and are using them in stores in California and northern Mexico. And in 2006,
the TJX Companies, which owns T.J. Maxx and Marshalls, reported one of the
largest customer-data breaches ever: 45.7 million debit and credit card
numbers were stolen from the retailer's computer systems over an 18-month
period. Authorities still don't fully know the scope.
There's little you can do to predict a mass retail
theft. But you can be smarter about how you use your card to avoid these and
other common pitfalls. In addition to scams, hidden overdraft fees are at an
all-time high, not to mention surprise holds and mismanagement traps that
could land your account in the red faster than the ATM can spit out your
receipt.
Know When to Hold 'Em
When Ann Agent of Portland, Oregon, was planning to
attend a children's book publishing conference in Tulsa, Oklahoma, she
booked her hotel room over the phone by debit card. She and three colleagues
intended to split the bill and each pay the hotel directly at checkout time.
Two days into the conference, Agent's husband
called from home to read her a letter from her bank: Her checking account
was overdrawn, and she was being charged $35 a day in overdraft fees. "I
thought there had to be a mistake," Agent, 45, says. "I keep close track of
my account balance."
Turns out when Agent reserved the room, the hotel
"blocked," or held, enough money in Agent's account to cover the entire four
nights' stay, plus miscellaneous charges, amounting to $580. This blocked
every available penny she had and caused her to overdraw. The charges
weren't reversed until Agent returned home the following Monday.
Holds are common practice in the travel and
hospitality industry. They're the merchant's way of ensuring you'll pay your
bill. If you rent a car, the agency could block several thousand dollars to
make sure you return the vehicle. Some restaurants will place debit card
holds for large parties, and a friendly bartender can put a hold on your
card if you start a tab. The hold is usually removed within five business
days, sometimes much sooner.
Gas stations are notorious for holds. On a Friday
morning in January 2005, Jessica Hathaway of Allentown, Pennsylvania, bought
$22.29 of gas by debit. On Saturday, the 34-year-old single mother of three
checked her bank balance and learned she was almost broke. Right before the
gas station debited Hathaway's account for the gas, it imposed a $75 block.
"I was living paycheck to paycheck. I didn't have
much extra in my account, and this $75 charge worried me all weekend," she
says. Hathaway was out of luck—and cash—until the following Tuesday, when
her bank released the hold.
The kind of hold Hathaway described is a standard
preauthorization for signature (non-PIN) transactions. Stations vary widely
in their hold amounts. Because Hathaway bought gas before the weekend, her
hold may have taken longer than usual to clear.
Avoid the Trap
Leave your debit card at home when traveling.
"People should use a credit card, even if they don't any other time,"
advises Clark Howard, consumer advocate and radio host of The Clark Howard
Show. Never use a debit card any place your card is taken out of sight, like
a restaurant. Book dinner reservations on a credit card. If you must use
debit at a gas station—a hot spot for skimming—use your PIN inside or at the
pump. Your card is safest if it stays in your hand, and typing in a PIN
eliminates the hold.
Be Wary on the Web Say you buy an MP3 player for
$80 through an Internet discounter. You wait two weeks. Your music player
never arrives, and now the seller is nowhere to be found.
If you used your credit card to buy the player,
you've got options. Under the terms of the Fair Credit Billing Act, your
card company must remove the questionable charge from your bill while it
investigates. The law says you're liable for up to $50, but you'll most
likely end up owing nothing.
If you paid by debit card, you're doubly out of
luck: no pocket tunes for you, and your money is already gone. Under the
Electronic Fund Transfer Act, your debit card issuer isn't required to step
in if you make a deal with an unscrupulous merchant. You get to wrangle with
the seller yourself, no matter what your bank promised when you opened your
account.
Then there's the fraud issue. Federal law generally
limits your liability to no more than $50 if your debit card is stolen or
copied, as long as you report the crime within two days of receiving your
statement. However, if you don't notice the suspicious activity till weeks
later, you may be liable for up to $500 or more. As with transaction
disputes, recouping your cash isn't a sure thing.
Avoid the Trap
Don't use debit for online purchases, especially if
you don't know the retailer's reputation, says Avivah Litan, electronic
security specialist for Gartner, an information technology research firm
that works with banks. Also opt for credit for all expensive items, like
furniture.
Fraud is trickier because it can strike even if
you're careful. Nessa Feddis, a senior federal counsel to the American
Bankers Association, recommends checking your printed statements every
month. Better yet, register for online banking and track your money trail
even more frequently.
Some card issuers offer zero liability policies,
meaning they won't hold customers responsible for even that first $50 in
fraud charges. But they are not legally bound to do so. "We get calls from
listeners who struggle for weeks to get their own money back," notes Howard.
Even if a store's card reader prompts for your PIN, you can override the
system by pressing Credit/Other or asking the cashier to process the sale
that way. When you sign a receipt, your debit transaction piggybacks on the
credit card processing system, triggering the zero liability policy to kick
in.
Steer Clear of Hidden Fees At the end of the week,
most of us pull a wad of debit receipts out of our wallets and purses. Do we
religiously record these amounts? Probably not. And even a $5 purchase can
cause you to overdraw if your balance is tight.
"Banks sometimes change the order of transactions
at night. They take your biggest transactions and run them first," says Ed
Mierzwinski, consumer program director at the U.S. Public Interest Research
Group. By manipulating the order of checks and debits, banks can cause you
to overdraw sooner and more often than you thought, earning huge overdraft
fees for themselves. Debit purchases and withdrawals are now the single
largest cause of customer overdrafts, according to the Center for
Responsible Lending (CRL). "Five years ago, if you didn't have enough money
in your account to buy something, your card would be declined," says Leslie
Parrish, a CRL senior researcher. Today banks extend "courtesy overdraft
loans," the financial euphemism for letting you overdraw and then charging
you for it. Charges average $34 per transaction and add up to an estimated
$17.5 billion in annual fees for financial institutions, says the CRL.
Avoid the Trap
Link your checking account to another account in
case you overdraw. The fee, if any, is much lower than overdraft loans. If
you incur fees, banks will often waive them if you ask. Some banks offer
e-mail or text-message alerts if your balance gets too low. That could be a
warning that someone has copied your card or charged you incorrectly.
What's Next?
If you thought debit cards were popular now, just
wait. The young tech-savvy generation is entering its prime earning and
spending phase of life, and they live by their debit cards.
All the more reason for debit card security to step
up a notch. Brad Lipman, the man who lost $1,800 at a restaurant (his credit
union eventually returned his money, including overdraft fees) was inspired
to develop TablePay, a device that allows diners to safely swipe their debit
cards right at their tables. Before long, U.S. debit card issuers may embed
electronic chips in cards' magnetic strips, predicts Litan, the security
specialist. These sophisticated cards are much harder to copy and use
fraudulently.
And that's good, since even fraud victims like
Lipman aren't willing to part with their debit cards. "I just can't give up
the convenience," he says.
How to avoid those huge debit card fees? Debit cards may seem attractive to consumers who want
to avoid racking up credit charges, because they appear to have the safeguard of
drawing from your checking account. But it is possible to overdraw from your
debit card, and the resulting fees are very high. Here's how to avoid such
charges.
Michelle Singletary, "Watch Your Debit Card Balance," NPR, July 31, 2007
---
http://www.npr.org/templates/story/story.php?storyId=12374687
I stumbled upon your site looking for finance
resources--I recently graduated college and am just starting to stand on my
own feet financially. This is also my first year that I'll be paying taxes,
so all your IRS info was especially appreciated! I actually wanted to
suggest a site that your readers might be helpful: I've been consulting
bankaholic.com quite a bit, and I've found their information to be quite
good. I've read their section on comparing credit cards over and over again!
Just a thought!
Question
Why did Bob Jensen cut up his "free airlines mileage" credit cards?
Answer
Using such cards is now a bad deal relative to cards that provide cash discounts
on nearly all purchases. In the past this added mileage from credit cards was a
good deal and helped Erika and I get a number of free trips to Europe and
elsewhere. Now these airline-miles credit cards are more of a scam, especially
cards that charge an annual fee. The problem is the increased barriers airlines
are putting up for redemption of the miles, especially the almost certain
likelihood that one or more legs of your planned itinerary will not have free
seating available.
My advice:
Get a free credit card that offers cash discounts on almost all purchases. Shop
around! There are some good deals in this regard and bad deals for airline
miles. The airlines now have trillions in outstanding free mile liabilities for
free miles that they are increasingly being creative on how to avoid providing
free redemptions. Also the huge reduction in the numbers of flights scheduled by
most all airlines is another bummer.
About the only good deal remaining for free miles, at least for me, is the
Southwest Airlines free ticket deal, and you don't need any particular credit
card to get this deal. Southwest Airlines, to my knowledge, is the only major
airline to consistently earn a profit year-to-year. There are a lot of reasons
why!
"Gauging the Worth of a Frequent-Flier Credit Card," by Ron Lieber, The
New York Times, August 16, 2008 ---
Click Here
One after the other in recent weeks, airlines have
altered their frequent-flier mile programs, adding fees, taking away bonuses
and raising the number of miles you need for some free tickets.
But lost in fliers’ frustration over the changes is
this: It may make more sense to change the credit card you use, not the
airline you fly.
Consumers are currently holding about 45 million
credit cards issued by United States banks that reward their users with
frequent-flier miles, according to The Nilson Report, a payments systems
newsletter. That number has held steady for three years.
This may be the year that number starts dropping.
After a certain point, it will no longer make sense for many people to pay
the annual fees that mileage cards usually charge and pay new fees to book
tickets or upgrades. Will they also want to spend tens or hundreds of
thousands of dollars on a card just so they can try to redeem miles for a
single free plane ticket?
I’ve come up with five questions to ask yourself if
you’ve still got a mileage credit card at the top of your wallet, and a
number of alternatives for different types of cards. But first, some
snippets from the program changes, just in case you’ve missed them:
US Airways has stopped giving bonus miles to
members of its Dividend Miles program who have elite status, and the airline
also added reward booking fees that range from $25 to $50.
American added a new online booking fee for rewards
tickets and is about to raise the number of miles required for many flights.
Moreover, its customers will soon have to pay new or increased co-payments
much of the time, along with their frequent-flier miles, for upgrades to the
front of the plane.
Delta added its own surcharges and also raised the
number of miles customers will need to redeem for many free flights. Perhaps
most interestingly, it introduced a three-tier price chart. For flights to
49 states (not including Hawaii) and Canada, for example, you could end up
trading 25,000, 40,000 or 60,000 miles for a round-trip flight.
That 25,000-mile price for a free ticket has become
somewhat sacred. The major airlines have increased the prices in miles for
many other tickets, but not this one. How many people will give up on
finding available seats at the 25,000 level, then hand over 40,000 or 60,000
miles? It’s hard to say, but Delta probably hopes that it is a lot.
The availability question gets to the heart of the
matter. How hard is it to get free seats? And is it getting harder? The
frustrating thing about this whole game is that we don’t really know the
answers.
We don’t know how often average fliers get their
first (or 10th) choice of flight or destination when trying to use their
miles or just give up and buy the ticket. The airlines don’t tell us how
many seats are available on any given flight or if more will become
available later. Joe Brancatelli, proprietor of the business travel site
joesentme.com, refers to frequent-flier programs as unregulated lotteries,
which gets it about right.
Are fewer seats available for reasonable amounts of
miles? Well, most major airlines are reducing the number of seats they fly,
often by double-digit percentages. Flights are extremely crowded. But the
airlines keep selling their miles to credit card companies and others that
want to give them away to their own customers.
That means more miles are chasing fewer seats, even
if the airlines aren’t reducing the number of seats on each flight that
customers can book with a reasonable amount of miles.
It’s tempting to throw up your hands in despair at
the lack of information. But there are several questions that can help you
determine whether you want to keep adding miles from credit card spending to
the miles you earn on the plane. Start with these:
DO YOU CARRY A BALANCE? If you don’t pay your bill
in full each month, you’re excused from this discussion. You’ll do better by
using cards with lower interest rates than frequent-flier mile cards, which
generally have pretty high rates.
ARE YOUR CHILDREN IN SCHOOL? If they are, you’ll be
fighting everyone else who wants to travel at the same time. The airlines,
knowing your desperation to get out of town, may make fewer free seats
available during school vacations, since the airline will probably sell all
the seats on those flights anyway.
DO YOU HAVE ELITE STATUS? Some airlines — like
American, Northwest, United and Continental — carve out additional inventory
of free seats at their lower mileage levels for some or all customers with
elite status. That inventory, plus the bonus miles that most airlines still
offer to elite members, make a mileage credit card more attractive.
ARE YOU A BIG SPENDER? If you’re wealthy, or can
run business expenses through your card, you can earn six figures in miles
from card spending alone each year. A huge mileage balance gives you the
ability to exchange those miles for premium-class overseas tickets, which
could cost $10,000 or more if you bought them with cash. Miles are worth a
lot more if you redeem them for this sort of travel.
President Brad Stroh of Bills.com feels that
consumers debts are growing without conscious decisions being made. "For
those who are over their heads in debt, taking action quickly is critical,
before it's too late to prevent any temporary hardships from becoming
permanent financial crises," he warns.
Stroh has six steps that he says, if followed, will minimize the damage of
mounting debts.
First and foremost, stop charging.
Consumers are falling back on credit cards and using them as "emergency
funds", often doing more harm by charging items that they don't need and
that are not necessary.
Always pay bills on time. Pay on time,
even if you can only afford a minimum payment. Penalty rates for late
payments can be crippling, as high as 31 percent, which in turn leads to
a higher balance and higher minimums and big late fees. Cards may even
raise the interest rate if you are late in payment to another creditor.
Pay more than the minimum. Promise
yourself that you will pay more than necessary when ever you can, even
if it is $10 and round the amount out to the next $10 or $100 increment.
By doing this, you decrease the debt faster.
Pay the highest interest debt first.
Pay more on the debt that is charging the highest rate and move down in
order of the rate, saving the lowest rate debt for last, such as a
student loan.
Negotiate your rates. If you pay on
time and have a bigger debt than you would normally have, you might be a
company's ideal client, so try to capitalize on a good payment history
by getting your rate lowered, especially if it is above the 14.67
national average. Call customer service and ask. Try more than once.
Get help. There are many sources that
can provide help with debt problems and advice on how to get out of
debt, especially in cases such as medical problems that have resulted in
short-term debt. Borrowing money from family or combining old debt onto
a no-interest, lower interest card are some ideas, as are borrowing
against life insurance or retirement funds.
Bills.Com,
is a free, online service for consumers who need help on complex and
personal financial issues. The California company's co-founders and CEOs,
Brad Stroh and Andrew Housser, were recently named finalists for Northern
California by Ernst & Young's 2006 Entrepreneur of the Year Award. They
handle more than 7,500 clients, nationwide.
People sure stay busy trying to cheat us, don't they?
A friend went to the local gym and placed his belongings in the locker.
After the workout and a shower, he came out, saw the locker open, and thought
to himself, "Funny, I thought I locked the locker. Hmm." He dressed and just
flipped the wallet to make sure all was in order.
Everything looked okay - all cards were in place.
A few weeks later his credit card bill came - a whooping bill of $14,000!
He called the credit card company and started yelling at them, saying that he
did not make the transactions.
Customer care personnel verified that there was no Mistake in the system and
asked if his card had been stolen.
"No," he said, but then took out his wallet, pulled out the credit card, and
yep - you guessed it - a switch had been made. An expired similar credit card
from the same bank was in the wallet.
The thief broke into his locker at the gym and switched cards. Verdict: The
credit card issuer said since he did not report the card missing earlier, he
would have to pay the amount owed to them.
How much did he have to pay for items he did not buy?
$9,000 !
Why were there no calls made to verify the amount swiped? Small amounts
rarely trigger a "warning bell" with some credit card companies.
It just so happens that all the small amounts added up to one big one!
********************
SCENE 2.
A man at a local restaurant paid for his meal with his credit card.
The bill for the meal came, he signed it, and the waitress folded the receipt
and passed the credit card along.
Usually, he would just take it and place it in his wallet or pocket. Funny
enough, though, he actually took a look at the card and, lo and behold, it was
the expired card of another person.
He called the waitress and she looked perplexed.
She took it back, apologized, and hurried back to the counter under the
watchful eye of the man.
All the waitress did while walking to the counter was wave the wrong expired
card to the counter cashier, and the counter cashier immediately looked down and
took out the real card.
No exchange of words --- nothing! She took it and came back to the man with
an apology.
Verdict:
Make sure the credit cards in your wallet are yours. Check the name on the
card every time you sign for something and/or the card is taken away for even a
short period of time.
Many people just take back the credit card without even looking at it,
"assuming" that it has to be theirs.
FOR YOUR OWN SAKE, DEVELOP THE HABIT OF CHECKING YOUR CREDIT CARD EACH TIME
IT IS RETURNED TO YOU AFTER A TRANSACTION!
********************
SCENE 3:
Yesterday I went into a pizza restaurant to pick up an order that I had
called in.
I paid by using my Visa Check Card which, of course, is linked directly to my
checking account.
The young man behind the counter took my card, swiped it, then laid it on the
counter as he waited for the approval, which is pretty standard procedure.
While he waited, he picked up his cell phone and started dialing.
I noticed the phone because it is the same model I have, but nothing seemed
out of the ordinary.
Then I heard a click that sounded like my phone sounds when I take a
picture..
He then gave me back my card but kept the phone in his hand as if he was
still pressing buttons.
Meanwhile, I'm thinking: I wonder what he is taking a picture of, oblivious
to what was really going on.
It then dawned on me: the only thing there was my credit card, so now I'm
paying close attention to what he is doing.
He set his phone on the counter, leaving it open. About five seconds later, I
heard the chime that tells you that the picture has been saved.
Now I'm standing there struggling with the fact that this boy just took a
picture of my credit card.
Yes, he played it off well, because had we not had the same kind of phone, I
probably would ne ver have known what happened.
Needless to say, I immediately canceled that card as I was walking out of the
pizza parlor.
All I am saying is, be aware of your surroundings at all times
Whenever you are using your credit card take caution and don't be careless.
Notice who is standing near you and what they are doing when you use your card..
Be aware of phones, because many have a camera phone these days.
When you are in a restaurant and the waiter/waitress brings your card and
receipt for you to sign, make sure you scratch the number off.
Some restaurants are using only the last four digits, but a lot of them are
still putting the whole thing on there.
I have already been a victim of credit card fraud and, believe me, it i s not
fun. The truth is that they can get you even when you are careful, but don't
make it easy for them.
Jensen Comment
The above scenarios are interesting but I have a little difficulty entirely
believing all of Scene 1.
What credit card did the thief trade for the victim's card? If the thief used
his own credit card I nominate him for the
Darwin Award. Most likely the thief used another stolen card which we then
have to assume is still active since it was never confiscated by a merchant when
hour Scene 1 victim used it. Suppose the "victim" in Scene 1 was really a thief
who just claimed his card had been switched. He could then charge thousands of
dollars on a card he knew was stolen and, if caught, could claim to the police
that he was an innocent victim. Innocent ha ha!
Also credit card companies are supposed to make good on fraudulent purchases
in excess of $50 even if the card is not reported stolen. Why did our victim
have to pay $9,000? With credit card insurance you don't lose the $50.
Cuomo's Latest Targets Include Universities' Deals With Credit-Card
Providers Agreements with credit-card providers, however, appear
to be only a portion of what Mr. Cuomo is now exploring. A deputy counsel to the
attorney general, Benjamin M. Lawsky, this week outlined wide-reaching plans to
broaden the office's investigations into conflicts of interest in the
arrangements between colleges and companies that do business with the
institutions or their students and alumni. The new investigative work will
involve banking, health-insurance, textbook, food-service, and credit-card
companies that have business relationships with hundreds of American colleges,
Mr. Lawsky told a gathering of educators and guidance counselors from school
districts on New York's Long Island on Wednesday, Newsday reported.
Paul Basken, Chronicle of Higher Education, February 29, 2008 ---
http://chronicle.com/daily/2008/02/1898n.htm?utm_source=aw&utm_medium=en
What about your secret, hush-hush,
Bankruptcy Risk Score that you don't even know
about?
Thanks to new laws, you can find out your FICO credit score. But lenders
now have a secret credit score on you that is their secret alone. While most people are aware that their credit score
can have a large impact on their financial lives, there is another score that
the credit bureaus keep that most people are not aware of - your Bankruptcy Risk
Score Your credit score is made up mostly of your history of obtaining credit
and paying off debt. This score helps determine what type of interest rate you
receive on credit cards or loans that you apply for. Most people assume that it
is this score alone is used by the financial institutions considering whether or
not to give you a loan. The truth is that a bankruptcy risk score is now being
used more and more when lending institutions are looking at a person's credit
history. The bankruptcy risk score has been around for about 20 years, but has
been kept fairly hush - hush. It measures how likely a person is to file
bankruptcy and uses information that makes it more specific than a credit risk
score. The bankruptcy risk score is exclusively for lenders provided by the
credit reporting agencies. This bankruptcy score is supposedly a complex mix of
your credit score plus your spending habits. The credit agencies and those that
use this report (and have contributed to creating it) don't want to reveal the
model because they spend a lot of time and money developing it and if they
explain it, they are giving away part of it's value. Therefore little is said
about this report (and why you have never likely heard of it before). You may be
able to learn a bit more about it in the near future. Experian is considering
making its bankruptcy risk score available to consumers. This is after they
revealed a study last July which ranked the states that had consumers who were
most likely to file for bankruptcy within the next year.
"Bankruptcy Risk Score - The Hidden Credit Score ," Jeffrey Administrator,
February 21, 2006 ---
http://www.savingadvice.com/forums/showthread.php?t=15148
Pay to Get Your FICO Score Your FICO credit score is crucial to your credit to your good name. It
can be altered without your knowing it due to fraud and errors. Getting a
free credit report may not give you a FICO scores as well.
The main advantage of thefrom
http://www.myfico.com/ is that it will give you your FICO score from each of
the three major credit reporting agencies. Consumer Reports (August, Page 18)
notes that credit scores nearly always differ between the three major credit
reporting agencies. You may miss something if you only get one agency’s score.
To monitor your
FICO score, Consumer Reports (August 2005, Page 17) recommends that you get the
$44.85 package from
http://www.myfico.com/
"Canceling a card does not help your credit score," by Marshall Loeb,
MarketWatch, November 15, 2006 ---
Click Here
According to Bankrate.com, canceling your credit
card probably won't help your credit score. In fact, it could really hurt
it. Here's why: If you cancel a card, your "credit-utilization ratio" is
altered. Say you have five open credit-card accounts that add up to a total
available credit line of $50,000. Your total outstanding balance on all five
cards combined is $10,000. Thus, your credit-utilization ratio is 20%. But
if you cancel two of those cards, bringing your total available credit line
down to $25,000, the ratio jumps up to 40%. And that can make your credit
score go down.
Bankrate.com also warns against canceling an old
card. You build up a payment history on old cards, so if you cancel one
you've had for a while, you're only trimming the length of your credit
history. This can be especially damaging if the old card was one on which
you made regular payments. T
he best bet, of course, is to simply pay off your
cards. Unless you're paying fees to keep an account open, it's good enough
to pay down the balance -- and cut that card up.
Overdue Library Books and Unpaid Parking Tickets May
Harm Your FICO (Credit) Score
Late library books, unpaid parking tickets and other
routine municipal fees are beginning to affect people's credit scores as city
and state governments increasingly hire private collections agencies to collect
fines.
Jane Spencer, "A New Threat To Your Credit Rating," The Wall Street Journal,
January 3, 2006; Page D1 ---
http://online.wsj.com/article/SB113625248988836069.html?mod=todays_us_personal_journal
This
is Important
Egads! Is this what you call filling in where schools fail? The College Board will administer its revised
college-admissions test to thousands of high-school juniors for the first time
on Saturday, and the test has generated a bonanza of new study aids. "The
new SAT has led to a flurry of new products because all publishers are starting
new -- there's a new thing to compete over," says Justin Kestler, a founder
of SparkNotes LLC, a division of Borders
Group Inc. Adds Jon Zeitlin, manager of college-prep programs for
Kaplan Inc., a unit of Washington
Post Co.: "We've been on a product-creation jag for months."
Test-prep giant Princeton
Review Inc., which isn't affiliated with Princeton University, has developed
software that delivers test questions, including critical-reading passages, to
cellphone screens -- then grades the answers and sends the results home to Mom
and Dad. Its chief competitor Kaplan has software for a cellphone or a Palm
device: Order up easy, medium or hard questions in reading, writing or
math. Texas
Instruments Inc. is programming all of its latest graphing calculators with
SAT math and vocabulary drills. And SparkNotes has its test-prep eye on the
ubiquitous iPod. "We're trying to figure out how to do it in audio,"
says Mr. Kestler. "It's the next big killer application."
June Kronholz, "To Tackle New SAT, Perhaps You Need A New Study
Device: Test-Prep CDs, Puzzles, Cellphone Software Hit A June Market of
Nonreaders," The Wall Street Journal, March 8. 2005, Page A1
--- http://online.wsj.com/article/0,,SB111024562510773081,00.html?mod=todays_us_page_one
Jensen Comment
College admission tests serve many purposes, not the least of which is to guide
students into what to learn in school. One of the failings of our schools
and the college tests is the failure to test and motivate students toward
understanding personal finance. Why is this important? Personal finances are a major cause of suicide and divorce.
Sometimes I don't think teachers really are concerned about the tragedies of
life that affect nearly all people later in life from the very poor to the very
rich. Our graduates mess of their lives because they mess up their personal
finances and/or allow themselves to be screwed by credit card companies, finance
companies, brokers, financial advisors, and banks (yes and banks).
March 4, 2005 message from a staff member at Trinity University
Think of the many people whose lives might be saved and whose marriages
might be more successful if they understood the basics of who to keep out of
digging themselves into financial holes and how to stop digging once they're in
those holes.
"Majoring in Credit-Card Debt: Aggressive on-campus marketing by
credit-card companies is coming under fire. What should be done to educate
students about the dangers of plastic?" by Jessica Silver-Greenberg, Business
Week, September 4, 2007 ---
Click Here
This story is the first in
a series examining the increasing use of credit cards by
college students.
Seth
Woodworth stood paralyzed by fear in his parents' driveway
in Moses Lake, Wash. It was two years ago, during his
sophomore year at Central Washington University, and on this
visit, he was bringing home far more than laundry. He was
carrying more than $3,000 in credit-card debt. "I was pretty
terrified of listening to my voice mail because of all the
messages about the money I owed," says Woodworth. He did get
some help from his parents but still had to drop out of
school to pay down his debts.
Over the
next month, as 17 million college students flood the
nation's campuses, they will be greeted by swarms of
credit-card marketers. Frisbees, T-shirts, and even iPods
will be used as enticements to sign up, and marketing on the
Web will reinforce the message. Many kids will go for it.
Some 75% of college students have credit cards now, up from
67% in 1998. Just a generation earlier, a credit card on
campus was a great rarity.
For many of
the students now, the cards they get will simply be an
easier way to pay for groceries or books, with no long-term
negative consequences. But for Seth Woodworth and a growing
number like him, easy access to credit will lead to spending
beyond their means and debts that will compromise their
futures. The freshman 15, a fleshy souvenir of beer and
late-night pizza, is now taking on a new meaning, with some
freshman racking up more than $15,000 in credit-card debt
before they can legally drink. "It's astonishing to me to
see college students coming out of school with staggering
amounts of debt and credit scores so abominable that they
couldn't rent a car," says Representative Louise Slaughter
(D-N.Y.).
Congressional Oversight Weighed
The role of
credit-card companies in helping to build these mountains of
debt is coming under great scrutiny. Critics say that as the
companies compete for this important growth market, they
offer credit lines far out of proportion to students'
financial means, reaching $10,000 or more for youngsters
without jobs. The cards often come with little or no
financial education, leaving some unsophisticated students
with no idea what their obligations will be. Then when
students build up balances on their cards, they find
themselves trapped in a maze of jargon and baffling fees,
with annual interest rates shooting up to more than 30%. "No
industry in America is more deserving of oversight by
Congress," says Travis Plunkett, legislative director for
Consumer Federation of America, a consumer advocacy group.
The
oversight may be coming soon. With Democrats in control of
Congress and the debt problems for college kids only growing
worse, the chances of a crackdown have increased
substantially. The Senate is expected to hold hearings on
the credit-card industry's practices this fall.
Representative Barney Frank (D-Mass.) has pledged to
introduce tough legislation. And Slaughter introduced a bill
in August to limit the amount of credit that could be
extended to students to 20% of their income or $500 if their
parents co-sign for the card.
The
major credit-card companies take great issue with the
criticisms. Bank of America (BAC),
Citibank (C),
JPMorgan Chase (JPM),
American Express (AXP),
and others say they are providing a valuable service to
students and they work hard to ensure that their credit
cards are used responsibly. Citibank and JPMorgan both offer
extensive financial literacy materials for college students.
Citibank, for instance, says it distributed more than 5
million credit-education pieces to students, parents, and
administrators last year for free. At JPMorgan Chase, bank
representative Paul Hartwick says: "Our overall approach
toward college students is to help them build good financial
habits and a credit history that prepares them for a
lifetime of successful credit use."
Continued in article
In addition to a free annual credit report, you can get a
report following ID theft
Consumers who have evidence of attempts to open
fraudulent accounts in their name should contact those creditors
immediately, and file a report with the local police department. If
possible, obtain a copy of the police report, or at least the police report
number. Evidence of fraudulent activity allows victims to request that a
90-day fraud alert be extended to seven years, though a credit bureau will
require proof of identity and a copy of the police report.
Placing a fraud alert entitles you to a free copy
of your credit report from each of the major bureaus, in addition to a free
report the law allows every consumer to request annually. If you get a
fraud-related credit report, Givens advises waiting a few months before
ordering the annual free one.
Alert the credit bureaus and credit issuers in
writing of any inaccurate information or fraudulent accounts listed in your
credit reports. You also have the right to have the credit bureaus strike
any inquiries against your credit history that were generated by fraud.
For many identity-theft victims, being denied a
loan or line of credit or receiving a call from a debt collection agency is
the first sign of trouble. By law, if you inform a collector that a debt is
the result of identity theft, that collector also must inform the creditor,
and creditors are prohibited from selling debt that results from identity
theft or placing it for collection. You also are entitled to a copy of all
information about fraudulent debt, including late notices and account
statements.
At least 23 states have passed "security freeze"
laws that allow consumers to indefinitely prevent anyone from issuing credit
in their name. California, Colorado, Connecticut, Florida, Illinois,
Kentucky, Louisiana, Maine, Minnesota, Nevada, New Hampshire, New Jersey,
New York, North Carolina, Oklahoma, Utah, Vermont and Wisconsin provide all
their residents with the option of placing a security freeze on their credit
files. Hawaii, Kansas, South Dakota, Texas and Washington currently provide
this option only to ID theft victims.
A number of state laws also are driving businesses
to alert consumers about potential data losses, but legislation being
considered on Capitol Hill could soon change that. Ed Mierzwinski, consumer
program director of the U.S. Public Interest Research Group, a consumer
watchdog group in Washington, said a bill recently passed by the House
Financial Services Committee and supported by the major financial
institutions would exempt companies from alerting consumers about data
thefts or losses if the company does not know whether that loss places the
consumer at a direct risk of identity theft. The bill also would reserve
credit freezes for ID theft victims only.
Update on the dirty secrets of our credit card systems: A hidden
"tax" on those that opt out Per-transaction "interchange" fees are a silent but
very effective tax. And as card issuers continue down the perilous path of not
charging their customers anything for the credit cards they use, the thirst for
"tax money" becomes ever greater.But the real rub is that retailers will
pass along the higher premium-card fees to all customers, including those who
don't qualify for a credit card, let alone a premium card. Checks and cash still
account for more than 50% of all retail payments, and the sad truth is that it
is precisely those who can pay only by check or cash who are footing most of the
bill for the costs of these cards. In most tax systems the wealthy pay most of
the taxes; in this model, those who can't or don't use credit cards are paying
for those who do qualify for them. Here's the real dirty secret of the
card-issuing industry: Because card regulations demand that cardholders pay no
more for goods and services than cash and check customers, the working poor are
subsidizing the vacation points earned by America's top income classes.
"A Dirty Little Secret About Credit Cards," The Wall Street Journal, May
4, 2005; Page A19 ---
http://online.wsj.com/article/0,,SB111517843155624225,00.html?mod=todays_us_opinion
From PBS:
Things a Credit Card Holder Should Know (including online tests for students)
You can watch the
entire Frontline video from the link on the above site.
Should
you get a Capital One credit card?
The point is that
credit card companies don't care how rich you are or even your liquidity.It's your payment practice on all your accounts payable that really
counts. Payment history is the main
ingredient of a FICO score, but the actual FICO formula is very complex --- http://www.consumeraffairs.com/finance/fico.html
You're a grade C
credit card user if you zero out all your accounts payable in less than 20 days.Good guys don't get an A or a F grade as credit card customers.Of course the credit card companies still get a percentage of your
purchase prices from the vendors who sold you the goods. Credit
card companies always get something (usually around 6% of the price), but
vendors can negotiate the rate they pay on their customers' purchases.
Credit card companies don't care as much for C grade customers because they are
limited to the what the product vendors pay one time on each purchase.
You're a Grade B
card user if you don't (or can't) pay off your entire monthly balances.A Grade B customer always pays the minimum balance due on each credit
card, but never in his lifetime pays off an entire balance due. That
way the credit card companies collect forever (actually only about 35 years if
you don't add to your account) from you in addition to what the product vendor
initially paid to them for your purchase.
You're a Grade A
customer for Visa if you miss one payment on your Discover card but keep on
making all minimum payments on your Visa. That
way Visa can jack up your interest rate from 8.9% to 29.9% APR for the rest of
your life because your FICO score increased due to one missed payment on any one
of your credit cards or other accounts.The
Frontline show has a segment on how one guy's perfect six-year perfect record of
making minimum payments did not prevent his interest rate from jumping up by 20%
when it was discovered by the FICO folks that he missed one payment on an
account six years in the past. This is funny (sad?) because this guy’s
credit card company’s CEO phoned the guy after the Frontline TV show aired and
lowered his rate back down to 8.9%.
It's the indexing
of your changing interest rates to your increased FICO score that's the biggest
"secret" credit card companies don't want consumers to understand.The Frontline show ("Secret History of the Credit Card")
stresses that most consumers don't even know what a FICO score is let alone how
it affects their future interest rates on all their credit card unpaid balances.
See http://www.pbs.org/wgbh/pages/frontline/shows/credit/eight/
How
can you beat this scam?
Never pay less than the minimum amount due, control your credit addiction, and
try to zero out every credit card balance in less than 20 days or whatever the
payment cycle is on your card. If this fails I would not necessarily
advise getting a Capital One card.
Capital One now advertises that the bank has
changed its ways and doesn’t change credit card rates
in the same way that other credit card companies are bilking the public --- http://www.washingtonpost.com/wp-dyn/articles/A8200-2005Jan13.html
I would still advise reading the small print even if it’s a Capital One card.
The
Minnesota state attorney general’s office has sued one of the nation's largest
credit card issuers (Capital One),
claiming it is misleading consumers with promises of “fixed“ interest rates,
then hiking their rates as much as 400 percent. Bob Sullivan, MSNBC, "Capital One Sued Over Marketing
Practices," January 3, 2005 --- http://www.msnbc.msn.com/id/6781155/
I have another, totally unrelated reason for not
getting a Capital One card. I must say, this story has given me great meat for
class discussion in auditing!
When I applied for a mortgage 8 years ago, my credit
report contained a three-year-old written-off Capital One card to the tune of
$8,000. I had never heard of this card, and it had been issued in my maiden
name!
Just think of all the failures of internal controls
my case included. At the time the card was issued, they used a marketing list
at least three years old to solicit the account. A basic credit check would
have revealed that I no longer went by that name, and that in fact I had taken
out a mortgage in the past year at a different address. They allowed the
perpetrator to run up over $6,000 of charges without having made a single
payment. They made no effort to contact me to collect the money, or they'd
have discovered the fraud two years earlier. Finally, after I submitted an
affadavit to disclaim the account and after they had my credit cleared, they
started calling me to collect the debt. Unbelievable!
So will I ever get a Capital One account? NEVER!!!
What do you tell college students about getting store
credit cards in order to get the initial 15% discount on merchandise? My
daughter gets every credit card Express, Old Navy etc. will give her in order
to get the discount and then she cancels the card after the first bill. She
feels that she is getting the benefit of the marketing system and none of the
costs of having open credit lines count against her (or tempt her).
Barbara W. Scofield, PhD, CPA
Associate Professor of Accounting
University of Dallas
1845 E. Northgate Irving, TX 75062 scofield@gsm.udallas.edu
Barbara: She should be concerned about her FICO
score. The more inquiries made by department stores, the lower her FICO score
will be. The FICO scoring secret algorithms view frequent credit applications
a sign of desperation, even if the application is successful.
Q. What are some common missteps that bring down your
score?
A. Balance transfers on your credit cards, for one
thing. It may seem smart to load all your debt onto one low-rate card. But if
you max out on a high-limit card, your credit score takes a big hit. Even if
you aren't applying for more credit, your current credit-card companies may
raise your interest rates because your credit score dropped.
The whole instant-credit thing also hurts your
credit, like when you're at the Gap and they say you get 10 percent off if you
apply for a credit card and buy this thing using your new credit card.
You have the combined effect of an "inquiry for
new credit" and a small credit limit on the store card, which you already
filled up. Both are bad.
The other thing you have to watch out for are
collections, the leading type of which is medical collection. Many of those
are mistakes -- often an insurance company is responsible for a co-payment,
but the doctor bills it to the patient and it ends up becoming a collection.
Richard J. Campbell
School of Business
University of Rio Grande
Rio Grande, OH 45674
If she lives in Texas she should request her free
credit report from all three agencies starting in June. This can be done at http://www.annualcreditreport.com
If she doesn't live in Texas, that site will also tell her when they will be
available for her location. She will notice that all of those credit cards are
on her report, whether they have a balance or not, whether they are closed or
not.
She should then get her FICO score. She will have to
pay a small amount for this but it will tell her the score AND what she can do
to make it higher. The higher it is the better interest rates you receive on
loans from cars to mortgages. If she has been doing what you say, it will most
likely report that there have been too many inquiries (like Richard said) and
they are lowering her score. It may still be over 700, which seems to be the
demarcation line for quick loan acceptance with decent rates but the next
inquiry (which she might need for something really important) might drop it
below 700 and that would cost her big money (much more than she saved on those
department store discounts), especially if it means the difference of a
half-point or more on a 30 year mortgage.
College students tend to be very short sighted so
this will probably be a big sale on your part -- as you well know. I have two
daughters myself which are both out of college now, but still, the only time
they listen to ole dad is when they already agree with him and tells them what
they want to hear:-)
John C. Roberts, Jr.
Saint Johns River Community College
283 College Drive Orange Park, FL 32065
February 6, 2005 reply from Bob Jensen
I was careless in mentioning that you can get a free credit report and FICO
score. Not everyone can get these as of yet. There is a stupid, perhaps
technically necessary, lagged in part of this that began in the West and will
roll across the country in phases. It is very important to read the rules of
the road at http://www.ftc.gov/bcp/conline/edcams/credit/ycr_free_reports.htm
Some outfits are advertising free credit reports now, but read the fine
print and consumer beware:
Many Universities Are Receiving Kickbacks from Credit Card Companies
(I've written about this before, but an inquiry from a reporter inspired me to
search out some update information.)
University of West
Florida students might have more trouble resisting the urge to splurge this
year.
UWF is one of several state universities releasing
student contact information to banks and credit card companies, which
subsequently bombard mailboxes and in-boxes with credit card and other
solicitations.
The University of Florida, the University of
Central Florida and the University of South Florida also are releasing
student information.
UWF says it has no choice but to release the
information -- unless a student specifically requests that it be kept
private.
Because of the state's public records law, anyone
who submits a request can obtain directory information -- student names,
phone numbers, addresses, e-mails and majors, said Ann Dzaidon, university
registrar.
"We are a public institution," she said. "We have
to follow certain requirements."
Students who want to keep their information private
can fill out a form in the registrar's office or access their records
online, she said.
"Students do have the right to protect their own
records," Dzaidon said.
Banks and companies also look to alumni and
athletic organizations for records. But Missy Grace, UWF's alumni
coordinator, said they won't get it from her.
"We don't give out anything," she said. "The
directory is online, but you have to have a password. Everything's
confidential."
Some out-of-state colleges charge a fee for the
information, using the profit to offset declining government revenue.
The easy access to student information comes as
some groups have warned that college-age consumers are accumulating alarming
debt. According to Nellie Mae, a leading provider of higher education loans,
a study of last year's student loan applicants showed that college students
hold an average of three separate credit cards. About 78 percent of students
have at least one card, and at least 32 percent of students have four or
more cards.
On June 8, 1999, the Consumer
Federation of America (CFA) convened a major press conference on student
credit card debt at the National Press Club in Washington, D.C. The program
featured leading consumer advocates, mothers of two college students whose
credit card debts contributed to their recent suicides, and the release of
the first major academic study of student credit card debt that was based on
both in-depth interviews and cross-sectional, survey data. The highly
publicized event was widely reported in the national and regional media.
This is because the previously neglected social consequences of credit card
debt captured the nation’s attention in front-page newspaper stories,
magazine articles, newspaper editorials, evening television news programs,
cable TV interviews, and radio call-in shows.
Although
Americans have become inured to the tremendous growth of the national debt
and economic consequences of corporate mergers, the newly reported social
impacts of student debt struck a chord in the national consciousness. Most
Americans assumed that college administrators are responsible for providing
a safe, nurturing environment where parents can expect that their children
will acquire the personal skills and professional experiences necessary for
a rewarding future. Instead, it was a national revelation that young lives
were being ruined by credit card debt due to dropping out of college
(misclassified as academic casualties), health problems (physical and
emotional), family conflicts, bankruptcy, job rejections (due to poor credit
histories), loan denials, inability to rent apartments, professional school
rejection, and even suicide. Many people were aware of anecdotal stories of
family members or friends whose collegiate careers were disrupted or
abruptly ended by credit card debts. However, most had been persuaded by the
assurances of the credit card industry that the problem affected only a
small number of students (3-4 percent) and most of them would suffer only a
minor financial inconvenience after beginning their work careers.
The personal
testimonies of parents whose children committed suicide challenged the
benign image of student credit card debt as a new adolescent rite of passage
of the “Just Do It”-”Shop ‘til You Drop” generation. Their anguish resonated
with the concerns of all Americans who realized that their own sons and
daughters were at risk to the predatory marketing policies of the credit
card industry. Janne O’Donnell described the despair of her 22 year-old son,
a National Merit finalist and a “letters” major, who succumbed to the
temptations of “easy money:”
“A week
before Sean killed himself [we] had a long talk about his debts and
about his future. He told me he had no idea how to get out of his
financial mess and didn’t see much of a future for himself. He had
wanted to got to law school but didn’t think he could get a loan to pay
tuition because he owed so much on his cards... Sean tried to pay off
his debts. He went through credit counseling but fell further behind...
and moved [from University of Dallas] back home with us to attend the
University of Oklahoma. He was working 2 jobs while attending OU. Still
he couldn’t make ends meet... By the time he died he had 12 [credit]
cards including 1 MasterCard, 2 Visas, Neiman-Marcus, Saks 5th Avenue,
Macy’s Marshall Fields, Conoco, and Discover. How those companies can
justify giving credit to a person making $5.15 an hour is beyond me...
Credit must be based on the applicant’s present income--not on potential
to earn... There simply has to be some limits set on credit card
companies before more students end up in bankruptcy or dead.”
O’Donnell later
described the emotional pain of making the “hard” decision not to help Sean
with his mounting credit card bills. In previous years, Janne and her
husband had paid some of his debts. In retrospect, however, they believed
that their assistance had actually been a “disservice” by not “holding him
responsible for his debts.” At the time, Sean expressed his desire to attend
graduate school and become a lawyer. With his younger brother preparing to
start college in the fall, Janne explained that “we thought our money should
be spent paying for Tim’s bachelor’s degree rather than graduate school for
Sean. It was a [difficult] choice of allocating our [limited] resources.” As
Janne pondered this agonizing dilemma, she related that “I don’t know if it
was the right decision and I do not know if Sean would be here today if we
had paid his bills. It haunts us still.”
Sadly,
Janne and her family are regularly reminded of their personal tragedy due to
ongoing debt collection activities. The aggressive tactics of one particular
bill collector continues to haunt O’Donnell, “He called about Sean’s credit
card debt [a year later]. I left two messages explaining his death and where
to get a copy of his death certificate. I just couldn’t believe it when I
received the third phone call... [This time] he insisted that I pay [Sean’s]
debt. I’ll never forget [this conversation]... he said to me ‘wouldn’t you
want to honor his memory by paying off his debts.’ I was so angry. If I had
the money, I would have paid them [earlier] and Sean might be with us
today.” As if the O’Donnells need further reminders of their ordeal, Chase
and other credit card companies still mail “pre-approved” credit card
applications in Sean’s name to their home. And, more instructively, “the
creditors still call but not as often.”
See O’Donnel Web site
To the chagrin
of the credit card industry, the national debate continues to intensify over
the seriousness of the student debt problem and who is ultimately
responsible. Criticism of the industry’s methodologically flawed research
(which have been previously used to soften and systematically underestimates
student credit card debt) elicited a flurry of journalistic and academic
investigations that confirmed many key findings of Manning’s 1999 CFA study.
Significantly, the most striking feature of the ongoing furor over predatory
marketing to college and high school students has been the adamant refusal
of the credit card industry to publicly acknowledge any culpability. In
fact, representatives of the credit card industry have rejected all requests
to participate in national television or radio programs that specifically
addressed the issue of student credit card debt. As CNN reporter Brooks
Jackson concluded the “Headline News” story on the CFA press conference, he
explained that “credit card companies say [that] most students use credit
responsibly but the representatives [of] Visa, MasterCard, American Express
would not go on camera to discuss this story.” The following week, Visa even
withdrew its spokesperson from an interview on “Good Morning America” which
included O’Donnell and Manning. To the surprise of millions of viewers, a
miffed Diane Sawyer curtly commented that “the credit card companies, by the
way, would not come on our program to talk with us [about the CFA study].”
For the credit
card companies, their initial public relations strategy was to dismiss the
scholarly criticism and its relevance to the public as unrepresentative of
national trends and the student suicides as anecdotal anomalies. By ignoring
the negative publicity, they gambled on the expectation that the public’s
attention would shift during the summer to baseball pennant races and family
vacations, financed by friendly credit cards--of course. Instead, the
groundswell of opposition to credit card marketing and lending policies led
to mounting public pressures for political action in the form of federal
bills and legislative amendments as well as the introduction of restrictive
marketing bills in at least nine state legislatures. The most prominent
federal response is HR-3142, the “College Student Credit Card Protection
Act,” which was introduced by U.S. Congresswoman Louise Slaughter (D-NY) in
October 1999 and again in January 2001.
Additionally,
student groups, parents and alumni have intensified pressure on college
administrators to ban or restrict credit card marketing on their campuses.
During the academic year 1999-2000, over 400 colleges and universities
formulated official policies against on-campus credit card marketing and
nearly 600 other schools are considering similar restrictions.
Significantly, the most effective policies have been instituted by small,
liberal arts colleges where the loss of even a few students has social and
economic repercussions. Conversely, it is large public schools with their
highly profitable student populations where credit card companies are
aggressively directing their energies. This includes the threat of potential
lawsuits against non-cooperative universities, persuasive tactics of
corporate lobbyists, major donations, and of course lucrative marketing
contracts such as the $16 million deal with the University of Tennessee. The
latter has provoked greater public scrutiny of “exclusive licensing”
agreements with colleges that generate millions of dollars in annual fees.
In addition to
the public scrutiny of college administrators in providing a “safe”
environment for their students, the result has been greater attention to the
role of colleges and universities in promoting complacent attitudes toward
personal debt and the need for effective credit card education/financial
literacy programs. The latter focus is reminiscent of the beer industry’s
“Drink Responsibly” campaign which publicly lauds cautious attitudes toward
alcohol consumption but loathes the impact on its financial bottom line.
Unfortunately, the current business climate of higher education rewards
revenue enhancement programs over instructional excellence. This explains
why many college administrators are willing to sacrifice the long-term
interests of their students and their own institutional interests for the
short-term financial inducements of the credit card industry.
"'Pretexting' is common in business world," by Peter Svensson,
Yahoo News, September 13, 2006 ---
Click Here
Although the boardroom scandal at Hewlett-Packard
Co. made the practice more widely known, buying phone records or other
personal information obtained by "pretext" calls appears to have been common
in parts of the business world. ADVERTISEMENT
In a letter to the House Energy and Commerce
committee, which was investigating the issue this year, data broker PDJ
Investigative Services described its customers as "law offices, repossession
companies, financial institutions, collection agencies, bail enforcement
agencies, law enforcement agencies and various private investigation and
research companies."
"Those businesses have a common need. That need is
to be able to locate individuals, who do not wish to be found," another data
broker, Universal Communications Co., wrote to the committee.
For example, banks sought to find debtors who
defaulted on loan payments, and car finance companies traced people who
stopped paying their auto loans and disappeared, Universal Communications
said.
PDJ sold records of local and long-distance calls
as well as non-published phone numbers and home addresses, according to an
old price list submitted to the House committee.
In its letter, PDJ said it did not perform pretext
calls itself, but paid independent vendors for the information, or searched
public databases and the Internet.
Robert Douglas, a privacy consultant in Colorado
who closely follows pretexting and other investigatory techniques, said such
independent vendors use sophisticated methods to fool customer service
representatives into giving out information.
However, the attention given to pretexting in the
past two years — the HP scandal is just the latest in a series of
revelations — has made data brokers restrict sales of certain kinds of
information. Cell phone companies, one of the major targets of pretexters,
also have fought back by launching lawsuits.
Continued in article
More Banking Dirty Tricks and Special Privileges
"Banks Tap Social Security Funds Too," by Ellen E. Schultz, The Wall
Street Journal, April 28, 2007; Page A10 ---
Click Here
James Cain, a terminally ill Florida veteran, got
his first Social Security disability payment last month. Before he could
withdraw any of it to pay for his medicine or mortgage, his bank took it out
of his account.
His wife's Social Security check went in the same
day. The bank took most of that, too. It withdrew the money to make payments
to itself on a car loan the bank had made to the Cains.
Federal law says Social Security can't be taken to
repay debts. So how can banks do it?
They don't use the technique of debt collectors,
which is to file garnishment orders on bank accounts -- orders that succeed
because by and large no one is enforcing the exemption (see adjoining
article).
Banks have a different rationale. They say the
federal ban on taking Social Security benefits to repay debts doesn't apply
to them. The reason: They aren't really collecting debts.
Auto Loan at the Bank
They cite the doctrine of "set-off," which says
banks can collect money that customers owe them by taking it out of
customers' accounts. All agree this traditional practice makes sense for
routine fees like monthly account charges. But banks apply it broadly, to
other money customers owe them. Banks argue that when they take cash out of
a customer's account -- including cash from a Social Security check -- they
aren't really collecting a debt, just "setting off" what's owed them.
The Cains, of Palm Coast, Fla., took out a $31,000
loan from a SunTrust bank to buy a Ford Expedition in 2005. But last summer,
Mr. Cain was diagnosed with bladder cancer and soon was unable to work. His
wife, Elna, tried to find someone to take over the $690 monthly payments but
couldn't, so she surrendered the SUV to the bank this January. After selling
it at auction for $16,000, the bank told the Cains they owed it a balance of
$15,703, which included late charges, repossession expenses and interest.
Mrs. Cain, 63, says she told the bank her husband's
cancer had spread and he was confined to a wheelchair. They lost their
health coverage when he had to quit working. A Vietnam vet, Mr. Cain has
applied for veteran's benefits, but isn't yet receiving them.
He also applied for Social Security disability. On
March 14, both his first disability check, $1,343, and Mrs. Cain's $1,161
regular Social Security hit their SunTrust account through direct deposit.
The same day, SunTrust took $1,924 out of their
account. The next week, the Cains got a letter from SunTrust Recovery
Department, dated March 15, thanking them for their payment.
Exempt Funds
Besides Social Security, the Cains' account
received money from Mrs. Cain's pension from the American Red Cross. In
Florida, that is also exempt from collection to repay a debt.
The Cains contend they had never given SunTrust
permission to debit their account. SunTrust Banks Inc. pointed to its
deposit agreements, which say that the bank can use money in customers'
accounts to offset debts to the bank.
Asked whether the bank believes its set-off right
makes it legal to seize exempt funds such as Social Security, the bank said
in a statement: "We cannot publicly disclose the specifics of individual
client relationships. However, in cases when we offset accounts for
delinquent loans, we as a matter of policy exclude exempt funds and provide
proper notice to the customer."
Mark Budnitz, a Georgia State College of Law
professor and co-author of "Consumer Banking and Payment Law," said, "It's
an abuse of the right of set-off to use it to take money from Social
Security funds.... Banks are flouting federal policy."
California Lawsuit
A case before the California Supreme Court is
testing the issue. The court has agreed to review a suit alleging that Bank
of America Corp. seeks to profit from Social Security recipients by charging
high fees and taking them from the recipients' accounts.
The suit cites a case where the bank charged a
Santa Cruz man five overdraft fees in one day, totaling $160, based on
debit-card purchases that totaled $11. It took this out of an account funded
by Social Security disability benefit checks for the man, the victim of a
disabling head injury.
The fees are steep because of a newer type of
overdraft protection common with direct-deposit accounts set up to receive
Social Security. Instead of a line of credit, which preferred customers get,
this newer type creates a short-term loan to the account holder every time
he or she writes a check or makes an ATM withdrawal from an account with
insufficient funds.
Each such loan carries a fee, typically $25 to $30,
instead of interest. And instead of giving the customer time to repay, the
bank repays itself out of the account as soon as the customer puts some more
money in it.
Many of the largest U.S. credit-card companies
require customers to sign away their ability to take disputes to court and
instead settle disagreements in arbitration.
Now that practice itself is under attack in court.
A lawsuit filed recently in federal court in New York City alleges the
credit-card companies held secret meetings where they colluded to promote
arbitration, in violation of federal antitrust laws.
The complaint alleges that eight of the nation's
biggest card issuers -- Bank of America Corp., Capital One Financial Corp.,
J.P. Morgan Chase & Co., Morgan Stanley's Discover unit, Citigroup Inc.,
MBNA Corp., Providian Financial Corp. and HSBC Holdings PLC of the United
Kingdom -- "combined, conspired and agreed to implement and/or maintain
mandatory arbitration."
Some of the banks named allegedly convened a group
in 1999 called the "Arbitration Coalition" or "Arbitration Group," the
complaint says.
The suit, which was filed last month and is seeking
class-action status, claims that bank representatives spoke or met at least
20 times from 1999 to 2003 to share experiences from arbitration as well as
advice on how to set up arbitration agreements with consumers that would
withstand challenges in court.
Continued in article
An
entirely new definition of bankruptcy: What you don't know about a pending
bill might hurt you "Most of the credit cards that end up in
bankruptcy proceedings have already made a profit for the companies that issued
them," said Robert R. Weed, a Virginia bankruptcy lawyer and onetime aide
to former Republican House Speaker Newt Gingrich. "That's because
people are paying so many fees that they've already paid more than was
originally borrowed," he said. In addition, some experts say, the
changes proposed in the Senate bill would fundamentally alter long-standing
American legal policy on debt. Under bankruptcy laws as they have existed for
more than a century, creditors can seize almost all of a bankrupt debtor's
assets, but they cannot lay claim to future earnings. The proposed law, by
preventing many debtors from seeking bankruptcy protection, would compel
financially insolvent borrowers to continue trying to pay off the old debts
almost indefinitely . . . Debate about the bill continued Thursday, with the
Republican-controlled Senate refusing to limit consumer interest rates to 30%.
The vote was a bipartisan 74 to 24 to kill a proposed amendment by Sen. Mark
Dayton (news,
bio,
voting
record) (D-Minn.). Senate passage of the bill is expected next week.
Peter G. Gosselin, "Credit Card Firms Won as Users Lost," The Los
Angeles Times, March 4, 2005 --- http://snipurl.com/LAtimesMarch4
Bob Jensen's threads on credit card company dirty secrets are at http://faculty.trinity.edu/rjensen/FraudReporting.htm#FICO
Questions
Is your university getting credit card kickbacks on student and alumni use of
credit cards?
Did you know that many universities send names, addresses, and social security
numbers of students and alumni to a company that solicits them to use a credit
card?
Answers
January 19, 2005 message (re-written by Bob Jensen) from a former high level
university administrator
Many, if not most, colleges and universities are doing this. The reason: every
time a credit card is used for any purchase, the university gets a percentage (for
each purchase transaction) from the credit card company "as a gift." This
kind of income is generally not recognized as a gift by the rules of the
college and university auditors/business managers (see NACUBO).
Why should the university provide any of this information? In addition to not
informing people that this information is being "sold," this
practice encourages college students and alumni to go into more debt.
Fixed Rate Lures Have a Hook
"Beware of 'fixed rate' lure of credit cards," by Michelle Singletary,
Boston Globe, January 26, 2005 --- http://snipurl.com/GlobeJan_23
'Are you nutso?'
That was a question one reader posed to me recently.
He thought I was wrong to advise a young woman not to transfer $13,000 of
student loan debt to a credit card offering a very low interest rate.
But I'm not nuts, just realistic. I recommended that
the woman with the student loan debt not do it because those low-interest-rate
cards come with too many loopholes that allow a credit card company to hike
the rate even if you sneeze wrong.
''You give folks far too little 'credit' for being
able to monitor their situation," the reader scolded me.
It's not that I don't think people can't handle
credit well; it's that folks sign up for these cards without reading or
understanding the fine print, which states that minor missteps in the handling
of their accounts can trigger increased rates -- significantly higher interest
rates (much higher than the 8.25 percent fixed rate the woman in question was
paying on her student loan).
Actually, to the dismay of some, you can do
everything right and still have your credit card rate increased.
In fact, Minnesota Attorney General Mike Hatch is
going after one giant credit card company for what he says is a deliberate
attempt to mislead people into signing up for what they think are permanently
fixed-rate credit cards.
In a lawsuit filed recently against two subsidiaries
of Capital
One Financial Corp., Hatch alleges that the company uses false, deceptive,
and misleading television advertisements, direct-mail solicitations, and
customer service telephone scripts to market credit cards with allegedly
''low" and ''fixed" interest rates that, unlike its competitors,
will never be increased.
Capital One said in a statement that it has done
nothing wrong.
I do believe that much of the advertising for credit
cards doesn't emphasize that special low rates can be taken away for any
number of bill-paying infractions -- making a single payment late (even by one
day) or exceeding your credit limit.
However, what many consumers don't understand is that
the word ''fixed" in the credit card world isn't the same as, for
example, a 30-year ''fixed" mortgage loan. You can pay your mortgage late
or not at all and your rate will be the same. You might get kicked out of your
house or ruin your credit rating, but you won't get kicked up to a higher
interest rate.
Not so with credit cards. A fixed credit card rate
can be changed.
Hatch's suit alleges that consumers are not
adequately informed of what can happen with a low-interest-rate card and cites
case histories from several Minnesota cardholders. Here are some examples
outlined in the lawsuit:
Nicole Bourgeois opened a credit card account with
Capital One in July 2003. Bourgeois had seen a Capital One television ad
offering low, fixed-rate credit cards. Based on the ads, she thought fixed
meant the rate would not change for the life of the card. Bourgeois and her
husband had wanted to consolidate debt from other credit cards into a single
joint account with a low interest rate. Bourgeois received a card with a rate
of 4.9 percent. But nearly a year after having the card, she noticed one month
her rate had been increased to more than 14 percent. She called Capital One
and was told that the increase was the result of one late payment.
Robert Stein said he found the prospect of a low
fixed-rate card very appealing. He believed that the term ''low fixed
rate" meant that the interest rate would stay at 4.9 percent for as long
as he had the card. However, Stein's rate increased to 6.9 percent. Why? When
he called to inquire, he was told his interest rate was increased because his
payment was received two days past the due date.
Betty Ramsland obtained a Capital One credit card in
2002 with a fixed rate of 8.9 percent. Two years later, Ramsland's rate was
raised to 14.95 percent. Ramsland said in the lawsuit she asked the company
why her rate was increased but didn't receive an explanation.
Sure, some people move around debt from one
low-interest credit card to another with no problem. But you're nuts to
believe a promise of a forever fixed-rate credit card. Maybe it will stay
fixed. Maybe it won't.
Part of a message received from a friend on March 1, 2005
Dear XXXXX
Thank you for your
email, and for your consideration of our request to support PAA. The alumni
association does receive a percentage of the total amount of charges submitted
by our alumni who use the card. We are precluded by contractual arrangements
from disclosing the percentages or amount but I can tell you that this is a
significant revenue source for the alumni association.
The revenue from this
program is used in a variety of ways to support the programs and services
offered to our alumni and members. These funds help support our outreach
efforts such as alumni clubs, student recruitment events, Purdue on the Road
events. In addition these funds help support the Faculty Incentive Grant
program to assist in faculty development, Diversity Grants to support diverse
programming efforts and Legacy events that highlight Purdue students whose
parents are graduates of Purdue as well.
In addition to the
financial support is another way to market Purdue throughout the world. Every
time someone pulls the card out of their wallet they are marketing Purdue for
us.
I am more than happy
to answer any further questions you might have and thank you for your email.
It is very important for our alumni to be informed about our programs and I
appreciate your thoughtful questions.
Best wishes,
YYYYY
Jensen Comment One of my friends forwarded the above
message. It reflects what is commonplace now among alumni associations of
colleges. These associations promote a particular credit card company and
receive revenue for this service on purchases of alumni and students. I
suspect it is not unethical as long as alumni and students are aware of all
facts in the situation. The letter above does not mention that alumni
associations generally forward more than names and addresses to credit card
companies and possibly other vendors. I have some concerns when they
forward social security numbers without express written consent for
alumni. I also have concerns when alumni are not aware of how or who is
receiving confidential information from alumni associations.
I have
written previously about this general practice at http://faculty.trinity.edu/rjensen/FraudReporting.htm#FICO
I think the credit card companies want the social security numbers of all alumni
and students so that FICO ratings can be investigated before inviting an alumnus
or student to apply for a University of ZZZZZ credit card.
Probably the most technical and complete muck raking about credit rating
agency conflicts of interest arose in a law paper by Frank Partnoy (my hero)
with particular reference to evidence uncovered in the Enron
investigation. It is particularly revealing how the credit rating agencies
helped to artificially inflate Enron's credit rating. Time Magazine
reported on this on January 14, 2002. But the most complete analysis of
how rotten these agencies are to the core is in the following reference from my
hero:
A recent academic study compared ratings by Moody's
with those of Egan-Jones. William H. Beaver, professor of accounting at
Stanford's graduate school of business, Catherine Shakespeare, assistant
professor at the University of Michigan Business School and Mark T. Soliman,
also at Stanford, analyzed ratings on some 800 companies made by both services
from 1997 to 2002. The academics found that Egan-Jones's ratings changes
were more timely than those of Moody's, coming up to six months sooner. The
study also found much higher stock returns after rating changes by Egan-Jones
than by those of Moody's. "Using several tests we find that the
noncertified firm, EJR is more responsive and closely associated with
investors," the study noted. "Wanted: Credit Ratings. Objective Ones, Please," by
Gretchen Morgenson, The New York Times, February 6, 2005 --- http://www.nytimes.com/2005/02/06/business/yourmoney/06gret.html?oref=login
For years, the nation's credit rating agencies have
thrived, booking mouth-watering profits from operations that are riddled with
conflicts and shielded from competition.
Soon, however, that may finally change. And investors
should be better off for it.
Within the next two months, the Securities and
Exchange Commission will press a new regulatory framework for the industry to
ensure that debt ratings published by the big three - Standard & Poor's,
Moody's Investors Service and Fitch Ratings - are a result of thorough
analysis, not a desire for fatter profits.
"I think it's fair to say that the oversight of
the industry is insufficient," said Annette L. Nazareth, director of
market regulation at the Securities and Exchange Commission. "We want the
firms to commit to meet certain standards with respect to policies and
procedures on conflicts of interest and solicitation of ratings. Right now we
don't have that at all."
Now that would be an upgrade, long overdue. Indeed,
given how regulators have attacked conflicts of interest among Wall Street
firms, insurance companies and other financial services concerns, it's
astounding that the ratings agencies have been allowed to go on this way for
so long.
Rating agencies play an enormous role in a huge
market. After all, far more debt is issued than stock; last year, corporations
issued $1.2 trillion in straight debt versus $146 billion raised in common
stock, according to Thomson First Call. An additional $1.4 trillion was issued
last year in mortgage debt and asset-backed securities.
All that paper needed a rating before it could be
sold to the public. As such, the financial markets rely heavily on the
companies that rate them.
Since 1931, for example, the Federal Reserve Board,
the Comptroller of the Currency and federal and state laws have regulated the
debt held by banks and other financial institutions, using credit ratings
assigned to the debt. Pension funds, banks and money market funds are barred
from buying debt issues that carry ratings below a certain level.
But not just any rating agency's rating, mind you. In
1975, the S.E.C. ruled that the laws relating to debt carried by banks and
financial institutions refer only to ratings provided by agencies that it
recognizes. Right now, these are the big three and a much smaller fourth,
Dominion Bond Rating Service of Canada.
What you have, in other words, is an oligopoly.
Even more troubling, this oligopoly earns its keep
from fees charged to the companies whose debt it rates. This conflicted
business model means that the paying customers for these agencies are the
corporations they analyze, not the investors who look to the ratings for help
in assessing a company's creditworthiness.
Other industry practices also lend themselves to
producing less-than-rigorous analysis. For example, rating agencies typically
receive the largest fees when they analyze an initial bond issue. After that a
nominal fee is levied, providing something of a disincentive to do in-depth,
time-consuming work.
And because the nation's courts have ruled that the
work of these agencies is opinion and therefore protected by the First
Amendment, the big three are protected from lawsuits from investors contending
defective analysis. Such lawsuits could act as policing mechanisms.
To make matters worse, these companies have recently
begun to expand the services they offer to corporations, leading regulators to
fear that ratings could be swayed by revenues earned on other products.
These problems are on the agenda for Tuesday, when
Senator Richard C. Shelby, the Alabama Republican who is chairman of the
Banking, Housing and Urban Affairs Committee, will hold hearings on the state
of the rating agencies. Executives from the big three are scheduled to
testify.
This is not the first time that Standard &
Poor's, Moody's and Fitch have been in the hot seat. When Enron and WorldCom
failed, investors were stunned by how long it had taken the agencies to
recognize the companies' declining fortunes. For example, all three agencies
had rated Enron an investment-grade company until four days before it filed
for bankruptcy. They had rated WorldCom similarly until a few months before it
collapsed.
The rating agencies stress that they analyze debt
issuers' financial positions to try to predict for investors an entity's
ability to pay off its debt. They are not in place to audit auditors, they
say, and cannot root out fraud. Their mandate is to provide transparency to
the financial market.
IN an interview on Friday, Raymond W. McDaniel, Jr.,
president of the Moody's Corporation, acknowledged the industry's conflicts
but said his company manages them effectively. "We do not link analyst
compensation, including bonus compensation, to the ratings they have on the
companies they follow or to the amount of fees they receive from those
companies," he said. "Beyond that, we have a collection of business
conduct policies and codes of practice and behavior which the entire Moody's
population is required to adhere to." Top executives at Standard &
Poor's, a division of the McGraw-Hill Companies, and Fitch, a unit of Fimalac,
were not available for comment, but both companies said they were aware of the
potential for conflicts and careful to prevent them.
Increased competition would certainly help investors
who are troubled by the conflicts. Unfortunately, companies hoping to break
into the ratings game must first earn the all-important designation from the
S.E.C. Such nods do not come often.
One upstart concern that has applied unsuccessfully
to the S.E.C. is Egan-Jones Ratings, of Philadelphia. It rates approximately
800 companies and had warned of problems at WorldCom, Enron and Global
Crossing well before other agencies. Egan-Jones does not accept payment from
companies it rates; investors who use its services pay the freight.
A recent academic study compared ratings by Moody's
with those of Egan-Jones. William H. Beaver, professor of accounting at
Stanford's graduate school of business, Catherine Shakespeare, assistant
professor at the University of Michigan Business School and Mark T. Soliman,
also at Stanford, analyzed ratings on some 800 companies made by both services
from 1997 to 2002.
The academics found that Egan-Jones's ratings changes
were more timely than those of Moody's, coming up to six months sooner. The
study also found much higher stock returns after rating changes by Egan-Jones
than by those of Moody's.
"Using several tests we find that the
noncertified firm, EJR is more responsive and closely associated with
investors," the study noted.
There is no evidence, of course, that Moody's
tardiness is a result of a conflicted business model. And Mr. McDaniel
maintains that ratings stability and accuracy are what customers want.
"The market has become extremely intolerant of false positives or false
negatives, and encouraged the ratings to only be moved when there is not a
likelihood that they would be reversed," he said.
But Sean J. Egan, managing director of Egan-Jones,
said: "Timely, accurate credit ratings are critical for robust capital
markets. Investors, issuers, workers and pensioners will continue to be hurt
by the flawed credit rating industry until someone addresses the basic
industry problems."
I assume you mean if your credit score FALLS that
Capital One will increase your rate.
Incidentally, MBNA more than doubled my interest
rate, even though my score was rising and I never missed a payment.
You say your credit report and score are free. A free
credit report is currently only available for those in the west. Those of us
in the east have to wait until fall. I do not know of any source of free
credit scores. Do you?
Tom Lechner
Dr. Thomas A. Lechner
Dept. Accounting, Finance & Law
SUNY - Oswego Oswego, NY 13126
The Fall 2006 Checking Account Pricing Study, a
survey conducted by Bankrate.com, found that some customer fees and
requirements hit record highs.
"What makes these fees especially irritating is
that they're avoidable," according to Greg McBride, senior financial analyst
for Bankrate.com. "It's something that pops up and bites you when you're not
careful."
Average Automated Teller Machine (ATM) fees charged
users of machines at banks where users do not have an account, were a record
$1.64, up a dime in a year. Although six banks reduced fees, 22 banks
increased the amount, bringing the number of banks with ATMs that charge
users to a record 98.3 percent. A lower percentage of banks-77 percent- are
assessing fees on their customers who use other bank's ATMs and maintain a
minimum balance on an interest account. Using numbers from the General
Accounting Office (GAO), Bankrate.com estimated that customers would pay a
total of $4.2 billion for non-bank ATM withdrawals in 2006, a slight drop
from 2005
There is no better news concerning minimum opening
deposits, which rose to record highs on both types of accounts, with
interest accounts getting hit the hardest, at a 43 percent increase, up to
an average $615.41. Non-interest account opening balances, although only
$87.67, still posted a 21 percent increase, with an average $209.72 required
minimum balance. This is the second lowest number ever found by the survey.
Monthly fees for these accounts are also at a record low.
The balance requirement to earn interest and avoid
fees is a whopping $2,660. The recent string of rate hikes is not reflected
in the dismal 0.34 percent yield. Bankrate.com states "there is no need to
maintain a large balance in a low yielding account when so many checking
accounts come without balance requirements or fees."
Fees on bounced checks, non-sufficient fund (NSF)
checks, hit a record high average $27.40, with 85 banks posting increases
and 32 decreasing account fees. AccountingWEB contacted customer service
agents at various banks and discovered that fee policies vary and it is wise
to check the policy in the city and state in which the account was opened.
If the account remains negative for a certain number of days, either a one
time or a daily fee may be assessed, depending on the bank policy.
To earn interest at an online bank and avoid
checking fees, it costs about half the balance required at a regular bank,
but the initial opening balance is higher, at $605. The monthly service
charge is also about half, $5.50 compared to $10.74. Although the online
interest rate is higher, Bankrate.com maintains neither rate seems worth
tying up the money which could yield more invested in other places.
The general advice to avoid fees is to shop around
and check out all of the fees at a bank before opening an account, choose an
account that fits individual needs, maintain minimum balances if required
and keep track of balances, including checks written and any money withdrawn
from the account through ATMs or account debit cards. This way the money
will remain in your account and not on the banks profit statement.
The North Palm Beach online financial service
surveyed 248 large banks and thrifts offering checking accounts, with 215
non-interest accounts and 247 interest accounts evaluated, using one
non-interest and one interest checking account each, in 25 large U.S.
markets.
The American Bankers Association is not the best place to search for the
dirty secrets of banking, but the ABA does have some very helpful advice for
consumers at
http://www.aba.com/Consumer+Connection/default.htm
Cheque kiting is
when in-transit or non-existent cash is recorded in more than one bank
account. The crime usually occurs when a bank pays on an unfunded deposit.
For example, a bum
check is deposited into an account. Before the cash is collected by the
bank, a check is written against the same account and deposited into a
second account, or cashed. The increased use of wire transfers allows this
type of scheme to be perpetrated very quickly.
At least two
companies solicit uninsured deposits on the Internet. Netware International
advertises itself as a "Constitutional" bank and FocusInternational.com,
Ltd., is a West Indies company seeking deposits for an unidentified bank.
They lure
depositors by offering high rates of interest, or promising offshore
secrecy. Neither company is authorized, supervised, or regulated by any U.S.
State or Federal bank or financial institutions regulator. Deposits in these
companies do not have the protection of the Federal Deposit Insurance
Corporation or any other state or federal deposit insurance.
One con, while in
jail serving a state prison term for credit-card theft, actually perpetrated
yet another credit card scam over a seven month period, using a technique
that allowed him to hide the fact that he was calling from jail.
He would start off
by calling the county-run nursing home saying he was a Bell Atlantic
technician and that he needed the person to dial a special code to test the
lines. When the person pressed the requested numbers, he would be connected
to an outside line that he used to call businesses.
When he called the
businesses, he would tell them he was a credit-card representative and that
he needed customers' names and phone numbers to verify recent transactions.
With that information he then called the cardholders and posed as a credit
company employee, saying he needed personal information to check for fraud.
With this personal
information and the credit-card numbers, he then requested and received more
credit cards with which he made about $25,000 worth of purchases of such
things as sports memorabilia, flowers, and gift certificates. He also bought
calling cards so he could continue the scam.
Some of the items
were given to other inmates in exchange for helping with the fraud while
other items were shipped to friends to be held for him until he got out of
jail.
Duplication of
Card Information
Credit card "double
scan" machines can copy info from the magnetic strip of your card and create
a new duplicate card for which your account will be billed for any
purchases. Try to keep your card in sight when possible to avoid this
problem.
While card issuers
have fraud detection software which picks up unusual spending patterns,
smaller purchase "skimming" can be subtle and prolonged, compared to the
flurry of spending when a card is stolen outright.
Keep a record
of your account numbers, their expiration dates, and the phone number
and address of each company in a secure place.
Void incorrect
receipts and destroy carbons.
Save receipts
to compare with billing statements.
Open bills
promptly and report any questionable charges promptly and also in
writing to the card issuer.
If you realize
they've been lost or stolen, immediately call the issuer. Many companies
have toll-free numbers and 24-hour service to deal with such emergencies.
By law, once you
report the loss or theft, you have no further responsibility for
unauthorized charges. In any event, your maximum liability under federal law
is $50 per card. If you suspect fraud, you may be asked to sign a statement
under oath that you did not make the purchases in question.
Booster Checks
A booster check is
a non-sufficient fund (NSF) check used to make a payment to a credit card
account. One group used "booster checks" to "bust out" legitimate credit
cards. They used credit card "convenience checks" issued by the banks and
credit card companies to inflate their credit card limits; or to "bust out"
the credit card to double or triple the established line of credit.
Because banking
laws require financial institutions to immediately post credit payments even
before the check has been cleared, they would use the window of time between
the posting of the credit card payment and the discovery of the bad check to
go on a spending spree and purchase, among other things, large amounts of
gold coins from legitimate coin vendors.
They would also go
to store owners who knowingly aided the bust out scheme, who would "swipe"
the credit cards through point-of-sale credit card terminals located at
their businesses. While these transactions would appear to be legitimate, no
merchandise would actually be exchanged.
Once a credit card
company transfers funds to a store owner's bank account, a collusive
merchant is able to dispense funds from the busted out credit card. The
merchants in this case allegedly issued kickback checks to the card holder
for the amount of the transaction, and they would then receive a kickback
from the card holder which would amount to a small percentage of the
transaction.
The Secret Service
estimates the total loss in this one case is between $10 million and $15
million.
Falsification of
Loan Applications
While scheming to
defraud four banks and a credit union, one con opened checking and savings
accounts using a false name and a fraudulently obtained new social security
number. He then applied for seven loans for the stated purpose of financing
the purchase of motor vehicles.
He also submitted
false documents concerning his employment and income, including fake tax
returns. By producing fictitious records including motor vehicle appraisals,
insurance documents and invoices he obtained approximately $380,000 in loans
for the purchase of a 1976 Rolls-Royce Silver Shadow, a 1978 Ferrari model
308 GTS convertible, a 1992 Mercedes-Benz model 300SE, a 1995 Mercedes-Benz
model SL320 and a 1994 Mercedes-Benz model 500SL.
He also applied for
and was issued multiple credit cards and charge cards. In just seven months
he ran up charges leading to losses of at least $460,000.
For example, he
used an American Express account to pay $27,000 towards the purchase of an
item of jewelry, used an MasterCard to place a $5,000 down payment towards
the purchase of a 1955 Mercedes-Benz 300SL Gullwing with a purchase price of
$203,000 and a 1964 Ferrari 250GT Lusso convertible with a purchase price of
$153,000, and then used the American Express account to pay $320,000 towards
the purchase of these two antique automobiles. He also used various VISA and
MasterCard accounts to obtain substantial cash advances and used the
American Express account to pay $93,600 towards the purchase of a Patek
Philippe Moon Phase watch with a purchase price of $95,600.
Laxity of
Enforcement
One of the problems
with enforcing bank fraud laws is that it is often relegated to a low
priority, or ignored altogether, because the activity can span several
jurisdictions, involve many unidentified subjects, is non-violent and
usually there are few leads.
Normally, the
typical bank robber nets $700 and is caught within 24 hours, yet the average
check scam involves losses of more than $2,000, the perpetrators are seldom
caught, and there are more than one hundred times as many cases as bank
robberies. Out of 10,000 cases the losses exceeded $60 million dollars.
Many bank fraud
suspects are able to elude arrest by furnishing false identification when
cashing stolen, forged, or counterfeited checks. One effort to stop this
crime is the "Check Print" program which requires non-bank customers to
provide a thumb print, using a clear solution, on the negotiated check for
identification purposes. With this positive identification, it has been much
easier to identify, arrest, and successfully prosecute bank fraud scams.
Check Security
Features
Check manufacturers
help deter check fraud by making checks difficult to copy, alter, or
counterfeit. Some useful security measures include:
Watermarks.
Watermarks are made by applying different degrees of pressure during
the paper manufacturing process. Most watermarks make subtle designs on the
front and back of the checks. These marks are not easily visible and can be
seen only when they are held up to light at a 45-degree angle. This offers
protection from counterfeiting, because copiers and scanners generally
cannot copy watermarks accurately.
Copy
Void Pantograph. Pantographs are patented
designs in the background pattern of checks. When photocopied, the pattern
changes and the word "VOID" appears, making the copy nonnegotiable.
Chemical Voids Chemical voids involve treating
check paper in a manner that is not detectable until eradicator chemicals
contact the paper. When the chemicals are applied, the treatment causes the
word "VOID" to appear, making the item non-negotiable.
High
Resolution Microprinting. High-resolution microprinting is very
small printing, typically used for the signature line of a check or around
the border, in what appears to be a line or pattern to the naked eye. When
magnified, the line or pattern contains a series of words that run together
or become totally illegible if the check has been photocopied or desktop
scanned.
Three-dimensional Reflective Holostripe. A holostripe is a metallic
stripe that contains one or more holograms, similar to those on credit
cards. Those items are difficult to forge, scan, or reproduce, because they
are produced by a sophisticated, laser-based etching process.
Security
Inks Security inks react with common eradication chemicals. These
inks reduce a forger's ability to modify the printed dollar amount or alter
the designated payee, because when solvents are applied, a chemical reaction
with the security ink distorts the appearance of the check.
Cooperation
between Check Manufacturers and Financial Institutions
Participating
financial institutions can report all checking accounts "closed for cause"
to a central database, called ChexSystems. This program prevents people, who
have outstanding checks due to retailers, from opening new accounts.
You can use this
information before opening new accounts to spot repeat offenders and you can
also use MICR information from a check presented with the applicant's
drivers license number to check the SCAN file for any previous fraudulent
account activity.
Rental Car and City Tax Rip Offs
Rental car companies have a sorry history for ripping off
customers with inflated and/or hidden charges. The most notorious ripoffs
were, and possibly still are, the rates charged for optional collision and
comprehensive (theft, storm damage, etc.) insurance. Renters should always
check on whether their credit cards used for renting cars covers this optional
insurance for no added fee. They should also check on whether the company
that insures their owned vehicles extends this coverage to cars rented.
The fuel option where renters can pay an up-front fee to avoid
having to pay for fuel when returning a car may be a bad deal. Always
compare the up-front fee with what the rental car company charges to fill the
tank when you return the car. Also compare those rates with what it costs
to fill the car just before returning the car.
Rip Offs in City Taxes
How cities sock it to visitors: New Rental Car Taxes
Added Fees Can Double the Price of a car
People who rent cars are getting hit with a host of new taxes that are being
used to pay for things like stadiums, museums and alternatives to renting a
car, such as monorail systems and rail lines. The fees are being levied to pay for things
like stadiums, museums -- and alternatives to renting a car, such as
monorail systems and rail lines. State and local lawmakers, many of whom
operate under balanced-budget mandates, got hit hard by the recent economic
downturn and have become more creative about looking outside their
constituencies for funding. Some of the new taxes are taking effect just as
travelers are making plans for the busy holiday season. That means they are
likely to sting even more, since many companies raise their rates around
this time of year.
Avery Johnson, "Travelers Hit With Slew of New Taxes on Rental Cars:
Added Fees Can Double the Price of an Economy Car," The Wall Street
Journal, November 9, 2005; Page D1 ---
http://online.wsj.com/article/SB113150004298391824.html?mod=todays_us_personal_journal
One Way to Possibly Avoid Extra Charges (if you are going to rent for a
significant number of days)
Because most of the taxes are being passed at the
local level, travelers face a hodge-podge of charges. Some fees, for
example, apply at the airport, but not in town. This means that travelers
can sometimes avoid taxes -- either by taking a cab across city lines or
flying into an airport where the fees are lower.
But sometimes the quest to avoid the fees can be more
expensive than the charges themselves.
The increased use of rental-car taxes was touched
off last year in Kansas City, Mo., when the city passed a new fee of $4 per
day on cars rented in the city limits. The money is going to help fund a new
sports arena. Then in April of this year, Arlington, Texas, put a 5% tax on
cars rented in the city to fund a new stadium for the Dallas Cowboys
(Arlington borders Fort Worth). Indianapolis increased its rental car tax
from 2% to 4% on rentals within the city limits as of July 1. Last month,
Revere, Mass., a town about a mile from Logan Airport outside Boston, added
a new $10 tax per rental-car transaction to fund an $18.5 million
police-and-fire station. Tom Ambrosino, Revere's mayor, says that rental
cars should be taxed because they add wear and tear to the roads and create
more traffic and pollution.
David Bach's "Latte Principle" ---
Click Here
A Penny Saved Compounds to Much More Than a Dollar Earned Jim Mahar provided the following two links:
Here's a post from
Yahoo Finance that details the author's
struggle with her husband to take his
lunch to work. But the essence of what
she says is really that
saving/watching your pennies is the key
to wealth. Her
thoughts:
I'm
convinced that for the average
person who wants to build wealth,
pennies count.
Pennies
have a funny way of snowballing into
dollars, and then hundreds, and then
thousands, especially if you use
them to buy the stocks of
well-managed companies. Consider the
story of a parking attendant who
earns $20,000 a year but has amassed
a $500,000 equity portfolio. Or the
one about a group of New Yorkers who
managed to save for a down payment
on a (very expensive, very tiny)
piece of the Big Apple. Or the clan
of seven dubbed "America's cheapest
family," who paid off their mortgage
in nine years on a salary of $35,000
a year.
I've seen article after article bashing
David Bach's "Latte Principle" -- the
idea that if you save on small spending
you can amass a large amount of wealth.
The main argument against it is that
people should be paying attention to
large expenditures -- that's where the
real difference is made. But Bach isn't
saying to ignore the expensive decisions
in life. He's just aware that for many
of us there are small amounts we spend
every day without really thinking about
how much they end up costing us. And
that if we just limit a few of them and
save that money, we can save a good
amount throughout the years.
Yahoo Finance has
a list of
ten money drains along with the annual
costs of each of them.
I view this as a
list of where we all can save a bundle
of money. Here's their list as well as
the annual amounts spent on each of them
(in other words, what you could save if
you eliminated them):
1.
Coffee -- $360 per year.
2. Cigarettes -- $1,660 a year.
3. Alcohol -- $3,650 per year.
4. Bottled water from convenience
stores -- $365 per year.
5. Manicures -- $1,068 per year.
6. Car washes -- $348 per year.
7. Weekday lunches out -- $2,350 a
year.
8. Vending machines snacks -- $260
per year.
9. Interest charges on credit card
bills -- $4,868 in interest (over
time).
10. Unused memberships -- $480 per
year.
Now of course I wouldn't suggest that
someone cut out everything and eliminate
all of life's pleasures. After all, we
should use part of our money to enjoy
ourselves. But for those people out
there looking for a way to save a bit
extra, for those who simply "can't make
it on what I earn", and for those who
would simply like to pay down their
debt, this is a pretty good list to
consider cutting down on -- even if it's
for a short period of time. And you
don't have to eliminate each of the
items above, simply consider cutting
back on them. There's still tons of
savings available by cutting your car
washes, manicures, or alcohol
consumption in half.
Jensen Comment
Of course eliminating all the above would not necessarily be wise. If there's
five feet of snow on the ground, I'm not about to wash my own car. Yet getting
the car washed in winter is more important than in summer if you live where they
salt and sand the roads. Spending $358 each winter car washes may well save
thousands if you can, thereby, double the life of your car.
New cars
lose 60% of value in the first four years. Most people waste more money on cars and interest charges for car
financing than any other single cash drain in their lives, including the cost of
housing. Cars are a necessity of life for most of us who have no convenient
public transportation alternatives. But frequent trading in of good cars for new
cars is a monumental mistake in finance. Leasing is also a synonym for
stupidity. Insiders call it "fleecing
a car." But I'm grateful for ignorant people who are constantly turning in
good owned or leased cars. Most of the cars I've owned over the years were
turned back leased cars. Great mechanics put my previously-owned or
previously-leased vehicles back in top shape, and I save a bundle relative to
their prior owners. If you must finance your next vehicle, please be a smart
shopper and be informed how dealers cheat ---
http://faculty.trinity.edu/rjensen/FraudDealers.htm
I lived in San Antonio for 24 years where over
500 cars per month are stolen. See the video ---
http://www.youtube.com/watch?v=TQPSXCqBqz4
My answer was to buy an old car (usually a station wagon) and make it look even
less desirable to the thousands of car thieves cruising about San Antonio by day
and by night. Little did thieves know that underneath the hood was a new power
train and other features that made my old heaps just like new. I always remember
a comedy show that featured a company in Los Angeles that would ghettoize a new or relatively-new car to make it look like a junk yard dog. My city cars were like that. My
wife and I were more safe since our cars were of little temptation to
carjackers. But my children generally crouched down in the seats or asked to be
let out a block away so their friends would not see them in my cars.
Next to car financing, the biggest mistake most people make is credit card
financing to a point where they seldom zero out what they owe on credit cards.
This is the "dirty secret" of that makes credit card companies suck billions
upon billions of dollars out of the economy ---
http://faculty.trinity.edu/rjensen/FraudReporting.htm#FICO
When we're about to go on long trips, I overpay monthly expenses ahead of time
so that if we're delayed in returning home we never have to worry about being
charged interest or late payment penalties. For example, I put huge credit
balances into our credit card accounts before going on a long adventure.
Do I buy into David Bach's "Latte Principle?"
Well yes and no. I do not believe in Spartan living so I can watch my savings
grow for the sake of watching my savings grow. I don't drink latte, but I also
opt for four-star or five-star hotels or lovely country inns when my wife and I
are on adventures. Expensive restaurants are generally wastes of money, but we go to them
when the mood is right and/or the friends we're with prefer a top restaurant.
Often you can eat just as well in the hotel's lounge as in the expensive
restaurant down the hall. There's a huge difference between what you splurge for on daily (like credit
card interest and latte) versus what you splurge for infrequently. When I used
to come home at night and have a couple of drinks daily, I drank cheap Boca
Chico rum in my cubalibras. Now that I don't drink daily, I splurge on fine wine
and expensive liquor once in a while.
In the final analysis, I would have to say that I live better in retirement
because I pretty much followed the "Latte Principle" before it was called "Latte
Principle." Most of my travels in life were
financed by others who made me sing (lecture) for my supper, but I enjoyed
the fellowship and strokes of these types of trips more than I did boring
leisure vacations. I spent as much as I could possibly afford on land and
houses, but these generally returned more than I paid for them. I spent as
little as possible on cars and preferred to buy finely-tailored suits in upscale second hand shops
(look for Second Looks in San Antonio and Austin).. I think most of the former owners
of my suits had passed on in life.
I never argue with my wife over money even when she tips almost as much as
the check itself. I never object when she hands out ten dollar bills to
receptionists, postal clerks, trash haulers, window washers, and bell
ringers outside the Wal-Mart stores. She's thrifty but likes a lot of new things
she generally buys on sale. She seldom shops in stores. But the UPS truck stops up here in the mountains
nearly every day. While my wife is wearing the "8" and "0" buttons off on phone in our den
(mostly she orders gifts), I'm on the computer ordering everything from books to
groceries to space heaters from
Amazon.com (a great, great place to shop). Our UPS driver's name is
Joe, and if I'm not at home he comes into the basement and assembles what he's
just delivered. Will your UPS driver do that?
I truly got my money's worth out of faculty clubs. I would've joined
expensive country clubs but I never had time for a round of golf even once a
week. Such is the price one pays for being a workaholic.
It's easier for a workaholic to live by the "Latte Principle." But most of us
workaholics are doing what we like best.
When my husband was in training to be a police
chaplain, the trainer began talking about the issue of stolen cars by
pointing to my husband and saying, “What kind of car do you drive?” Rob, my
husband, responded, “A ’99 Saturn wagon.” The police trainer told him, “You
can leave the keys in your car.”
INSTEAD OF LAYING A chocolate on your pillow, many
hotels have decided to present you with a markedly more unwelcome treat: sneaky
fees that can easily increase your bill by 20% . . . Charges have become a
common way to bolster revenues while keeping advertised room rates low, says
Robert Mandelbaum, director of research for PKF Consulting, a hotel-industry
research firm. "Surcharges of one degree or another have been in the industry
awhile now," he says. "It looks better than raising the room rates." Surcharges
also tend to move in cycles, says Mandelbaum. "It's supply and demand," he
explains. "If you want a room in a market like Manhattan, with an 85% occupancy
rate, you basically have to pay whatever the hotel wants you to." In slower
markets and off-seasons, hotels are less likely to tack on fees because there's
more competition for guests.
"Hotel Heists," by Kelli B. Grant, Smart Money, February 13, 2006 ---
Click Here
Academic Conferences that Rip Off Colleges: Do you
really want to participate in these frauds?
I've written about this before, but I want to elaborate.
Academics either unwittingly or willingly sometimes allow themselves to get
caught up in fraudulent "conferences." Spam is on the rise for these
frauds. The degree of fraudulence varies. At worst, there is no
conference and organizers merely charge an exorbitant fee that allows the paper
to be "refereed" and published in a conference proceedings, thereby giving
a professor a "publication." See
http://lists.village.virginia.edu/lists_archive/Humanist/v18/0633.html
Even when the conferences meet, they may be fraudulent.
Generally these conferences are held in places where professors like to travel
in Europe, South America, Latin America, Las Vegas, Canada, the Virgin Islands,
or other nice locations for vacations that accompany a trip to a conference paid
for by a professor's employer. The professor gets credit for a
presentation and possibly a publication in the conference proceedings.
But wait a minute! Here are some warning signs for a
fraudulent conference:
Even though there is a high registration fee, there are no
conference-hosted receptions, luncheons, or plenary sessions. The
conference organizer is never called to account for the high registration
fee. The organizer may allude to the cost of meeting rooms in a hotel,
but often the meeting rooms are free as long as the organizer can guarantee
a minimum number of guest who will pay for registered rooms in the hotel.
All or nearly all submissions are accepted for presentation.
The only participants in most presentation audiences are
generally other presenters assigned to make a presentation in the same time
slot. There is virtually no non-participating audience. Hence
only a few people are in the room and each of them take turns making a
presentation. Most are looking at their watches and hoping to get out
of the room as soon as possible.
Presenters present their paper and then disappear for the
rest of the conference. There is virtually no interaction among all
conference presenters.
The papers presented are often journal rejects that are
cycled conference after conference if the professor can find a conference
that will accept anything submitted on paper. Check the dates on the
references listed for each paper. Chances are the papers have few if
any references from the current decade.
These conferences are almost always held in popular tourist
locations and are often scheduled between semesters for the convenience of
adding vacation time to the trip. They are especially popular in the
summer.
August 31, 2006 reply from Bob Jensen to a professor who
proposed rating conferences.
Hi XXXXX,
Publishing ratings of conferences will be almost impossible due to
endless debates that will arise over defining criteria.
I wish you luck if you carry through with this effort, but I think that
it will be very difficult to shut down fraud conferences. Organizers of
fraud conferences are very good at their craft, and the professors who
attend them are desperate for new lines on dusty old resumes. The professors
who attend are often very good teachers frustrated with blank spaces each
year by blank spaces for evidence of research in their performance reports.
Hence, the "teachers" who attend fraud conferences will continue to do so
even if you take the time and trouble to warn them. These professors want
the lines on a resume and an expense-paid vacation in a terrific tourist
locale. Interestingly, many of these professors justify this by truly
believing that they are badly underpaid and are fully justified for
reimbursed travel for R&R if nothing else.
Since you are only listing the good conferences, college deans and
administrators will not necessarily be forewarned of the bad conferences
since you can't be expected to list 100% of the good conferences in all
fields of business, finance, and economics. Most fraud conferences in our
discipline are very generic and cover all fields of business and economics.
It will be very difficult to track over 1,000 conferences (most legitimate)
across such a wide path.
I think the best we can do is plead with the academy, and possibly our
reimbursing colleges, to demand accountability of registration fees for
conferences. They should be treated a bit like charitable organizations
where conference organizers must give an expense accounting and disclose how
much of the conference revenues go to personal profit and "administrative
expense."
Bob Jensen
Added September 9, 2006 by Bob Jensen
The issue in general is not one of reviewing papers
or possibly even acceptance rates.
It is important to provide a listing of the names
and affiliations of the reviewers who screen submitted papers. If the
reviews are only conducted by the conference organizer, or employees of the
organizer, then the review process is highly questionable.
The main issue for all academic conferences should
be accountability and transparency of the registration fees and possible
sharing in hotel room rates by conference organizers (which is not common).
It's common for hotels to provide free meeting rooms if there are a
sufficient number of paying guests in the hotel. In fact there are usually
no fees for the meeting rooms other than fees for beverages --- some
questionable conferences will not even provide beverages for sessions.
Without beverage, meal and reception costs, there are very few fees for
organizing many conferences other than the cost of the name tags and
possibly the cost of having someone register participants (which is often
the same person who organized the conference).
It's become much cheaper to advertise conferences in
the days of email. If proceedings are published only electronically, the
cost of compiling proceedings is minimal for papers submitted in MS Word.
Another issue is audience size. Are there any
keynote or plenary sessions with large audiences? Are the concurrent
sessions of a decent size or are most audiences comprised mainly of
presenters in the same scheduled session? For example, if there are four
presenters, is the average audience size larger then eight? How many remain
when the last speaker begins to present in most sessions?
How many speakers remain to participate in the
conference after they have made their presentations?
How many scheduled speakers don't show up at all? I
know of some well known accounting professors who got their travel to Europe
or elsewhere paid by their universities and then don't even show up for the
conference. They sometimes report to their colleges that plane or train
delays prevented them from reaching the conference even though they did
manage to visit the homes of their friends or relatives. Often they paid the
registration fees in advance which thereby become wasted money.
It's all a matter of personal ethics!
Bob Jensen
Question
Is your academic association negotiating a good deal for conference hotel rooms
and airline fares?
The
National Association of College and University Business
Officers last week nailed at least $4 million to the fall
tuition bills going out to strapped families and students
this month. NACUBO gathered more than 1,000 higher education
business officers and 200-plus vendors at a Mardi Gras in
New Orleans.... I mean, an annual meeting, “Crossroads: New
Beginnings Built on Valued Traditions.” Those traditions
being, for example, free food, an umbrella from Microsoft in
the registration bag and a golf tournament with the Beverage
Cart sponsored by
Higher
One, a cash-card company, I think.
. . .
Did NACUBO
negotiate premiums as high as 58 percent for hotel rooms in New Orleans? I
was looking up prices on Web hotel sites, and I scrolled down to the
featured hotels on the NACUBO pages. I thought I’d made a mistake – NACUBO
prices were higher. How hard can negotiating a deal be in Katrina-ravaged
New Orleans? Take a look.
NACUBO Price
Web Price
Difference
Premium
Hilton
$175
$119
$56
47%
Wyndham
$169
$109
$60
55%
W New Orleans
$169
$107
$62
58%
Marriott
$167
$129
$38
29%
. . .
I have yet to
meet anyone who accepts accountability for the ever-rising
costs of a higher education. As a society, we’ve never known
more about the mind and learning and cognitive science. New
knowledge and great need in other fields breed innovation.
How about a better way to deliver an education? The
four-year bachelor’s degree, the big cost driver in higher
education, is a construct from the University of Bologna in
the 1400s. The pedagogical constraint was the virtual
absence of books. Education required gathering students in a
room and the professor reading the book to them. I pitched
this idea many times to NACUBO chiefs. Not the answer, but
let’s tackle the question. No luck, and costs keep rising,
and back interest on student loans compounds.
Continued in article
Jensen Comment
Years ago, a well known academic Association in which I'm a member negotiated
airline fares (to a conference in Hawaii) from a Florida travel agency that were
much higher than fares available directly from the designated airline (Delta)
without going through the Association's "special fare" travel agent. Complaints
from the membership subsequently led to various happenings including the
dropping of that travel agency used for years by the Association.
It may be difficult for the average consumer to
evaluate the sometimes grandiose claims that various supplements, vitamins,
and other such products make on their labels and such. One way to learn
about products is ConsumerLab.com, which provides independent test results
and information in order to assist consumers and healthcare professionals to
evaluate such products. The casual visitor will want to begin by looking
over the "Latest Results" area on the homepage, which provides some
information on their recent tests on melatonin sleep supplements and other
related nostrums.
Visitors looking for information on specific
products will want to direct their mouse to the "Laboratory Test Results"
area. Here they can look through a list of product evaluations that include
nutrition bars, ginkgo biloba, and the ever-popular echinacea. The site is
rounded out by a very nice area on "Recalls and Warnings, which (as its name
suggests) includes information on recent notices posted by the Federal Trade
Commission and other such agencies.
"The EPA tests don't correspond to the way most of
us drive," Kleman said. "Their tests represent driving on a 75-degree day on
a road with no curves or no hills, which is ideal for maximizing fuel
economy."
The EPA tests haven't changed in 30 years, so they
don't take into account today's driving conditions. There's a lot more
congestion, idling in traffic, and widespread use of air conditioning.
Consumer Reports runs its own fuel economy tests.
The engineers say these tests—done outdoors—give a much more accurate
assessment of the actual mileage you'll get from a car.
Consumer Reports' tests often turn up results that
are substantially different from the EPA's—especially for stop-and-go city
driving.
For instance the EPA says you'll get 22 miles per
gallon with a Jeep Liberty diesel, but Consumer Reports found you'll get
just half that—11 miles per gallon.
With a Chrysler 300 C, the EPA says you'll get 17
miles per gallon, but Consumer Reports' tests get only 10.
As for a Honda Odyssey minivan, the EPA gets 20
miles per gallon; Consumer Reports gets just 12.
The differences Consumer Reports turned up with
hybrids in city driving are even greater. The EPA says the Honda Civic
hybrid gets 48 miles per gallon; Consumer Reports measured just 26.
Continued in article
Free Lunch, Dinner, and/or Night in a Post
Resort
Beware of those offers of a free lunch, free dinner, free night
in a condo, etc. that end up being high pressure sales affairs that pray on the
elderly and other vulnerable sectors of society.
Who's Preying on Your Grandparents? Back in February, Jose and Gloria Aquino received a
flier in the mail inviting them to a free seminar on one of their favorite
topics: protecting their financial assets. As retirees, they were always on the
lookout for safe investment strategies as well as tips on how to make sure they
didn't outlive their savings. Besides, the flier promised a free lunch for
anyone attending the workshop, so what did they have to lose? Potentially
plenty, they would soon discover.
Gretchen Morgenson, "Who's Preying on Your Grandparents?" The New York Times,
May 15, 2005 ---
http://www.nytimes.com/2005/05/15/business/yourmoney/15vict.html?
Protect Yourself From Pretexting
"'Pretexting' is common in business world," by Peter Svensson,
Yahoo News, September 13, 2006 ---
Click Here
Although the boardroom scandal at Hewlett-Packard
Co. made the practice more widely known, buying phone records or other
personal information obtained by "pretext" calls appears to have been common
in parts of the business world. ADVERTISEMENT
In a letter to the House Energy and Commerce
committee, which was investigating the issue this year, data broker PDJ
Investigative Services described its customers as "law offices, repossession
companies, financial institutions, collection agencies, bail enforcement
agencies, law enforcement agencies and various private investigation and
research companies."
"Those businesses have a common need. That need is
to be able to locate individuals, who do not wish to be found," another data
broker, Universal Communications Co., wrote to the committee.
For example, banks sought to find debtors who
defaulted on loan payments, and car finance companies traced people who
stopped paying their auto loans and disappeared, Universal Communications
said.
PDJ sold records of local and long-distance calls
as well as non-published phone numbers and home addresses, according to an
old price list submitted to the House committee.
In its letter, PDJ said it did not perform pretext
calls itself, but paid independent vendors for the information, or searched
public databases and the Internet.
Robert Douglas, a privacy consultant in Colorado
who closely follows pretexting and other investigatory techniques, said such
independent vendors use sophisticated methods to fool customer service
representatives into giving out information.
However, the attention given to pretexting in the
past two years — the HP scandal is just the latest in a series of
revelations — has made data brokers restrict sales of certain kinds of
information. Cell phone companies, one of the major targets of pretexters,
also have fought back by launching lawsuits.
Continued in article
"Protect Yourself From Pretexting," by Kim Zetter, Wired News,
September 13, 2006 ---
Click Here
Pretexting has long been a tactic used by private
investigators and others to obtain personal information and records about
people. Also known as "social engineering" in the hacker realm, it involves
using ploys to obtain data and documents.
The ploys range from the creative to the
straightforward. In the Hewlett-Packard case, outside investigators hired by
the company simply posed as the victims -- HP board members and journalists
-- to obtain their phone records from phone companies.
On the more inventive side, Verizon Wireless last
year accused online data brokers of making
hundreds of thousands of calls to the company's
customer service lines posing as fellow Verizon employees with the company's
"special needs group," a nonexistent department. The callers obtained
customer account information by claiming to be making the requests on behalf
of voice-impaired customers.
Against that kind of initiative, it seems like
there's little an ordinary consumer, Silicon Valley director or tech
journalist can do. But there are some options.
Buy a TracFone. There's a reason
law enforcement agencies hate disposable cell phones: They don't keep a call
detail record. This solution isn't convenient or desirable for everyone, but
if you're concerned about your phone records being obtained fraudulently by
third parties, or subpoenaed by authorities, a prepaid phone service offers
the best privacy.
Prepaid phones range in cost from $20 to $80 and
usually come with a set number of minutes to start, which can be augmented
by purchasing prepaid calling cards for $20 to $100.
Naturally, your prepaid phone number will still
appear on the calling records of people you call, and who call you. But
because the prepaid services don't require you to provide your name, the
phone number alone will be of limited use to snoops. Be sure to pay for your
phone and prepaid phone cards with cash, and only add minutes through the
phone's built-in interface -- don't use the service provider's website,
which could track your IP address.
Don't Tell on Yourself. A little
bit of information can help scammers get a lot more; in the HP case, the
investigators used the last four digits of their targets' Social Security
numbers to authenticate themselves to the phone companies they tricked.
That's why the FTC advises consumers to guard
personal information such as Social Security numbers, birth dates, account
numbers and passwords to prevent someone from using the information to
impersonate you and obtain your records. To that end, don't provide personal
information over the phone, in an e-mail or in person to anyone unless you
initiated the contact. Even then, be guarded about providing legitimate
agencies with more information than they need.
Choose Your Own Passwords.
Companies love using Social Security numbers and dates of birth as
authentication, despite the fact that neither bit of info is very private.
Insist that your health insurance provider and phone companies allow you to
use a customer-designated password or a unique identifying number instead.
Don't let them bully you into using your Social Security number, and use
different passwords for different accounts.
Shred It. Cross-shred documents
that contain personal information before discarding them, and do not
leave such documents lying around where maintenance workers and visitors
can see them.
Leave Your Vital
Stats Offline. Do not publish your birth date or other
personally identifiable information about you or your children on your
MySpace or Facebook page. It's obvious, but worth repeating.
Don't Pay Bills Online. Yes,
we know it's convenient, and we know that banks and utility companies
pressure customers to establish online billing accounts to eliminate the
cost of paper records. But resist the urge. Online accounts put you at
risk no matter what businesses say.
Websites are seldom as secure as companies
insist they are. Even when they are secure, smart people like you can
sometimes still get tricked into using a spoof site that looks exactly
like the real thing, or wind up with malicious software that records
every keystroke on their computer and passes the info on to a hacker.
While we're on the subject, don't file your
taxes online either. Yes, it's convenient. No, it's not secure. It's
possible that hackers can obtain the same information by hacking a
vulnerable data server or stealing an employee laptop, but that's out of
your control. How you file is in your control.
See If You've Already Been Hit.
In an internal investigation of pretexted records, AT&T identified about
2,500 of its customers as possible victims. And that's just one phone
company. To find out if you've already been a victim of phone record
pretexting, contact your telephone company in writing to determine if
anyone has requested your records. If you've pissed off HP recently, do
it today.
Lobby for Change. Pressure
your congressional representatives and the FCC into forcing phone
companies to improve the security of customer records. The Electronic
Privacy Information Center offers a number of
suggestions for boosting security, include
forcing carriers to maintain an audit trail to track whenever a
customer's records are accessed, and by whom.
EPIC also suggests that phone companies be
required to notify customers when someone has breached their records.
Phone companies, in recent lawsuits against pretexters, have admitted
being duped hundreds of thousands of times into handing over customer
records to unauthorized people. Yet current breach-notification laws
don't cover these records, since they're not considered personally
identifiable information.
Additionally, phone companies should be forced
to notify customers of changes to their account, such as when someone
establishes a new online billing account for their phone number. Many
banks already send written verification to customers by mail if the
customer or someone else requests a change to their account password or
contact information. Had AT&T done this, HP board member Tom Perkins and
others caught in the HP investigation would have been alerted back in
January that someone was trying to access their records online.
Charity Frauds
How to check on a charity or church before you donate
You can begin with IRS Form 990 disclosures, but these may be more misleading
than helpful. You can access them from Guidestar at
http://www.guidestar.org/index.jsp
Guidestar also provides salary disclosures for top executives in the charity.
However, funds can be diverted by cheats in other ways.
Research Tools
Analyst Reports
Charity Check
Grant Explorer
Data Services
Nonprofit Compensation Reports
Salary Search
"Giving Freely—And Wisely: One site names preachers who may be
misusing money and suggests that you 'prayerfully' consider giving to other
ministries instead," Jane Bryant Quinn, Newsweek, December 18, 2006, Page
51 ---
http://www.msnbc.msn.com/id/16127630/site/newsweek/
Unfortunately, you can't always believe what the
(IRS Form) 990 says. It's supposed to show how much
the nonprofit spends on actual services, as opposed to fund-raising and
administration. But the law isn't much enforced. In a report covering part
of the 1990s, the General Accounting Office found that 64 percent of public
charities claimed to have zero—zero!—fund-raising expenses. Do you believe
that? Neither do I.
Some of the rating services
adjust for these problems. Uncharitably, they often slam each other's
methods while touting their own. I'm a civilian in these wars, so my advice
is to look for good grades from every source. Start your research here:
1. The Better Business Bureau Wise Giving Alliance (Give.org).
It currently posts reports on more than 900 nonprofits, testing them by a
number of standards including good governance. About 65 percent of them
pass. The rest fail, or refuse to be evaluated (a bad sign, no matter what
excuse the charity gives).
2. American Institute of Philanthropy (CharityWatch.org).
It's the toughest of the bunch, rating more than 500 charities on a scale of
A+ down to F. Because it disregards certain, potentially suspect, expenses
and donations, it fails some nonprofits that the other raters approve.
Readers of this column can get its latest Charity Rating Guide free from AIP,
P.O. Box 578460, Chicago, IL 60657.
3. CharityNavigator.org rates 5,100 nonprofits on a
scale of zero to four stars. This site draws only from a nonprofit's latest
990 form, which could mislead. But I like its Top Ten lists, such as 10
Charities Overpaying Their For-Profit Fund-Raisers.
4. MinistryWatch.com rates more than 500 evangelical
groups on a scale of 1 to 5 stars. It's an ardent advocate for financial
disclosure. The site names preachers who may be misusing money and suggests
that you "prayerfully" consider other ministries instead. Withholding that
advice, says MinistryWatch.com, would be "tantamount to condoning sin."
Hear, hear.
5. The Evangelical Council for Financial Accountability
(Ecfa.org) accredits Evangelical churches and charities based on such
standards as audited financial reports and ECFA's own field reviews. If your
group hasn't joined (or is on the lists of those that left) you should ask
why. There's no comparable service for Jewish, Muslim or Catholic
organizations.
You'll find other sources. GuideStar.org gives no
ratings, just access to 990s for nearly 700,000 charities. Pennsylvania's
Department of State lists nonprofits that ran into trouble there. They may
be fund-raising in other states.
Still, most people donate simply because someone
asks them to, says William Meehan, chair of Philanthropic Research, parent
of GuideStar. Charity ratings haven't had much impact, because they're
flawed and not enough people follow them. Besides, the ratings don't help
you choose among similar charities. For that, you need to know how well they
do their jobs. That's the next step—and a new Web site should help it along.
Watch for GreatNonprofits.org, launching next spring. People familiar with
specific charities—clients, donors, staff and volunteers—will be able to
post opinions there, for you to read before you decide to give.
Make the
business of giving your business. If you’re a consumer or a businessperson,
it’s important to know where your donation dollars end up. Ask questions
about the nature and activities of the organization to which you’re
considering donating. That’s the only way you can be sure the money you
contribute will support a worthwhile cause. And if you work for a nonprofit
organization, you need to know what are acceptable solicitation practices.
This Web site can help. It offers useful tips for consumers, business people
and nonprofit organizations. If you – or someone you care about – is
considering a charitable donation, first read our Charity
Checklist. And if you represent a charitable organization, check out Raising
Funds? What You Should Know About Hiring a Professional.
Throughout the year,
and especially during the holiday season, you probably get appeals in the mail
or by telephone urging you to contribute financially to a good cause. But the
U.S. Postal Inspection Service warns those who want to give that there are
plenty of fraud operators out there who are scheming for your money--and the
last thing on their mind is charity. Not only do such come-ons bilk you of
your money, but they also put money you intended for the needy into the hands
of con artists.
But just how do you
know who is legit and who isn't? The Salvation Army and the American Cancer
Society--those are among the obviously worthy organizations. But what if you
receive a charitable solicitation from an organization you've never heard of?
To guard against being taken advantage of, the Postal Inspection Service
offers the following guidelines when donating to charities:
Check out
organizations you're unfamiliar with, or whose names are similar to well-known
charities. You can do this by visiting the Bureau's
Wise Giving Alliance Web site, or by contacting them at this address:
BBB Wise Giving Alliance
4200 Wilson Blvd., Suite 800
Arlington, VA 22203
If you're unfamiliar
with the charity, ask for its annual report and financial statement. If the
organization is not willing to provide these financial documents, you should
immediately be suspicious.
Make checks payable
to an organization only--never an individual.
Be suspicious of
solicitors who say they will accept your donation in cash only. (Con artists
want cash so there will be no paper trail for authorities to follow.)
Report any
suspicious organizations to your local postmaster or Postal Inspector.
The Postal Inspection
Service encourages giving others a helping hand, but cautions those who give
to make sure that the organization they're giving to is a legitimate charity,
and not one that was set up for the sole purpose of bilking the public.
Cyber-begging is not new, but a free web service
called Dropcash has linked data from payment service PayPal with that of
blogging system TypePad to make it even easier to create your own
fundraising webpage - complete with progress bar. The Guardian, September 9, 2004
Here's a guide to finding -- and
interpreting -- charity information on the Web.
WATCHDOG SITES
Your first stop when researching a
charity should be a watchdog site. These groups offer information about
nonprofits and often rate their efforts.
Remember, though, that these sites
come with some important caveats. Many of them rely on information in
charities' IRS returns, called Form 990s. And that information can be quite
old by the time the watchdogs get it. Charities file their returns as much
as 11 months after the end of the fiscal year, and then it can take months
for the IRS to process the form and make it available. Meanwhile, if the
charities aren't forthcoming on their IRS return, the watchdogs' data and
analysis will end up skewed.
With that in mind, here's a look at
some of the best information sources out there.
CharityNavigator.org, provided by the nonprofit
group Charity Navigator in Mahwah, N.J., rates more than 5,000 U.S.-based
charities, using information in their Form 990s. The site is free to people
who register.
For an idea of how the rankings work,
consider the group's take on United Way of America. The charity, which is
based in Alexandria, Va., gets three stars out of four for "Efficiency," in
part because 90% of its budget went to programs, and it cost only two cents
for the program to raise a dollar.
The organization also gets three
stars of four for "Capacity," or its ability to sustain itself over time.
The group had annualized revenue growth of 21% from 2002 through 2005 and
had enough working capital to operate for about eight months without any
income.
If you want to look at the raw data,
GuideStar.org, a product of Philanthropic Research
Inc., in Williamsburg, Va., is the go-to organization for copies of a
charity's Form 990. It covers 1.7 million groups and has about 3.1 million
Form 990 images, many of which are available free to people who register.
The site makes money from a
combination of donations and subscriber fees, so not all of the content is
free. For instance, a prospective donor can see that the March of Dimes
Foundation wanted to continue a $75 million education, awareness and
research campaign on premature birth in 2006, and that it has more than
1,000 employees.
To get other details, such as the
charity's income and assets, you need a subscription. That will run either
$30 or $100 a month, depending on the depth of information you want and
other factors.
Give.org, operated by
the BBB Wise Giving Alliance in Arlington, Va., reports on whether the
approximately 1,200 charities it has evaluated meet the alliance's 20
"Standards for Charitable Accountability." It doesn't do ratings or
rankings.
The group's free reports provide
information on who runs a charity and list its income, expenses, assets and
sources of income. The reports also describe the group's programs; in some
cases, this includes a breakdown of how much the group spent on them.
To meet the alliance's standards,
organizations have to do everything from spend at least 65% of total
expenses on programs to provide a clear privacy policy online. Charities
that come up short will have a report on exactly where they failed.
The NAACP, for instance, fails on
three standards, the site says. Its annual report doesn't include the
recommended financial information, it doesn't include financial information
or a recent Form 990 on its Web site, and it doesn't have a privacy policy
with the recommended information on its Web site. Give.org says it was
unable to evaluate six other standards, because it's waiting on an
information request to the NAACP.
The NAACP says many of the requested
items -- like the annual report and privacy policy -- are on the site, even
if they lack the level of detail desired by the alliance. It says the
group's Web disclosures are in line with its peers and that more specific
information, like a copy of the Form 990, can be obtained by contacting the
NAACP directly.
Moreover, an NAACP spokesman points
out that each watchdog site has its own criteria and agenda, which can make
it difficult for nonprofits to satisfy every set of standards. He recommends
checking multiple sources to get a more accurate picture of the
organization.
FIGURING IT OUT YOURSELF
So, what if the charity you're
interested in hasn't been reviewed by a watchdog group?
First, get some information at the
IRS site,
IRS.gov. Search for Publication 78, which has a
list of nonprofit groups that qualify for tax-deductible donations. Next up:
Request a Form 990. The IRS return, required by most organizations with
annual revenue of more than $25,000, will have much of the financial
information you need.
100% of its money on programs
isn't likely to have much longevity, but a program that spends too
little could be more interested in enriching staffers then helping the
underprivileged.
But be careful when weighing
ratios, says Charity Navigator President Trent Stamp, since the expected
program expenses vary depending on the work that's being done. Food
banks, for instance, devote a higher portion of expenses to programs,
say 90% or so. Museums, in contrast, spend about 70% of the budget on
programs.
So, if you're investigating a
charity, compare its numbers with those of another group that's closely
related. For instance, you might compare the Committee for Missing
Children in Lawrenceville, Ga., with the National Child Safety Council,
since the groups do similar work and have similar revenue. You would
find that the two have strikingly different spending ratios: The
Committee for Missing Children spends 11% of its budget on programs and
87% on fund raising, according to IRS returns, while the National Child
Safety Council spends 81% on programs and 7.8% on fund raising.
David Thelen, chief executive of
the Committee for Missing Children, says the fund-raising costs seem
disproportionately high because the group has to rely on pricey
telemarketing. He says the group doesn't have the same cachet as larger
organizations, which has made it difficult to get corporate donations or
gifts from individuals that aren't solicited by a third party.
It's also important to make sure
the IRS return accurately conveys the organization's behavior, and isn't
full of one-time expenses. A charity may have low program spending one
year because it's investing in a new computer system that is going to
make the organization more productive down the road, for instance.
In the case of the Committee for
Missing Children, IRS returns for the past three years show that program
expenses were less than 10% of the budget in 2005 and 2004. The National
Child Safety Council, by contrast, spent just 58% of the budget on
programs in 2004, but the number increased to 75% in 2005 and 81% in
2006.
Mr. Thelen at the Committee for
Missing Children says that while the program percentages may seem small,
it doesn't change the fact that the money is going to good use. That 10%
or so distributes pictures of missing children, provides literature on
child recovery and connects parents with help here and abroad.
Meanwhile, the National Child Safety Council says it understated program
spending prior to 2005, due to a misunderstanding of IRS rules.
If the charity seems to be having
an off year, call or email to find out why. The nonprofit may have a
great reason. But if it answers with a fuzzy explanation or won't take
the call, it may be time to move on.
Checking executive salaries,
which are listed on the Form 990, can also be helpful. Donors are
sometimes dismayed by what they perceive as exorbitant wages, but it's
important to take the numbers in context. Many nonprofits are complex,
multimillion-dollar organizations that require experienced managers -- a
labor pool that isn't cheap.
If a salary seems high, check
salaries at charities that are doing similar work and that are a similar
size. The alarm bells shouldn't start ringing unless executive
compensation is out of line with comparable organizations.
Donors who check the Form 990 may
also want to look at the list of "Officers, Directors, Trustees and Key
Employees" toward the middle of the form. An organization that has
multiple family members on the payroll as directors, or that pays the
president a nominal amount but shells out hundreds of thousands of
dollars to someone in a lower-level position, deserves some extra
scrutiny.
It's also a good idea to do a Web
search on the organization and its officers, since the mainstream media
-- along with bloggers and forum members -- often flush out problems
before the IRS pulls a charity's tax-exempt status.
A short conversation with a
staffer can also be helpful. Ask whether the organization has a written
privacy policy that's available for review. (Sometimes nonprofits will
sell the names of donors who contribute nominal amounts, say $10 or
$50.) Also look into progress the organization made the previous year
and check its goals for the year to come. Someone in the group should be
able to answer those questions in a clear way.
SHARING THE WORK
Vetting a charity may seem
daunting, or too time-consuming. But people with charitable inclinations
don't have to go it alone. A number of donors are joining "giving
circles." Members generally pool money and divide the research among
members of the group. The idea has gained popularity in recent years,
with the Forum of Regional Associations of Grantmakers in Washington
identifying more than 400 giving circles in 2006, up from about 200 in
2004.
The circle investigates charities
as a group and then decides how to distribute the money. In some
circles, decisions are made by consensus, while others let majority rule
or let individual members vote with their dollars.
Margae Diamond, an executive at a
donor-advised fund in San Francisco, joined the Traveling Giving Circle
to Kenya, a project of the Clarence Foundation, last year. The group
went to Africa and visited six charities in six days. The International
Child Resource Institute in Nairobi, Kenya, completed some of the
background research, but the 19 members of the circle did plenty of
reconnaissance on the ground.
They interviewed the program
leaders and talked with many of the people receiving services. They also
investigated conditions at the charities, which helped them spot larger
needs or areas where the charity might have been looking for a quick
fix.
Ms. Diamond says the group made
better decisions about giving because it was able to draw on the
knowledge and input of so many people. "It was very, very thorough," Ms.
Diamond says. "We never stopped talking about it."
The Charitable Foundation Scam Donors get those perks because they agree to relinquish
control over the money. But since they appoint the organization's board, they
can retain a great deal of influence over it. Regulators and lawmakers suspect
that many wealthy people have used these organizations more for tax planning
than for any charitable aim and are pushing for tighter rules as part of a
broader crackdown on charitable tax exemptions. "I'm deeply disturbed that with
a good number of supporting organizations, people are taking multimillion-dollar
tax deductions for what they claim are contributions to charity, yet too often
the result is a thimbleful of benefit to charity," said Senator Charles E.
Grassley, the Iowa Republican who is chairman of the Senate Finance Committee.
Stephanie Strom, "A Tax Benefit for Big Donors Often Bypasses Idea of Charity,"
The New York Times, April 25, 2005 ---
http://www.nytimes.com/2005/04/25/business/25taxes.html?
This comes as no surprise: Charity has
always afforded scam opportunities The tax laws
allow favorable treatment for donations to charity and for institutions
ostensibly dedicated to good works. But for every tax break that's legal,
there's a scheme to stretch it too far. Abuse in the charitable world is on the
rise, IRS Commissioner Mark Everson told the Senate last week. Charitable scams
account for part of the billions lost each year in fraudulent deductions, though
the IRS can't say exactly how much. The Senate Finance Committee is looking into
the abuses, which include people who take inflated deductions for dubious gifts
and foundations that squander money on lavish salaries. In either case, the
federal treasury is cheated, and other taxpayers must make up the losses. Such
charitable scamming turns tax laws on their head: Deductions meant to encourage
public good works are being hijacked by cheaters for their own benefit. Leaders
in the non-profit world should be the toughest on these scams, which at times
have soured the public on giving. Instead, they've acted only after Congress
pushed them and have called for only milquetoast reforms.
"As charitable cheating rises, so does cost to taxpayers Non-profits fail to
enact tough reforms to root out growing scams," USA Today, April 11,
2005, Page 12A ---
http://www.usatoday.com/printedition/news/20050411/edit11.art.htm
Profiteers
Heading Legitimate Charities Charity executives haul home the lion's share striking
disparity between what nonprofit fat cats make and industry norms — hundreds
of thousands of dollars in many cases — illustrates a troubling lack of city
oversight, officials say. A whopping 200 executives at organizations that
provide services for the city's have-nots take home in excess of $150,000 a
year. That's more than the salaries of City Council members, the public advocate
and all the city's district attorneys. Another 12 nonprofiteers make more
than the top nonprofit earners in the entire state based on the budget size of
their groups, according to a survey of 2002 salaries by the nonprofit watchdog
Guidestar.org.
"$WEET CHARITY FOR EXECS AT NONPROFITS," New York Post, March
13, 2005 --- http://www.nypost.com/news/regionalnews/42413.htm
Possible
new assurance service clients for CPA firms A number of major international charities are opening
their doors for the first time to outside inspectors, allowing them to certify
that donations are spent as advertised. The charities say they hope
thorough inspections and a new industry seal of approval will assuage public
fears of donations being misused. The nonprofits are also trying to keep ahead
of a movement in Congress to impose regulations on the fast-growing but largely
unsupervised world of nongovernmental organizations.
Michael M. Phillips, "Big Charities Pursue Certification To Quell Fears of
Funding Abuses," The Wall Street Journal, March 9, 2005; Page A1 ---
http://online.wsj.com/article/0,,SB111033202546074217,00.html?mod=todays_us_page_one
Just because a charity Web site looks authentic does
not mean it is authentic. Also, don't fall for telephone
solicitations. These crooks have no conscience!
The FBI is investigating dozens of bogus Web sites
that prey on potential tsunami donors by mimicking sites of well-known
charities, FBI Special Agent Tom Grasso said Monday. The fake sites, which
have surfaced in recent days, range from crude to accurate replicas that use the
charities' logos and photos.
Edward Iwata and Martin Kasindorf, USA Today, January 11, 2005 --- http://www.usatoday.com/printedition/news/20050111/a_emailscam11.art.htm
Bob Jensen's threads on charity frauds are at http://faculty.trinity.edu/rjensen/fraudReporting.htm#CharityFrauds
Question
What's "affinity fraud?"
Answer: See below
A key fund-raiser for Harvard University used his connection to the school to
defraud benefactors out of millions of dollars, showing how sophisticated
professional investors can be just as vulnerable as amateurs.
Karen Fleiss had good reason to trust
Gregory Earls.
Both had children at Harvard College
and they knew each other as donors to the Harvard Parents Fund, which Mr.
Earls headed for a time with billionaire Robert Bass. Mr. Earls was a deal
maker with a penchant for high-risk investments; Ms. Fleiss was a hedge-fund
manager.
So when he asked her to invest in one
of his companies in 1998 -- and intimated that Mr. Bass might, too -- she
opened her hedge fund's checkbook, eventually putting almost $1.8 million into
the venture.
"He had a Southern accent and a
big smile, and he would say, 'Karen, I have a deal for you,' " she
recalls. "By the time he was finished, it sounded like the deal of a
lifetime."
It wasn't. When she cashed out, all she
had to show for her investment was $50,000. Ms. Fleiss was one of three
wealthy Harvard parents and alumni who recently testified about being bilked
by Mr. Earls. The authorities say he stole much of the money they invested
with him, siphoning off cash as he passed it through another company he
controlled. In the ledgers, the skimmed funds were camouflaged as legal,
management or accounting fees.
All told, prosecutors say, Mr. Earls
defrauded more than 100 investors of $13.8 million. They say Mr. Earls
diverted $1.2 million to an education trust fund for his own children, and
$4.3 million more to other personal accounts.
The Harvard connection and other
fund-raising activities gave Mr. Earls "access to a pool of potential
investors who were very wealthy, and he knew how to talk those people into
investing with him," prosecutor William Stellmach said at the trial.
In April, Mr. Earls was convicted of 22
counts of fraud in Manhattan federal court after one investor took his
suspicions to prosecutors. In court, Mr. Earls acknowledged moving investors'
money to various accounts he controlled -- which he attributed to "sloppy
business practices" -- but denied stealing.
His lawyer, Barry Coburn, said in court
that Mr. Earls couldn't have had criminal intent to steal because he kept
records of the amounts diverted. The investors "lost their money because
the Internet bubble expanded and expanded and popped," Mr. Coburn argued.
They didn't have "some kind of money-back guarantee."
Mr. Coburn says his client declines to
comment on the details of his case. "Mr. Earls has been convicted by a
jury," Mr. Coburn says. "It would not be appropriate in my view for
us to respond to particular factual allegations in this context given that Mr.
Earls is facing sentencing."
As described by prosecutors, Mr.
Earls's scam appears to be a variation of "affinity fraud," in which
victims are lulled into dropping their guard by mutual ties to the same
religious organization or ethnic group. Mr. Earls cultivated important
contacts through his work for the Harvard Parents Fund and the Boys &
Girls Clubs of Greater Washington, D.C. -- and used data supplied by Harvard
to assess likely investors.
The case shows that sophisticated
professional investors can be just as vulnerable as amateurs. Much of the
money Mr. Earls stole came from a handful of wealthy Harvard benefactors,
including a former aide to junk-bond impresario Michael Milken. Even Harvard
found itself short-changed. Mr. Earls reneged on three separate pledges
totaling $275,000 that he made while he headed the parents fund, a school
official testified at his trial.
Mr. Earls, 59 years old, grew up in
Bluefield, W.Va., and attended the University of Virginia. In the 1970s, after
stints as a gym teacher, mutual-fund salesman and stockbroker, he recruited
others to invest with him in projects including movies, theaters, apartments
and microwave-oven retailers. The 1980s saw him organizing investment groups
that bought stakes in numerous enterprises.
In the mid-1990s, Harvard's development
office took notice of Mr. Earls as a potentially productive fund-raiser for
the Harvard Parents Fund. He was a big donor to the school, and three of his
four children eventually enrolled there. His lawyer says in an interview that
recruiting investors wasn't the principal motive for his unpaid volunteer
work.
Harvard fund-raising officials are
angry about what happened. "The fact that someone would volunteer their
time for a nonprofit and then use that opportunity to line their own pockets
is an outrage," says Andrew Tiedemann, communications director for alumni
affairs and development at Harvard. "We have never seen anything remotely
like this in Harvard history."
One of Mr. Earls's most important
fund-raising assignments was Robert Bass, one of the well-known Bass brothers
from Texas, who had made numerous high-profile investments in the 1980s. The
two men met in connection with Harvard Parents Fund activities, and Mr. Bass's
daughter Chandler, who entered Harvard in 1996, became "good
friends" with Mr. Earls's daughter Kate, Mr. Bass testified.
"Lavish Spending, Little Reward D.C. Agencies Gave Contractor Millions for
Projects but Scant Oversight," by David S. Fallis and Dan Keating, The
Washington Post, November 28, 2005 ---
http://snipurl.com/LavishSpending
With the District's approval, he gave himself an
$82,000 salary and paid his brother $8,000 as a consultant. He spent $25,000
for signature artwork and a matching stainless steel table. He bought $6,000
chairs, a new blue sport-utility vehicle and a silver van, personalized with
vanity tags. He spent $143 to settle debts at a florist and rush a "Happy
Birthday" bouquet to the D.C. Council member who approved his grants. He
billed taxpayers for it all.
Over seven years, District officials sank nearly
$5.4 million into his projects. Three city agencies gave him multiple
contracts, and four others had a role in making sure he was paid.
But when Prioleau's foundation collapsed last year,
the city's investment evaporated. Most of the furnishings had been sold at
public auction after languishing in a warehouse for almost two years. About
$195,000 worth of equipment was sold for slightly less than $9,000, just to
pay a storage bill. Prioleau closed his training center.
Prioleau defended his work in interviews over the
course of a year and reported to the D.C. government that his center had
trained thousands of disadvantaged people. But city officials say there are
no records to verify that number.
The story of Archie Prioleau and his dealings with
the District is one of broader failings -- the propensity across city
agencies to violate their policies as they dispense public funds with little
attention to how the money is spent.
Continued in article
Corruption is chronic in labor unions
Labor officials doing personal things at an increasing rate But Mr. Yud said that if the department
(Department of Labor) had been doing audits as
vigorously as in decades past, it might have prevented corruption like the
embezzlement of more than $2.5 million by leaders of the Washington Teachers
Union. Among the items bought with the stolen union money were a $57,000 Tiffany
tea service for 24, a $13,000 plasma television and a $20,000 custom-tailored
mink coat. There were also the 277 checks totaling $41,309 that the secretary of
an autoworkers' local wrote to herself over two and a half years, and the dues
money stolen by the office secretary of a Minnesota plumbers' local, who, in
ultimately pleading guilty, agreed to repay $54,469. Since 2001, department
officials say, more than 500 union officials have been indicted on charges
including fraud and embezzlement.
Steven Greenhouse, "Labor Dept. Plans Increasing Scrutiny of Union Finances,"
The New York Times, April 17, 2005 ---
http://snipurl.com/NYTlabor
This month marks the deadline for the last of the
nation's unions to file newly expanded disclosure reports, known as LM-2
forms. LM-2s have been around a long time, though until Labor Secretary
Elaine Chao issued a rule requiring an expanded form in 2004, unions got
away with providing the skimpiest details. This proved useful to union
bosses who wanted to mask their political spending, or in some cases their
corruption.
They are now being dragged into the sunshine.
Whereas unions used to lump millions of dollars of disbursements into such
vague categories as "sundry expenses," the new regime requires them to
provide a detailed breakdown of who or what received union money: issue
advocacy groups, political consultants, polling outfits, even hotels at
which their members stayed.
Hard-working union members deserve to know, for
example, that of the AFL-CIO's $82 million in discretionary disbursements
from July 2004 to June 2005, only 36% went to representing members in labor
negotiations -- which is what unions were created to do. A whopping $49
million, or 60% of its budget, instead went to political activities and
lobbying, while another $2.4 million went to contributions, gifts and
grants. The National Education Association was even more skewed toward
politics, spending only 33% of its $143 million discretionary budget on
improving its members' lots.
By our calculations based on the filings, the
AFL-CIO spent at least $2.7 million alone on T-shirts, flyers, telephone
calls, Web site hosting, and other support for 2004 Presidential candidate
John Kerry. Groups that received AFL-CIO money included Citizens for Tax
Justice, an organization devoted to higher tax rates; the Economic Policy
Institute, a think-tank that campaigns against Social Security privatization
and tax cuts; and the Alliance for Justice, a ferocious opponent of
President Bush's Supreme Court nominees.
Dues-paying workers of the world might want to ask:
Why is Mr. Sweeney spending more of their money trying to raise taxes, or
fighting for the cultural left, than he is on collective bargaining?
The IRS may also want to inspect these forms.
That's because, prior to the new LM-2 disclosure rules, at least a dozen
large unions had told the tax agency that they spent nothing on politics.
The National Education Association's 2004 tax return, for instance, left
blank the line for "direct or indirect political expenditures." Yet
according to its LM-2, the NEA spent $25 million on such activities from
September 2004 to August 2005. Eliot Spitzer could sure have fun with that
one -- if he didn't have the NEA's endorsement.
The forms also offer a glimpse at union chief
salaries. At least three union heads took home more than a million dollars
in compensation in their last fiscal year -- though two were admittedly the
heads of the NFL and NBA players unions. The third-fattest union cat was
Martin Maddaloni, the chief of the Plumbers and Pipefitters, who took home
$1.3 million last year. The Plumbers' "director of training" -- a fellow
named George Bliss -- somehow managed to make $456,644 in 2005. Now we know
why plumbers are so expensive: They have to make enough to pay the dues that
keep their union reps in Armani.
The LM-2 forms show that some 1,015 paid union
officers and employees devoted more than 90% of their time to political
activities. Combined, these folks took home compensation worth nearly $53
million. Some 1,755 union personnel spent at least 50% of their time on
political activities and lobbying.
As for financial management, let's just say some of
these union chiefs are having fun in their jobs. United Auto Workers Local
14 reported it spent $67,000 at an amusement park. The International
Brotherhood of Electrical Workers spent $124,000 at a hotel resort. And the
Plumbers forked over $225,000 on Nascar advertising.
A couple of other fun facts: Of the 100 highest
paid union executives, 93% are men. We hope some class-action lawyer isn't
looking to sue for gender discrimination. And, believe it or not, unions
report that they spent $624,000 at largely non-unionized big box retailers
across the country, including Target, Wal-Mart, Sam's Club, Costco and
K-Mart. They apparently know a low price when they see one. * * *
When Secretary Chao proposed the new rules, unions
were furious and came close to getting them blocked on Capitol Hill, and in
court. Mr. Sweeney, the AFL-CIO chief, was quoted as saying the rule "will
cost union members an estimated billion dollars a year," and that the
average union would have to spend $1.2 million. The actual cost of AFL-CIO
compliance turned out to be $54,000, so Mr. Sweeney was only off by 96%.
Unions should have the right to spend whatever they
want on politics, and we've defended that right against McCain-Feingold and
other campaign-finance limits. At the same time, however, union members who
don't like the way their coerced dues are spent have the right under the
Supreme Court's Beck decision to ask for the political and grant portion of
that money back. May these illuminating LM-2 disclosures be spread far and
wide.
"5 Reasons I Hope Classmates.com Gets Sued
Into Oblivion: It's time for Classmates.com to change or close up
shop. A lawsuit against the company might just prompt some movement" by JR
Raphael, PC World via The Washington Post, November 13, 2008 ---
Click Here
Have you
heard? Someone's
suing Classmates.com over those
e-mails it's been blasting the world with for the past decade.
My reaction? It's about damned time.
Here's the
scoop: A man from San Diego says he received e-mails from
Classmates.com claiming his former classmates were
"trying to contact him" through the
site. (Surely you've received one or 100 of those, too -- I know
I have.) Our guy joined the service, paying for a premium
membership ($15 for 3 months) to gain access. Then, he said, he
discovered that no old friends had attempted to get in touch or
even looked up his name.
"Of those
www.classmates.com users who were characterized ... as members
who viewed Plaintiff's profile, none were former classmates of
Plaintiff or persons familiar with or known to Plaintiff for
that matter," the lawsuit says.
The suit claims
Classmates.com has pulled similar tricks on countless other
unsuspecting users. It demands the company refund subscriptions
fees and pay an additional fine for deceptive advertising.
I, for one, hope
the suit is a massive success. Why, you might ask? Allow me to
explain.
How happy are
people who get Classmates.com e-mails? A quick glance at the
Consumer Affairs complaints page for the company will give you
an idea. I found dozens of complaints from the past month alone.
The BBB gives Classmates a C+ rating. The reason for the rating
is "number of complaints filed."
"I have called
them several times to stop sending me junk e-mail, and they keep
telling me to unsubscribe, which I have done 10 times," writes
Jeff from Michigan.
"I have tried
many times to have them remove my name from their mailing list
and they do not acknowledge my request," notes Skip from
Arizona.
Look through the
consumer complaints on ConsumerAffairs.com and see just how many
people say they're being billed without authorization. Many
users say they gave a credit card number for a trial and kept
getting charged long after the trial's end, despite numerous
cancellations. Many users also say they can't even login to the
site, and no one will answer their requests for help.
When I tried
Classmates.com I couldn?t even look at my high school class list
(or any other class) without first giving my personal
information, including e-mail address. See a connection here?
I can see
how Classmates.com might have been appealing back in 1995, when
it first launched. But nowadays, you can find better and easier
ways to connect with old classmates -- ones that are both cost-
and spam-free. (Facebook, anyone? MySpace?) The company's
audacity in continuing to lure curious people into paying money
to find out what "mysterious person" is interested in them just
floors me.
"Eight Crazy E-Mail Hoaxes
Millions Have Fallen For: E-mail fills our in-boxes with
come-ons to see celebrities naked and to get rich quick. Even though
we know deep down that these are fakes, why do we contine to think,
'Maybe?'," by Nick Mediati and Anne B. McDonald, PC World via
The Washington Post, August 26, 2008 ---
http://www.washingtonpost.com/wp-dyn/content/article/2008/08/22/AR2008082200175.html?wpisrc=newsletter
Congratulations,
you won the lottery in a country whose name you can't even
pronounce! A wealthy oil executive in a far-off land wants to
give you millions of dollars, right now! Sexy girls want to meet
you!
Now let's be
honest. If someone came to your door and told you any of those
things, you'd tell him to get lost. So why do people still fall
for this stuff when it's in their e-mail, as if a poorly written
message made a weird-sounding pitch any more legitimate?
The saddest part
is, the only reason annoying e-mail keeps filing your inbox is
because it works. No matter the number of reports detailing
e-mail hoaxes gone bad and tales of spammers taking people for
all they're worth, people just keep on clicking.
Why? It's
the law of percentages. The response rate for snail-mail spam is
between 0.5 and 1 percent. That might not sound like a lot, but
if you apply it to e-mail, it means a spammer can send 1 million
messages--without the cost of paper and postage--and 5000 to
10,000 people will answer. In fact, a study out this month
indicates that nearly 30 percent of Internet users
confessed to purchasing something from spam e-mail.
In 100 years,
the spam boxes on our brain-implant chips will be maxed out, and
we'll still be asking: Who's clicking on this stuff?
Here's PC
World's list, in no particular order, of the top e-mail hoaxes
that have come through inboxes and fooled millions.
It's
amazing
how many people were willing to believe this e-mail
about a breeder in New York who raised
kittens in bottles. Perhaps it's the horrible detail that
outraged the recipients so much: The small animals are given a
muscle relaxant to pacify them and to allow the breeder to get
them in the bottle. They're fed through straws. Their skeletons
take on the shape of the bottle. "Latest trends In New York,
China, Indonesia and New Zealand." A bizarre case of animal
cruelty? A sick joke?
Actually,
it started as a fake Web site,
Bonsai Kitten, the product of MIT students.
The idea was so outrageous, it spread like
wildfire via e-mail. Plenty of people fell for it, many begging
animal-welfare organizations to help the small furry creatures.
Even
the FBI investigated. Perhaps it could
happen--after all, you can
miniaturize a tree
by pruning it and shaping it. But cats? Last time we checked,
it's more or less impossible (not to mention probably illegal)
to stop an animal from growing simply by keeping it in a small
container.
E-mail alerts
outlining the dangers of dihydrogen monoxide swept the Internet
in the late 1990s and still pop up today. Many ask that you sign
and forward a petition to ban the chemical, which contributes to
global warming, is a major ingredient in acid rain, causes
metals to rust more quickly, and has been found in cancerous
tumors. The chemical also contributes to the greenhouse effect
and to erosion of our natural landscapes. It's even in food.
Sounds pretty dangerous. You're ready to sign right now, aren't
you?
Well, let
us tell you one more thing about dihydrogen monoxide: It's more
commonly known as water. You know, the substance that every
single living being relies on to survive? The origins of this
item are multifold, from flyers circulated at the University of
California at Santa Cruz in 1989 (so 20th century!) to a junior
high school student who surveyed 50 classmates in 1997 and got
43 of them to sign his petition to ban the chemical. He then
won a prize at his science fair
for his project, called "How Gullible Are We?" Several Web pages
touting the chemical's dangers
are still live.
Don't feel too bad if you've ever fallen victim to this hoax;
even
a government official in New Zealand
took the bait last year.
With all
the talk of
cell phone dangers, the idea of
radiation from them being
powerful enough to pop popcorn doesn't
seem that far-fetched, at least on the surface. Why, just this
summer the Pittsburgh Cancer Institute
advised its employees to limit exposure
to electromagnetic radiation from cell
phones. So why wouldn't you believe the swarm of e-mail telling
you to look at the incredible video of friends popping kernels
of corn with their mobile phones?
The group
allegedly did it by placing the kernels inside a ring of cell
phones that then rang at the same time. The result: The kernels
popped wildly as the cell phone owners shrieked in delight. It
must be true--it was on the Internet, and the video was fun to
watch. The event set off a wave of imitators attempting to film
themselves re-creating it or trying to disprove it. The best of
these, in our opinion, was the video where the people
replaced their cell phones with Barack Obama dolls and
the popcorn popped anyhow. Watch out, Senator McCain!
Unfortunately, as you might expect, it was all fake. A company
called
Cardo Systems made the video to
promote its cell phone headsets. Abraham Glezerman, Cardo's CEO,
told CNN that the phones were real and
the popping popcorn was real, but the video was a composite,
with the footage of the popcorn heated over a kitchen stove
digitally dropped into the video of the folks with their phones.
Dang. Guess the
e-mail about cell phones that can cook eggs
isn't accurate either.
Bill Gates Wants
to Give You Money
This summer an
editor at PC World received a note from a relative asking if the
e-mail she had received that told her Bill Gates wanted to send
her $1000 was real. Uh, no...
Although
Gates is being very generous with his fortune now that he has
retired from day-to-day work with
Microsoft,
you can get some of it only by applying to the
Bill and Melinda Gates Foundation. But
long before the foundation was created, back in the early days
of the Internet, e-mail discussing Gates's or Microsoft's
willingness to fork over free cash was widely circulated--and
clearly, it's
still forwarded today. Snopes.com has
a list of the urban legends circulating most widely and,
despite the fact that Gates and Microsoft have been the subject
of phony e-mail alerts and hoaxes since the 1990s, they are
still in the top 25 this month.
One version says
that Microsoft wants to make sure Internet Explorer remains the
dominant browser (which we're sure is true). All you need to do
to help out and get money from Microsoft is to forward an e-mail
to your friends. Microsoft will track the e-mail for two weeks,
and you get paid for every person who receives the e-mail
through you. Among the attractive details is a list of differing
amounts that will come to you depending on how many referrals
you make--one version of the scam says the sender received a
check for $24,800 from Microsoft. Not chump change!
Hold on a
second. First, if tracking an e-mail like that were even
possible, the
Electronic
Frontier Foundation would be all over
that faster than you can say "invasion of privacy." Oh, and did
we mention that the technology to do such a thing probably
doesn't exist? Of course, since you read PC World, you know that
already. But if Microsoft ever really wanted to pay us just for
forwarding an e-mail, we're game.
In 2002,
Symantec supposedly issued an advisory about certain e-mail
messages flying around the country about an "important virus to
look out for." The antivirus-software maker, which does issue
warnings on real viruses, allegedly instructed Internet users
not to open any e-mail with the subject line "LAUNCH NUCLEAR
STRIKE NOW." If you did open that e-mail, you would
inadvertently end up sending nuclear warheads winging their way
toward the former Soviet Union. That's right, you could start
your very own nuclear war while in your slippers and bathrobe.
The deal
was that opening the e-mail would download a virus that would
tell your PC to access NORAD computers in Colorado and instruct
them to launch a full-scale attack on Russia and former U.S.S.R.
states. Okay, maybe Secretary of State
Condoleezza Rice
may be thinking that way right now over
the current crisis in Georgia, but
let's leave that to the professionals, shall we?
Needless to say,
the virus isn't real, Symantec didn't issue such a caution, and
it should be painfully obvious that this one is a hoax. If that
isn't clear to you, step away from your PC and don't ever touch
it again.
Let us
guess: At one time or another, you've received an e-mail from an
earnest resident of Nigeria that
starts with a hello and an introduction to the sender. The
e-mail then suggests that your help is needed to claim an
abandoned sum of money in a foreign account, or something
similar. The message typically promises that you will receive a
large amount of money if you simply send a smaller amount of
money now.
You didn't
fall for it, did you? These convincing missives, which may or
may not be from Nigeria, are known as 419 scams (named after a
section of the Nigerian criminal code that deals with fraud).
Wikipedia says most of them are
advance-fee frauds or confidence tricks.
Not only will you not get rich, but you'll
also have a very hard time getting back any money you wire the
sender up front. We're sorry to report that these types of
scams, which are based on versions dating back to the early
1900s, are still popular--variants purporting to be from Russia,
Spain, Nigeria, and many other countries still pour in to e-mail
accounts around the world.
Continued in article
Question:
What vexing problems do Wikipedia Authority and Online Product
Reviews share in common?
Simson
Garfinkel takes a look at
authority and sourcing in Wikipedia world
with an article in the latest edition of
Technology Review. He focuses on Wikipedia’s requirement
to cite published sources in adding information to Wikipedia
articles. Yes, with a mob-written encyclopedia, a requirement
for citing published, vetted sources makes sense, he writes.
“But there is a
problem with appealing to the authority of other people’s
written words: Many publications don’t do any fact checking at
all, and many of those that do simply call up the subject of the
article and ask if the writer got the facts wrong or right,” Mr.
Garfinkel writes. “For instance, Dun and Bradstreet gets the
information for its small-business information reports in part
by asking those very same small businesses to fill out
questionnaires about themselves.”
This policy is
particularly problematic if you are the authority on a
particular topic, but you can’t use your own base of knowledge.
Jaron Lanier, a futurist, had problems changing a statement on
the Wikipedia entry about himself that said he was a filmmaker.
He wasn’t a filmmaker, yet every time he removed that non-fact,
someone put it back in.
He finally
got the item changed, but was then criticized for editing his
own wikientry. (PR directors who maintain their college
Wikipedia pages, take note.)
Comments
Doesn’t the problem of
unreliability of other sources apply to any
secondary or tertiary work? ;) (…and on that note, I suggest
reading the Wikipedia page
Wikipedia:Reliable sources …)
"Online User Reviews: Can They Be
Trusted? They're all over the Web. Everybody reads them. But are
reader reviews reliable enough to depend on when it comes to
spending your cold, hard cash?" by Robert Luhn, PC World via
The Washington Post, October 23, 2008 ---
Click Here
Anyone can write
a product review, and everybody reads them. But can you trust
them? I refer, of course, to reader or user reviews, the kind
you find on Amazon, Buy.com, Epinions, PC World, Yelp, and even
the sites of tech product manufacturers, such as Dell. They're
everywhere.
But it's the
fraudulent reviews--positive reviews contributed by "readers"
paid by the company being evaluated--that worry critics and
advocates alike.
In an October
2007 poll conducted by the PR firm Burson-Marsteller, 1000 savvy
Web consumers (dubbed "e-fluentials" by some wordsmith who
evidently was unfamiliar with the term " effluent") were clearly
convinced that fake reviews are endemic--and could result in a
backlash from online consumers.
The numbers tell
the tale: 48% (up from 39% in 2001) believe that fake reviews
are being planted on consumer sites. 57% say they won't buy a
product if the reader reviews seem suspect. And a whopping 76%
claim to double-check what they read online. All are signs of a
healthy skepticism.
So, how
pervasive are falsified reviews?
Beau Brendler,
Director of Consumer Reports' WebWatch site, says that the
bottom line is: "[Fake reviews] happen all the time--but proving
it, quantifying it--is very hard."
WebWatch--whose
motto is "Look Before You Click"-- says on its site that its
credibility campaign has led more than 170 sites, including CNN,
CNet, The New York Times, Travelocity, and Orbitz to agree to
uphold WebWatch's credibility guidelines.
Barbara Kasser,
author of Online Shopping Directory For Dummies and Internet
Shopping Yellow Pages, says: "There's no way to check the
reviewer's veracity or if they're on the take--they're
anonymous." Another concern: the reviewer might not be
competent. "How did [the reviewer] use the product? Did they use
it properly? Did they follow the manufacturer's directions?
There's no way to know," she points out.
Why So Enticing?
Many ordinary
people consider reviews written by consumers to be more
reliable, more critical, and ultimately, more useful than many
other sources of information. At least that's what they told The
Nielsen Company in a survey conducted in April 2007. The top
three most trusted sources: "Recommendations from consumers"
(78%), "Newspapers" (63%), and "Consumer opinions posted online"
(61%). (In a story that PC World posted in 2003, we generally
agreed with the above perceptions--but we're a bit more cynical
now.)
Certainly,
reader reviews have come a long way since the era of Usenet and
reader forums. Depending on the site and its readers, you may
find pithy commentary, long-winded rants, numeric ratings, pros
and cons, graphs, and even reviewer videos.
But Mitch
Meyerson, author of the book Guerilla Marketing on the Internet,
thinks that "influenced" reviews (paid for or not) are pretty
common. For example, says Meyerson, "authors often enlist
friends, colleagues, and clients to review their books on
Amazon."
According to
Blogging Tips founder and Web developer Kevin Muldoon, "tech
sites usually have fair, accurate [reader] reviews...but there
are definitely more fake reviews [on sites] covering cosmetics
and hotels." Read Muldoon's blog entry on his own guidelines for
how he reviews products.
The following is a combination of
parts of two November 14, 2008 messages from David Fordham, James
Madison University
[fordhadr@JMU.EDU]
For many years,
I've included a link to the dihydrogen monoxide warning site
from my own bookmarks page, showing it as the only activist
group I affiliate with. Every semester I recommend my students
visit it. Everything reported on that website is entirely true
and factual, probably more factual than a lot of what I read in
the Post and WSJ. And guess what! My students report that they
actually DO LEARN A LOT from visiting that site, and it helps
them immensely in their daily life as a modern citizen.
Before they
visit the site, I inform my students of the fact that the
federal government (U.S. Army, actually) maintains several
massive storage facilities containing millions of gallons of
this chemical in the mountains above our valley, in what most
people assume is a civilian area called the George Washington
National Forest. If if those storage facilities were to
experience failure and suddenly release all that stuff, you can
rest assured there would be millions of dollars of damages, and
probably some deaths, too. My students do the research, check it
out, and learn that what I'm saying is entirely true.
Of course,
that's NOT the main thing they learn from the coalition's
website, however. No, they learn something far more important.
The site is one
of the most well done educational sites of its genre I've seen.
It is intended to help people stop and think, and to remind them
that they are too often willing to accept nonsense from the net.
And from other sources, too.
It's not a scam
and shouldn't be included with them. A scam is defined as a
"confidence-based scheme intended to defraud". I'm unaware of
any defrauding or even any attempt to defraud. The site doesn't
ask for donations, tell you to send money, pay dues, or even ask
you to write your Congressman. Sure, they sell t-shirts
promoting their organization, but so does Stanford, so does
Harvard, and so does Trinity.
Check it out.
You won't get a virus, and you might realize how much benefit
today's college students can get from learning what the site
wants you to learn.
The main reason
I like the DHMO site is that it brings attention to the common
journalism practice today of giving sensationalized,
fear-mongering, emotionally-charged, possibly factual but
unquestionably one-sided, abridged, carefully selected, and
positively misleading wording masquerading as "news". As I am
wont to point out, there are some national daily publications
which make this practice their bread and butter. The DHMO site
makes it clear that unless someone already knows a lot about
what is being reported, they have to rely on the presence of the
dire, emotional, wording, and the presence of an "unmistakable
conclusion any idiot can reach from this article" as the hints
that let them recognize the stuff as pure drivel. I hate to see
supposedly-intelligent people get taken in by this biased
half-truth selective reporting regardless of whether it is
delivered via a website, an email, an NPR feature story, or on
the front page of the Wall Street Journal.
David Fordham
Beware of those bargain deals that companies
offer From hotels to cell phone bills, companies attach a
barrage of hidden, extra charges. One reason is the Internet. Online shopping
permits consumers to comparison shop for bargains. So companies are countering
low prices with hefty fees. So if a $99 room is snagged at a nice hotel via
Priceline.com, then the hotel tends to attach a "resort fee" for towels at the
pool or removing something from the mini-bar – even it put back 60 seconds
later. Bob Sullivan, author of Gotcha Capitalism, talks with Steve Inskeep about
deceptive fees and why U.S. businesses are so dependent on them.
"Companies Use Fees to Counter Bargains," NPR, January 18, 2008 ---
http://www.npr.org/templates/story/story.php?storyId=18212223
New
fraud-prevention technology has made credit card crime more
difficult in the U.K., but it is increasing in other countries
that have not adopted "chip-and-pin" safeguards. Chip-and-pin
credit cards are cards containing electronic chips that contain
the information otherwise found on magnetic strips. According to
the Association of Payment Clearing Services (APACS), the U.K.
clearing service, credit card crime in the U.K. dropped 4
percent in the first half of this year, compared with the
first six months
of 2006. However, fraud on UK-issued cards, primarily in the
U.S., rose 126 percent during that time. Chip-and-pin is not
accepted universally, so cardholders' names and account numbers,
expiration dates, and security codes are still stored on the
magnetic strip of a credit or debit card, as well as on the
microchip.
Criminals are
copying the data on the strip to create a fake card that is then
used in a country that has yet to upgrade to chip-and-pin
technology, the BBC reported. All European Union members plan to
upgrade by 2010.
Fraud patterns
are changing. Last year, losses suffered by retailers, credit
card users and financial institutions fell by 3 percent. But
this year the numbers are rising due to the surge of cloned
cards in the U.S. and elsewhere, along with a 44 percent
increase in online and telephone fraud for the first half of
this year, reported.
The good news in
the U.K. is that online banking fraud is down, thanks to
chip-and-pin and other security measures, as are losses from
stolen cards being used to withdraw money from cash machines,
which is down by 57 percent. When it comes to transactions where
the cardholder is present, fraud has fallen 11 percent,
FinanceWeek reported.
U.S. companies
are boosting spending on credit card security, however, under
the threat of fines. According to The Wall Street Journal, rules
called the Payment Card Industry's Data Security Standards
discourage encoding customer information on the magnetic strips.
The rules call for ways to encrypt information to make it
unreadable to hackers and methods to control employee access to
sensitive information. The rules are not new, but Visa has
announced it would start levying fines of up to $25,000 a month
to large merchants who aren't following the rules.
Forrester
Research says that the biggest merchants in the U.S. are
forecast to spend $400 million to $500 million this year on
technology to meet the security standards.
Another
technology is making its way into circulation in the U.K.: a
bank card that allows shoppers to pay for inexpensive items
without using a PIN or signature, The Times of London reported.
These so-called contactless cards will be issued in London over
the next couple of months. APACS estimates 5 million will be
issued by the end of next year.
Contactless
payment cards use short-range radio to exchange payment
information with the register for items less than £10. Shoppers
merely tap their debit or credit cards on a reader. A PIN will
still be needed for more expensive items.
Robert Kenly of
moneysupermarket.com, a price comparison site, told the Times:
"There will be a number of checks in place and so long as
cardholders remember to report lost cards immediately, they will
always have any losses refunded. For some people it will perhaps
seem too risky but, as with anything new, once people have tried
it they may find that they actually like it."
Banks in the
U.S. have been issuing contactless cards since 2003, with more
than 10 million now accepted by 30,000 shops and restaurants,
the Times reported.
The World Wide Web is a
marvelous thing. Because it exists, more people have direct
access to more knowledge than at any time in history. But, by
linking people everywhere, the Web has also spawned a new
international criminal class, and a related class of sleazy
businesses.
These creeps now find it
easier than ever to defraud people, steal their identities and
blast them with unwanted or false advertising. They use the Web
as a pathway to infect computers, corrupt data and take over
others' machines.
Security software can
help block this wave of woe. But it would be better to know in
advance if a Web site that comes up in a search result, or one
you arrived at through other means, is harboring malicious
software, or perpetrating scams, or generating spam and unwanted
pop-ups. It might also be nice to know if a site with an
innocuous name contains pornography, hate speech or other
content that might be offensive to you.
I've been testing two
services that aim to provide such advance notice of bad or
offensive sites. The services, Scandoo and SiteAdvisor, take
different approaches to the task and offer different features.
But both instantly mark up a search-result page, and label the
links that might be dangerous.
Both services are free of
charge, and each works on both Windows and Macintosh computers,
and in multiple Web browsers. On balance, I prefer SiteAdvisor,
though Scandoo has a couple of things SiteAdvisor lacks.
Scandoo, still in beta,
or test, phase, is from a company called ScanSafe, which
provides site-scanning and security services for corporations.
SiteAdvisor was founded by some engineers from MIT and was
recently bought by McAfee, the big computer-security firm.
SiteAdvisor works via a
software plug-in that you download and install. The plug-in,
available at
www.siteadvisor.com, modifies either
the Internet Explorer browser for Windows, or the Firefox
browser for Windows, Macintosh and Linux, so the browser can
identify bad Web sites. SiteAdvisor works with the Google, Yahoo
and MSN search engines.
Scandoo requires no
software downloads and works with more browsers than SiteAdvisor
does. But it requires you to enter a search term at its Web
page,
www.scandoo.com, rather than at the
home page or search box of your favorite search engine. It then
transfers to the search engine you choose and modifies the
results page to identify sites that may be troublesome. It now
works only with Google or MSN.
There are some other
major differences between the two. Scandoo scans Web pages on
the fly to look for bad stuff. SiteAdvisor matches Web sites
against a database it has compiled about content. Scandoo works
only on pure search results, not the ads alongside the results.
SiteAdvisor rates the results and the ads, which often are more
dangerous.
In addition, because it
is built into the browser, SiteAdvisor can rate any site you are
visiting, not just sites listed in search results. SiteAdvisor
places a small, unobtrusive icon in your browser. The icon is
green if you are on a Web page it considers safe and honest. It
turns red if it regards the site as dangerous.
Scandoo works only on
search results pages. But it has a function SiteAdvisor lacks.
It can rate pages for offensive content, while SiteAdvisor
focuses just on the presence of malicious software, or invasive
advertising techniques. Scandoo allows you to specify which
kinds of content you want flagged, including pornography, hate
speech and gambling.
SiteAdvisor also flags
sites it regards as perpetrating scams, like charging people for
software that actually is free. But in my tests, it ignored some
other scams, such as offers for pills that magically enlarge
body parts.
In my tests, SiteAdvisor
consistently flagged more Web sites as bad than Scandoo did.
When I searched for "Free iPods" in Google, Scandoo gave all the
regular search results a green check mark, meaning OK.
SiteAdvisor marked the first regular result in red and gave it
an "X," meaning trouble. It also marked most of the ads in red
and gave them "X's."
This is partly due to
different techniques they use. Scandoo claims its real-time
scanning can uncover bad sites SiteAdvisor might miss.
SiteAdvisor claims its database is more comprehensive.
Another reason for the
disparity is that SiteAdvisor isn't just looking for viruses or
spyware. It uses test computers to see if sites are likely to
generate what it calls "spammy" email or pop-up ads. If they do,
the sites get flagged.
Some might regard
SiteAdvisor's filters as too aggressive, but, unlike Scandoo, it
gives a detailed explanation for each rating. The explanations I
saw made sense. For the free iPods site SiteAdvisor flagged, it
explained: "After entering our e-mail address on this site, we
received 11 e-mails per week. They were very spammy." It even
showed some test emails.
Both services are very
helpful. You might want to use Scandoo if you're concerned about
offensive content. But for flagging malicious software and
invasive advertising, SiteAdvisor is more comprehensive and
tougher.
Stay Clear of Foreign Lotteries They say you can't win if you don't play,
but when it comes to foreign lotteries, you'll definitely lose.
Americans lose tens of millions of dollars this way each year.
Elizabeth Leamy, "Don't Get Fooled by Foreign Lotteries," ABC
News, April 14, 2006 ---
http://abcnews.go.com/GMA/Business/story?id=1897591&page=1&gma=true
Dangers in Buying Gift Cards from Display Racks Well the crooks have found a way to rob you
of your gift card balance. If you buy Gift Cards from a display rack
that has various store cards you may become a victim of theft.
Crooks are now jotting down the card numbers in the store and then
wait a few days and call to see how much of a balance THEY have on
the card. Once they find the card is "activated", and then they go
online and start shopping. You may want to purchase your card from a
customer service person, where they do not have the Gift Cards
viewable to the public. Please share this with all your family and
friends...
Snopes ---
http://www.snopes.com/fraud/sales/giftcard.asp
Question
What can you do to prevent being taken on eBay?
(Word of Caution: Never open an email message that pretends to be from
Pay-Pal)
To which "Kate" replied: "That's true, indeed. I
just scammed you, sorry for that, it's nothing personal. ... It's what I do, and
it pays well." How did Smith get into this mess? The way any confidence-game
victim does - by letting an overabundance of trust overwhelm ordinary caution.
Jeffe Gelles, "Psssst ... wanna buy a wedding dress?" The News-Sentinel,
http://www.fortwayne.com/mld/newssentinel/living/13980893.htm
Two brothers have published a book of "true tales of
treachery, lies and fraud" from eBay. "Dawn of the eBay Deadbeats" contains
stories written by eBay buyers and sellers. From stories of disappointing
purchases to out-and-out fraud, the book is a manual of what can go wrong when
buying and selling on auction sites. Brothers Stephen and Edward Klink co-wrote
the book, illustrated by Clay Butler. The idea for the book sprung from a
website Stephen Klink had created. A New Jersey police office, he founded
eBayersThatSuck.com - a site that aims to help people avoid auction scams -
after he himself was ripped off online.
Ina Steiner, "Dawn of the eBay Deadbeats: New Book Uncovers Online Auction
Treachery," AuctionBytes.com, December 28, 2005 ---
http://www.auctionbytes.com/cab/abn/y05/m12/i28/s01
Imagine buying vintage Spiderman
comics for $16,000 and receiving instead, a box of printer paper or
losing a whopping $27,000 in purchasing a big rig that didn't exist in
the first place. These are just many of the online auction fraud horror
stories that brothers Edward and Steve Klink compiled from their eBay
watchdog Web site eBayersThatSuck.com (E.T.S.).
In their book "Dawn of the eBay Deadbeats," some
70 strange-but-true stories were collected and retold with the help of
illustrator Clay Butler.
The December 2005 publishing of the book comes just in time as the
online auction giant has been criticized by consumer groups, most
recently by the U.K. magazine "Computing Which?" for its passive and
sometimes delayed approach in handling fraud reports.
At any given time, the site has 78 million listings, and 6 million new
listings are added each day.
And while, eBay maintains that less than .01 percent of all listings end
in a confirmed case of fraud, that could mean that of the 1.9 billion
listings reported by eBay in 2005, that 190,000 cases were confirmed
frauds in the last year.
Currently there are almost 900 horror stories from eBay fraud victims
are on the E.T.S. site whose motto is "Winning the war on deadbeats."
And already the brothers are working on the next volume of horror
stories, encouraging victims who want to get their tales to be told to
get into contact with them.
United Press International spoke with Edward Klink about the recent
book, their watchdog
Web site, and the current state of eBay.
"We had collected hundreds of stories
on the Web site
and figured it was time to take these stories to a wider audience and
let the victims have their say," Edward Klink said. "Plus with our
combined backgrounds, Steve is a police officer and I'm a
business writer,
we felt we were ideally suited to get the job done."
Fraud on eBay can take on many forms including items paid for that vary
from the description in the sale, unpaid items, and spoof eBay or
Pay-Pal e-mails.
And like the many victims on their site, the brothers too have
encountered the problem of auction fraud.
In 2003, Steve, a New Jersey police officer, won a set of "new"
speakers, only to find that it looked as if they were "gnawed on by a
wild animal."
"The seller said they weren't that way when mailed, and eBay said there
was nothing they could do," Klink said. "Annoyed that he was stuck with
the merchandise and given no recourse, Steve started
www.ebayersthatsuck.com and stories began pouring in from around the
world."
And the site has received a positive response since it's been up and
running.
"People love it," Klink said. "On eBay, their official boards are
closely monitored and talk about problems and scams and eBay's failings
are not generally tolerated. So E.T.S. gives them an outlet. When it
first came out Ebayersthatsuck.com was featured on Courttv.com and
newspapers as far away as South Africa."
According to Klink, while eBay has what could be considered --"the
ultimate
business model" -- of collecting fees and
delegating the marketing, selling, packaging, shipping, and
customer service
to eBay users, it's very easy for these same users to fall victim to
fraud.
"I think consumers let their guard down when they are sitting at home
and surfing the Web with their coffee," he said. "If a stranger offered
them a $1,400 antique vase on the street they'd most likely walk away,
but when that same vase is on
the Internet for some reason the reaction is
more, 'Say, now that looks interesting.'"
And have the brothers seen any improvements in eBay's handling of the
fraud issue?
"eBay says it is a tiny fraction of all auctions," Klink said, "but the
hundreds of people who told us their stories hate being in that tiny
group and never thought they would be. Lots of fraud is underreported,
too. EBay encourages users to settle it among themselves, and if they
can't, then they are directed to pay $20.00 to have SquareTrade, a third
party, mediate the dispute. But it's not often a scammer shows up for
mediation!"
. . .
"We want people on eBay to have a good buying and
selling experience - transparent, well-lit, and safe," the spokesperson
said. "Fraud on all levels is something we take seriously."
The company also has a team dedicated to working
with law enforcement rather it be educating them on fraudulent cases and
working proactively taking information on specific cases to them or
cooperating with investigations.
"We would invite anyone to visit the site and read
more," said the spokesperson, who also emphasized that the no. 1 issue for
online shoppers is to pay safely using Pay-Pal or a credit card than any
other form of payment.
In many cases, consumers are able to get their
money back, Pay-Pal offers up to $1,000 back with buyer protection and
credit card programs usually have a pay back program in cases of fraud. In
many cases, Pay-Pal offers a way for consumers to make purchases without
providing personal information and at the same time protecting money.
"Dawn of the eBay Deadbeats" ($12.95) is
available on Amazon, eBay, and in select bookstores.
Fakes! The global counterfeit business is out of
control, targeting everything from computer chips to life-saving
medicines. It's so bad that even China may need to crack down
"Fakes," Business Week, February 7, 2005 --- http://snipurl.com/FakesJan_29
"Click Fraud Is Growing on the Web," by Karen J. Bannan, The New York
Times, September 23, 2006 ---
Click Here
"Click Fraud: The dark side of online advertising," Business Week
Cover Story, October 2, 2006 ---
Click Here
Martin Fleischmann put his faith in
online advertising. He used it to build his Atlanta company,
MostChoice.com, which offers consumers rate quotes and other
information on insurance and mortgages. Last year he paid Yahoo!
Inc. (YHOO )and Google Inc. (GOOG ) a total of $2 million in
advertising fees. The 40-year-old entrepreneur believed the
celebrated promise of Internet marketing: You pay only when
prospective customers click on your ads.
Now, Fleischmann's faith has been
shaken. Over the past three years, he has noticed a growing
number of puzzling clicks coming from such places as Botswana,
Mongolia, and Syria. This seemed strange, since MostChoice
steers customers to insurance and mortgage brokers only in the
U.S. Fleischmann, who has an economics degree from Yale
University and an MBA from Wharton, has used specially designed
software to discover that the MostChoice ads being clicked from
distant shores had appeared not on pages of Google or Yahoo but
on curious Web sites with names like insurance1472.com and
insurance060.com. He smelled a swindle, and he calculates it has
cost his business more than $100,000 since 2003.
Fleischmann is a victim of click fraud:
a dizzying collection of scams and deceptions that inflate
advertising bills for thousands of companies of all sizes. The
spreading scourge poses the single biggest threat to the
Internet's advertising gold mine and is the most nettlesome
question facing Google and Yahoo, whose digital empires depend
on all that gold.
The growing ranks of businesspeople
worried about click fraud typically have no complaint about
versions of their ads that appear on actual Google or Yahoo Web
pages, often next to search results. The trouble arises when the
Internet giants boost their profits by recycling ads to millions
of other sites, ranging from the familiar, such as cnn.com, to
dummy Web addresses like insurance1472.com, which display lists
of ads and little if anything else. When somebody clicks on
these recycled ads, marketers such as MostChoice get billed,
sometimes even if the clicks appear to come from Mongolia.
Google or Yahoo then share the revenue with a daisy chain of Web
site hosts and operators. A penny or so even trickles down to
the lowly clickers. That means Google and Yahoo at times
passively profit from click fraud and, in theory, have an
incentive to tolerate it. So do smaller search engines and
marketing networks that similarly recycle ads.
SLIPPING CONFIDENCE
Google and Yahoo say they filter out most questionable clicks
and either don't charge for them or reimburse advertisers that
have been wrongly billed. Determined to prevent a backlash, the
Internet ad titans say the extent of click chicanery has been
exaggerated, and they stress that they combat the problem
vigorously. "We think click fraud is a serious but manageable
issue," says John Slade, Yahoo's senior director for global
product management. "Google strives to detect every invalid
click that passes through its system," says Shuman Ghosemajumder,
the search engine's manager for trust and safety. "It's
absolutely in our best interest for advertisers to have
confidence in this industry."
That confidence may be slipping. A
BusinessWeek investigation has revealed a thriving click-fraud
underground populated by swarms of small-time players, making
detection difficult. "Paid to read" rings with hundreds or
thousands of members each, all of them pressing PC mice over and
over in living rooms and dens around the world. In some cases, "clickbot"
software generates page hits automatically and anonymously.
Participants from Kentucky to China speak of making from $25 to
several thousand dollars a month apiece, cash they wouldn't
receive if Google and Yahoo were as successful at blocking fraud
as they claim.
"It's not that much different from
someone coming up and taking money out of your wallet," says
David Struck. He and his wife, Renee, both 35, say they dabbled
in click fraud last year, making more than $5,000 in four
months. Employing a common scheme, the McGregor (Minn.) couple
set up dummy Web sites filled with nothing but recycled Google
and Yahoo advertisements. Then they paid others small amounts to
visit the sites, where it was understood they would click away
on the ads, says David Struck. It was "way too easy," he adds.
Gradually, he says, he and his wife began to realize they were
cheating unwitting advertisers, so they stopped. "Whatever
Google and Yahoo are doing [to stop fraud], it's not having much
of an effect," he says.
Spending on Internet ads is growing
faster than any other sector of the advertising industry and is
expected to surge from $12.5 billion last year to $29 billion in
2010 in the U.S. alone, according to researcher eMarketer Inc.
About half of these dollars are going into deals requiring
advertisers to pay by the click. Most other Internet ads are
priced according to "impressions," or how many people view them.
Yahoo executives warned on Sept. 19 that weak ad spending by
auto and financial-services companies would hurt its
third-quarter revenue. Share prices of Yahoo and Google tumbled
on the news.
Google and Yahoo are grabbing billions
of dollars once collected by traditional print and broadcast
outlets, based partly on the assumption that clicks are a
reliable, quantifiable measure of consumer interest that the
older media simply can't match. But the huge influx of cash for
online ads has attracted armies of con artists whose activities
are eroding that crucial assumption and could eat into the
optimistic expectations for online advertising. (Advertisers
generally don't grumble about fraudulent clicks coming from the
Web sites of traditional media outlets. But there are growing
concerns about these media sites exaggerating how many visitors
they have -- the online version of inflating circulation.)
Continued in article
Click Fraud Gets Smarter
Internet ad-traffic scams could be ripping off as much as $1 billion annually.
Are Web companies like Google doing enough to foil them?
"Click Fraud Gets Smarter," by Burt Helm, Business Week, February 27,
2006 ---
Click Here
Internet ad-traffic scams could be ripping off
as much as $1 billion annually. Are Web companies like Google doing enough
to foil them?
Web consultant Greg Boser has an ingenious method
for sending loads of traffic to clients' Internet sites. Last month he
began using a software program known as a clickbot to create the impression
that users from around the world were visiting sites by way of ads
strategically placed alongside Google search results. The trouble is, all
the clicks are fake. And because Google charges advertisers on a per-click
basis, the extra traffic could mean sky-high bills for Boser's clients.
But Boser's no fraudster. He cleared the procedure
with clients beforehand and plans to reimburse any resulting charges.
What's he up to? Boser wants to get to the bottom of a blight that's
creating growing concern for online advertisers and threatens to wreak havoc
across the Internet: click fraud.
BILLION-DOLLAR QUESTION. The practice can
wildly skew statistics on the popularity of an ad, drain marketing budgets,
and enrich the scam artists behind it. While click fraud isn't new, the
methods for carrying it out--take Boser's clickbot software--are getting
increasingly sophisticated. And some advertisers, analysts and consultants
question whether Web companies such as Google (GOOG) and Yahoo (YHOO) are
doing enough to nip click fraud in the bud. "No one has any idea how much
of this is actually going on," says Boser. "So we're going to see how well
[the search engines] actually try to protect advertisers."
One of Boser's biggest challenges is putting a
finger on exactly how widespread the practice is. Some search consultants
say click fraud accounts for upwards of 20% of all traffic, and may generate
more than $1 billion in dubious sales a year. Others say those stats vastly
overstate the problem.
Now, one of the biggest players in fraud detection
aims to end the guessing. Fair Isaac (FIC), which analyzes 85% of U.S.
credit card transactions, in partnership with Web search consultancy
Alchemist Media, will unveil plans at this week's Search Engine Strategies
Conference for what it says is the most rigorous study ever of click fraud.
Fair Issac will invite companies to submit traffic data that can be mined
for aberrations that may signify fraud. "We've seen indications that the
overall losses due to click fraud could equal more than $1 billion [a
year]--larger than the total magnitude of credit card fraud in the U.S.,"
says Kandathil Jacob, Fair Issac's director of product marketing. "It's
certainly worth our effort to look at it."
MORE CLICKS, MORE DOLLARS. A rising number
of companies would agree. The percentage of advertisers listing click fraud
as a "serious" problem tripled in 2005, to 16%, according to a survey by the
Search Engine Marketing Professional Organization. Advertisers have filed
at least two class-action suits saying Google, Yahoo, and other search
engines ought to be more up-front about methods for combating the practice.
Google says the suits are meritless. Yahoo declines to comment.
And in January, Standard & Poor's equity analyst
Scott Kessler downgraded Google stock in part because he considers click
fraud a "notable risk" (see BW Online, 1/17/06, "S&P Downgrades Google to
Sell"). Among his concerns: the prospect of false clicks may sour companies
from placing ads on Google. He too says Google needs to be more forthcoming
on the issue. "No one has any idea as to what Google assesses [as] its own
percentage of clicks that are generated by fraud, no idea what that process
consists of, and all the things that are being done to battle it," he says.
The Internet Fraud Complaint Center (IFCC) 2001
Internet Fraud Report is the first annual compilation of information on
complaints received and referred by the IFCC to law enforcement or regulatory
agencies for appropriate action. From January 1, 2001 – December 31, 2001 the
IFCC web site received 49,711 complaints. This total includes many different
fraud types and non-fraudulent complaints, such as computer intrusions,
SPAM/unsolicited email, and child pornography. During this same time period, the
IFCC has referred 16,775 complaints of fraud, the majority of which was
committed over the Internet or similar online service. The total dollar loss
from all referred cases of fraud was $17.8 million, with a median dollar loss of
$435 per complaint. Some of the significant findings of this report
include:
•Internet auction fraud was by far the most reported
offense, comprising 42.8% of referred complaints. Non-deliverable merchandise
and payment account for 20.3% of complaints, and Nigerian Letter fraud made up
15.5% of complaints. Credit/debit Card fraud and Confidence fraud (such as home
improvement scams and multi-level marketing) round out the top five categories
of complaints referred to law enforcement during the year. Among those
individuals who reported a dollar loss, the highest median dollar losses were
found among Nigerian Letter Scam ($5,575), Identity Theft ($3,000), and
Investment fraud ($1,000) complainants.
•Nearly 76% of alleged fraud perpetrators tend to be
individuals (as opposed to businesses), 81% are male, and half reside in one of
the following states: California, Florida, New York, Texas, and Illinois. While
most are from the United States, perpetrators have a representation in Canada,
Nigeria, Romania and the United Kingdom.
•Over 70% of fraud complainants are male, half are
between the ages of 30 and 50 (the average age is 38.6), and over one-third
resides in one of the four most populated states: California, Texas, Florida,
and New York. While most are from the United States, the IFCC has received a
number of complaints from Canada, United Kingdom, Australia, and Japan.
•The amount loss by complainants tends to be related
to a number of factors. Business victims tend to lose more than individuals and
males tend to lose more than females. This may be a function of both online
purchasing differences by gender, and the type of fraud the individual finds
themselves involved in. While there isn’t a strong relationship between age
and loss, proportion of individuals losing at least $5,000 is higher for those
60 years and older than it is for any other age category.
•Electronic mail (E-mail) and web pages are the
two primary mechanisms by which the fraudulent contact took place. Nearly 70% of
complainants reported they had e-mail contact with the perpetrator.
Overview
The Internet Fraud Complaint Center (IFCC), which began
operation on May 8, 2000, is a partnership between the National White Collar
Crime Center (NW3C) and the Federal Bureau of Investigation (FBI). The IFCC’s
primary mission is to address fraud committed over the Internet. This is done by
facilitating the flow of information between law enforcement agencies and the
victims of fraud, information that might otherwise go unreported.
While the primary mission of the IFCC is to address
Internet fraud, the IFCC served a critical role for the United States starting
on September 11, 2001. On that date, just hours after the terrorist attacks in
New York, Pennsylvania and metropolitan Washington, D.C., the IFCC web site
served as the mechanism by which people filed online tips with the FBI regarding
these attacks. Tens of thousands of tips were received and processed in
real-time in the months following the tragedies, and some of the information
received proved useful in the subsequent criminal investigation.
The IFCC 2001 Internet Fraud Report is the first annual
compilation of information on complaints received and referred by the IFCC to
law enforcement or regulatory agencies for appropriate action. The results
provide an examination of key characteristics of 1) complaints, 2) perpetrators,
3) complainants, and 4) the interaction between perpetrators and complainants.
Overall, the results are intended to enhance our general knowledge about the
scope and prevalence of Internet fraud in the United States.
General IFCC Filing Information
From January 1, 2001 – December 31, 2001 the IFCC web
site received 17,138,551 “unique” web hits 1 . The number of complaints
filed during the year equaled 49,711. During the same time period, 33,940
complaints were referred to enforcement agencies on behalf of the filing
individual. This total includes many different fraud types and non-fraudulent
complaints, such as computer intrusions, SPAM/unsolicited email, and child
pornography 2 . The IFCC averaged 1,428,212 “unique” web hits per month. The
number of complaints filed per month averaged 4,142.
The IFCC saw a significant increase within the year of
complaint filings from the January – March period (total complaints 7,040) to
the October – December period (total complaints 15,878). Finally, an average
of 2,828 (both fraudulent and non-fraudulent) complaints were referred per
month.
The IFCC referred 16,775 complaints of fraud during the
2001 calendar year. Even though the IFCC’s primary mission is to address fraud
committed over the Internet, those complaints involving only the more
traditional methods of contact (e.g., telephone and mail) were also referred on
behalf of the individual filing a report. Using information provided by the
complainant, it is estimated that just over 90% of all fraud complaints are
related to the Internet or online service. Each complaint is usually referred to
multiple agencies, based on where the subject(s) and victims(s) reside(s).
During the 2001 year, each referral was sent to an average of three law
enforcement and regulatory agencies; overall, 2,711 unique law enforcement and
regulatory agencies around the United States received complainant filings.
The results from this report were based on information
that was provided to the IFCC on the complaint forms submitted via the Internet
by complainants. These complaints were subsequently referred to law enforcement
and regulatory agencies. This report may not represent all victims of Internet
fraud, or fraud in general, because it is derived solely from the people that
reported to the IFCC. Care must also be taken in comparing these results with
those from the IFCC Six-Month Data Trends Report. On January 11, 2001 a new
complaint form was implemented and over the past year the IFCC has automated
many of its processes; this has resulted in more relevant, accurate, and
complete data. The culmination of these efforts is a report that continues to
serve as an awareness tool for the general public and those groups responsible
for controlling Internet-related fraud.
WiredSafety --- http://www.wiredsafety.org/
This is a great site for data about use of the Internet. It is also a very
good sight about safety in use of the Internet, including dangers of fraud,
crime, and sexual predators.
Spammer Exposes Customer Data A seller
of pirated Norton software, who inundates the Net with spam touting his cheap
prices, leaves open a back door to buyers' personal information -- and officials
say it happens all the time. - Special Report: Frauds, Scams and the
Flimflam-Man --- http://ecommerce.internet.com/news/news/article/0,,10375_1569901,00.html
One of the Web sites
operated by this particular spammer is called salesscape.com,
and links related to the site showed hundreds of customer orders in .txt
files.
The exposed data
includes what item was purchased, customer names, street addresses, phone
numbers and e-mail addresses, but apparently not credit card numbers.
Sites like this are
often totally unsecured, which is a good reason not to do business with them,
said a spokesman for Symantec.
And for anyone
wondering why spammers do what they do, the sheer number of customer orders
for this one spammer alone tells the story.
There is lots of
money to be made, which accounts for why an estimated 76 billion spam e-mails
will be sent worldwide in 2003, at an average cost to the spammers of 0.00032
cents per message, according to figures from eMarketer.
One of the recent
spam e-mails touting this software sales site came from
"first_response005@yahoo.com" and advertised Norton SystemWorks 2003
Software Suite -Professional Edition.
The e-mail touted
"Five Feature-Packed Utilities...For One Great Price... A $300-Plus
Combined Retail Value... YOURS for Only $39.99!" That software package
normally sells for about $70 or less on Amazon.com. It includes Norton
AntiVirus 2003, Norton Ghost 2003, GoBack 3 Personal Edition, Norton Utilities
2003 and Norton CleanSweep 2003.
Clicking on the link
in the e-mail takes one to www.salesscape.com,
which may be shut down by now, but which earlier listed the software package
and linked to an order page
that requests payment, either by clicking on a button or by snail mail to
"G.A. Moore - PO Box 19803 - Baltimore, MD 21225."
A whois check on the
site shows it is registered to Maryland Internet Marketing, with the
administrative contact being one George Moore Jr., 300 Twin Oaks Road,
Linthicum, Md. 21090. There was no answer when a reporter called the phone
number listed.
The order form
instructs potential customers to enter their addresses and a credit card
number, then push a "send" button or print the form out and mail it.
It also says that the software comes with no retail packaging and the
"manuals are built into the programs." Customers are also given an
opportunity to buy Roxio EZ CD Creator for another $29.99.
A Symantec spokesman
said that "one of the key indicators of pirated software is the fact that
retail packaging is not included."
Ten Ways to Reduce
Chargebacks and Fraud Merchants' concern about online credit card
fraud and chargebacks is rising at a significant rate. According to
the 2001 Online Fraud Report conducted by Mindwave Research, 41
percent of merchants say the issue of online credit card fraud is
"very serious" to their business. http://www.newmedia.com/default.asp?articleID=3443
Beware of the fine print in popular gift
cards issued by major stores.
Each $50 card may decline by as much as 5% per month even though you
paid full value up front. Looks like a consumer rip off from the
big chain retailers.
"Gift Cards May Bite
Recipient," by Lisa Munoz, San Antonio Express News,
September 22, 2003 (the article originally appeared in the Orange
County Register).
Gift cards
have steadily grown in popularity with both retainers and consumers
since the 1990s. But the Vinsons, and an increasing number of
other consumers, have learned that gift cards can come with many
strings attached.
A hard lesson learned is
that much of what gets forwarded around on the Internet is
fabricated. There is a website that works towards confirming or
debunking such items:
Take for example the recent
e-mail you forwarded me on Lee Marvin and Bob Keeshan (Capt.
Kangaroo). It seemed true enough as I remembered the Lee Marvin was
indeed a Marine who had served in the Pacific in WWII. However, it
seems someone has embellished the truth (for whatever their own
reason) and now that e-mail is making the rounds:
Another one I thought was
true following 9/11 was the one about the Budweiser delivery truck
removing its beer from the shelves of a mini-market in which the
middle eastern owner/employees were celebrating the 9/11 attacks. I
never questioned the e-mail because it seemed so true. I was to
learn months later that this was a complete fabrication, although
I'm sure celebrations like this probably occurred. The point is that
someone created the e-mail to stir up patriotic fervor. No matter
the intention, it just goes to show that you can't take what you
receive on the Internet for granted. It pays to check it out, and
this website serves as a good source. By the way, here's the answer
to the Budweiser item:
SEVENTEEN Manhattan property tax assessors
have been accused of taking bribes from property tycoons in what is
billed as “the biggest rip-off in New York City’s history”.
The 500 buildings that are said to have benefited from lower
taxation range from skyscrapers, including the headquarters of the
financial services company owned by Michael Bloomberg, the New York
Mayor, and two United Nations buildings down to a McDonald’s
burger bar.
None of the property- owners has been
indicted and it is not known how much they knew. James Comey, a
federal prosecutor, who has been unravelling the racket for two
years, said: “The investigation is continuing.”
The tax fraud, which is said to have been
going on for 35 years, is believed to have cost the city at least $1
billion (£700 million) in lost revenue and involved 18 city
officials who were paid a total of $10 million to reduce tax bills.
New York derives a fifth of its income from property taxes.
Mr Bloomberg said: “It has gone through
six Mayors and innumerable commissioners of finance. The bottom line
is: no one caught it until recently. We’ve got to make sure that
it doesn’t happen again.”
Mr Comey, announcing a total of 572
charges, said: “These defendants committed a breathtaking betrayal
of the public trust. “(The assessors responsible) sold their
office and sold out the people of New York by taking bribes. In
doing so, they undermined a bedrock of this city’s finances: a
fair and honest tax assessment system.”
The accused, all but two working in the
city’s Department of Finance Real Property Assessment Unit, are
said to have formed a “racketeering enterprise” that cheated New
Yorkers by causing higher taxes and inhibiting spending on schools
and public services.
They are said to have supplemented their
$60,000 legitimate incomes with bribes of between $500 and $15,000,
which were handed over during secret meetings in Manhattan coffee
shops and restaurants. They adopted nicknames such as the King Maker
and Harry Potter.
“Everybody was getting a piece of the
pie,” Barry Mawn, head of the FBI in New York, said. “They were
protecting one another. It was kept very quiet and everybody was
benefiting.” He estimated that the scam has cost the city $160
million in the past four years.
The city will try to recoup the losses from
the buildings’ owners and already has started proceedings to
recover $170 million from the defendants. The chief accused is
Albert Schussler, 85, nicknamed “the Old Man”, a former tax
assessor who from 1967 acted as a “tax consultant” for some of
the wealthiest landowners in the city. It is alleged that the lower
he fixed the tax, the more he was paid.
Mr Schussler is accused of paying $10
million in bribes to property tax assessors since 1967, including
bribes to Joseph Marino of $4.1 million over six years. Marino
pleaded guilty in April 2000 and provided the information leading to
yesterday’s court hearing. If convicted, Mr Schussler faces 25
years in jail for racketeering, bribery and mail-fraud. He and 16
others were arrested on Monday. All were bailed. Another man is
expected to give himself up today
Social Networking Dangers
Colleges warn about networking sites Incoming college students are hearing the
usual warnings this summer about the dangers of everything from
alcohol to credit card debt. But many are also getting lectured on a
new topic - the risks of Internet postings, particularly on popular
social networking sites such as Facebook. From large public schools
such as Western Kentucky to smaller private ones like
Birmingham-Southern and Smith, colleges around the country have
revamped their orientation talks to students and parents to include
online behavior. Others, Susquehanna University and Washington
University in St. Louis among them, have new role-playing skits on
the topic that students will watch and then break into smaller
groups to discuss. Facebook, geared toward college students and
boasting 7.5 million registered users, is a particular focus. But
students are also hearing stories about those who came to regret
postings to other online venues, from party photos on sites such as
Webshots.com to comments about professors in blogs.
"Colleges warn about networking sites," PhysOrg, August 2,
2006 ---
http://physorg.com/news73762121.html
Diamond Rating Scams
The Diamond Rating Scandals: Did you pay to much
for a diamond?
I'll just bet your finance also bought you those phony Lean
Macleans pawned off at McDonalds Restaurants. The still-unfolding scandal
over diamond ratings is fueling anxiety among both jewelers
and jewelry customers. Laboratory workers at the leading
rater of diamonds in the world, the Gemological Institute of
America, are being accused of taking bribes to give
higher-than-deserved ratings to stones. The GIA, which in
October fired four lab workers after a four-month internal
investigation, says only a handful of rogue dealers and a
relatively small number of stones were involved. But the
institute isn't saying how many stones may have bogus
ratings. The incident has diamond buyers around the world
wondering if they overpaid for their purchase.
Ann Zimmerman and Raymud Flandez, "Getting a Second Opinion
On Your Diamond: Bogus Ratings on Some Gems Fuel
Anxiety Among Buyers; GIA Offers Free Reappraisals," The
Wall Street Journal, December 21, 2005; Page D1
. . .
Diamonds are graded by the GIA after
being inspected under a microscope for internal flaws, and the
color is measured against a set of master stones reflecting the
spectrum of color ratings. Three graders look at the diamond
independently and then the stone is given a grading report, or
certificate, that lists its color and clarity rating, in
addition to its weight and cut.
Of course, getting an accurate rating
is only part of the challenge. Consumers need to make sure they
aren't paying too much for a stone that has been properly rated.
They can turn to resources such as Diamondhelpers.com, a
consumer-focused Web site that doesn't sell diamonds. It has a
price finder where consumers can enter information from the
diamond's certificate -- such as color, cut, carat weight and
clarity grade -- and get an idea of its value.
The diamond-grading scandal erupted
after a prominent diamond dealer filed a lawsuit earlier this
year charging that workers at the GIA lab in New York had
improperly graded stones sold in 2001 for $15 million to members
of the Saudi royal family. The Saudis later had an independent
evaluation done and got their money back. The GIA is on the
brink of settling the lawsuit, say people familiar with the
situation.
Joseph Tacopina, the attorney
representing the diamond dealer in the lawsuit, says that he has
gotten calls from dozens of consumers worried about the accuracy
of the grading certificates on their diamonds. He understands
their concern. "A difference in just two levels of a grade can
mean a lot of money and the average consumer, of course, can't
tell the difference," says Mr. Tacopina.
Jonathan Grella, a Washington PR
executive, says he has definitely taken note of the scandal. He
became engaged just two weeks ago, after months of learning the
ropes about buying a diamond.
"I learned that a certificate is a
must," he says, adding that he isn't sure whether he will get
the ring reevaluated by another lab.
"This could send shock waves, not just
through the jewelry and insurance industries," he says. "Can you
imagine, going back to your bride-to-be and saying, 'I don't
mean to alarm you, but the ring may not be what the certificate
says it is.' That could make for some interesting holiday
conversation."
Oct. 21, 2002 (Internet World) —
These are not the best of times to be sitting in the chief
executive's chair of a lot of companies. If a bear market weren't
bad enough, chief executives are being put directly in the bull's
eye of public and political ire over financial accounting scandals
that at their worst have sucked billions of dollars out of the
market, and at the least have depressed the market rebound.
That pressure will be felt far beyond just
the 947 public companies whose CEOs and CFOs have been forced by the
Securities and Exchange Commission to certify the truthfulness of
their financial reports. And though that move by the SEC was largely
a publicity stunt (you can even go to the SEC's Web site and view
the sworn statements from these executives), the question arises
about whether technology can play a part in providing protection for
investors and company executives.
"It's quite an interesting
topic," says Kraig Haberer, a former CPA at Price Waterhouse
who now serves SAP AG as director of product marketing for its mySAP
Financials suite. "Technology can be an enabler; however, it
cannot replace good judgment." He notes that the situations
that have blackened corporate images today are primarily caused, not
by a lack of technology, but by bad judgement by a few key
executives.
"However, I do think technology can
help minimize the chance of occurrences of either outright fraud or
purely overlooking something in an account," Haberer says.
"To some degree, the more automated you can make your processes
and your financial reporting and accounting, the better off you are
because technology can be that independent third party. You have a
lot of companies with multiple data feeds they are pulling from.
That process of recording, processing, and reporting on that
information is not automated, and you can introduce the likelihood
of just pure error, nothing fraudulent. So technology can be that
third party that can automate and integrate that process and
minimize the opportunities for error."
The mySAP response is to give the finance
department a number of automated tools for handling the complexity
of financial reporting in the modem global enterprise. That can make
it more difficult for an unscrupulous person somewhere in the mix to
introduce unethical practices, but it still may not be enough to let
the CEO relax. "You also have to empower that chief officer
with the information at his desk," Haberer says. MySAP offers
an executive dashboard, where you can specify the key indicators you
want to track at a high level and see their performance over time.
Simply by having lowerlevel executives know they're being watched
may not eliminate the threat, but if you sense a problem, you will
at least know what questions to ask.
To others, the problem is a security matter
related to protecting the integrity of the data in the enterprise's
financial systems. In August, Datum Inc. and WetStone Technologies
Inc. jointly announced a new subscription service, called Time Lock
for Microsoft Word that lets users embed secure and auditable
digital time stamps into their work. They then have a document that
can be verified for authenticity and time accuracy.
"If I was a CEO of a company and I had
to sign off on the financial statements, I would want to know that
my records are absolutely protected," says Steve Corie, who is
in fact the CEO and president of a company, Perimeter Data Inc.
Perimeter recently began selling a product that takes Datum's idea
to its logical conclusion: it makes it so that any files-email,
video, a series of sequential documents, voice mail, etc.-are
stamped, signed, and archived in a way that makes it impossible to
delete or modify. "CEOs have a fear, that if they do sign off
on something, they have to rely on people down the
organization," he adds.
For Comrie, the key point is that the data
is viable and can be proven legally in a court of law, if necessary.
He sees a future in which a brokerage house under investigation
might say certain e-mails being sought by investigators have been
deleted or don't exist, but their auditor steps in with the records
it keeps from its collaboration with its brokerage client, and
produces the digitally signed, time stamped, and sealed files. That
might actually create a headache for an unscrupulous chief
executive, but that headache, at least, would be well deserved.
"There's no way even an administrator
with access can go in and delete or manipulate data" with
Perimeter's system, says Comrie. "We believe there is a
vulnerability most corporations will never talk about, that at the
end of the day some of this stuff will be challenged in a court of
law-some will be brought forward as evidence."
The ultimate answer for corporate financial
accountability is not technological, of course. If a company's
executives or directors are concerned about their financials, the
answer lies in the integrity of the people managing the financial
records. But company leaders can invest in certain technology that
can help them detect problems before they become disastrous
headaches, whether the problem was man-made or a simple result of
people tripping over too-complex financial regulations.
mySAP.com delivers a comprehensive e-business platform designed
to help companies collaborate and succeed -- regardless of their
industry or network environment. mySAP.com solutions include:
Flexible Solutions
for Any E-Business Problem
mySAP.com solutions are open and flexible, supporting databases,
applications, operating systems, and hardware platforms from most
major vendors. They also uphold the highest quality
standards and deliver unparalleled levels of performance. And
they're appropriate for virtually any organization, from global
enterprise to small and midsize business.
What's more, SAP provides Business
Maps to help you visualize, plan, and implement a coherent,
integrated, and comprehensive solution.
Accounting Fraud
--- they do it because it usually pays very well even if they get
caught!
It is better and
much more lucrative to ask for forgiveness than permission.
February 2003
The 8th Ernst & Young Global Fraud Survey, "Fraud: The
Unmanaged Risk," based on a survey of 400 CEOs in more than 30
countries, reveals that, despite attempts to improve corporate
governance in the wake of recent financial scandals, more than half of
the companies interviewed had suffered a significant fraud in the last
two years. Moreover, some 85% of the worst frauds were by insiders on
the payroll. When asked what keeps them up at night, participants were
significantly more concerned about asset misappropriation than any
other kind of fraud. ---http://www.ey.com/global/download.nsf/South_Africa/Jan03_8th_Global_Fraud_Survey/$file/8th%20Global%20Survey.pdf
Some of the biggest challenges facing
business today are re-establishing confidence among investors,
promoting ethics and integrity in the workplace, and establishing
clarity in reporting procedures. This resource center will give you
the tools and information you need to combat fraud — whatever your
role in the business community.
The North American Securities
Administrators Association provides a listing of the top 10 investment
scams being investigated by state securities regulators. Some of the
examples published by NASAA have involved accountants and may serve as
current examples to use in ethics teaching --- http://www.nasaa.org/nasaa/abtnasaa/display_top_story.asp?stid=307
"Top
10" Investment Scams Listed by State Securities Regulators
WASHINGTON (August 26, 2002) – State securities regulators today
released a list of the “Top 10” scams, risky investments or
sales practice abuses they’re fighting. New to the third annual
list are unscrupulous brokers, conflicts of interest in analyst
research, charitable gift annuities, and oil and natural gas scams.
“Record-low interest rates and a bear market on Wall Street have
created a bull market in fraud on Main Street,” said Joseph Borg,
president of the North American Securities Administrators
Association (NASAA)¹ and director of the Alabama Securities
Commission. “Con artists know investors are concerned about the
volatile stock market and low yields on bonds and bank deposits, so
they pitch their scams as safe alternatives and promise high returns
– an impossible combination.”
The 2002 list was again topped by independent insurance agents
selling risky or fraudulent securities. Borg said that while most
independent insurance agents are honest professionals, too many are
letting high commissions lure them into selling high risk or
fraudulent investments.
The federal war on terror and large budget deficits at the state
level are diverting or pinching resources to fight investment fraud,
Borg warned.
“Putting people in jail gives investors the biggest bang for their
regulatory buck,” said Borg. “So legislators at all levels need
to ensure that regulators and prosecutors have sufficient resources
to successfully bring securities fraud cases.”
Here are the “Top 10” investment scams, ranked roughly in order
of prevalence or seriousness:
1. Unlicensed individuals, such as independent insurance agents,
selling securities.
In hundreds of cases from Washington state to Florida, scam artists
are using high commissions to entice independent insurance agents
into selling investments they may know little about. The person
running the scam instructs the independent sales force – usually
insurance agents but sometimes investment advisers and accountants
– to promise high returns with little or no risk. For example:
· In an alleged scam sold almost entirely by independent insurance
agents, investors in at least 14 states lost close to $30 million.
According to Ohio securities regulators, money raised from the sale
of fictitious limited partnerships was used to make interest
payments to another group of promissory note investors. Both groups
were promised double-digit returns. In April a court issued a
preliminary injunction and appointed a receiver in connection with
the allegations.
(The NASAA says the persons running these scams are usually
independent insurance agents, but some have been investment advisers
or accountants.)
· Earlier this month, an Arizona insurance agent was sentenced to
10 years in prison for selling $1.8 million in worthless stock and
bogus promissory notes to investors. Another Arizona insurance agent
was sentenced in May to five years in prison for scamming 32 elderly
investors out of nearly $2 million by first soliciting them to
purchase ‘living trusts’ and then switching them into annuities
and finally into bogus promissory notes. A third Arizona insurance
agent, working with his two sons, scammed $16.2 million by selling
high risk brokered CDs, viatical contracts, real estate deals and
equipment leases. They were ordered to repay all $16.2 million and
fined another $133,000.
To verify that a person is licensed or registered to sell
securities, call your state securities regulator. If the person is
not registered, don’t invest.
2. Unscrupulous stockbrokers.
The declining stock market has caused some brokers to cut corners or
resort to outright fraud, say state securities regulators. At the
same time, some investors have grown more cautious and are
scrutinizing their brokerage statements for unexplained fees,
unauthorized trades or other irregularities. In North Dakota,
regulators investigated a complaint from an investor who received
conflicting account statements. They discovered that two brokers
working for H.D. Vest Investment Securities Inc. issued phony
account statements to cover up losses from hundreds of unauthorized
trades. The brokers had also made unsuitable recommendations such as
risky options contracts. Under a settlement with state securities
regulators, H.D. Vest agreed to repay clients’ out-of-pocket
losses plus 6 percent, totaling over $3.2 million.
In New York, the attorney general’s office took action against
seven brokers and two firms for bilking hundreds of elderly
investors out of more than $12.5 million through a pay telephone
scam. The brokers pressured investors into liquidating their CDs,
annuities and IRAs, sometimes at significant penalty, and promised
them “risk-free” 14 percent returns. So far one firm has agreed
to pay $5.9 million in restitution.
3. Analyst research conflicts.
In May, the New York Attorney General’s office concluded a
10-month investigation into whether Merrill Lynch had issued
misleading research reports by entering into a settlement agreement
with the firm. Under the agreement, Merrill Lynch agreed to pay a
$100 million fine and make significant changes to way it does
business. NASAA is assisting a multi-state task force investigating
conflict of interest issues at Wall Street firms. The primary focus
of the ongoing investigation is to determine whether analysts issued
glowing research reports and made “buy” recommendations in order
to win investment-banking business. State investigators are now
reviewing materials provided by a dozen firms for possible
securities law violations.
In June NASAA learned of an attempt by Morgan Stanley Dean Witter to
amend an early version of the Sarbanes-Oxley Act with language that
would have ended the states’ probe into whether Wall Street
analysts intentionally misled investors. NASAA held a press
conference and met with lawmakers; the draft amendment was
ultimately not included in the bill.
4. Promissory notes.
These are short-term debt instruments often sold by independent
insurance agents and issued by little known or non-existent
companies promising high returns – upwards of 15 percent monthly
– with little or no risk.
In June, four Georgia-based scam artists were each sentenced to 17
½ years in prison for recruiting independent insurance agents to
sell millions of dollars worth of bogus promissory notes. While
investors were promised nine-month returns as high as 21 percent,
half of each investment went straight to commissions that were
divided among company principals and sales agents. Acting on a tip
from the Better Business Bureau, Georgia securities regulators
seized nearly $5 million of the $8 million stolen from local
investors and, together with federal investigators, used the
evidence uncovered to broaden their investigation and prepare
criminal charges. In the end, the Federal Bureau of Investigation,
working with Georgia regulators, found the ringleader – Virgil
Womack – had scammed over $150 million from investors nationwide.
Of the $150 million, nearly $90 million was seized and returned to
investors. The average age of the victims was 68.
In another case, a Maine court sentenced an insurance agent to seven
years in prison for running a promissory note scam that took 25
investors for more than $1 million. The agent, who was sentenced in
June, told investors the notes were “better than certificates of
deposit and life insurance policies,” regulators said, and that
they would yield 10 percent to 12 percent returns annually.
“A 12 percent return may not seem over-the-top by bull market
standards, but it’s far more than banks are offering now for
insured deposits,” said Chris Bruenn, administrator for the Maine
Office of Securities and NASAA’s president-elect.
5. “Prime bank” schemes.
Scammers promise investors triple-digit returns through access to
the investment portfolios of the world’s elite banks. Purveyors of
these schemes often target conspiracy theorists, promising access to
the “secret” investments used by the Rothschilds or Saudi
royalty.
In Texas, a Harlingen-based con artist promised returns of 6 percent
to 8 percent a month through a secretive web of money dealers
supposedly set up by a coalition of governments in 1914 to pay for
World War I debt. In videotape shown at Monday’s press conference,
the promoter claimed that seven “world traders” control the
entire global money supply. In the end, the scam took over 300
investors for roughly $6 million.
6. Viatical settlements.
Originated as a way to help the gravely ill pay their bills, these
interests in the death benefits of terminally ill patients are
always risky and sometimes fraudulent. The insured gets a percentage
of the death benefit in cash and investors get a share of the death
benefit when the insured dies. Because of uncertainties predicting
when someone will die, these investments are extremely speculative.
In a new twist, Pennsylvania regulators say “senior settlements”
– interests in the death benefits of healthy older people – are
now being offered to investors.
In June, 15 individuals were indicted in connection with a scam that
cost hundreds of investors nationwide at least $100 million. State
securities and insurance regulators, together with federal
regulators, allege the individuals, employed by Liberte Capital
Group, were involved in a scheme to buy life insurance policies from
terminally ill individuals who lied to insurance companies about
their medical conditions. Liberte managers used investor funds to
support lavish lifestyles, including investments and the purchase of
large homes and dozens of boats and cars. A receiver has been
appointed in the case.
7. Affinity fraud.
Many scammers use their victim’s religious or ethnic identity to
gain their trust – knowing that it’s human nature to trust
people who are like you – and then steal their life savings. From
“gifting” programs at some churches to foreign exchange scams
targeted at Asian Americans, no group seems to be without con
artists who seek to take advantage of the trust of others.
In Alabama, nine individuals have been charged with scamming
parishioners at the Daystar Assembly of God church in Prattville out
of more than $3 million. Investors were told their money would be
used to purchase retirement properties in Florida. The income
generated by the Florida properties would be used to payoff the
mortgage of the Prattville church and build a religious theme park,
investors were told. In reality, state securities regulators allege,
the money went to pay off investors in a previous scam and to
purchase equipment for unrelated businesses.
8. Charitable gift annuities.
(As an example, NASAA describes a Ponzi scheme ran through a
network of independent insurance agents, financial planners and accountants.)
These annuities are transfers of cash or property to a charitable
organization. The value of the annuity is less than the value of the
cash or property, with the difference constituting a charitable
donation. While most annuities offered by charitable organizations
are legitimate investments, investors should be cautious of
little-known organizations or those that provide only sketchy
information.
In Arizona, regulators uncovered a scam that took 430 investors
nationwide for an average of $133,000. The scam involved the
purchase of charitable gift annuities from the Mid-America
Foundation. According to regulators, Robert Dillie, founder of
Mid-America, ran what amounted to a $54 million Ponzi scheme through
a network of independent insurance agents, financial planners and
accountants. Dillie used investors’ funds to purchase three homes
in Las Vegas, a ranch in South Dakota, pay child support, book
charter flights and support his extensive gambling.
Magdalena Scheller, 68, of Phoenix, invested more than $400,000 in
Mid-America. A life insurance agent approached her after her husband
died.
“It makes you wonder if there are any honest people out there,”
Scheller said at Monday’s press conference.
“Unfortunately, Mid-America is not an isolated scam,” Mark
Sendrow, director of securities for the Arizona Corporation
Commission told reporters Monday. “We are looking at two more
foundations in the Phoenix area which have issued millions of
dollars of charitable gift annuities in the last few years, and both
were basically penniless before they began issuing them.”
9. Oil and gas schemes.
These scams follow the headlines, rising in frequency with
predictions of oil shortages or a rise in natural gas prices. In
Arkansas, securities regulators forced Energy Consultants and
Ark-La-Tex Consulting Co., L.L.C. to discontinue their marketing
efforts after finding a natural gas well touted to investors as a
‘can’t lose’ opportunity hadn’t produced in years.
10. Equipment leasing.
While the majority of equipment leasing deals are legitimate,
thousands of investors have been scammed by individuals selling
interests in payphones, ATMs or Internet kiosks. In a typical
equipment leasing scam, a company sells a piece of equipment through
a middleman. As part of the sale, the company agrees to lease back
and service the equipment for a fee. Investors are promised high
returns with little or no risk. But state regulators say high
commissions paid to salesmen and promised returns that are
unrealistically high doom many projects. In North Carolina,
regulators took action against an individual who sold an Internet
kiosk to an investor for $24,950, promising a 17 percent return. The
individual had previously sold payphone leases to investors from a
company that later filed for bankruptcy.
Before investing, state securities regulators urge investors to call
their offices and ask if the individual selling the investment is
licensed to do so. Regulators say investors can also save themselves
a lot of grief by asking a second question – whether the
investment itself is registered. To check out an investment or
salesperson, contact your state securities regulator. Their phone
number is in the white pages of your phone book under
“government” or available online at www.nasaa.org.
The web link below is to a report of
potentially enormous significance to the accounting profession. It
concerns an insurance company specialising in workers compensation
insurance which collapsed in Australia about 2 years ago, leaving a
deficiency of about $A5 billion.
The report analyses a number of accounting
and auditing issues, including: provisioning for complex
liabilities; accounting for assets such as goodwill, future income
tax benefits, deferred costs such as IT and marketing related; the
nature of going concern.
There are several matters of interest.
The first may be that Andersen's audit
approach is analysed in great detail. HIH was one of Andersen's
biggest clients in Australia. The judge who presided over the
Commission does not directly conclude that Andersen was conflicted.
However, he does draw out the following features of the auditors'
relationship with HIH's management: Audit staff were assessed
against 'conerstone' measures, important amongst which were
on-selling of new business. Some internal memoranda make interesting
reading in this regard. (Again, as with Enron, the British branch of
Andersens comes out with their reputation intact.) The engagement
partner held a meeting with members of the audit committee because
he was unhappy with some of the accounting. The meeting was held
without management. The partner was taken off the assignment. Also
of interest is the consideration of audit evidence obtained by
Andersen's to support carrying values of assets. In the case of what
is referred to as Deferred Acquisition Cost (the deferral of
marketing costs against the future recognition of premium revenue),
Andersens claimed that the financial controller did an impairment
review. In evidence to the Commission, the financial controller said
he was completely unaware of the requirement until after he had left
HIH!
Of most significance is the damning
criticism of the Australian standard setting process. The judge
singles out the Australian insurance standard and its standard on
goodwill. In the first case he said that the standard setting
process was not independent of the industry for whom the standard
was set. He then compared the resulting standard unfavourably with
solvency requirements laid down by a government regulator, the
regulator requiring completely different accounting based more on
the conceptual framework than the 'matching' concept underlying the
standard. (It is the foolish adherence to 'matching' that has given
rise to the carrying of marketing cost as an asset.)
In the case of goodwill the judge concludes
the standard to be deeply ambiguous. He then concludes that the
standard setting process is deficient because it lacks input from
proper legal draughtsmen. In saying this it needs to be borne in
mind that Australia and New Zealand are unique in conferring on
standards the express force of law. In view of the criticism of FASB
and its propensity for legalism in the wake of the Enron matter, the
judge's criticism is particularly ironic.
E"x Official of Vatican Pleads Guilty in Conspiracy," by
Paul Zielbauer, The New York Times, September 6, 2002
A retired Vatican official who is an expert
on Catholic canon law pleaded guilty today to a federal conspiracy
charge for his role in an international insurance swindle run by
Martin R. Frankel, the Greenwich financier who is now in prison.
In a signed statement, Msgr. Emilio
Colagiovanni, 82, whose career included sitting on the board that
provides legal counsel to Pope John Paul II, pleaded guilty to
conspiracy to commit wire fraud and launder money. He faces a
maximum of five years in prison and a $250,000 fine.
In the six-page statement, Monsignor
Colagiovanni, an Italian citizen and a priest for 60 years, said
that in 1998 and 1999 he helped Mr. Frankel defraud American
insurance companies that Mr. Frankel wanted to buy. His
contribution, he said, was allowing his own Rome-based foundation,
the Monitor Ecclesiasticus Foundation, which publishes a journal of
canon law edited by the monsignor, to siphon $50 million of Mr.
Frankel's money into a second foundation. It had been created by Mr.
Frankel specifically to acquire the companies, the monsignor
acknowledged.
Case Studies and Questions --- http://riskinstitute.ch/
“Lessons From the Collapse of Hedge Fund, Long-Term Capital
Management” at the International Financial Risk Institute.
This case study also includes an analysis of what caused the collapse
and offers CPAs the same credit risk instruction the world’s bank
regulators received. In addition, the site’s Dictionary of Financial
Risk Management has detailed definitions for financial analysts and
managers.
The American Accounting
Association recently published a monograph (with CD ROM) -- Studies in
Accounting Research Volume No. 33. Empirical Research in Auditor
Litigation: Considerations and Data By Zoe-Vonna Palmrose Published 2000, 90 pages. Members $15.00
Nonmembers $20.00
The Internal Revenue Service
issued a nationwide alert to taxpayers warning them not to fall victim
to one of the "Dirty Dozen" tax scams. These schemes take
several shapes, ranging from false claims of slavery reparations to
illegal ways of "untaxing" yourself. http://www.accountingweb.com/item/70990
The
Stanford Securities Class Action Clearinghouse provides detailed
information relating to the prosecution, defense, and settlement of
federal class action securities fraud litigation. The Clearinghouse
identifies 1238 issuers that have been named in federal class action
securities fraud lawsuits since passage of the Private Securities
Litigation Reform Act of 1995. To view a searchable index of these
issuers click here. The Clearinghouse also contains full text
searchable copies of more than 2000 complaints, briefs, filings, and
other litigation-related materials filed in these cases. To search
these documents click here. The Clearinghouse takes no position
regarding the merits of individual claims.
The
Clearinghouse offers regular updates identifying companies that have
recently been named as defendants in federal class action securities
fraud complaints. If you would like to receive this information,
please register here.
In
addition, the Clearinghouse provides access to a range of research
reports and analyses that relate to the evolution of federal class
action securities fraud litigation since passage of the Private
Securities Litigation Reform Act of 1995. To view these materials
click here.
List
of Securities Fraud Class Actions
SORTED BY COMPANY NAME
IMPORTANT
NOTE:
If another district or date than the one for
which you searched appears in the "Court" column, the
explanation may be that the district/date for which you searched is
related to this case but is not singled out as our "First
Identified District". This list may be considered inclusive.
Summary:
According to a Press Release dated December 21, 2001, the complaint
alleges that during the Class Period defendants materially
misrepresented Take-Two's financial results and performance for each
of the quarters of and full year of fiscal 2000, ended October 31,
2000, and each of the first three quarters of fiscal 2001, ended
January 31, 2001, April 30, 2001 and July 31, 2001, respectively, by
improperly recognizing revenue on sales to distributors. On August
24, 2001, the truth about the Company's financial condition began to
emerge when the effects of defendants' scheme began to negatively
impact the Company's financial results. It was not until December
14, 2001 and December 17, 2001, however, that
the market began to learn that defendants had caused the Company to
improperly recognize revenue for products shipped to distributors,
where the distributors did not have a binding commitment to pay for
the products, in direct contravention of GAAP.
Significantly, defendants' unlawful accounting practices enabled
defendants to portray Take-Two as a financially strong company that
was experiencing dramatic revenue growth, and which was poised for
future success when, in fact, the Company's purported success was
the result of improper accounting practices. On December 14, 2001,
following rumors of a possible restatement of Take-Two's financial
results, Take-Two's common stock fell 31% --$4.72 a share to $10.33
per share. During the Class Period, Take-Two shares traded as high
as $24.50 per share. Defendants were motivated to misrepresent the
Company's financial results, by among other things, their desire to
sell approximately 900,000 shares of Take-Two common stock during
the Class Period at artificially inflated prices for proceeds of
over $15 million.
INDUSTRY
CLASSIFICATION: SIC Code: 7372 Sector: Technology Industry: Software
& Programming
NAME OF
COMPANY SUED: Take-Two Interactive Software Inc.
FIRST
IDENTIFIED COMPLAINT IN THE DATABASE Fischbein, et al. v. Take-Two
Interactive Software Inc., et al. COURT: S.D. New York DOCKET
NUMBER: JUDGE NAME: DATE FILED: 12/18/2001 SOURCE: Business Wires
CLASS PERIOD START: 02/24/2000 CLASS PERIOD END: 12/17/2001 TYPE OF
COMPLAINT: Unamended/Unconsolidated PLAINTIFF FIRMS IN THIS OR
SIMILAR CASE: Milberg Weiss Bershad Hynes & Lerach, LLP (New
York, NY) One Pennsylvania Plaza, New York, NY, 10119-1065 (voice)
212.594.5300, (fax) , Rabin & Peckel LLP 275 Madison Avenue, New
York, NY, 10016 (voice) 212.682.1818, (fax) , email@rabinlaw.com
Schiffrin & Barroway, LLP 3 Bala Plaza E, Bala Cynwyd, PA, 19004
(voice) 610.667.7706, (fax) 610.667.7056, info@sbclasslaw.com
TOTAL
NUMBER OF PLAINTIFF FIRMS: 3
February 28, 2002 message
from Allen Plyler
Bob,
Take-Two
Interactive just restated their last restatement.
Allen
Plyler
Keller Graduate School of Management, Chicago, Illinois.
Important
Database --- From the Scout Report on February 1, 2001
This column
from Law Library Resource Xchange (LLRX) (last mentioned in the
September 7, 2001 Scout Report) by Kathy Biehl becomes more
interesting with every revelation of misleading corporate accounting
practices. This is a straightforward listing of state government's
efforts to provide easy access to required disclosure filings of
businesses within each state. Each entry is clearly annotated,
describing services offered and any required fees (most services
here are free). The range of information and services varies
considerably from very basic (i.e. "name availability") to
complete access to corporate filings. The noteworthy exception here
is tax filings. Most states do not currently include access to
filings with taxing authorities.
From The Wall Street
Journal Accounting Educators' Review on May 23, 2002
TITLE: SEC Broadens
Investigation Into Revenue-Boosting Tricks; Fearing Bogus Numbers Are
Widespread, Agency Probes Lucent and Others
REPORTER: Susan Pulliam and Rebecca Blumenstein
DATE: May 16, 2002
PAGE: A1
LINK: http://online.wsj.com/article/0,,SB1021510491566948760.djm,00.html
TOPICS: Financial Accounting, Financial Statement Analysis
SUMMARY: "Securities and
Exchange Commission officials, concerned about an explosion of
transactions that falsely created the impression of booming business
across many industries, are conducting a sweeping investigation into a
host of practices that pump up revenue."
QUESTIONS:
1.) "Probing revenue promises to be a much broader inquiry than
the earlier investigations of Enron and other companies accused of
using accounting tricks to boost their profits." What is the
difference between inflating profits vs. revenues?
2.) What are the ways in
which accounting information is used (both in general and in ways
specifically cited in this article)? What are the concerns about using
accounting information that has been manipulated to increase revenues?
To increase profits?
3.) Describe the specific
techniques that may be used to inflate revenues that are enumerated in
this article and the related one. Why would a practice of inflating
revenues be of particular concern during the ".com boom"?
4.) "[L90 Inc.] L90
lopped $8.3 million, or just over 10%, off revenue previously reported
for 2000 and 2001, while booking the $250,000 [net difference in the
amount of wire transfers that had been used in one of these
transactions] as 'other income' rather than revenue." What is the
difference between revenues and other income? Where might these items
be found in a multi-step income statement? In a single-step income
statement?
5.) What are "vendor
allowances"? How might these allowances be used to inflate
revenues? Consider the case of Lucent Technologies described in the
article. Might their techniques also have been used to boost profits?
Reviewed By: Judy Beckman,
University of Rhode Island
Reviewed By: Benson Wier, Virginia Commonwealth University
Reviewed By: Kimberly Dunn, Florida Atlantic University
One-time Internet booster
Henry Blodget, who recently left Merrill Lynch, is reportedly one of
several stock analysts being probed for alleged conflicts of interest
--- http://www.wired.com/news/politics/0,1283,48992,00.html
From The Wall Street
Journal's Accounting Educator Reviews on January 24, 2002
SUMMARY: Paul F. Polishan,
the former chief financial officer and senior vice president of Leslie
Fay, was convicted of 18 felony counts for his role in overstating the
earnings of Leslie Fay between 1989 and 1993. Mr. Polishan was
sentenced to serve nine years in prison. Questions deal with
accountants' liability and consequences of fraudulent financial
reporting.
QUESTIONS:
1.) In what situations is overstating earnings a crime? What other
penalties could result from overstating earnings? Do you think
overstating earnings should result in a prison sentence? Support your
answer.
2.) Were Leslie Fay's
financial statements audited? What responsibility does the auditor
bear concerning the earnings overstatement?
3.) In what situations would
an independent auditor be liable under common law for overstated
earnings? What defenses are available to the auditor?
4.) In what situations would
an independent auditor be liable under civil law for overstated
earnings? What defenses are available to the auditor?
5.) In what situations would
an independent auditor be liable under criminal law for overstated
earnings? What defenses are available to the auditor?
6.) Who is harmed by
overstated earnings? How are each of these groups harmed?
Reviewed By: Judy Beckman,
University of Rhode Island
Reviewed By: Benson Wier, Virginia Commonwealth University
Reviewed By: Kimberly Dunn, Florida Atlantic University
In
particular, it has raised awareness of “hollow swaps”, where two
telecoms companies exchange identical amounts of network capacity,
then book the purchase cost as capital expense and the sale as
revenue. Although C&W says it does not use hollow swaps, it has
recently admitted to using another controversial accounting method to
book the sale of “indefeasible right of use” (IRU) contracts.
C&W booked the contracts, which give access to its telecoms
network, as upfront revenue even though they were spread over periods
of up to 15 years. Such deals — which were outlawed in 1999 by
regulators in America — boosted C&W’s revenues by £373
million in 2001.
Chris Ayres and Clive Mathieson, London Times Online, March 1,
2002 --- http://www.thetimes.co.uk/article/0,,5-222235,00.html
The
Association of Certified Fraud Examiners is an international,
25,000-member professional organization dedicated to fighting fraud
and white-collar crime. With offices in North America and chapters
around the globe, the Association is networked to respond to the
needs of anti-fraud professionals everywhere.
In the April 2002 issue of
Journal of Accountancy, Joseph Wells, chairman of the Association
of Certified Fraud Examiners (CFE), reviews the results of a survey by
CFE and discusses the implications for CPAs. http://www.accountingweb.com/item/77418
In Congressional testimony on
February 14, James G. Castellano, the chairman of the American
Institute of CPAs said the Institute plans to release a draft of a new
standard by the end of February. The objective of the new standard is
to help auditors detect new types of management fraud. http://www.accountingweb.com/item/72560
A message from Andrew Priest
on February 34. 2002
Yahoo! is
carrying this news story in respect of Tyco International.
Apparently the firm spent $US8 billion in its past three fiscal
years on more than 700 acquisitions that were never announced to the
public. The story is at http://au.news.yahoo.com/020205/2/3vlo.html
.
Is this
another Andersen client? :-) Seriously does anyone know who the
auditor is on this one?
On May 20, 2002 the Securities and Exchange Commission announced
proceedings against Big Five firm Ernst & Young. The case reaches
back to the years before E&Y's consulting practice was sold to Cap
Gemini. It involves alleged independence violations due to product
sales and consulting fees related to PeopleSoft software, while
PeopleSoft was an E&Y audit client. http://www.accountingweb.com/item/81348
In a ruling Tuesday, Brenda Murray, the chief administrative law
judge at the SEC, granted Ernst & Young's motion for summary
judgment and dismissed the case without prejudice. Ms. Murray agreed
with Ernst & Young that more than one SEC commissioner needed to
approve the action for it to be valid.
From Double Entries on July
5, 2002
In
the first-ever auditor independence case against a foreign audit
firm, the Securities and Exchange Commission has brought a settled
enforcement action against Moret Ernst & Young Accountants (Moret),
a Dutch accounting firm now known as Ernst & Young Accountants.
The case arises from Moret's joint business relationships with an
audit client. In today's order, the SEC censured Moret for engaging
in "improper professional conduct" within the meaning of
Rule 102(e) of the SEC's Rules of Practice, and ordered Moret to
comply with certain remedial undertakings, including the payment of
a $400,000 civil penalty. This is the first time that the SEC has
ordered any audit firm to pay a civil penalty for an auditor
independence violation. Moret consented to the order without
admitting or denying the SEC's findings. Full details from the SEC
in our full article. Just
click on through
1.)
"The most visible indicator of improper accounting-and source
of new investigations-is the growing number of restated financial
reports." Based on your knowledge of APB Opinion 23, why is
this statement true? What other sources of information does the SEC
use to trigger investigations?
2.) Why
would the SEC want to "ferret out" questionable accounting
practices before "word of a company's accounting problems has
leaked and battered its stock price"? How does this goal relate
to the SEC's responsibilities? What steps are they undertaking to
accomplish this goal?
3.) What is
fraudulent financial reporting (as opposed to an accounting error)?
Why might the current economic circumstances lead to greater
incidences of fraudulent financial reporting?
4.) Read
the summary of a research study entitled "Fraudulent Financial
Reporting: 1987-1997: An Analysis of U.S. Public Companies" at
the AICPA web site http://www.aicpa.org/news/p032699b.htm
How do the factors identified in this study provide a basis for
helping the SEC to detect questionable accounting practices earlier
than is now the norm?
5.) How are
executives' compensation packages tied to share prices? What are the
benefits of such compensation arrangements? Why do current market
conditions enhance the risk that executives may be willing to
undertake earnings management practices to enhance their own
salaries? What market reactions to earnings announcements exacerbate
these incentives to manage earnings?
AICPA Issues Proposed
Standard On Fraud Detection
On February 28, 2002, the American Institute of CPAs (AICPA) released
a draft of a revised audit standard on Consideration of Fraud in a
Financial Statement Audit. If adopted, this updated standard will
replace the current standard with the same name, (Statement on
Auditing Standards No. 82). http://www.accountingweb.com/item/73718
Risk
Management/Internal Audit BEYOND
TRADITIONAL AUDIT TECHNIQUES Paul E. Lindow and Jill D. Race Instead of just reviewing required controls, internal auditors
can broaden their approach both within and outside the audit process
to identify areas for risk management improvements. Here’s a case
study on how the internal audit group at California Federal Bank
redefined its role to add more value and become key advisers to the
company.
Risk
Management/Litigation Services FIVE
TIPS TO STEER CLEAR OF THE COURTHOUSE Paul Sweeney As litigation costs continue to mount, businesses want to
develop efficient strategies to identify and monitor vulnerabilities
and avoid lawsuits. CPAs have the expertise to offer clients
solutions to several corporate risk management problems.
From The Wall Street
Journal Accounting Educators' Review on March 7, 2002
SUMMARY:
The article implies that a new auditing standard on fraud actually has
been issued, but the actual document issued was an exposure draft of a
proposed standard.
The
article begins with the statement that "the Auditing Standards
Board (ASB) of the American Institute of Certified Public Accountants
issued expanded fraud guidance for U.S. auditors..."Is this statement correct?
2.)
In the second paragraph of the article, the author states, "The
guidance comes at a time when questionable accounting practices have
surfaced in the wake of bankruptcy-law filings by...Enron Corp. and
Global Crossing Ltd."Were
these recent scandals the reason behind the new auditing standard
proposal?If not, what
were the ASB's reasons for proposing the new standard?(Hint:again see
the actual document at the AICPA's web site.)
3.)
The proposed new standard would mandate specific requirements to
search for fictitious entries and perform other tests to search for
fraud under certain circumstances.Compare and contrast this proposal to current auditing
requirements to search for fraud.
SMALL
GROUP ASSIGNMENT: The proposed auditing standard requests feedback
from respondents to assess each of the major areas of the new standard(e.g., classification of risk factors for fraud, identification
of revenue recognition as the major area for risk of fraud,
consideration of the risk of management override of fraud, inquiry of
audit committees about fraud, and the attitude of professional
skepticism).Divide the
class into small groups and assign one section to each group to draft
a response to the questions posed in the exposure draft.
Reviewed
By: Judy Beckman, University of Rhode Island
Reviewed By: Benson Wier, Virginia Commonwealth University
Reviewed By: Kimberly Dunn, Florida Atlantic University
Can Internal Auditors truly
be independent while being employed by the entity and seen as working
for the management to achieve organizational goals? In theory,
External Auditors are more likely to be perceived as independent, but
is it not the case that Internal Auditors appear to have little or no
independence? http://www.accountingweb.com/item/65704
Internal
auditing is an independent, objective assurance and
consulting activity designed to add value and improve an
organization's operations. It helps an organization accomplish
its objectives by bringing a systematic, disciplined approach to
evaluate and improve the effectiveness of risk management, control,
and governance processes. (Institute of Internal Auditors)
Fraud
Investigation consists of the multitude of steps necessary to
resolve allegations of fraud - interviewing witnesses, assembling
evidence, writing reports, and dealing with prosecutors and the
courts. (Association of Certified Fraud Examiners)
This site focuses on
topics that deal with Internal
Auditing and Fraud
Investigation with certain hyper-links
to other associated and relevant sources. It is dedicated to sharing
information.
Responding
to widespread concerns that investors were not always given reliable
financial information in that time of frantic revenue growth,
regional offices of the S.E.C., the Federal Bureau of Investigation
and the United States attorney's office here are cooperating in a
legal crackdown on accounting violations.
A tough
law-enforcement response to accounting irregularities, of course, is
not new. In the past year, federal investigators have pursued cases
of irregularities at companies like Waste Management (news/quote),
Cendant (news/quote) and Sunbeam. But now the government is turning
up the heat in Silicon Valley, home to a preponderance of
questionable accounting, particularly among software companies,
during the Internet boom.
Over the
last four years, nearly one in five accounting restatements — red
flags for potential misconduct — have been by companies in
California, according to a study by Arthur Andersen, the accounting
firm. (Arthur Andersen was itself the recent subject of an S.E.C.
civil sanction for the way it audited the books of Waste Management,
the trash-disposal company, and agreed to a settlement without
admitting or denying civil fraud allegations.) In the same four-
year period, the total number of restatements for all industries has
nearly doubled, Arthur Andersen's report said.
So far in
the technology sector, federal investigators and prosecutors here
have set their sights on relatively small companies, where a high
proportion of problems center on what accountants call improper
"revenue recognition" — the recording of revenue that
does not exist. It could be, for example, from a pending sale that
is misclassified as completed, or a service contract in which money
has not yet changed hands.
The Arthur
Andersen study of accounting restatements from 1997 to 2000 showed
that 27 percent of the restatements nationwide had been filed in the
software and computer industries. About 62 percent of the software
companies involved had annual gross revenue of less than $100
million.
The rise of
accounting fraud investigations, specifically related to
overstatement of revenue, reflects a serious white-collar crime
trend in the high-technology sector in recent years, said Leslie B.
Caldwell, chief of the securities fraud section for the United
States attorney's office here.
"The
pressure to do this in the technology industry was intense because
the expectation for growth was so high, and it wasn't
sustainable," she said, without commenting on specific cases.
The inquiry
at Indus International focused on revenue for the third quarter of
1999. According to the shareholder lawsuits against the company and
former executives, the revenue total included sales derived from
"irregular contracts," money that was not received during
the quarter in question. Last October, Indus International agreed to
settle the suits for $4.3 million without admitting or denying
wrongdoing.
Previously,
Ms. Caldwell said, her office waited for the S.E.C. to refer cases
for criminal investigation. But now, "we're taking the bull in
our own hands," she said.
"There
are a number of matters under investigation of corporations that
cooked their books to meet Wall Street's expectations —
expectations that the companies themselves created," she added.
Harris
Miller, president of the Information Technology Association of
America, a trade group, said accounting problems in the software
industry had arisen because of what he called vague rules covering
sales of licensing agreements, which resulted in many companies
claiming revenue that they expected to receive.
"The
rules for revenue recognition were a bit cloudy, not just for
software companies but for any company that delivers services over
time," Mr. Miller said. His organization, he said, was not
making excuses for executives who intentionally violated
regulations. "Yes, there was pressure to drive the top
line," he said. "But you can never justify
misconduct."
Ms.
Caldwell's unit of seven lawyers, responsible for expediting
complicated and paper-intensive securities investigations, was
created in February 2000 by Robert S. Mueller, United States
attorney for the Northern District of California, whom President
Bush chose to serve as director of the F.B.I.
Matthew J.
Jacobs, a spokesman for the United States attorney's office here,
said Mr. Mueller had made the prosecution of accounting fraud a
major objective because of its prevalence in both economic booms and
declines. Mr. Mueller was not available for comment, the United
States attorney's office said on Friday.
In its most
prominent case to date, Ms. Caldwell's team obtained indictments
last September against two former executives at McKesson, the
pharmaceutical and medical technology company based here. The
defendants were charged with accounting fraud related to the 1999
merger of McKesson and HBO & Company, a software company based
in Atlanta. Prosecutors said $9 billion in shareholder losses
resulted. The defendants pleaded not guilty to the charges, and the
case is in the pretrial phase.
The F.B.I.
and federal prosecutors here are investigating about 50 cases of
possible criminal securities fraud in the district, more than a
dozen of them focusing on companies suspected of accounting fraud.
In addition
to Indus International, at least six small and medium-size software
companies in Northern California are under federal criminal and
civil investigation, according to officials. Among them is Critical
Path, a San Francisco company that sells e-mail messaging technology
to other businesses and reported $135.7 million in sales last year.
In February, after an internal investigation that led to the
departure of its chief executive and two other executives, Critical
Path restated revenue for the third and fourth quarters of 2000,
subtracting a total of $19.4 million from what it had claimed. The
company's share price plummeted and class-action suits were filed,
contending deception and fraud. Critical Path has said it is
cooperating with investigators.
In another
case, the S.E.C. filed a civil complaint last September in Federal
District Court here against three former executives of the Cylink
Corporation (news/quote), a Santa Clara company that makes
cryptographic software for computer network security, accusing them
of violating accounting rules by recognizing spurious transactions
as sales in quarterly earnings statements. The complaint said Cylink
recognized more than $900,000 in revenue in the second quarter of
fiscal 1998 for sales in which some customers were given a
three-month window to cancel their orders.
"When
senior officers are involved in this kind of conduct we're going to
hold them responsible," Robert L. Mitchell, head of the
S.E.C.'s enforcement office in San Francisco, said when the
complaint was issued. "Companies only act through
individuals." The S.E.C. settled a separate administrative
"cease and desist" proceeding with the corporation. In the
civil litigation against three former Cylink executives, each was
accused of securities fraud, circumvention of Cylink's internal
controls and falsification of records.
In July,
according to court records, one of the former Cylink executives,
Thomas Butler, who had been vice president for sales, signed a
consent decree, without admitting or denying the charges, agreeing
to pay a $100,000 fine and forfeit a $25,000 bonus he had been
awarded by Cylink for his sales performance. Litigation against the
two other defendants is still pending. Robert Fougner, Cylink's
general counsel, said that he and other company executives could not
comment on the case.
In cases in
which criminal charges are brought against company executives,
potential penalties can be harsh. In addition to fines imposed by
the S.E.C., a conviction of an executive on a criminal securities
fraud charge can result in a prison sentence of up to 10 years and a
fine as high as $1 million. Conviction on a lesser charge, like wire
fraud or conspiracy, carries a maximum five- year sentence and
$250,000 fine.
Until
recently, the pace of these investigations had been plodding, owing
to their complexity and a shortage of resources. For example,
Scorpion Technologies, a software company that was based in Los
Gatos, Calif., and is now defunct, was accused of fraudulently
claiming as much as $3.6 million of its $12.4 million in reported
1991 revenue. The S.E.C. filed civil charges and federal prosecutors
indicted company executives on securities fraud charges in 1996. The
last of the Scorpion defendants, John T. Dawson, was indicted in
1999. Last November, he pleaded guilty to charges that he had helped
create offshore companies that masqueraded as buyers of Scorpion
software products. Mr. Dawson's sentencing hearing is set for Oct.
2.
The Justice
Department has a high threshold for criminal prosecution in these
cases, with a distinction being made between misleading accounting
practices and criminal fraud, Ms. Caldwell said. A suspicious
accounting trick, by itself, cannot be the basis for seeking an
indictment without other facts establishing deliberate fraud, she
said.
Some major
technology companies, including Lucent Technologies (news/quote),
have been subject to recent class- action suits contending
irregularities in the way the companies accounted for their growing
revenue before their businesses weakened. The S.E.C. started
examining Lucent's books last November, after the company had
disclosed an accounting problem, fired an employee and filed a
restatement lowering its revenue for its fiscal year 2000 by $679
million.
Lucent,
however, seems an exception. For now, at least, it appears to be the
smaller technology companies that are receiving the most scrutiny.
The Securities and Exchange Commission has filed suit against the
founder and five other former top officers of Waste Management Inc.
for massive fraud. The complaint charges the defendants with inflating
profits to meet earnings targets. http://www.accountingweb.com/item/76329
Note that Waste Management just announced that it was changing
auditors. The auditor up to now was (guess?) Arthur Andersen.
"Channel stuffing" refers to the practice of
building inventories in distribution channels. On July 11, 2002
Bristol-Myers Squibb, one of the world's largest pharmaceutical
companies, confirmed that the Securities and Exchange Commission (SEC)
has launched an "informal inquiry" into its sales practices.
http://www.accountingweb.com/item/85930
Channel stuffing was (is?) common in the tobacco
industry where companies load up sales revenues on deliveries that
they know they will have to take back after the freshness dates on
packages expire. More cartons were (are?) sent to customers than
can ever be sold before expiration dates.
As consumers seek
help in managing their debt or repairing damaged credit, they should be
cautious when choosing a credit counseling organization, and to be wary of
promised "quick fixes," regulators warned Tuesday.
Due to an increasing
number of complaints to federal and state agencies, the Internal Revenue
Service, the Federal Trade Commission, and state regulators issued a consumer
alert for those seeking assistance from tax-exempt credit counseling
organizations.
The IRS and FTC are
concerned that some credit counseling organizations using questionable
practices may seek tax-exempt status in order to circumvent state and federal
consumer protection laws. State and federal statutes regulating credit
counseling agencies often do not apply to Section 501(c)(3) tax-exempt
organizations.
"Many of these
groups provide a valuable service to consumers, but some use the tax code to
skirt consumer-protection laws," said IRS Commissioner Mark W. Everson.
"It is not fair to taxpayers struggling with financial problems to be
taken advantage of by credit counseling groups exploiting gaps in the
law."
"We want all
consumers seeking help to take some common sense precautions," said
Timothy J. Muris, Chairman of the FTC.
The IRS and FTC
outlined some steps consumers can take to protect themselves from deceptive
credit counseling practices:
Check that the
organization will help you manage your finances better through counseling
and education. Carefully read through any written agreement that a credit
counseling organization offers. It should describe in detail the services
to be performed; the payment terms for these services, including their
total cost; how long it will take to achieve results; any guarantees
offered; and the organization's business name and address.
Beware of high
fees or required "voluntary contributions" that, with high
monthly service charges, may add to your debt and defeat your efforts to
pay your bills. It is illegal to represent that negative information, such
as bankruptcy, can be removed from your credit report. Promises to
"help you get out of debt easily" are a red flag.
Make sure that
your creditors are willing to work with the agency you choose. If they
are, follow up with those creditors regularly to make sure your debt is
being paid off.
Check with state
agencies and your local Better Business Bureau to find out about a
specific credit counseling organization's record.
"State charity
officials are working with other state and federal agencies to remedy abuses
in this area, and to assure that nonprofit credit counseling organizations
operate in accordance with the charitable trust or non-profit corporation laws
under which they are formed," said Mark Pacella, president of the
National Association of State Charity Officials (NASCO).
To address some of
the concerns, the IRS has stepped up its enforcement efforts to ensure that
existing Section 501(c)(3) organizations are complying with the applicable
rules and regulations. Further information and background can be found in Fact
Sheet 2003-17.
Continued in the article.
Year 2004 Top 10
Scams, Schemes & Scandals
Organized in 1919, the North American
Securities Administrators Association (NASAA) is the oldest international
organization devoted to investor protection. We are a voluntary association
whose membership consists of 66 state, provincial, and territorial securities
administrators in the 50 states, the District of Columbia, Puerto Rico, Canada,
and Mexico. In the United States, NASAA is the voice of the 50 state securities
agencies responsible for efficient capital formation and grass-roots investor
protection.
State Securities Regulators
Release Top 10 Scams, Schemes & Scandals: Mutual Fund Practices, Senior Investment Fraud, Variable Annuities Join
2004 List
http://www.accountingweb.com/cgi-bin/item.cgi?id=98605
WASHINGTON (January 14, 2004) – State securities regulators today forecast
that investors will be challenged with increasingly complex and confusing
investment frauds and identified the Top 10 schemes investors are likely to
see in 2004. New to the North American Securities Administrators
Association’s (NASAA) annual survey of state securities enforcement
officials are mutual fund practices, senior investment fraud, and variable
annuities.
“Investors face a complex maze of scams, schemes and scandals,” said Ralph
A. Lambiase, NASAA’s president and director of the Connecticut Division of
Securities. “Our fight against fraud never stops because each year con
artists discover new ways to fleece the public. Sadly, many of the age-old
scams still work to cheat victims of their hard-earned savings as well. It
pays to remember that if an investment opportunity sounds too good to be true,
it usually is.”
Investors lose billions of dollars annually to investment fraud, Lambiase
said. He cautioned that investors must remain vigilant in the fight against
investment fraud. “All securities regulators, whether local, state, or
federal, share the common goal of protecting investors,” he said. “I urge
legislators to help us continue to do our jobs by ensuring that regulators
have sufficient resources to protect our citizens.”
The following ranking of NASAA’s Top 10 scams, schemes and scandals for 2004
is based on the order of prevalence and seriousness as identified by state
securities regulators: 1) Ponzi Schemes, 2) Senior Investment Fraud, 3)
Promissory Notes, 4) Unscrupulous Broker/Dealer Representatives, 5) Affinity
Fraud, 6) Insurance Agent Securities Fraud, 7) Prime Bank/High-Yield
Investment Schemes, 8) Internet Fraud, 9) Mutual Fund Business Practices, 10)
Variable Annuities.
Lambiase also announced that NASAA has created an interactive Fraud Center on
its website.
The center features details of NASAA’s Top 10 scams, schemes and scandals;
tips on how to detect con artists and avoid becoming a victim; an Investor
“Bill of Rights;” instructions on how to file an investment-related
complaint; and contact information for each state securities regulator.
“Education and awareness are an investor’s best defense against fraud,”
Lambiase said.
NASAA’s 2004 Top 10 List of Scams, Schemes and Scandals
(based on a survey of state securities enforcement officers and regulators)
1. PONZI SCHEMES. Named for swindler Charles Ponzi, who in the early
1900s took investors for $10 million by promising 40 percent returns, these
schemes are a perennial favorite among con artists. The premise is simple:
promise high returns to investors and use money from new investors to pay
previous investors. Inevitably, the schemes collapse and the only people who
consistently make money are the promoters who set the Ponzi in motion. Con
artists typically attribute government intervention as the reason why new
investors didn’t get their promised returns. In Mississippi last year, a
Tennessee attorney and a Mississippi securities dealer pled guilty to 58
counts of investment fraud for their role in a Ponzi scheme that bilked 41
investors from four states out of $10.2 million. Authorities said the victims
were told they were investing in a money-trading program that, in fact, did
not exist.
2. SENIOR INVESTMENT FRAUD. Volatile stock markets, low interest rates,
rising health care costs, and increasing life expectancy, combined to create a
perfect storm for investment fraud against senior investors. State securities
regulators said older investors are being targeted with increasingly complex
investment scams involving unregistered securities, promissory notes,
charitable gift annuities, viatical settlements, and Ponzi schemes all
promising inflated returns. Pennsylvania securities regulators last year shut
down a “Ponzi” scheme that targeted seniors, but not before 13
Philadelphia-area investors had lost nearly $2 million from their pensions and
IRAs. In Arizona, the Arizona Corporation Commission ordered a Scottsdale
company and four individuals to return more than $15 million to mostly senior
investors and pay penalties of $45,000 to the state in a case involving “CD
alternatives” earning up to 8.5 percent. “These schemes offer products and
pitches that may sound tempting to many seniors who’ve seen their retirement
accounts and income dwindle in recent years,” Lambiase said. To learn more,
visit NASAA’s Senior
Investor Resource Center.
3. PROMISSORY NOTES. A long-time member of the Top 10 list, these
short-term debt instruments often are sold by independent insurance agents and
issued by little known or non-existent companies promising high returns –
upwards of 15 percent monthly – with little or no risk. When interest rates
are low, investors often are lured by the higher, fixed returns that
promissory notes offer. These notes, however, can become vehicles for fraud
when the issuer of the note has no intention or capability of ever delivering
the returns promised by the sales person. In November 2003, for example,
Grammy-nominated polka star Jan Lewan pled guilty to charges that he defrauded
investors in 21 states through the sale of promissory notes. State authorities
said Lewan, who defected from Poland in 1979 and launched a successful career
that included performances before President Reagan and Pope John Paul II,
illegally persuaded investors to invest in a series of failing business
ventures. Lewan offered promissory notes that were supposed to pay an interest
rate of 12 to 20 percent. Authorities said investors lost between $2 million
and $2.5 million. Lewan sold the promissory notes during a period of time when
he was under a five-year ban by the Pennsylvania Securities Commission barring
him from selling securities in the state. New Jersey authorities also acted
against Lewan in 2003, fining him $950,000 and prohibiting him from selling
securities in the state. Connecticut securities regulators are also
investigating Lewan.
4. UNSCRUPULOUS BROKERS. Despite the stock market’s rebound in 2003,
state securities regulators say they are still receiving a high level of
complaints from investors of brokers cutting corners or resorting to outright
fraud to fatten their wallets. “I give credit to the increasing numbers of
investors who are giving their brokerage statements a closer look and asking
the right questions about unexplained fees, unauthorized trades or other
irregularities,” Lambiase said. In October 2003, US Bancorp Piper Jaffray
agreed to pay $2.6 million to settle a complaint by the state of Montana
alleging unethical business practices and fraudulent securities dealing by the
investment firm and one of its brokers. State regulators accused Thomas J.
O`Neill, who was a broker in the firm’s Butte office, of making more than
6,000 unauthorized trades for mostly elderly customers between 1997 and early
2001. They said some trades were made for a customer who was in a coma and
again after he died. Authorities said O`Neill generated commissions for
himself and the firm through the illegal trades that transformed mostly
conservative retirement investments into risky portfolios.
5. AFFINITY FRAUD. Con artists know that its only human nature to trust
people who are like yourself. That’s why scammers often use their victim’s
religious or ethnic identity to gain their trust and then steal their life
savings. No group seems to be immune from fraud. In November 2003, authorities
arrested five people accused of defrauding evangelical Christians of $160
million in three years and using the money to live extravagantly. Federal and
state investigators charged that a California family promoted an affinity
fraud scheme through evangelical leaders and groups, targeting people who
shared religious beliefs and common ethnicities. A joint effort involving the
FBI, the SEC, the IRS and the Texas State Securities Board, brought criminal
and civil charges to halt the scheme, which promised returns of 25 percent
within three months.
6. INSURANCE AGENTS AND OTHER UNLICENSED SECURITIES SELLERS. While most
independent insurance agents are honest professionals, too many are lured by
high commissions into selling fraudulent or high-risk investments, such as
promissory notes, ATM and payphone investment contracts and viatical
settlements. “Scam artists continue to entice independent insurance agents
into selling investments they may know little about,” Lambiase said. The
person running the scam instructs the independent sales force – usually
insurance agents but sometimes investment advisers and accountants – to
promise high returns with little or no risk. For example: Arizona securities
regulators in 2003 obtained a $4.3 million final judgment against a Scottsdale
company and two insurance agents who fraudulently sold charitable gift
annuities to mostly senior investors who were told their money would be
invested in secure accounts. Instead it was placed in high-risk, speculative
investments while the insurance agents helped themselves to $1.3 million in
commissions. California authorities in 2003 ordered several insurance agents
to stop selling viatical investments – interests in the death benefits of
terminally ill patients that are always high risk and sometimes fraudulent.
The agents promised returns as high as 150 percent in three years, and
guaranteed the investment through a “fidelity” bond, but failed to tell
investors that the bond was issued by a company incorporated in Vanuatu, South
Pacific that is not licensed by to issue bonds in California.
7. PRIME BANK SCHEMES. A perennial favorite of con artists who promise
investors triple-digit returns through access to the investment portfolios of
the world’s elite banks. The negative publicity attached to these schemes
has caused promoters in recent cases to avoid explicitly referring to Prime
Banks. Now it is common to avoid the term altogether and underplay the role of
banks by referring to these schemes as “risk free guaranteed high yield
instruments” or something equally deceptive. In 2003, five Oklahoma men were
convicted on fraud charges stemming from a prime bank scheme in which 5,000
investors lost $14.6 million.
8. INTERNET FRAUD. With the Internet becoming a common part of daily
life for increasing numbers of people, it should be no surprise that con
artists have made cyberspace a prime hunting ground for victims. Internet
fraud has become a booming business. The most recent figures show
cyberfraudsters took in $122 million in 2002, according to the Federal Trade
Commission. “The Internet has turned from an information superhighway to a
road of ruin for victims of cyber fraud,” Lambiase said. The Internet has
made it simple for a con artist to reach millions of potential victims at
minimal cost. Many of the online scams regulators see today are merely new
versions of schemes that have been fleecing offline investors for years.” In
November 2003 various federal, state, local, and foreign law-enforcement
agencies targeted cyberfraudsters and netted 125 arrests and more than 70
indictments. Operation Cyber Sweep identified more than 125,000 victims with
losses estimated to exceed $100 million. Lambiase also warned investors to
ignore e-mail offers from individuals representing themselves as Nigerian or
West African government or business officials in need of help to deposit large
sums of money in overseas bank accounts. “Don’t be dot.conned. If you get
an e-mail pitching a deal that can’t be beat, hit delete,” Lambiase
cautioned.
9. MUTUAL FUND BUSINESS PRACTICES. Although mutual funds play a
tremendous role in the wealth and savings of our nation, ongoing scandals
throughout the industry clearly demonstrate that some in the mutual fund
industry are putting their own interests ahead of America’s 95 million
mutual fund shareholders. State securities regulators, the SEC, NASD, and
mutual-fund firms themselves have launched a series of inquiries into mutual
fund trading practices. To date, more than a dozen mutual funds are under
investigation and several mutual funds and mutual fund employees have either
pleaded guilty, been charged or settled with state regulators. State and
federal investigations have uncovered sales contests where investors have been
steered to funds paying higher commissions to brokers; abusive trading
practices, such as “market timing,” that may cost tradition buy-and-hold
investors more than $5 billion each year; and illegal trading practices, such
as “late trading,” that may cost investors $400 million each year.
“These investigations demonstrate a fundamental unfairness and a betrayal of
trust that hurts Main Street investors while creating special opportunities
for certain privileged mutual fund shareholders and insiders,” Lambiase
said. “We will continue to actively pursue inquiries into mutual fund
improprieties and are committed to aggressively addressing mutual fund
complaints raised by investors in our jurisdictions.”
10. VARIABLE ANNUITIES. Sales of variable annuities have increased
dramatically over the past decade. As sales have risen, so too have complaints
from investors. Regulators are concerned that investors aren’t being told
about high surrender charges and the steep sales commissions agents often earn
when they move investors into variable annuities. Some investors also are
misled with claims of guaranteed returns when variable annuity returns
actually are vulnerable to the volatility of the stock market. The benefits of
variable annuities – tax-deferral, death benefits among others – come with
strings attached and additional costs. High commissions often are the driving
force for sales of variable annuities. Mississippi securities regulators moved
last year against a licensed securities broker in the state who rang up
commissions of approximately $1 million within a 15-month period largely
through sales of variable annuities. Often pitched to seniors through
investment seminars, regulators say these products are unsuitable for many
retirees. “Variable annuities make sense only for consumers willing to
invest for 10 years or longer, but they are not suitable for many retirees who
cannot afford to lock up their money for a long time,” Lambiase said.
Variable annuities are considered to be securities under federal law and the
laws of 17 jurisdictions. Most states consider variable annuities to be
insurance products. NASAA is encouraging changes in state laws that would
allow state insurance regulators to continue to oversee the insurance
companies that sell variable annuities while authorizing state securities
regulators to investigate complaints about variable annuities and to take
action against the companies and individuals who sell them. “Those who buy
variable annuities should not be denied the protections enjoyed by every other
class of investor,” Lambiase said.
Congratulations. You’ve been hoaxed. This happens
to the best of us. I’ve been hoaxed many times. I even have a web page for
my students where they can reference many of the urban legends making the
rounds these days.
You can find information on this “Hotel Key
Contains Personal Information” hoax at:
As a rule of thumb, about 99% of the warnings that I
receive are from paranoia-spreading anti-technologists and are little more
than sensationalistic hoaxes. I have my Information Security students conduct
research projects and give class presentations on a lot of these type
warnings. It opens their eyes to how gullible most of the public is, having
been conditioned by the media to “fear everything”. When you browse the
urban legends websites, you think, “how ridiculous, who would believe this
tripe?” But then when you get a new warning you’ve not seen before, it is
human nature to believe it, because we all seek security.
Common sense dictates prudence. But as my student’s
(and my own) research shows, most of the ** unsolicited ** warnings you get
are pure bunk. I tell my students, if you want the truth, seek it out. It
won’t come to you on its own anymore.
And please, don’t take my word for it, either.
Everyone should cultivate the habit of collecting their own personal
collection of sites they consider trustworthy for doing their research.
Put your fears to rest by shopping online without revealing
your credit card number—to anyone. Instead, Virtual Account
Numbers gives you the power to use a substitute number in
place of your real credit card number when you make a
purchase.
Added protection—use a
new number for each online transaction to prevent
unauthorized charges.
Easy to use—generate a
virtual account number in just one click.
Track purchases—purchases
made with Virtual Account Numbers will appear on your
monthly statement, just like any other transaction.
Bob, this is an on-going joke in the Information
Security arena. It is being billed as a way to “keep your … identity from
being stolen”, when in fact, it is merely adding a couple of layers (and
fairly weak ones at that) to the security procedure collection.
To steal your identity, the criminal now needs only
steal your Citi log-on id and password.
True, using your Citi logon and password instead of a
credit card number makes it a little harder for an interceptor to decrypt the
data stream going over the public internet. Logons and passwords use the
entire alphabet and other characters while credit card numbers use only ten
numerical characters. But then, logons and passwords use special packet
identifiers making them easier to spot (sniff, intercept) than numbers
imbedded in a complicated web form when traveling across the Internet.
I guess this approach does prevent a criminal from
“lurking” (eavesdropping, packet sniffing, lots of other names) on a
vendor’s internet connection path, and requires him/her to lurk on the
Citi’s path, which usually is slightly (but not significantly) more secure
than run-of-the-mill ISP connections used by most vendors. So I guess you can
say that it does add a little bit to security.
But anyone paranoid about identity theft should still
be aware that it is still possible to capture your Citi login and password (so
the criminal can get a virtual credit card number by posing as you!), *almost,
but not quite* as easily as they can your credit card number. I feel the ad is
misleading, like saying that “auditors prevent fraud”. Plus, I wonder how
hard it is to get hold of the right person to “cancel” your Citi login
once you discover it has been stolen? I don’t deal with Citi anymore because
it is impossible to get in touch with them, they change their 1-800 numbers
more often than some congressmen change their underwear. In fact, the 1-800
number printed on the back of my last Citi credit card was a non-working
number less than four months after I received the card!
David R. Fordham
PBGH Faculty Fellow
James Madison University
Experience is the best teacher, especially for con artists.
Online Fraud Complaints Triple Internet auction fraud continues to lead the list
at IFCC, but the Nigerian oil minister scam actually rips off the most money on
a per-complaint basis. http://ecommerce.internet.com/news/news/article/0,,10375_2179261,00.html
Complaints about fraud perpetrated online tripled in 2002, and auction fraud
continues to be the most frequently reported offense, according to figures from
the Internet Fraud
Complaint Center
Read this before you buy on eBay
Last year, one woman sold almost $1 million worth of Apple computers on online
auction sites -- without delivering the goods. Most Web auctions are fraud-free,
experts say, but it never hurts to protect yourself --- http://www.wired.com/news/ebiz/0,1272,57153,00.html
At a time when interest
rates are low and personal bankruptcies are high, credit card companies have
come up with new ways to boost revenues. Increasingly, customers are seeing new
income- generating tactics, such as increased late fees and surcharges for
overseas purchases. http://www.accountingweb.com/item/97461
After listening to a presentation by a
U.S. Secret Service agent, the first thing I did when I returned home is to
photocopy every card in my billfold and my wife's purse. Be certain that
you copy both sides of each card. Then carry a copy of your copies on
trips and well has keeping copies filed in your home and office. Make it
as simple as possible to report lost cards!
When you
get a new suspect that sounds like consumer fraud, you probably
should investigate it and/or report it to http://www.consumer.gov/sentinel/
The
FBI's Internet Fraud and Complaint Center (IFCC FBI)
To thwart fraud on the Internet and terror in general, check in and/or
report to http://www1.ifccfbi.gov/index.asp
National
Infrastructure Protection Center (NIPC) --- Report security incidents
here.
Located in the FBI's headquarters building in Washington, D.C., the
NIPC brings together representatives from U.S. government agencies,
state and local governments, and the private sector in a partnership
to protect our nation's critical infrastructures.
http://www.nipc.gov/
When you
are sent some rather surprising "facts" or find some rather
surprising "facts," please investigate them before
forwarding information that may be false and misleading. At the
purportal.com site, users can search five of the most well-known
sites dedicated to setting the record straight: Snopes Urban Legends
Archive, About.com Urban Legends search, CIAC Hoax Database, CERT
Computer Security Database, and Symantec (Real) Virus Encyclopedia. http://www.purportal.com/
One of our local television
stations in San Antonio recommended the Private Citizen web site
for reducing the amount of junk phone calls and junk mail that you
would like to halt. The Wall Street Journal has also
recommended this web site. http://www.privatecitizen.com/
Searcher Beware
From eNews and Views on July 25, 2001
"Watchdog Group Awaits FTC Action on Search Engines" by
Dennis Callaghan
Gary Ruskin can
accept, grudgingly, search engines' increasing use of
advertising-driven search results. He just wants the search engines
to come clean.
That's why Ruskin,
executive director of consumer advocacy group Commercial Alert, in
Sacramento, Calif., filed a complaint with the Federal Trade
Commission last week, alleging that seven search engine companies
are engaging in deceptive advertising practices by not properly
describing search results that are given higher relevance on a
search results page because advertisers paid for the placement.
"We hope the
FTC will require the search engines to tell us when an advertisement
is an advertisement," said Ruskin. "And we hope that
people will stop using search engines that have no editorial
integrity."
Management perceives major threats from viruses and
teenage hackers. But bigger threats come from organised crime
involving fraud and commercial espionage, argues David Love, former
head of security at NATO and current Head of Security Strategy for
Europe, the Middle East and Africa at Computer Associates --- http://www.out-law.com/php/page.php?page_id=organisedcrimeont1050497394&area=news
"Suit: Visa, Amex profit from fraud: Plaintiffs say
credit card companies not vigilant," by Bob Sullivan, MSNBC,
May 22, 2003 --- http://www.msnbc.com/news/917088.asp?0si=-
Three merchants have filed suit against
Visa, MasterCard American Express and Discover, claiming the credit
card companies profit from Internet fraud and do not do all they can
to stop it. The suit, which seeks class action status, claims that
“merchants have paid virtually all of the costs associated with
fraud and theft,” while credit card associations and issuing banks
make millions on fraud-related charges. It also alleges the
associations use monopoly power to force merchants to sign unfair
contracts.
MasterCard, Visa, American Express and the banks that issue credit
cards don't do enough to protect merchants and consumers from the
perils of fraud, reports analyst firm Gartner --- http://www.wired.com/news/privacy/0,1848,57823,00.html
The credit card industry focuses too much
on reducing its own fraud costs and not enough on protecting
consumers.
That's the central claim in a new report
from research firm Gartner that slams credit card companies for
failing to notify consumers when credit card records are compromised
by malicious hackers.
The report notes that while credit card
companies' "zero-liability" policies protect card holders
from paying for unauthorized or fraudulent charges, they do not
protect consumers from identity theft and the credit
report hell that can follow.
Avivah Litan, Gartner vice president and
the report's co-author, said when security breaches happen, banks
that issue credit cards seldom notify consumers.
"The issuers claim they don't really
know if a card was compromised after a merchant or transaction
processing firm reports a problem, so they wait to see whether a
consumer reports fraud against his or her card," Litan said.
"Of course the fact that closing
potentially compromised accounts and providing consumers with new
cards costs the issuer about $35 per card is also a factor here. So
the card issuers take a calculated risk that compromised cards won't
be used fraudulently."
On Feb. 18, Visa, MasterCard and American
Express confirmed that a malicious hacker had gotten access to 8
million credit card records through Data Processors International, a
company that processes credit card transactions for mail order and
online businesses.
The credit card companies quickly issued
statements saying none of the stolen card-holder information was
used fraudulently, and that all card-issuing banks had been alerted
to the problem.
According to Litan, the card issuers have
tagged the accounts believed to have been compromised in the theft,
and will watch them for a period of time, typically three to six
months, for possible fraudulent use.
"Based on a standard margin of error,
I wouldn't be surprised to see 5 percent of those stolen cards
compromised even while they are on the watch list," Litan said.
"The only way to ensure that the cards will never be
fraudulently used is to issue new cards to all 8 million
users."
Consumer rights groups agreed that credit
card companies should notify card holders about potential problems,
and should at least offer the option of replacement cards if account
records have been illegally accessed.
"Credit card issuers and other
creditors should be required to let customers know immediately if
they believe that their account information has been
compromised," said Susan Grant, director of the National
Fraud Information Center. "As it is now, it's hard for
consumers to know exactly how security breaches happen or assess
whether the companies who have their information have taken adequate
steps to safeguard it."
"Credit card companies have a rocky
road ahead of them," said Linda Sherry of Consumer
Action in San Francisco. "Consumers are getting
increasingly worried and angry about how their personal information
is being used and protected. I wouldn't be surprised to see the
federal government step in soon."
On 18 February 2003, Visa, MasterCard and
American Express confirmed that a computer hacker had recently
accessed 8 million credit card records, including 2.2 million
MasterCard accounts and 3.4 million Visa accounts. The hacker targeted
Data Processors International, a merchant processor that mainly
processes catalog and other card-not-present transactions. The card
associations began to notify their member institutions in early
February 2003. The card companies said that none of the information
accessed was used fraudulently and that all card issuing banks were
alerted. But fraud could potentially occur later on using these
compromised records.
First Take
Although zero-liability policies protect card
holders from paying for unauthorized or fraudulent charges, they do
not protect consumers from identity theft and credit report nightmares
that can follow. Seven percent of online adult consumers surveyed by
Gartner in September 2002 reported being victimized by credit card
fraud, and 1 percent reported having their identity stolen. However,
since stolen credit card data makes stealing identities easy, Gartner
believes identity theft will affect substantially more than 1 percent
of this population. The credit card industry has focused too much on
reducing its fraud costs and not enough on protecting consumer
information.
Up to now, no one had much incentive to
address the problem. Card issuers seldom notify consumers about
hacking incidents they learn about through merchants or processors.
The issuers claim they don't really know if a card was compromised, so
they wait to see whether a consumer reports fraud against the card.
Giving consumers replacement cards costs the issuer about $35 each.
When fraud occurs in a physical store, the issuer bears the cost, but
the merchant bears the cost of fraud for Internet, telephone and mail
orders. If the present case follows typical patterns, the card
associations will probably fine the processor whose site was hacked or
possibly just issue a stiff warning.
However, rising levels of identity theft and
consumer anger will lead to onerous legislation unless credit card
companies move aggressively. Indeed, a recent California law (SB 1386)
will require any company that sells to California citizens (just about
every online merchant) to notify consumers. Accordingly, Gartner
recommends:
Card companies should enforce requirements
that all online credit card databases use encryption or other
methods to ensure they aren't compromised.
Card companies should improve the
vulnerability scanning of their online merchants and processors to
find weaknesses before attackers do.
Card issuers should immediately inform
consumers when their card information has been compromised so that
they can try to protect themselves against identity theft by
notifying credit bureaus and monitoring their own credit reports
to catch problems early.
Analytical Sources: Avivah Litan and
John Pescatore, Gartner Research
"Holiday
Fraud Causes Huge Losses for Online Retailers" — E-tailers
must continue working on their back-end fraud prevention programs
so that they don't turn away good sales and don't turn off
convenience-seeking consumers. By Avivah Litan
(You may need to sign in or be a Gartner
client to access all of this content.)
How to
Guard Against Identity Theft and Pretexting
On October 4, 2002 at Indian
Rocks Beach in Florida at a conference of the Florida Association of
Accounting Educators (FAAE), my presentation on education technology
followed an eye-opening presentation on Identity Theft by John W.
Joyce, Special Agent in Charge, U.S. Secret Service in the Tampa Field
Office of the Secret Service.
One of the most common check
writing frauds is really simple. Criminals simply find your bank
account number (which is not difficult) and then duplicate our checks
using VersaCheck printing software and supplies --- http://www.g7ps.com/
Of course you can detect this if you reconcile your bank account
regularly.
You should learn more about 'pretexting" and the Gramm Leach
Bliley Act --- http://www.ftc.gov/privacy/glbact/
What amazed me is the rising
frequency in which our identity's are being stolen for crimes ranging
from illegal use of our credit cards to borrowing money in our names.
In an audience of roughly forty people, I was amazed at the number who
had their identities actually stolen in one way or another, including
Professor Jane Reimers from Florida State University who discovered in
a credit report that a huge amount of money had been borrowed using
her social security number (but not her name).
The first thing I decided to
do is to start paying for credit reports. For example,
enter "Credit Reports" in Advanced Google at http://www.google.com/advanced_search?hl=en
There are various free credit reporting services such as the
following:
How to
find out if you qualify for a Free Credit Report
According
to the Fair Credit Reporting Act, the only way that you can receive
a Free Credit Report is if you meet the following conditions:
You have
been denied credit, insurance, or employment within the past
sixty (60) days as a result of your credit history.
You can
certify in writing that you are unemployed and intend to apply
for employment in the 60-day period beginning on the date in
which you made the certification.
You are
a recipient of public welfare assistance or have reason to
believe that your file at the agency contains inaccurate
information due to fraud.
Residency
Clause:
If you are a resident of Colorado, Massachusetts, Maryland, New
Jersey, or Vermont, you may receive one free copy of your credit
report each year from the each of the credit bureaus. If you are a
resident of Georgia, you may receive two free copies of your credit
report each year from the credit bureaus.
If
you meet the above conditions, here is the information that you will
need to receive a Free copy of your Credit Report:
To
obtain a copy of your credit report from Experian --- http://www.experian.com/
Mail request to: P.O. Box 2002, Allen, TX 75013
Or call toll-free (888) Experian (888-397-3742)
To
obtain a copy of your credit report from Equifax --- http://www.equifax.com/
Mail request to: P.O. Box 740241, Atlanta, GA 30374
Or call toll-free (800) 685-1111
To
obtain a copy of your credit report from TransUnion --- http://www.transunion.com/index.jsp
Mail request to: 2 Baldwin Place, P.O. Box 1000, Chester, PA 19022
Or call toll-free (800) 888-4213
What to
do if you do not meet the above requirements
There are a variety of inexpensive online
Credit Report Services that you can choose from. Here are some of
the benefits that you will receive:
Online
access at the time of purchase - usually viewable within 5
minutes from the time you start filling out the application.
Your
Credit Score - free credit reports from the Credit Bureaus
do not include a credit score option.
Overall
better service and experience - Credit Bureaus are run just
like any other company, and are not interested in giving
products away. They only do this because the FCRA requires it;
this means that their level of product support is limited. Other
companies are looking to keep you as a customer, and thus
provide an elevated level of service.
For
more information on fee-based credit report options, visit our Credit
Report section, or select a service from the box presented
below.
When
evaluating Free Credit Reporting options, it is important to
consider how far you are willing to go in order to receive a
"free" credit report. It also depends on what you consider
to be free! Many services such as Consumer
Info or Privista
offer a Free credit report with a trial subscription to their Credit
Monitoring Service. The "Free" aspect of this offer is
that you have the option of canceling your subscription over a
specified trial period for a full refund. Sounds good, right?
Well,
that depends. First off, you should not discount your personal time
as "Free" (remember the saying "time is money.")
If your are a busy person, you might not be too interested in taking
the time to contact a Credit Provider to cancel a Monitoring
Service.
Furthermore,
when you call you should expect various questions regarding why it
is you want to cancel the service, and plenty of reasons why you
shouldn't. Many of us would put this task off, possibly beyond the
trial period (AKA refund period) - which incidentally is what these
companies are counting on. This is not a big secret folks; it's
called marketing.
So what
should you do?
You have a decision to make. First off,
are you truly interested in receiving a "Free Credit
Report"? If you answer yes to this question, make sure you
factor in the time it will take to cancel the $40-$100 subscription
before it is billed to your credit card (usually 30 days from the
purchase date). Also, don't expect to receive any free add-ons such
as a Credit Score or detailed analysis - these companies will give
away as little as possible to get your business.
Finally,
if you do go for the Free Credit Report, and fail to cancel your
subscription thinking that it will only cost you the initial price -
think again! Most of these companies have automatic renewal policies
built into their service agreements (read
"Free" Credit Reports really free?), so after a year
your card will get hit with an additional yearly fee - OUCH!
If
this doesn't sound too good, consider the alternative; part with the
$8.50 that it will cost for a online Credit Report. Affordable
services are offered below, or you can view additional options in
ACL's Credit Report Section.
In
short, don't underestimate your time, and be aware that nothing
comes for free - there is always a catch. Keep in mind that you are
entitled to a Free Credit Report directly from the Credit Bureaus if
you meet
these requirements.
Foozles & Frauds
By Harold F. Russell|
Copyright 1977
Institute of Internal Auditors
Library of Congress Catalog Card No. 76-058739
ISBN 0-89413-044-7
Second Printing 1978
From the table of contents:
Part one - Elements of Fraud
Chapter 1 Interaction of
Foozles and Frauds
Chapter 2 Project
Objectives
Part two - Audit Program
Part three The Investigative
Audit
Chapter 11 Activation of
the Audit
Chapter 12 The Soft Query
Chapter 13 The
Interrogation
Chapter 14 Evidence
Chapter 15 Attitudes of
the Profession
Chapter 16 Honesty
Insurance
Chapter 17 Polygraph
Systems
Part four - Fraud and the
Criminal Law
Part five - Suggested Audit
Recommendations
Part six - Conclusions
Part seven - Historical
Aspects and Case Readings
Chapter 24 The Lineage of
Deceit
Chapter 25 The Modern
Landmarks
Chapter 26 Cases That
Defined Auditor Liability
Chapter 27 Authors and
Activists
Chapter 28 Notes from
Audit Experiences
Part eight - Wrap-up
A really clever and dangerous
scam discovered by David R. Fordham [fordhadr@JMU.EDU]
(December 30, 2002)
My
16-year-old son has a "subordinate" AOL account (e.g.,
secondary screen name under my wife's account) and thus AOL does not
bill him. He has no credit card on file at AOL. Thus, he was
surprised when he got an email from the "billing
department" of AOL, telling him that they needed a NEW credit
card number to keep his account active, and for him to click on the
"Click HERE" link in the email.
Smelling a
rat, he right-clicked the link, and discovered the link would take
him to the following URL:
After
coming to get me to take a look over his shoulder (being an
infosec-kinda guy that I am), together we clicked the link. Three
things happened of note:
First, we
got a professional looking dialog box explaining that AOL needed a
new credit card number, full name, and other personal information in
order to "keep our account open", but more interesting:
Second, we
noticed that while we were watching the dialog box, something ELSE
was apparently downloading onto our computer. And third:
We couldn't
close the browser window.
Since the
download was proceeding slowly, we clicked OK on the dialog box, and
that's when we received the most professional-looking scam page that
I've ever seen. The page uses AOL's real logo, even right down to
their copyright notice at the bottom. It asks for all the personal
information in a professional-looking AOL-lookalike screen!
It should
be noticed that my wife, who really DOES pay the bill for our AOL
account, has not yet received any notification from AOL about them
needing a new credit card number!
We
immediately notified AOL's security department, and so far, all
we've heard back from them is that they do NOT need a new credit
card number, and they will investigate.
This
happened Friday night. As of Monday morning, the scam screen is
still up. I tried it from my office computer which is behind all
kinds of firewalls and runs all kinds of protective software.
Nothing malicious seems to be coming down the pipe, so some of you
might want to take a quick look and see one of the best-done scams
I've ever seen. I would not tarry too long at the site, however, on
the chance that it is trying to trace IP addresses or perform some
other mischief.
If you are
not fully confident in your security systems, however, I recommend
against going there. I don't know what the threat really is, but
figured that some risk-takers out there might enjoy looking at a
really-good, well-done scam page.
This
reminds me of the story about the 1800's preacher who was preaching
hellfire and brimstone, and one of the ladies in the balcony got so
worked up she almost fainted, and fell over the balcony.
Fortunately, she got caught on the chandelier, but there she hung,
with her dress open at the bottom, showing her petticoat. The
preacher, appreciating her plight, immediately announced that any
man who looked up at Sister Patricia would be instantly struck
blind. One man on the main floor turned to his companion and said,
"She's hot. I think I'm going to risk one eye."
David R.
Fordham
PBGH Faculty Fellow
James Madison University
Some of the biggest challenges facing
business today are re-establishing confidence among investors,
promoting ethics and integrity in the workplace, and establishing
clarity in reporting procedures. This resource center will give you
the tools and information you need to combat fraud — whatever your
role in the business community.
Yet another bank-related e-mail scam
is beginning to show up in Internet users' mailboxes this
week, this one targeting users of a money-transfer service
owned by Citibank FSB.
The fraudulent e-mail attempts to
lure customers of the c2it service into divulging their
account usernames and passwords, as well as the credit card
numbers associated with their accounts. The message appears
to be from c2it Customer Service, but is in fact sent from a
Hotmail account. It is an HTML message that contains a form
that also asks for each user's Social Security number, birth
date and mother's maiden name.
The message is unlike many of the
other bank scams currently circulating on the Internet in
that it looks quite authentic, right down to the actual c2it
logo. There are none of the misspellings, careless grammar
or other mistakes that typically give away other such scams.
One of the few clues that the message is not authentic is
the Hotmail return address in the message header.
Also, if a user clicks the button
in the message to submit their information, the link takes
the user to a site owned by the Harvard-Smithsonian Center
for Astrophysics.
C2it is a Web-based service that
enables users to send money to individuals or bank accounts
around the world. The e-mail arrives with a subject line
reading, "Your account is on hold." The body of
the message reads, in part:
"c2it is currently performing
regular maintenance of our security measures. Your account
has been randomly selected for this maintenance, and placed
on Hold status. Protecting the security of your c2it account
is our primary concern, and we apologize for any
inconvenience this may cause.
To restore your account to its
regular status, you must confirm your email address by
logging in to your c2it account using the form."
Beware of your tax preparer: Just say no to
loans based upon anticipated tax refunds A refund-anticipation loan is a bank loan,
short-term borrowing based on the amount you expect from your federal
tax refund. It is also a popular marketing tool for the big
tax-preparation companies, appealing especially to people living from
paycheck to paycheck. In some limited circumstances,
refund-anticipation loans can be beneficial. But for most people,
"they're completely unnecessary, an extremely expensive drain on
expected refund money," said Jean Ann Fox, director of consumer
protection at the Consumer Federation of America. "It's
money out of the pockets of the working poor," Fox said.
The federation and the National Consumer Law Center have been leading
the campaign against refund-anticipation loans for several years, with
some success. Fees have dropped and disclosures have improved.
But that doesn't change the fact that these so-called instant refunds,
with interest rates to make usurers blush, are an expensive way to get
use of your own money for a few extra days.
Kevin G. Demarrais, "Quick cash back comes at a cost:
Have a bit of patience, and enjoy your whole tax refund," Houston
Chronicle, February 27, 2005 --- http://www.chron.com/CDA/umstory.mpl/business/3058554
Finding Cheaper Prescription Drugs Without Fear of
Fraud
Don't trust offers from cheap prescriptions that come via email. Go the
name of a trusted online pharmacy.
Time Magazine on August 30, 2004, Page 70 lists some good sites for
Canadian, U.S., and various international sites.
Various states have started comparison shopping sites for within-state
pharmacies.
I have friends that safely use the following Canadian pharmacies
(they accept U.S. prescriptions and in many cases will provide a
year's supply in one mailing):
At this time of year, there is no room in the
budget for purchases that do not deliver value. Yet, the General
Accounting Office reports the number of fake insurance policies sold
to consumers is on the rise, resulting in $252 million in unpaid
health insurance claims alone.
According to a survey released today, conducted by the National
Association of Insurance Commissioners (NAIC), most of the public (74
percent) is unaware of the rise in fake insurance sales and the need
for increased vigilance when purchasing insurance.
The survey also revealed that most Americans feel the information
available from their state insurance department could be helpful in
avoiding fake insurance (83 percent), but only 8 percent of adults
surveyed said they have contacted their state insurance department to
confirm the validity of an insurance provider before making a
purchase.
As part of the United States' fight against the rise in fake
insurance, the NAIC has launched a nationwide awareness campaign that
encourages consumers to "Stop. Call. Confirm." before buying
insurance.
"In the area of fake health insurance alone, the General
Accounting Office reported 144 fake health insurers nationwide sold
bogus policies to more than 200,000 policyholders between 2000 and
2002," said Diane Koken, NAIC president and commissioner of the
Pennsylvania Department of Insurance. "This is simply
unacceptable."
According to most states' laws, with very few exceptions, no insurance
product can be sold by individual agents, brokers, or companies
without the approval of the state insurance department. Fake insurance
is any insurance plan intended to defraud consumers or businesses.
Everyone is at risk
"Fake insurance can touch anyone at any time with potentially
disastrous results," said Koken. "Frequent targets of
unauthorized health insurance plans are older adults and small
businesses or associations looking to reduce health insurance
costs."
Fake insurance is attractive because it is typically less expensive
than legal policies. But that is because a fake policy does not
provide sufficient - if any - coverage.
As a result of fake insurance policies, honest people and businesses
are swindled, health is endangered, premiums stay high, and goods and
services cost more.
Protecting yourself is easy
The NAIC recommends, if not absolutely sure you are dealing with a
reputable, licensed insurance provider, look for three warning signs
of fake insurance:
Aggressive marketing and a high-pressure,
"you must sign today" sales approach with lots of fine
print and disclaimers
Premiums that are 15 percent or more under
the average price for comparable insurance products on the market
Few coverage limitations
How can you protect yourself against fake
insurance? The NAIC urges you to STOP ... CALL ... and CONFIRM before
buying insurance:
STOP before signing anything or writing a
check
CALL your state insurance department;
contact information is available at www.naic.org
CONFIRM the company is legitimate and
licensed to do business in your state
"If consumers will stop, call, and confirm
before they buy insurance, they may save themselves the pain of unpaid
claims," said Koken. "They also can help us track down and
take action against the con artists who sell fake insurance."
Medicare ripoffs by medical equipment companies, physicians,
hospitals, and therapists is almost out of control. But there are
also thousands upon thousands of ripoffs of other third party insurers
and even patients themselves.
The check for $10,000 arrived in the mail
unsolicited. The doctor who received it from the drug maker Schering-Plough
said it was made out to him personally in exchange for an attached
"consulting" agreement that required nothing other than his
commitment to prescribe the company's medicines. Two other physicians said in
separate interviews that they, too, received checks unbidden from
Schering-Plough, one of the world's biggest drug companies.
"I threw mine away," said the first doctor,
who spoke on the condition of anonymity because of concern about being drawn
into a federal inquiry into the matter.
Those checks and others, some of them said to be for
six-figure sums, are under investigation by federal prosecutors in Boston as
part of a broad government crackdown on the drug industry's marketing tactics.
Just about every big global drug company — including Johnson
& Johnson, Wyeth
and Bristol-Myers
Squibb — has disclosed in securities filings that it has received a
federal subpoena, and most are juggling subpoenas stemming from several
investigations.
The details of the Schering-Plough tactics, gleaned
from interviews with 20 doctors, as well as industry executives and people
close to the investigation, shed light on the shadowy system of financial
lures that pharmaceutical companies have used to persuade physicians to favor
their drugs.
Schering-Plough's tactics, these people said,
included paying doctors large sums to prescribe its drug for hepatitis C and
to take part in company-sponsored clinical trials that were little more than
thinly disguised marketing efforts that required little effort on the doctors'
part. Doctors who demonstrated disloyalty by testing other company's drugs, or
even talking favorably about them, risked being barred from the
Schering-Plough money stream.
One in ten websites offering information on
alternative cancer therapies give advice that could harm patients, a
recent study suggests.
People need to be aware that such websites
are not necessarily benign and they should seek out responsible,
independent advice about complementary medicines, warns Edzard Ernst
of the Peninsula Medical School, run by the universities of Exeter and
Plymouth, who led the study.
Up to 55% of the Internet's 600 million users
gather medical information from it. Patients with life-threatening
diseases, such as cancer, often use the web to seek out alternative
therapies, but with over half a million sites offering advice, the
quality of that information varies greatly.
To investigate the likely consequences of
patients relying on such websites, Ernst's team surveyed the 32 most
popular sites offering advice on 'alternative' or 'complementary'
medicine and cancer. Their results can be found in the Annals of
Oncology1.
In total, the sites touted 118 cancer
'cures', such as shark cartilage and mistletoe, and 59 cancer
'preventions', including green tea and flaxseed, also known as
linseed. But none of these treatments have been scientifically proven
to work, says Ernst.
Shark cartilage was the most recommended
alternative cancer 'cure'. A preliminary human study has suggested
that Neovastat, a product derived from cartilage, can lengthen the
lives of patients with a type of kidney cancer2. But the research
needs to be repeated with larger numbers, and the only published
clinical study of a shark cartilage treatment for cancer failed to
find any positive effects3.
Because such preparations have not been
scientifically tested, their benefits are questionable and it is
possible that they might interact adversely with conventional
treatments.
Worse still, three of the websites (HEALL,
HealthWorld Online and worldwidehealthcenter.net) overtly discouraged
patients from using conventional cancer care, such as chemotherapy and
radiotherapy. One of the sites also dissuaded its readers from taking
doctors' advice. "These websites are a risk to cancer
patients," says Ernst.
Not all bad
Good websites do exist, and the majority of
those tested provided useful and reliable information. Two sites,
Quackwatch and Bandolier, stood out for the quality of the information
they provide, says Ernst.
He hopes to raise public awareness about the
usefulness of online information. He suggests that the major cancer
organizations should investigate websites offering cancer-related
information and issue a recognized 'seal of approval' to help patients
sift good advice from bad.
In the meantime, Ernst stresses the need for
patients to be vigilant, and to be aware that some websites may have a
financial motive for promoting certain alternative therapies. "My
basic advice is: if it sounds too good to be true, it probably is too
good to be true."
"There is a confusing amount of
information about 'alternative' cancer cures available on the
Internet," says cancer expert Julie Sharp of Cancer Research UK.
"Many of these have no clinical or scientific basis and so it is
vitally important that patients seek advice from their doctors."
Although, I
think it is helpful to have an "expert's" opinion of what
information is valuable, there are organizations that do that already
by industry and charge a lot of money for it. For example,
Cancersource is a company that sells "qualified" data on
cancer to hospitals so that the hospital can release it to their
cancer patients under the their private label. Cancersource has an
excellent reputation for their experts in the industry that qualify
their data before it is released.
It's easy to
find info on the internet, but many times, the info is bad. Hence the
value in a company like Cancersource. www.cancersource.com
Why you should think twice about using computers at Kinkos,
libraries, airports, and other public access locations. This
also applies to having your computer serviced by someone you don't
know and trust. This link was forwarded by Glenn Gray.
There's a guy in New York who may have
gotten into your personal business. If he did, he probably looted
your online bank account.
Juju Jiang is serving time now after
pleading guilty. But for a couple years, he bugged public computers
at Kinko's with software that logged keystrokes. He used it to
capture usernames and passwords. Some he used to steal money; others
he sold on the Web.
He got caught when he manipulated a
victim's home computer while she was present. She watched
incredulously as he methodically searched her computer. He was using
GoToMyPC, which allows travelers to manipulate their computers from
afar. The victim had used GoToMyPC previously from a Kinko's
machine. Jiang stole her username and password.
This raises an issue which many people
haven't considered. Spying software can easily be placed on public
computers, such as those not only at Kinko's stores, but in Internet
cafés, airports, libraries and other public places.
With spying software, a criminal can grab
your passwords and usernames. Ultimately, you could lose your money
or have your identity stolen. That should tell you enough to be wary
of public PC terminals.
Software is unobtrusive
Spies usually use software because it is
invisible to the untutored eye. Hardware to do virtually the same
thing also can be used, placing it between the keyboard and
computer. But using it is too obvious in a public place.
The software programs, however, can
unobtrusively make a record of a victim's every keystroke. The
keystroke loggers can then e-mail the collected information on a set
schedule. It also can be downloaded. Other software programs take
screen shots of places you go. These, too, send their collected
information via e-mail.
Every year
during tax season the Internal Revenue Service releases a list
of its least-favorite tax scams. “Scam artists will tempt people
in-person, on-line and by email with misleading promises about
lost refunds and free money. Don’t be fooled by these,” warns
Commissioner Douglas Stives.
The list
changes from year to year. Here’s what the IRS is warning about
for this tax season. For more information, click
here, or watch a video
here.
1.
Identity theft
“An IRS notice
informing a taxpayer that more than one return was filed in the
taxpayer’s name may be the first tipoff the individual receives
that he or she has been victimized.”
2.
Phishing
“If
you receive an unsolicited email that appears to be from either
the IRS or an organization closely linked to the IRS, such as
the Electronic Federal Tax Payment System, report it by sending
it to phishing@irs.gov.”
3.
Tax-preparer fraud
“In 2012 every
paid preparer needs to have a Preparer Tax Identification Number
(PTIN) and enter it on the returns he or she prepares.”
4.
Hiding income offshore
“Since
2009, 30,000 individuals have come forward voluntarily to
disclose [undeclared] foreign financial accounts. . . With new
foreign account reporting requirements being phased in over the
next few years, hiding income offshore will become increasingly
more difficult.”
5. ‘Free
money’ from the IRS and tax scams involving Social Security
“Flyers
and advertisements for free money from the IRS, suggesting that
the taxpayer can file a tax return with little or no
documentation, have been appearing at community churches around
the country.”
6.
False/inflated income and expenses
“Claiming income
you did not earn or expenses you did not pay in order to secure
larger refundable credits such as the Earned Income Tax Credit
could have serious repercussions…. Fraud involving the fuel tax
credit is considered a frivolous tax claim and can result in a
penalty of $5,000.”
7. False
Form 1099 refund claims
“In this ongoing
scam, the perpetrator files a fake information return, such as a
Form 1099 Original Issue Discount (OID), to justify a false
refund claim on a corresponding tax return.”
8.
Frivolous arguments
“Promoters
of frivolous schemes encourage taxpayers to make unreasonable
and outlandish claims to avoid paying the taxes they owe. The
IRS has a list of
frivolous tax arguments that taxpayers
should avoid.”
9.
Falsely claiming zero wages
“Filing
a phony information return is an illegal way to lower the amount
of taxes an individual owes. Typically, a Form 4852 (Substitute
Form W-2) or a ‘corrected’ Form 1099 is used as a way to
improperly reduce taxable income to zero. The taxpayer may also
submit a statement rebutting wages and taxes reported by a payer
to the IRS. ”
10.
Abuse of charitable organizations and deductions
“The
IRS is investigating schemes that involve the donation of
non-cash assets – including situations in which several
organizations claim the full value of the same non-cash
contribution. Often these donations are highly overvalued or the
organization receiving the donation promises that the donor can
repurchase the items later at a price set by the donor.”
11.
Disguised corporate ownership
“Third parties
are improperly used to request employer identification numbers
and form corporations that obscure the true ownership of the
business…. The IRS is working with state authorities to identify
these entities and bring the owners into compliance with the
law.”
12.
Misuse of trusts
“IRS personnel
have seen an increase in the improper use of private annuity
trusts and foreign trusts to shift income and deduct personal
expenses. As with other arrangements, taxpayers should seek the
advice of a trusted professional before entering a trust
arrangement.”
Question
Why doesn't some of the information below appear prominently on
Hannaford's Website? Fortunately, there are no Hannaford stores close to where I
live.
Hannaford cut corners when protecting customer privacy information.
Hannaford is a large New
England-based supermarket chain with a good reputation until now.
Recently, Hannaford compromised credit card information on 4.2
million customers at all 165 stores in the eastern United States.
When over 1,800 of customers started having fraudulent charges
appearing on credit card statements, the security breach at
Hannaford was discovered.
Hannaford made a press announcement, although the Hannaford Website
is seems to overlook this breach entirely ---
http://www.hanaford.com/
My opinion of Hannaford dropped to zero because there is no help on
the company's Website for customers having ID thefts from Hannaford.
I can't find any 800 number to call for customer help directly from
Hannaford (even recorded messages might help)
And
when the Vice President of Marketing
gets quoted in the press talking about the
security breach, it means that there is no CIO
(Chief Information Officer) at the company. It
means their network was designed haphazardly
with only a minimal thought to security. What,
they couldn’t get a quote from the
President of Marketing? How does the
dairy stocker in store 413 feel about the
breach? He probably knows as much about network
security as the Marketing VP.
All
of this means that as the days go on, you will
see more and more headlines talking about this
breach being much worse than originally thought.
The number of fraud cases will climb
precipitously… and no one will be fired from
Hannaford.
If you shop there and have used a credit card,
get a copy of your credit report ASAP.
By law, you get one free credit report per year.
You can contact them below.
A Simple Thing to Try in Case of Identity
Theft James Woods, who played an LA prosecutor on Shark, has
set a great example for dealing with identity theft. Woods told Michael Glynn at
The Enquirer that he was horrified to learn that someone had charged thousands
of dollars on his credit card. The crook had bought a computer and purchased two
VIP tickets to the recent Dave Matthews concert at the Staples Centerin LA for
$3,700. The fraudulent charges were deducted from his bill, but James was
determined to find the guilty party. He called the Staples center and cleverly
told them he hadn't received his tickets yet - that he wanted to verify the
correct name and address. Incredibly, the crook had used his own real name and
address. James realized he'd eaten at a restaurant just blocks from where the
crook lived. He then called the restaurant and tracked down a guilty waiter.
Woods handed the info to the Beverly Hills police and they arrested the guy.
Janet Charleton's Hollywood, August 28, 2008 ---
http://janetcharltonshollywood.com/gossip/james_woods/identity_theft_james_woods_proves_crime_does_not_pay_20080828.php
Bob Jensen's threads on how to protect yourself from ID theft are at
http://faculty.trinity.edu/rjensen/FraudReporting.htm#IdentityTheft
The Securities and
Exchange Commission took action last week to stop a
sophisticated Internet scheme that stole the identities of
unsuspecting individuals and netted more than $66,000 in illicit
profits in just seven weeks.
In a
complaint filed in the U.S.
District Court for the Eastern District of New York, the SEC
alleged that one or more unknown traders conducted their entire
online account intrusion scheme over the Internet and concealed
their identities by, among other things, fraudulently opening
brokerage accounts in the names of individuals who responded to
a job advertisement on the Web site Craig's List.
"While con
artists continue to find new ways to defraud online brokerage
customers, our efforts to protect U.S. investors from these
account intrusion schemes continue to be a top priority of the
Enforcement Division," said Linda Chatman Thomsen, director of
the SEC's Division of Enforcement.
"Even when
hackers hide behind stolen identities, this case shows that SEC
action can take the profitability out of the scheme," said David
Nelson, regional director of the Miami Regional Office. "While
our main focus is on the securities law violators, there is a
reminder here about how important it is to safeguard personal
identifying information."
According to the
SEC's complaint, the unknown traders posted an advertisement on
Craig's List beginning in February 2007 for a job with a
fictitious Latvian brokerage firm, AWE Trading, Inc. Individuals
who responded to the advertisement provided their personal
information, including Social Security numbers and dates of
birth to AWE via the Internet for purported company background
checks. The unknown traders then used this personal information
to open securities trading accounts online at Interactive
Brokers LLC without the individuals' knowledge.
The SEC's
complaint further alleges that, on multiple occasions between
March 8 and April 24, 2007, the unknown traders gained
unauthorized, online access to accounts held by customers of
various retail brokerage firms. They purchased and sold at least
18 securities listed on the New York Stock Exchange and NASDAQ.
The unknown traders simultaneously bought and sold the same
securities in the accounts they opened fraudulently, profiting
from the change in trading volume and stock prices generated by
the unauthorized transactions.
The SEC's
complaint charges the unknown trader defendants with violating
Section 17(a) of the Securities Act of 1933 and Section 10(b)
and Rule 10b-5 of the Securities Exchange Act of 1934 by
engaging in the complex securities account intrusion scheme. The
complaint also seeks a final judgment permanently enjoining the
unknown traders from further violations of the securities laws
and ordering them to repatriate assets of the fraudulent scheme
they hold outside the U.S., to disgorge their ill-gotten gains,
and to pay civil money penalties. The Commission's complaint
identifies Interactive Brokers, which fully cooperated in the
staff's investigation, as a relief defendant because it
currently holds cash and securities related to the scheme. In
April 2007, Interactive Brokers detected suspicious trading in
the involved accounts, suspended activity and froze the funds in
the account.
Phishing With Fake Jury Notice
I think this has been around foe a
while, but Roger Hermanson called my attention to it once again. The
scammer phones and claims to be working with a court. He alleges
that you failed to show up for jury duty ---
http://www.snopes.com/crime/fraud/juryduty.asp
Prevent Identity Theft Tips to
protect yourself from ID thieves
"Fight Back -- 8 Simple Ways," by
Karen Lodrick
Karen Lodrick's website,
www.fightingbacknow.com , offers these tips to protect yourself
from ID thieves:
1. Opt out of
unsolicited credit card offers by calling 888-567-8688
(supported by the consumer credit reporting industry).
2. Get spyware
protection for your computer, such as Ad-Aware (free at
lavasoftusa.com/software/adaware).
3. Don't return
warranty cards for purchased items. Save your receipt -- that's
all you need to make a claim.
4. Have all your
mail sent to a post office box rather than to your home address.
5. Never open
e-mail from people you don't know.
6. Use different
passwords for your online accounts.
7. Mix numbers
and letters, upper and lowercase, in passwords.
8. Shred all
documents, especially from credit card companies, before
discarding.
Bob Jensen's threads on identity
theft are at the following two links:
Scam Warning
Denny Beresford sent me a message about the latest
Social Security email scam. Always remember that government agencies like the
IRS and the Social Security Administration, along with banks credit unions, do
not send you email messages out of the blue seeking your privacy information or
your money. These messages come from crooks, most of whom reside outside the
legal jurisdiction of the United States. I don't even open email messages from
these institutions.
The sad part is that these scams work so
successfully!
I'm receiving social security benefits
now and I have to say that the email I received earlier this
morning looked fairly official. However, it seemed unlikely that
Social Security would make such a notification by email. So I
found the announcement on the official Social Security site.
While I'd bet that most people don't fall for the "wife of the
former president of Nigeria" type of scam, this looks like one
that might have a higher degree of success.
Jensen Comment
Even the familiar Nigerian-type scams are still enormously
successful. These scams are the second most lucrative export (oil is
number one) from Nigeria, and Nigeria is only one of many places in
the world where such scams originate. Many also come from Eastern
Europe where technology geniuses are always miles ahead of law
enforcement and vendor security protection upgrades ---
http://faculty.trinity.edu/rjensen/FraudReporting.htm#NigerianFraud
Andy Kordopatis is the
proprietor of Odyssey Bar, a modest watering hole in Pocatello,
Idaho, a few blocks away from Idaho State University. Most of
his customers pay for their drinks with cash, but about three
times a day he receives a phone call from someone he's never
served -- in most cases someone who's never even been to Idaho
-- asking why their credit or debit card has been charged a
small amount by his establishment.
Kordopatis says he can usually
tell what's coming next when the caller immediately asks to
speak with the manager or owner.
"That's when I start telling
them that I know why they're calling, and about the Russian
hackers who are using my business," Kordopatis said.
The Odyssey Bar is but one of
dozens of small establishments throughout the United States
seemingly picked at random by organized cyber criminals to serve
as unwitting pawns in a high-stakes game of chess against the
U.S. financial system. This daily pattern of phone calls and
complaints has been going on for more than a year now.
Kordopatis said he has talked to the company that processes his
bar's credit card payments about fixing the problem, but says
they can't do anything because he hasn't actually lost any money
from the scam.
The Odyssey Bar's merchant
account is being abused by online services that cyber thieves
built to help other crooks check the balances and limits on
stolen credit and debit card account numbers. In April, I wrote
about a pet store in Buffalo, N.Y., whose merchant account was
being similarly abused by another card-checking service. In that
story, I cited research on this trend by Lawrence Baldwin, a
security consultant in Alpharetta, Ga., who has been working
with several financial institutions to help infiltrate illegal
card-checking services:
The services are
advertised on Internet forums that facilitate identity
theft, and cater to criminals who wish to buy large numbers
of stolen credit and debit cards. Using such services, the
would-be buyers can quickly verify whether a random sampling
of the cards is still active, and -- for an additional fee
-- the available balance on each card. In most cases, the
only barrier to new customers signing up at these services
is the ability to speak and read Russian, and the ability to
pay with one of several virtual currencies, such as Webmoney.
Baldwin estimates that at
least 25,000 credit and debit cards are checked each day at
three separate illegal card-checking Web sites he is
monitoring. That translates to about 800,000 cards per month
or nearly 10 million cards each year.
Baldwin said the checker
sites take advantage of authentication weaknesses in the
card processing system that allow merchants to conduct
so-called "pre-authorization requests," which merchants use
to place a temporary charge on the account to make sure that
the cardholder has sufficient funds to pay for the promised
goods or services.
Pre-authorization requests
are quite common. When a waiter at a restaurant swipes a
customer's card and brings the receipt to the table so the
customer can add a tip, for example, that initial charge is
essentially a pre-authorization.
With these card-checking
services, however, in most cases the charge initiated by the
pre-authorization check is never consummated. As a result,
unless a consumer is monitoring their accounts online in
real-time, they may never notice a pre-authorization
initiated by a card-checking site against their card number,
because that query won't show up as a charge on the
customer's monthly statement.
In fact, in most cases
when banks are alerted to the card-checking activity, it is
because a credit card customer is regularly checking their
online statement or has signed up with their bank to receive
e-mail alerts each time a charge is initiated against their
account.
The crooks have designed
their card-checking sites so that each check is submitted
into the card processing network using a legitimate,
hijacked merchant account number combined with a completely
unrelated merchant name, Baldwin discovered.
On June 11, Kordopatis heard
from Keri Tetlow, a mother of three from the suburbs of Houston.
Tetlow, who watches her family's debit account balance like a
hawk from their home computer, said she called Odyssey Bar
because she noticed a $2.77 charge from the establishment.
Tetlow said that after checking with her husband to make sure he
hadn't made the charge, she decided to wait and see if the
pending charge would clear. It never did.
But a few days later, Tetlow
spotted $300 missing from her checking account, which she
noticed was due to two unauthorized charges at a Office Depot on
Broadway in New York City. So she called her bank. After
confirming neither she nor her husband had lost their debit
card, she told the bank to cancel the card.
Continued in article
Those phony emails pretending to be from banks and PayPal
Q.I get a ton of
e-mail messages purporting to be from banks and Web sites
that are obviously not from those institutions even though
the return address looks real. Is there a way to find out
where these messages actually came from?
A. Although
you probably won’t be able to trace the fraudulent message
directly back to its human sender, you can usually poke
around inside the message’s full header field to see where
it might have come from electronically. Check your
particular e-mail program’s settings for displaying “full”
or “long” message headers — in Outlook Express, for example,
you can see the full header by right-clicking on a message
in your mailbox window, selecting Properties and clicking
the Details button.
The full header shows the path that
message took across the Internet from sender to recipient.
Even if the return address is forged with something like
admin@irs.gov,
if you look closely, odds are you’ll see other addresses in
the “Received:” lines in the header that give some
indication of the message’s origin. A detailed explanation
of how to read e-mail headers is at
spamlinks.net/track-trace-headers.htm.
If you receive spam that solicits
your personal information, the consumer safety site
OnGuardOnline.gov suggests forwarding it to the bank or
institution used in the forged address and to
spam@uce.gov.
Dirty Tricks Played on Job
Seekers Job hunters using Monster.com, the employment Web site
owned by Monster Worldwide, received fake job offers by e-mail that asks for
their Bank of America account information. The e-mail contains personal
information collected when hackers tricked Monster.com customers into
downloading a virus in a fake job-seeking tool, according to researchers at
Symantec, the world's biggest maker of security software.
Rochelle Garner, "Monster.com Users Get Fake Offers And Request," The
Washington Post, August 23, 2007, Page D04 ---
Click Here
The IRS warned taxpayers Wednesday not
to be duped by scammers posing as private debt collectors the
agency has hired to chase unpaid tax debts.
The Internal Revenue Service designed
the debt collection program to minimize that risk "because we
know what it's like out there with regard to identity theft
nowadays," said Brady Bennett, IRS director of collection.
But some critics of the program see so
many pitfalls that they're urging debtors to insist on
negotiating payment directly with the IRS.
The National Treasury Employees Union,
which represents IRS employees and opposes the program, has even
drafted a sample letter that taxpayers can send to opt out of
the private collection program and demand that the IRS handle
their case.
The IRS plans to assign 12,500 accounts
with unpaid tax debts to three private agencies beginning Sept.
7. About 40,000 accounts will be turned over by the end of the
year. The IRS chose taxpayers who owe less than $25,000 and
don't dispute the debt.
Anyone contacted by a private
collection agency has the right, among others, to insist that
only the IRS deal with their account. Bennett said he hoped few
taxpayers with debts sent to private collectors would opt out.
"The purpose of this program is to
provide value to the American taxpayer. Those who don't pay have
an impact on everybody else who does," he said.
Question
What should you do if you think you're a possible victim of ID theft?
Answer
There are a number of things to do, especially the following:
Fill out an identity theft report with your local, state or federal
law enforcement agency. It's unclear if the mere loss or theft of
personal information constitutes identity theft, but filing a report
may offer additional protections. The FTC makes an affidavit
available at
http://www.consumer.gov/idtheft/pdf/affidavit.pdf
"Tips for Preventing or Catching Identity Theft: Contacting
one of three credit reporting agencies is the key to monitoring
possible fraud," MIT's Technology Review, May 24, 2006 ---
http://www.technologyreview.com/read_article.aspx?id=16923
Consumer advocates have some advice for
the 26.5 million veterans whose personal information was stolen
from the home of a Veterans Affairs employee: Don't panic.
Identity theft may be a growing problem
that affected 9.3 million Americans last year, according to
Javelin Strategy and Research. But consumer advocates say a few
precautions can lessen the chances of becoming a victim, even
for people whose personal information has been stolen.
The first thing to do if you think your
Social Security number, birth date or other sensitive data has
fallen into the wrong hands is to place an initial fraud alert
on your credit reports. There are three major credit reporting
agencies, but a call to one -- for instance, Equifax at
800-525-6285 -- will ensure the other two are notified.
A fraud alert entitles you to a free
copy of your credit report from each of the three companies.
Order one from each and scrutinize them carefully for accounts
you didn't open or debts you don't recognize. Also, make sure
that information such as your Social Security number and
employer are correct on each report.
If you discover accounts or
transactions you didn't authorize, call and speak with someone
in the fraud department of each company involved. Keep a log of
each person contacted, along with the date, time and topics
discussed on each call.
An initial fraud alert also requires
businesses to take additional steps to confirm your identity
before issuing loans or opening accounts in your name. Be
prepared for loan and credit card applications to take slightly
longer to be processed.
It's important to understand that an
initial fraud alert, as the name implies, is only a temporary
fix. That's because it remains in effect for only 90 days. To
prevent becoming a victim after the three months are up, you'll
need to take additional steps.
Next, fill out an identity theft report
with your local, state or federal law enforcement agency. It's
unclear if the mere loss or theft of personal information
constitutes identity theft, but filing a report may offer
additional protections. The FTC makes an affidavit available at
http://www.consumer.gov/idtheft/pdf/affidavit.pdf
Ask each of the three credit reporting
companies to place a freeze or extended alert on your account.
Seventeen states have enacted laws that require the reporting
companies to block access to your files in most instances. Check
with the Consumers Union Web site or attorney general in your
state to see if this is available where you live.
Even if your state doesn't offer this
protection, ask Equifax, TransUnion and Experian to give you an
extended alert anyway. This option will entitle you to two free
credit reports per year, and it will also require the credit
reporting companies to remove you from lists marketers use to
send prescreened credit offers for five years.
To qualify for an extended alert, the
reporting companies will require you to prove you've been the
victim of identity theft, even though it is not always clear how
the law defines a victim in this case. Be sure to include the
FTC affidavit or other law enforcement report you filed. It is
legal documentation that your personal identification has been
stolen.
Finally, recognize that safeguarding
your privacy is a never-ending task, even for people who have no
reason to believe their personal information has been stolen. A
little education and prevention, say consumer advocates, can go
a long way.
''You need an ongoing vigilance,'' says
Paul Stephens, a policy analyst with the Privacy Rights
Clearinghouse in San Diego. ''We want people to be proactive, to
be vigilant, but we also don't want to have people panicking.''
Questions
Who are the lowly "cashiers" in ID theft rings?
Who are the bad guys at the top of the theft chain?
According to Dillinger, he obtained at
least 450 numbers from a Russian hacker he met online, then used
them to withdraw thousands of dollars from ATM machines before banks
canceled the cards and issued new ones to customers. Dillinger, a
drug addict and former prostitute in Southern California, was
arrested last month on charges unrelated to the cash-out operation.
It's unclear whether he'll be charged for the cashing, although he's
spoken openly about his activities with many people . . . Dillinger
typifies the thieves who are carving out a living on the bottom rung
of the growing international cybercrime industry. Congregating on
members-only web forums, where they take assignments from more
technically sophisticated criminals, many have only moderate
computer skills. They are the mules of electronic fraud, filling a
vital role at the intersection of the virtual and the real:
converting stolen account information into cold, hard cash. Most are
young males in their teens and early 20s who are lured by the
prospect of making big bucks in an environment that offers them
relative anonymity. Others are longtime bank and identity thieves in
the offline world who have become acquainted with the riches that
carding sites promise to even unsophisticated scammers like
Dillinger. At the top of the pyramid are sophisticated hackers --
many of them East Europeans -- with the technical skills to hack
databases and online bank accounts. It's the latter who have helped
turn carding into a multibillion-dollar worldwide crime.
Kim Zetter, "Confessions of a Cybermule," Wired News, July
29, 2006 ---
http://www.wired.com/news/technology/0,71479-0.html?tw=wn_index_1
In addition to a free annual credit report, you can get a
report following ID theft
Consumers who have evidence of attempts
to open fraudulent accounts in their name should contact those
creditors immediately, and file a report with the local police
department. If possible, obtain a copy of the police report, or
at least the police report number. Evidence of fraudulent
activity allows victims to request that a 90-day fraud alert be
extended to seven years, though a credit bureau will require
proof of identity and a copy of the police report.
Placing a fraud alert entitles you to a
free copy of your credit report from each of the major bureaus,
in addition to a free report the law allows every consumer to
request annually. If you get a fraud-related credit report,
Givens advises waiting a few months before ordering the annual
free one.
Alert the credit bureaus and credit
issuers in writing of any inaccurate information or fraudulent
accounts listed in your credit reports. You also have the right
to have the credit bureaus strike any inquiries against your
credit history that were generated by fraud.
For many identity-theft victims, being
denied a loan or line of credit or receiving a call from a debt
collection agency is the first sign of trouble. By law, if you
inform a collector that a debt is the result of identity theft,
that collector also must inform the creditor, and creditors are
prohibited from selling debt that results from identity theft or
placing it for collection. You also are entitled to a copy of
all information about fraudulent debt, including late notices
and account statements.
At least 23 states have passed
"security freeze" laws that allow consumers to indefinitely
prevent anyone from issuing credit in their name. California,
Colorado, Connecticut, Florida, Illinois, Kentucky, Louisiana,
Maine, Minnesota, Nevada, New Hampshire, New Jersey, New York,
North Carolina, Oklahoma, Utah, Vermont and Wisconsin provide
all their residents with the option of placing a security freeze
on their credit files. Hawaii, Kansas, South Dakota, Texas and
Washington currently provide this option only to ID theft
victims.
A number of state laws also are driving
businesses to alert consumers about potential data losses, but
legislation being considered on Capitol Hill could soon change
that. Ed Mierzwinski, consumer program director of the U.S.
Public Interest Research Group, a consumer watchdog group in
Washington, said a bill recently passed by the House Financial
Services Committee and supported by the major financial
institutions would exempt companies from alerting consumers
about data thefts or losses if the company does not know whether
that loss places the consumer at a direct risk of identity
theft. The bill also would reserve credit freezes for ID theft
victims only.
Debit Card Fraud Jumps Several banks have reported that account
information has been stolen and consumers have reported mysterious
fraudulent account withdrawals. Litan told MSNBC, “This is the
absolute worst hack that has happened, the biggest scam to date.”
Using a debit card to steal cash is a more direct process for
thieves. Stealing merchandise and converting it into cash can be a
risky business. MSNBC reports this so-called “white card” fraud does
not require interaction with clerks or other store staff. Careless
PIN storage is to blame for these losses.
"Debit Card Fraud Jumps," AccounitngWeb, March 13, 2006 ---
http://www.accountingweb.com/cgi-bin/item.cgi?id=101885
Online broker Charles Schwab Wednesday
issued a guarantee against any and all losses from unauthorized
account access, the latest online trader to calm customers'
jitters about phishing scams and identity theft.
As of Wednesday, all Schwab customers
are 100 percent covered against loss, the San Francisco-based
company said. They need take no action unless they suspect that
their account has been accessed without their permission or
knowledge, Schwab added.
"It has always been our practice to
make clients whole in cases of unauthorized account activity.
Our new security guarantee turns that historic practice into a
public promise," said chief executive Charles Schwab in a
statement. "Given rising public concerns over identity theft and
cyber-fraud, we think adding a clear and simple guarantee will
contribute to even greater peace of mind for our clients."
Schwab follows rivals in posting a
guarantee; in January, New York-based ETrade launched what it
called "Complete Protection Guarantee" to cover all losses
originating from fraud.
Banks, online brokers, and other
financial institutions have been worried of late about fraud in
general and identity theft in particular, as online users have
turned skittish in reaction to a rise in e-fraud. Several polls
taken in 2005, for example, noted that U.S. consumers were
becoming less likely to conduct financial transactions over the
Internet.
Even the Securities and Exchange
Commission (SEC) has expressed concern about the trend. In
September, it issued a guide on the dangers that identity
thieves posed to online brokerage accounts.
Free Credit Reports Go Nationwide
Beware of identity thief imposter sites for free credit reports Identity thieves continue to proliferate, but soon all
consumers will have access to at least one free method of surveillance.
Beginning next month, a federal law expands nationwide to allow individuals to
get free copies of their credit reports, once a year, from each of the three
major credit-reporting agencies. As part of the Fair and Accurate Credit
Transactions Act, passed in late 2003 and aimed at combating identity thieves,
the rule was rolled out across the U.S. over the past year, and culminates with
the addition of the Eastern states, Puerto Rico and all U.S. territories next
month. At that point, all consumers will have access to the reports from
Experian, Equifax Inc. and TransUnion LLC. The official Web site where you can
request the free reports is annualcreditreport.com, or you can call toll free
1-877-322-8228. (Don't contact the three credit companies individually.)
Tara Siegel Bernard, "Free Credit Reports Are Set to Go Nationwide: But
Consumers May See Pitches for Other Services And Imposter Web Sites," The
Wall Street Journal, August 23, 2005; Page D2 ---
http://online.wsj.com/article/0,,SB112475744986720188,00.html?mod=todays_us_personal_journal
Pay to Get Your FICO Score Your FICO credit score is crucial to your credit to your good name. It can
be altered without your knowing it due to fraud and errors. Getting a free
credit report may not give you FICO scores as well.
The main advantage of
http://www.myfico.com/ is that it will give your FICO score from each of
the three major credit reporting agencies. Consumer Reports (August, Page 18)
notes that credit scores nearly always differ between the three major credit
reporting agencies. You may miss something if you only get one agency’s score.
To monitor your FICO score, Consumer Reports (August 2005, Page 17)
recommends that you get the $44.85 package from
http://www.myfico.com/
The top categories of consumer fraud complaints for 2004
include:
Internet Auctions - 16 percent
Shop-at-Home/Catalog Sales - 8 percent
Internet Services and Computer Complaints - 6
percent
Foreign Money Offers - 6 percent
Prizes/Sweepstakes and Lotteries - 5 percent
Advance-Fee Loans and Credit Protection - 3
percent
Business Opportunities and Work-at-Home - 2
percent
Telephone Services - 2 percent
Other (miscellaneous) - 12 percent
Other findings from the report include:
Of the 635,173 complaints received in 2004,
246,570 were identity theft reports and 388,603 were fraud complaints.
Internet-related complaints accounted for 53
percent of all reported fraud complaints.
The major metropolitan areas with the highest
per-capita rates of complaints concerning consumer fraud were Washington,
DC; San Jose-Sunnyvale-Santa Clara, CA; and Las Vegas-Paradise, NV.
Credit card fraud was the most common form of
reported identity theft, followed by phone or utilities fraud, bank fraud,
and employment fraud.
The major metropolitan areas with the highest
per-capita rates of reported identity theft were Phoenix-Mesa-Scottsdale,
AZ; Riverside-San Bernardino-Ontario, CA; and Las Vegas-Paradise, NV.
Copies of the report, “National and
State Trends in Fraud and Identity Theft,” are available online at http://www.consumer.gov/sentinel/pubs/Top10Fraud2004.pdf
and from the FTC’s Consumer Response Center, Room 130, 600 Pennsylvania
Avenue, N.W., Washington, D.C. 20580. The FTC works for the consumer to
prevent fraudulent, deceptive, and unfair business practices in the
marketplace and to provide information to help consumers spot, stop, and avoid
them. To file a complaint in English or Spanish (bilingual counselors are
available to take complaints), or to get free information on any of 150
consumer topics, call toll-free, 1-877-FTC-HELP (1-877-382-4357), or use the
complaint form at http://www.ftc.gov.
The FTC enters Internet, telemarketing, identity theft, and other
fraud-related complaints into Consumer Sentinel, a secure, online database
available to hundreds of civil and criminal law enforcement agencies in the
U.S. and abroad.
When you surf the Internet, you
leave footprints everywhere you go. Google conceivably
knows every term you've
searched for and every e-mail you've sent and received.
Cookies greet you when you return to a site and track
your movements when you stay within its pages or visit
affiliated sites. Your ISP knows who you are and where
you live or work whenever you get online.
This tracking continues far
from your computer. The
hundreds of publicly and
privately owned surveillance cameras within a 10-block
radius of my office capture my image when I buy a
falafel or read a book in Washington Square Park. If you
talk on a cell phone or send text messages from your
PDA, your provider knows where you are. The same goes
for when you pay for socks with a credit card or get
cash from an ATM.
As the battle to provide ads
better-targeted to online consumers intensifies, our
information becomes more valuable to online marketers
and publishers.
Web surfers also fear that
identity thieves are on the prowl for their personal
data. The government is a potential bogeyman, too: As
fears over terrorism intensify, the feds may find your
personal data irresistible. In 2003, Congress scuttled
the Total Information Awareness program, which would
have enabled the Pentagon to mine millions of public and
private records to search for indications of terrorist
activity. But that doesn't mean the effort to combine
databases has stalled—it's
just been redirected.
So, how can we
protect ourselves? We're going to
have to pay for it. In the same way
we fork over a few extra bucks a
month for caller ID block and an
unlisted phone number, we'll pay for
anonymity in other areas. Privacy
has become a commodity. The more our
personal information gets out there,
and the more valuable it becomes,
the more incentive there will be for
companies to shield it on our
behalf.
There's a
good chance you already have a
personal
firewall
or a
spyware remover
installed on your machine. But there
are loads of other products that can
do everything from masking your IP
address—kind of like driving in a
car with a fake license plate—to
scrambling your data so that anyone
trying to intercept it will
encounter gibberish, to services
that claim to expunge your personal
information from a whole range of
databases and search engines. Some
do what they say they can do. Others
don't.
For $29.99,
Acronis
Privacy Expert Suite will wipe your
hard drive of all traces of Web
surfing.
Anonymizer.com
offers an
array of products that do everything
from masking your identity by
routing your Web traffic through
secure servers to encrypting your
wireless connection.
GhostSurf,
a competing product, provides "an
anonymous, encrypted Internet
connection" that erases any trace of
your surfing "to Department of
Defense standards." Encryption
schemes like
PGP will
let you send e-mail securely so that
even if hackers intercept it
upstream, they won't be able to read
it. A program called
SafeHouse
will fully encrypt your hard drive
to ensure that if your laptop is
stolen, your data won't be.
Not
everything that comes at a price can
do the job. A new service called
DeleteNow
vows to expunge your personal
information from search engines,
databases, and directories for $2.99
a month. The company says it uses
searchbots and a "deletion module"
to search for and destroy
information in databases and on the
Web that its client doesn't want
dispersed in the ether. But
DeleteNow's claims are a bit
exaggerated. It can't simply delete
information from third-party Web
sites—all it does is automate the
process by which any user can ask
that a page gets removed from a
particular search engine. Believe
me: If Google didn't remove its CEO
Eric Schmidt's personal information
from search
results after the company
raised a stink
with CNET,
it's not going to remove yours.
Not all
privacy enhancers cost money. Some
free Web-based services help those
who simply want to control their
information because they don't want
"The Man" to have it—marketers, the
government, whoever.
Bugmenot
offers communal logins and
passwords—the password "liberalmedia"
for the New York Times and
the e-mail
nypostisfuckingretartedforrquiringregistration@suckme.com
to access
the New York Post, for
example—that allow users to avoid
providing personal information at
sites that require free (but
annoying) registration. But the
model that
Hushmail,
which offers snoop-proof e-mail, has
adopted will probably hold sway in
the future. The company gets you in
the door by offering free e-mail
accounts but then offers a number of
different services that cost money.
Of course,
it's possible that these services go
too far. Do most of us really need
to encrypt our hard drives so that
pictures of our kids don't fall into
enemy hands? The most important
question, though, is whether it's
right that individuals have to bear
the economic burden of protecting
their anonymity online. Shouldn't
our own personal default settings be
set on privacy?
Continued in article
27 states have enacted some form of ID theft notification law
to date California was the first state to require
companies to notify consumers of data losses, and 20 more states
have enacted some form of notification law, MarketWatch says. More
bills are pending in Congress which let companies decide when
notification is necessary. Financial institutions in particular,
need to do more to beat the problem of identity theft, Bruce
Schneier said, writing in Wired, according to ZDNet.UK. “Financial
institutions make it too easy for a criminal to commit fraudulent
transactions, and too difficult for the victims to clear their
names,” he writes. “They can put security countermeasures in place
to prevent fraud, detect it quickly and allow victims to clear
themselves.” The cost of securing systems can be steep for many
companies, says Mike Sattler. It cost him almost $100,000 for a high
level audit to verify his own systems, he told MarketWatch. But all
of the solutions are not hi-tech, says Alan Brill, senior managing
director of Kroll Ontrack, a subsidiary of Kroll, Inc. the global
risk-consulting firm. Brill suggests that after considering the
specific risks a company faces, management might divert some money
from protecting against hackers to encrypting backup tapes or doing
more detailed employee background checks. Banks and credit card
companies now provide identity-theft protection services to
individuals for an average of $12 a month, according to a report in
Dow Jones Newswires. Some insurance companies provide it for free,
and American Express Co. is pitching free as well as paid services.
"Companies Combating ID Thefts while Consumers Check Credit
Reports," AccountingWeb, October 11, 2005 ---
http://www.accountingweb.com/cgi-bin/item.cgi?id=101372
What is a "security freeze" protection from ID theft? The bill's marquee provision is the
"security freeze", the right to control access to your credit
report. If used, the security freeze prevents identity thieves from
getting new credit in your name. "Other states have created security
freezes that are expensive or difficult to use," said Caplovitz, "so
very few consumers choose to use the freeze. The freeze is like the
lock on your front door; if you don't use it, it doesn't keep
thieves out. There's no point in creating a freeze that people won't
use. The legislature recognized that, and created the best, most
consumer friendly security freeze in the country. All consumers are
going to wish they were lucky enough to be New Jerseyans." New
Jersey's freeze is better than all others because (1) the credit
reporting agencies must provide a convenient method of use, such as
phone or internet; (2) the credit reporting agencies must lift the
freeze as quickly as possible, with the goal being within 15
minutes; (3) the freeze is free to put on and $5 to temporarily
lift; and (4) it is available to all consumers. Other states'
freezes authorize but don't require a convenient method of use;
allow up to three days to lift; cost more; and, in some states, are
limited to Identity Theft victims only.
"NJ Enacts Strong, Comprehensive ID Theft Prevention
Legislation—Best 'Security Freeze' in the Country," June 23, 2005
---
http://njpirg.org/NJ.asp?id2=17818&id3=NJ&
What should I
do if my wallet or purse is lost or stolen?
Immediately contact
all three credit reporting agencies --
Equifax, Experian and TransUnion -- and have
them place a fraud alert on your account.
This means that companies issuing new credit
accounts in your name will have to call you
to obtain permission first. The alert will
last for 90 days only. You can extend the
alert to seven years, but only if you've
been a victim of identity theft and can
provide a police report.
In addition to
contacting the credit reporting agencies,
you should file a police report if your
property was stolen. Close any accounts that
you think may have been compromised by the
loss or theft. The FTC provides
more information
and a chart to tick off steps you should
take.
What can I
do to prevent myself from becoming a victim?
There isn't really
anything you can do to prevent identity
theft. As long as Social Security numbers
are used for purposes other than Social
Security, you are at risk of having your
identity stolen any time someone has access
to documents that carry your number and
other personal data. There are, however,
things you can do to lower your risk of
becoming a victim.
Review monthly
financial statements carefully for
fraudulent activity.
Request a free
copy of your credit report from a
credit-reporting agency once a year to
examine it for fraudulent activity. A
new law requiring credit reporting
agencies to provide a free annual report
goes into effect nationwide in
September. Until then, it's in effect
only in western and Midwestern states.
The credit report will show who
requested access to your credit record.
Look for requests from companies you
haven't done business with and tell
credit-reporting agencies if you see
credit accounts that you didn't open or
debts you didn't incur. Check to see
that your name and address are correct.
Don't give
your Social Security number to any
business that doesn't really need it.
Cross shred
sensitive documents. Thieves have been
known to piece together strips of paper
that are shredded only once.
Cross-shredders double-shred documents.
Shred
pre-approved credit-card offers before
tossing them in the garbage.
Don't store
sensitive personal information, such as
bank account numbers and passwords, on
home computers or handheld devices.
Install a
firewall and anti-virus software on your
computer and keep the virus definitions
up to date to prevent viruses and Trojan
horses from infecting your computer and
feeding personal information back to
hackers.
Don't fall for
phishing scams. Phishing occurs when
someone sends you an e-mail purporting
to be from your bank or other company
you do business with and requesting you
to update your account information.
Use specially
designed software programs to clean data
from your computer before you sell or
discard it. Simply deleting files will
not remove data from the memory.
Don't carry
any documents in your wallet that have
your Social Security number on them,
including your medical card or military
ID, on days when you don't need the
card.
Opt-out when
your bank or other financial institution
requests permission to share information
about you with other businesses.
Close all
credit-card accounts except the one or
two that you really need.
If you are an
identity theft victim and live in one of
ten states, including California,
Colorado, Louisiana, Maine, Texas,
Vermont or Washington, consider placing
a "freeze" on your credit report so that
no one can access it without your
permission. More than 20 additional
states are considering passing similar
legislation. Creditors need to look at
your report before granting you credit.
By freezing your report, it will prevent
unauthorized people from seeing your
personal data and it will prevent
creditors from opening a new credit
account in your name for an impostor.
Some states only let victims of identity
theft freeze their records. Other states
allow anyone to freeze their record. The
State Public Interest Research Groups
maintains
a list of
states with freeze laws.
What is SpoofStick? SpoofStick is a simple browser extension
that helps users detect spoofed (fake) websites. A spoofed website is
typically made to look like a well known, branded site (like ebay.com or
citibank.com) with a slightly different or confusing URL. The attacker
then tries to trick people into going to the spoofed site by sending out
fake email messages or posting links in public places - hoping that some
percentage of users won't notice the incorrect URL and give away
important information. This practice is sometimes known as “phishing".
From CoreStreet ---
http://www.corestreet.com/spoofstick/
The Federal Trade Commission (FTC) received
246,570 identity theft complaints last year, and the problem actually
is much worse: 9.9 million people (about one in every 30 Americans)
were victims of identity theft in a one-year period starting in spring
2002, according to an FTC survey. Thieves use the data to get credit
cards, pilfer bank accounts and take over identities for future
thefts.
Several factors give them the upper hand:
•Companies hide break-ins. Many
companies react as ChoicePoint did initially. They keep quiet after
computers are hacked, fearing lawsuits and damaged reputations.
•Police are busy elsewhere. Local
police are often reluctant to pursue cases. The amounts, while large
to an individual, seem small compared with other monetary crimes.
Often the consumer lives in one state, the thief in another. Federal
authorities can act, but only about 1 in 700 cases of identity theft
resulted in a federal arrest in 2002, according to Avivah Litan, a
cybercrime expert with the Gartner research firm.
•Oversight is weak. Identity theft
is a relatively new crime and, outside of California, governments
haven't yet geared up to address it. The rising industry of data
brokers has little oversight, and rules for financial institutions
aren't up to the task.
The good news is that the ChoicePoint breach
is prompting several states, including Georgia, New Hampshire, New
York and Texas, to consider bills patterned on the California
notification law. Several U.S. senators are pushing a federal law.
> -----Original Message-----
> From: Spam Prevention Discussion List
> Sent: Monday, July 11, 2005 9:37 AM
> Subject: MEDIA: [infowarrior] -
> Phishing for the missing piece of the CardSystems puzzle]
>
> [ Yet another illustration that the relationships between
various
> forms of 'net abuse can be complex. In this case, spam,
phishing,
> data theft and identity theft all converge.
> I think this illustrates that even if we could wave our magic
wand and
> make SMTP spam vanish forever...we'd be far, far from out of
the
> woods. ---Rsk ]
>
> ----- Forwarded message from infowarrior.org -----
>
> > Date: Sun, 10 Jul 2005 22:07:56 -0400
> > Subject: [infowarrior] - Phishing for the missing piece of
the
> > CardSystems puzzle
> > Phishing for the missing piece of the CardSystems puzzle
> >
> > By Donald Smith
> > 07 Jul 2005 | SearchSecurity.com
> >
> > A banking insider examines the ties between customized
phishing
> > attacks this spring and the CardSystems breach announced
> soon after.
> > Don't miss his revelations on how they're linked and what
> the phishers
> > really needed.
> >
> > Perhaps you heard about customized phishing scams when they
began
> > circulating back in May, in which actual credit card data
> was used to
> > lure consumers into divulging even more secrets. But did you
know
> > these scams could very well be the first externally visible
> result of
> > the CardSystems breach, before it was made public in June?
> >
> > -/SNIP/-
> >
> > About the author
> > Donald Smith is the IT audit manager for The Mechanics Bank
of
> > Richmond, Calif. Smith's opinions are his own, and not those
of The
> > Mechanics Bank.
> >
> > You are a subscribed member of the infowarrior list. Visit
> >
www.infowarrior.org for list information or to
unsubscribe. This
> > message may be redistributed freely in its entirety. Any and
all
> > copyrights appearing in list messages are maintained by
> their respective owners.
> >
>
> ----- End forwarded message -----
It's probably too soon to tell about effectiveness of identity theft
insurance. Last year, Allstate Corp. began offering identity-theft
insurance in Texas and a few other states as a $30 rider on its homeowner and
renter policies. The spadework is contracted out to Kroll Inc., a
risk-consulting company. "We take a lot of the work of identity restoration
off the shoulders of victims," says Troy Allen, vice president for fraud
solutions at Kroll. "It's very time-consuming and difficult and
frustrating."
"ID stolen? Call a privacy gumshoe," The Christian Science Monitor,
March 9, 2005 --- http://www.csmonitor.com/2005/0309/p12s01-stin.html
Freezing Out Identity Theft In an effort to combat the rapidly escalating
outbreak of identity-theft crimes, a handful of states including
California and Texas have passed legislation that allows consumers to
put a "security freeze" on their credit history. Some 20
other states this year have considered or are considering adopting
similar laws, which make it nearly impossible for criminals to use
stolen information to open bogus new accounts. The measures are so
effective because once frozen, a merchant is unable to review an
applicant's credit history. Lacking such information, most companies
refuse to open a new account, greatly devaluing stolen personal data. .
. Currently, federal law does allow consumers to put a fraud
"alert" on their files. If an alert pops up when someone
applies for credit, the bank or merchant is supposed to try to verify an
individual's identity. But the alert doesn't close off this access to
credit histories. Instead, it merely warns the cellphone store or the
credit-card issuer to take extra care with any new customer using a
particular name. No federal law gives all consumers the right to
freeze their credit entirely, which keeps merchants from being able to
look at it at all. (Companies with a pre-existing relationship with
someone can generally still get access to their frozen credit files.)
Jennifer Saranow and Ron Lieber, "Freezing Out Identity
Theft: Potent State Laws Let Consumers Bar Access to Credit
Reports, But Not Without Headaches," The Wall Street Journal,
March 15, 2005; Page D1 --- http://online.wsj.com/article/0,,SB111084275620679216,00.html?mod=todays_us_personal_journal
Texas law is limited But in some states, legislators are fighting
identity theft by proposing laws that give consumers the right to lock
up their credit files with a security freeze. A security freeze lets you
decide who gets to see your credit record, which prevents thieves from
obtaining credit using your identity. Texas has enacted such a
law, but only for consumers who have already been victimized by identity
theft. SB 100 would expand that right so that all consumers could look
up their credit files with a security freeze.
Consumers Union --- http://snipurl.com/SecurityFreezeTexas
The black-leather day-planner is an identity
thief's dream: Inside are the names, Social Security numbers, birth
dates, banking information and credit-card numbers of about 40 people.
One section, written in a cursive script, even has helpful
instructions for what to say when calling customer service at a
credit-card company. Police say the book, seized from a ring of
suspected car prowlers by Bellevue police in July, illustrates a shift
in the motivation for car break-ins: It may not be your stereo, but
personal information that thieves are seeking when they smash into
your car.
"It's not that what they're looking for
has changed, it's expanded," said Detective Rodney Chinnick of
the King County Sheriff's Office. "The old saying is lock your
car and remove everything that's valuable. That's still good advice.
What's changed is what may be valuable."
That includes mail, which could contain
personal information such as bank, credit-card and Social Security
statements. Other things that have value already, such as briefcases,
laptop computers and personal digital assistants, have extra worth to
thieves looking to steal an identity by using information they'll find
inside.
"They're looking for Social Security
numbers, passwords, financial-account information," said Linda
Foley, co-director of the
Identity Theft Resource Center, a San Diego
nonprofit that researches and distributes information on identity
theft. "They can sell that information over and over again."
The result is that identity theft can be a
lot more lucrative than nabbing a stereo or camera. Police say
profiles of individuals containing personal information, such as those
found in the seized day-planner, can be sold for $30 to $40 each.
A thief also can use credit cards to go on a
quick shopping spree, or use Social Security numbers and other
personal information to open credit accounts in the victim's name.
The Internal Revenue Service on Friday
warned consumers about an identity theft operation that tries to
elicit personal information from taxpayers by sending emails
alleging they're the subject of a tax investigation.
Neither the Treasury Department nor the
Internal Revenue Service send emails to taxpayers about issues
related to their accounts.
The official-looking email tells recipients
they can dispute the tax fraud charge by logging onto a web site and
providing detailed personal information like Social Security
numbers, credit card numbers and driver's license numbers.
Identity thieves use individuals' personal
data to create false identification documents, to purchase goods and
to apply for loans, credit cards or other services in the victim's
name.
The Internet service provider that hosted
the fraudulent web site shut it down at the request of the Treasury
Department's inspector general for taxes. The IRS warns that new
versions could surface.
Taxpayers who receive suspect emails should
call the Treasury Department toll-free fraud hot line at
1-800-366-4484, or the IRS at 1-800-829-1040.
April 16, 2004 (Kennebec Journal)
— KeyBank Maine President Kathyrn Underwood warned that the guest
speaker's talk would leave the audience "scared to death,"
and she was right.
Over the next two hours, white-collar crime
expert and former scammer Frank W. Abagnale told the 250 people at
the Sable Oaks Marriott on Tuesday exactly how easy it is these days
for criminals to steal their identities, forge their checks or
otherwise defraud them. It's even easier today than when he was a
globe-trotting flimflam man 40 years ago, Abagnale said.
"The fact is that what I did 40 years
ago is 2,000 times easier to do today," he said.
Abagnale is the best-selling author of
"Catch Me If You Can," and was portrayed by actor Leonardo
DiCaprio in the recent hit movie by the same name. It's the story of
how Abagnale cashed more than $2.5 million in bad checks in every
state and 25 foreign countries between the ages of 16 and 21,
impersonating an airline pilot, an attorney, a college professor and
a pediatrician.
Police caught him when he was 21, and
Abagnale served five years in prison. He was released on the
condition that he would help the government by providing advice to
law-enforcement agencies. Today, more than 14,000 businesses and
law-enforcement agencies use Abagnale's services to prevent fraud.
He doesn't look much like DiCaprio, but his
speaking voice has the cadence of a master salesman, giving a hint
of the skills he used to fool bank tellers and police alike.
Abagnale described various types of
white-collar crime, but spent a majority of the KeyBank talk focused
on identity theft and check fraud. When Abagnale forged checks 40
years ago, he said, he needed a $1 million printing press. Today,
$6,000 will buy highly portable, top-of-the-line computer equipment
that can perfectly duplicate checks and other documents that don't
have special defenses built into them, he said.
"Technology is only going to make
crime easier -- always has, always will," said Abagnale.
In 2002, he said, there were 9.9 million
victims of identity theft in the United States. Identity theft is
when a criminal uses someone else's vital data (birth date, Social
Security number and other information) to apply for such things as
credit cards, home mortgages and car loans. Identity theft cost
defrauded businesses $47.6 billion that year.
The total loss to individual victims was $5
billion, and they spent 297 million hours trying to resolve the
tangled financial mess left by the thief.
Getting the information needed to steal an
identity is "so simple it's absurd," said Abagnale. There
are at least 22 different types of personal information that can be
obtained off the Internet, Abagnale said.
There are Web sites that legally sell
Social Security numbers. The Mormon Church keeps an online database
of death statistics, and information such as birth date, date of
death, Social Security number and last five addresses are included
10 days after someone dies, he said.
A scam artist can see in the newspaper that
a wealthy stockbroker died, wait 10 days and get the information off
the church Web site. He can use the information to apply for a
credit card on a predated form, spend the money and leave the bill
for the stockbroker's widow, said Abagnale.
"Everywhere we look, we're giving away
information, every day, all the time," he said.
To protect against identity fraud, Abagnale
suggested a service that he uses, www.privacyguard.com
. Anytime your credit is checked, said Abagnale, this company alerts
you within 30 minutes.
"The only way to protect yourself
against identity theft is to know when someone is doing it," he
said.
April 19, 2004 reply from Robert Haun
I checked out the www.privacygaurd.com
and found 5 old credit cards that were on my report… thanks for
the resource!
Rob
W. Robert Haun '01
Alumni Information Systems Coordinator
Trinity University
Oh my god, it just happened to me. I
received a phone call this morning from someone telling me they were
Citicorp Credit and that there was a problem with my AT&T
Platinum Master Card and it would have to be cancelled and a new one
issued. Being skeptical, I thanked the person for calling and said I
would call the credit card directly. Turns out the Citicorp person
was ligitimate...so here's the latest scam.
A florist in California tested my number
with a $1 charge on Monday. Yesterday, a card with my number was
used to purchase gas. Thank goodness, the credit card company was
alert to this unusual activity. This is a card I never charge on,
only make payments on because they gave me a good balance transfer
rate last year. I just cut the card up and they'll be issuing
another.
I always
find it interesting to learn how technology is being used (and
abused) in
innovative ways. Get a load of this ATM scam, from the U-Texas
Austin Police Department! Bob, have you seen one of these in your
neighborhood?
David R.
Fordham
PBGH Faculty Fellow
James Madison University
April 21, 2004 reply from Bob Jensen
Carl Hubbard informs me that organized criminals invented a device
that fits over the card slot of a legitimate ATM. Your ATM
transaction will still work properly, but in the meantime the
criminals have captured your identity.
Be certain that the card slot of the ATM is flush with the entire
panel.
Bob
April 19, 2004 reply from Steve
Curry
My father lost several million dollars over
his lifetime. In 1985, all our cars were repossessed. When he died
last January, he was on a delinquent payment program with CitiBank.
Yet he also died with five credit cards in his wallet, one $1600
over the limit and one $2000 over the limit. To this day, I still
receive pre-approved credit card offers in his name – including
offers from CitiBank even after I sent them a copy of his death
certificate in order to terminate his existing account.
Something is terribly wrong. How can a dead
man who should have a bad credit rating still be getting
pre-approved for platinum credit cards? I’m sure “privacyguard.com”
does what it advertises but I am convinced that creditors are not
checking credit histories in the first place. Either that or they
are choosing to ignore what the reports tell them.
I suspect that marketer commissions are not
linked to the validity or reliability of the credit being extended.
I imagine that there is a wall of separation between the marketing
division and the fraud division and it is easier to blame the other
for the problem rather than working together to solve it. And I know
that we consumers must bear our own share of the blame as we keep
borrowing rather than following God’s commandment to “leave no
debt outstanding” (Romans 13:8). (By the way, I’m studying for
the ministry.)
In any case, it is apparent that when money
is to be made, caution goes out the window. I fear it will take a
disaster before people decided to follow the checks and balances
they should have been following all along. And often, in the wake of
such disasters, much effort is wasted in placing blame rather than
rectifying the situation. Still, it seems that there would be some
mechanism in place designed to prevent the problem from arising in
the first place, especially in light of the current concern over
national security and the funding of terrorism.
I
agree. So easy it is absurd. Absolutely. I’ve
been pointing this out for a long time to the old-timers on this
list.
And
Bob, it isn’t just the Internet. Your public library can
reveal amazing things about you, too. And even the government
can help! No kidding, hand on a stack of Bibles: In the
past 7 days alone, I have received two marriage licenses and six
birth certificates (of LIVING people no less!), and have about ten
more on order and presumably in the mail. Total cost to me:
a set of checks totaling $84, written to entities such as Dupage
County Illinois, Leon County Florida, Florence County South
Carolina, Montgomery County Maryland, and State of Florida
Department of Health.
Forget
the Mormon Church. Your county’s courthouse Real Estate
records office has on public display your old car loans, as well as
home equity loans, and a lot of other loans besides your mortgage,
and in many cases these documents include things like your bank
account numbers (especially for direct deposit loans!), your escrow
bank and escrow amounts, your mortgage account number, bank names
and locations, etc. – I’ve even found where some lawyers include
a copy of the loan application with the loan filing (about a tenth
of the time, as an attachment), which includes annual income
figures, credit card companies and account numbers, parents and
children’s names and birthdates, social security numbers, etc.
IRA accounts, other assets, etc. It is astounding what a
dedicated researcher can find out about you. And this is just
the stuff available to the general public, too, and doesn’t
include the stuff that so-called “authorized” officials can find
out through Lexus-Nexus, the FBI, and other sources available to
legal and law enforcement professionals!
Underwood
was entirely correct. If you were fooled into thinking there
is such a thing as privacy, learning this will scare you big time.
But
those of us who know what information is available enjoy hearty
laughs whenever anyone complains about a “loss of privacy”!
I
teach my students that only paranoid schizophrenics stay awake
nights worrying about this. Sure, a criminal can do you harm.
But a criminal can also mug you in the campus parking lot or break
into your office. You don’t do stupid things like walk in
the parking lot at 3 am in the morning, or leave your checkbook
lying on your desk while you go on vacation. But at the same
time, you don’t worry about what might happen by being in public,
either. I’m much more worried about a
cell-phone-talking driver crossing the center line on the highway,
or a thug stealing my ’95 Corolla or someone pickpocketing my
wallet on the D.C. metro. But I don’t lie awake worrying
about that, either. Fear-mongering is an age-old ploy
used by the press to garner sales, and cancer scares are losing
their impact, so the desperate reporters are exploiting the
public’s ignorance about information availability. And
because of that ignorance, it’s working. “Privacy Acts”
and “privacy policies” are downright humorous.
Compare
the number of your friends who have had their identities truly
stolen to the number of your friends who have been in car accidents,
contracted cancer, Alzheimer’s, Parkinson’s, had heart attacks,
been sued, or any of a number of other bad-luck scenarios.
I’m not talking about third-hand
I-know-someone-who-knows-someone-who-knew-someone, just compare your
first-hand friends, to get an idea of the magnitude of the real
problem.
One
problem with the press’s pre-occupation with this type of
fear-mongering is that paranoia tends to obscure rational decision
making.
And
those who call for the removal of this information from public
scrutiny are completely forgetting why that information is public to
start with!
Yes,
I admit stealing an identity is so easy it is indeed absurd. Absolutely.
But then again, if you’ll pardon me for being morbid, so is
killing someone! (And the latter tends to have much more
permanent and uncorrectable consequences. And I’d dare say I could
kill someone with a lot less effort than opening a credit card
account in their name. The only difference is in the amount of
effort put into catching perpetrators and the penalties involved,
which is an ENTIRELY different issue than (ridiculous) legislation
being demanded to prevent the act from occurring.)
David
R. Fordham
PBGH Faculty Fellow
James Madison University
April 19, 2004 reply from Uday Murthy, University of South Florida
[umurthy@COBA.USF.EDU]
As a recent
victim of identity theft, I wanted to let you know about a technique
used by these criminals. Once they have some key personal
information about you (SSN, DOB, mother's maiden name), which as Bob
and David indicate is not that hard to obtain, this is what can
happen:
1.
Individual contacts your bank over the phone, says you are moving
(provides all the "key" identifying information to
convince the customer service rep that it is indeed you on the
phone).
2. Calls
back (talks to a different rep), and says he needs a duplicate
ATM/debit card mailed. The duplicate, of course, gets mailed to the
new address.
3. Calls
back (of course, talks to a different rep), and says he's forgotten
the PIN number, and to mail *THE PIN ON FILE* to him. Of course, the
PIN goes to the new address.
You can
guess the next step. Individual goes to the nearest ATM (presumably
wearing a big hat and dark glasses so the camera doesn't get a clear
image) and goes to town.
In my case
the guy (or gal?) took out about $2,800 over two days.
Being in
the business of teaching about IT controls, I'm astounded by the
lack of controls at the bank. The bank's systems should have been
programmed to prevent the above three events occurring in close
succession. Any one (or even two) of the above events by itself is
fine, but the combination should have raised a red flag in the
bank's system. The third event (or even the second) should not have
been allowed *BY THE SYSTEM*. Individual customer service reps are
fallible, which is precisely why the SYSTEM should have controls
built-in. At a minimum, the second event should have triggered an
alert -- requiring a phone call to me. Eventually I did get a phone
call from the bank's fraud department, but it was two days late and
2800 dollars short. The bank is reimbursing me, but I'm going
through the pain of closing my main bank account and transferring
all the automatic debits and credits to my new account.
A few tips
for list members:
1. I did
not even know that these things could be done over the phone
(address change, duplicate ATM, mail PIN no. on file). I do all my
banking online, using a complicated userid and password. It is
possible to "shut off" phone banking, but by default it is
usually open. At a minimum, you should apply a complicated password
that needs to be verbally supplied before any action can be taken.
2. The
daily limit for ATM withdrawals was $1500 in my case. I rarely
withdraw more than $200 at any given time. Just don't use cold hard
cash all that much. It is possible to lower the daily ATM limit, but
again, by default it is set quite high.
So, if your
inquiring mind wants to know who I bank with, it's the bank with a
slight variation of the US flag as its logo. They are everywhere.
The term "Identify Theft" is one
of those terms whose misuse, misapplication, and abuse is quickly
rendering the term meaningless as it becomes synonymous with
"Fraud" and "theft of anything and everything under
the sun".
This morning, I opened my morning mail and
found an "Explanation of Benefits" from my health
insurance company where they have paid $500 to a dentist who I never
heard of. My name is listed as the patient, and the date of service
is a date when I was traveling. As I write this, I am on
"hold" on the phone listening to the insurance company's
music, getting frustrated because I've already talked to four people
at the company who say they can't help me -- even by taking a
report! -- and I have to call another number, listen to some more
music, punch some more touchtone keys, and wait some more. It's been
35 minutes since I first picked up the phone...
A colleague in the next office overheard my
conversation and came over to co-miserate about "identity
theft". It seems he had his wallet stolen, and someone used his
credit card and this "Identity theft" cost him a lot of
time. Identify theft. Yeah, right. Try "wallet theft" or
"credit card theft" or "credit card fraud". But
identify theft?
Well, I finally just got through to a
person who sounded bored and who told me, "We'll take it off
your claim history. We contacted the dentist office and they will
get the information corrected and refile a new claim. The claim
should have been for a lady."
What?! A new claim?! For a lady?! By a
dentist I've never been to?
I asked if they were going to do anything
else, and they said, "No, the lady at the dentist office
assured us it was just a mistake and they would get it corrected.
The new claim won't be under your name."
A mistake? How can a dentist office I've
never been in file a claim (which makes it all the way to payment)
with my name listed as patient? Where did the dentist get my filing
information? Isn't anyone going to investigate that? "Nooooo.
Too much trouble, and besides, they promised to correct it, so that
makes everything ok."
And no, the insurance company won't tell me
where the dentist is located so I can call myself, and find out
where they got my name and filing information to file the original,
um, "erroneous", claim!
Darn. If I weren't so ethical, I'd call a
lawyer! ;-)
The insurance company personnel don't seem
to care. -sigh- The "it's no skin off my back" syndrome
seems to be kicking in... And to think I just wasted forty five
minutes trying to help the company out.
Perhaps when Bonnie and Clyde had robbed
the bank, when the sheriff came to arrest them, they should have
said, "Sorry, it was just a mistake, we'll get it
corrected!" and all would be well.
My explanation of benefits says
"Amount You Owe To the Above Dental Care Provider" is
$330. I really hope the dentist office sends me a bill for that!
Identify theft? Sheeesh...
Sign me: "Frustrated, cynical,
disgruntled, -- but with really good teeth..."
David R. Fordham
PBGH Faculty Fellow
James Madison University
"ID theft costs banks (at least) $1 billion a year," MSNBC,
March 26, 2003 --- http://www.msnbc.com/news/891186.asp?0cv=TA01
And it will get worse if the banks don't do more to put away the bad
people doing the stealing.
When a collection agency is involved,
consumers should demand proof that a debt exists. The agency must
note the dispute in any report to a credit bureau and must also
establish the validity of the debt before continuing collection
efforts.
Although Mr. Graham said he thought he
had resolved the issue with AT&T, the debt was referred to a
collection agency. After he sent proof that AT&T had accepted
his final check, he thought the issue had been settled.
But in March, when Mr. Graham applied for
a mortgage, he said he found that his credit score - a figure
derived from credit accounts and bill-paying history, aimed at
identifying who is most likely to repay debt - had dropped and he
could not get the rate he wanted. This time, he sued NCO.
(Brian Callahan, a spokesman for NCO,
said it did not comment on specific cases. He defended the
company's practices, however, saying disputes were handled as
required under federal law.)
BRIAN GRAHAM prides himself on paying
his bills on time. So after he applied for a mortgage earlier
this year, it came as a surprise that he was unable to qualify
for a low adjustable rate.
The culprit was a $72 bill for a
cellphone service cancellation fee - one he had disputed with
AT&T Wireless. Mr. Graham said he thought the matter had
been resolved, but it had instead been placed on his credit
report.
"Brian, this isn't good," Mr.
Graham recalled the mortgage agent telling him. "I would do
something about it if you can." He tried, but after months
of letters and phone calls, he has hired a lawyer and filed a
lawsuit to try to clear his name.
Mr. Graham, 41, who lives in Oxford,
Mich., and owns a business making foot and ankle braces, learned
how hard it can be to clean up one's credit history, even when
it is soiled in error.
Sometimes the dispute is over a small
sum. Other cases may involve identity theft or something as
ludicrous as being listed as dead. (It happens.) But once bad
information is on file, removing it can be difficult.
"What we have is an industry that
has completely run amok and is continuing to publish inaccurate
information that harms consumers and does so without giving
consumers an adequate remedy," said Ian Lyngklip, a lawyer
in Detroit who is representing Mr. Graham. "Every one of
these cases is like taking a little day excursion into the
twilight zone."
Lawyers and consumer advocates say the
system is overwhelmed. Rather than truly investigating
complaints, they say, the big credit bureaus make only cursory
checks.
Norm Magnuson, a spokesman for the
Consumer Data Industry Association, which represents the major
reporting agencies, defended the system, saying it handles huge
volumes of information and processes complaints efficiently. The
industry is required to resolve disputes in 30 days, he said,
but in 80 percent of cases it does so in 10 days.
In June, U.S. PIRG, the Washington
lobbying office for state Public Interest Research Groups,
released a survey showing that 80 percent of credit reports had
mistakes; one in four had errors serious enough that credit
could be denied.
Complicating matters, lawyers say,
collection agencies increasingly place even questionable debts
on credit reports.
Richard J. Rubin, a lawyer in Santa Fe,
N.M., who has worked extensively in the area, said, "They
use the pressure of the negative report to the credit bureau,
that's the pressure point, to make people pay the disputed
debt."
Rozanne Andersen, general counsel with
the American Collectors Association International, said members
of her trade group were well informed of their duties on debt
reporting and handling disputes. "I strongly disagree with
the statement that debt collectors, when acting as data
furnishers, avoid their responsibilities to update those credit
reports,'' she said.
She said, however, that debt collectors
had been frustrated because credit reports were not being
updated quickly enough after errors were reported to the credit
bureaus.
What can consumers do? First, they
should know their rights and keep a watch on their credit
reports. Ed Mierzwinski, consumer program director at U.S. PIRG,
recommends that consumers check their report months before
applying for a car loan or mortgage. By law, the big three
national reporting bureaus - TransUnion, Experian and Equifax -
must provide consumers a report once a year for $9, and
consumers will soon be able to get one free report annually upon
request.
Six states, including New Jersey,
already require free reports. The new requirement is being
phased in by region for the rest - the West Coast in December,
the Midwest in March 2005, the South in June 2005 and the East
Coast in September 2005. The changes in the disclosure
requirements were part of the Fair and Accurate Credit
Transaction Act, which passed Congress in November.
But consumers still face a big
challenge in fixing errors.
The place to start, lawyers say, is the
credit reporting bureau. Under an older law, the Fair Credit
Reporting Act, the bureaus must initiate an investigation after
being notified by the consumer of a disputed entry. It is a good
idea to notify the creditor, too. If the investigation does not
resolve the dispute, consumers may ask the credit reporting
agency to include a statement of the dispute in their files and
in future reports.
But if the creditor says a debt should
stay on a report, "the bureaus believe they are entitled to
keep it on regardless of what the consumer says or
provides," said Leonard Bennett, a lawyer in Newport News,
Va., specializing in such cases.
Ultimately, the only recourse for
consumers may be to sue the creditor or credit bureau for
damages for not conducting a reasonable investigation.
When a collection agency is involved,
consumers should demand proof that a debt exists. The agency
must note the dispute in any report to a credit bureau and must
also establish the validity of the debt before continuing
collection efforts.
Although Mr. Graham said he thought he
had resolved the issue with AT&T, the debt was referred to a
collection agency. After he sent proof that AT&T had
accepted his final check, he thought the issue had been settled.
But in March, when Mr. Graham applied
for a mortgage, he said he found that his credit score - a
figure derived from credit accounts and bill-paying history,
aimed at identifying who is most likely to repay debt - had
dropped and he could not get the rate he wanted. This time, he
sued NCO.
(Brian Callahan, a spokesman for NCO,
said it did not comment on specific cases. He defended the
company's practices, however, saying disputes were handled as
required under federal law.)
Denise Gohman, 54, of Clear Lake,
Minn., had a similar experience when, in November 2002, she was
denied credit to buy a wedding dress for her daughter because
her credit report said she was dead. Wells Fargo, which had
given Mrs. Gohman a loan to pay college tuition for another
daughter, had erroneously listed her as dead after that
daughter's death in 1998. Armed with documentation, Mrs. Gohman
notified the bank's student loan division of the mistake and
believed the matter to have been resolved.
BUT in August 2003, when she went to
buy a truck, she was not only denied credit - Wells Fargo still
listed her as dead - but, she said, she was taken into a back
room of the dealership and accused of identity theft.
It was not until she hired a lawyer and
filed a lawsuit that her report was corrected.
Identity
Crisis by
Sue Cant, Sydney Morning Herald Online ”Stealing
an identity or creating a new one is not new but it has become much
simpler with a personal computer, scanner and laser printer.” http://www.smh.com.au/articles/2004/02/23/1077497503111.html
Identity
Theft Worries Consumer Advocates While
businesses and universities can do more to prevent identity theft,
federal lawmakers have opened loopholes in some state laws that
previously didn't exist, making it easier for crimes to occur. by
Peter Brownfeld, FoxNews.com http://www.foxnews.com/story/0,2933,110923,00.html
Businesses
appeal date identity-theft law goes into effect Citing
higher-than-expected upgrade costs, businessmen asked legislators to
approve a bill that would give them more time to comply with a state
law designed to curb identity theft. by
Elbert Aull, MaineToday.com http://www.centralmaine.com/news/local/439761.shtml
John Walsh is one of my heroes in life. America's Most Wanted
is best known for its television show, but AMW also has a very
interesting Website at http://www.amwweb.com/
Special topics include the following:
Missing Children
Amazing Captures
Show Archives
Unsolved Cases
Local Crime Info
Law Enforcement Links
To enter the full site, you must submit your email address and
first name. At the bottom of that main page you will find links
to local news stories about crime.
At the top of the full site's main page, you will find a link
called "Protect Your Identity." That will lead you to
the Street Smart page at http://www.consumerinfosystems.com/home.asp
Street Smart services include the following:
Biannual copies of your credit report;
As a StreetSmart member you will automatically receive biannual
copies of your credit report. Your credit report refers to a
consumer credit file designed to give lenders a picture of your
credit history. Credit reports are generally the most important
piece of information used to determine your credit worthiness and
the interest rates you receive. Dispute forms and credit report
revisions; StreetSmart provides you the appropriate forms needed to
change mistakes which may be found on your credit report.
StreetSmart shall also ensure that once members have disputed an
inaccuracy on their report that they shall automatically receive an
updated report showing the proper changes have been made.
Watch Program;
StreetSmart is the first service in America to provide its members
Automatic notification of the establishment of new accounts in their
name. Anytime a new account is opened in your name and reported to
the nations largest credit-reporting agency, Trans Union,
StreetSmart shall automatically notify you of the change. This
service is revolutionary in helping consumers catch identity theft
occurrences and mistakes as they happen.
Address change notification;
Utilizing the watch program Streetsmart shall notify you of any
address changes reported on your credit file to Trans Union. This
service will help prevent identity thieves from rerouting your
current accounts to an unknown addresses in an attempt to utilize
your credit without your knowledge.
Social security records search;
As a StreetSmart member you will be provided the proper forms to
receive a copy of your social security earnings statement. This
statement will provide you a complete overview of your life’s work
history. This history will allow you to ensure that your earnings
have been reported properly and also to ensure that you are the only
person working under your social security number.
Medical records search;
StreetSmart provides you the needed information to request the
proper forms necessary to receive a copy of your medical information
report. Most insurance companies utilize this report to determine
your insurance rates and eligibility.
Credit card registration;
Your membership entitles you to register your credit cards with
StreetSmart. Our credit card registration program considerably
reduces your time and effort making calls and relaying information
to card issuers in the event of an emergency.
Security Labels;
As a StreetSmart member you will receive security labels to warn
thieves that your credit cards are registered with StreetSmart.
Household Inventory, document and valuables registration;
Streetsmart members may register copies of any important documents
(i.e. wills, deeds, insurance policies, titles, etc.) and the serial
numbers of any valuable possessions (i.e. televisions, VCRs,
cameras, etc.). This service could prove to be invaluable in the
event of an emergency or disaster.
Collectively, StreetSmart is perhaps the most comprehensive way
to stay informed of your personal information and protect your good
name.
StreetSmart is committed to you and to the ever-changing needs of
the consumer. Rest assured that all of us at StreetSmart are vowed
to continually improve the services and benefits, which StreetSmart
provides to its members.
SAN
FRANCISCO — Computer identity theft has long been a fast-growing
cybercrime. But increasingly, hackers are seeking profit rather than
just fun.
Complaints
of Internet-related identity theft tripled to 1,000 last year, says
the Federal Trade Commission. While that still accounts for a only
fraction of the 160,000 nationwide reports of identity theft, the
growth is alarming as more consumers put credit card and other
financial data online
"It's
the perfect crime of the information age," says Rich Stana, of
the General Accounting Office. "The Internet gives identity
thieves multiple opportunities to steal personal identifiers and
gain access to financial data."
The
biggest break-ins came last month, when computer intruders accessed
more than 10 million Visa, MasterCard and American Express credit
card account numbers from the computer system of a third-party
payment company. No theft occurred.
Also
last month, a computer-science student allegedly hacked a University
of Texas database and swiped the Social Security numbers of more
than 55,000 students, employees and former students, county
prosecutors said. Authorities last week charged Christopher Andrew
Phillips, 20, with unlawful access to a protected computer and
unlawful use of a means of identification. Phillips told officials
he had no intention of using the information to harm anyone,
according to court papers.
But
in two other high-profile cases, hackers did use the information to
access funds:
Tokyo
police arrested two men for allegedly determining the passwords
five people used to access their bank accounts online and
transferring $141,000 from those accounts to another bank. One
of the men, using an alias, withdrew $136,000, police said.
The
two men, an unemployed computer software developer and a
businessman, allegedly got the passwords by using software to
determine what keystrokes a previous PC user used. They allegedly
snooped on about 100 computers at 13 Tokyo-area cybercafes last
year. The software was downloaded from the Internet.
Thomas
Pae, 20, the ringleader of an international computer hacking and
Internet fraud scheme, admitted to authorities he purchased
credit card numbers from hackers on the Internet and used them
to purchase $324,061 in computer equipment from Ingram Micro,
Amazon.com and others. Last month, Pae was sentenced to 33
months in prison.
Such
ID thefts have prompted financial institutions to fortify their
computer systems with millions of dollars in security software and
shore up computer security among employees, security experts say.
The
Justice Department, meanwhile, is encouraging banks that are victims
of computer crimes to be more forthcoming with details to aid
authorities in the arrest and prosecution of hackers.
Continued in the article.
This includes the academic job market around the world.
The Internet's largest job listing site sends an e-mail to its users
warning about the possibility of identity theft from fake help-wanted
ads posted online --- http://www.wired.com/news/business/0,1367,57852,00.html
The job sites generally advise users not to
give out their social security, credit card or bank account numbers,
not to disclose personal information that isn't related to work such
as their marital status, and to be particularly careful of
prospective employers from outside the country.
Leading tax software companies Intuit (TurboTax) and H&R Block
(TaxCut) may be producing software that puts customer tax data at
risk, according to some data security experts. Both TurboTax and
TaxCut leave taxpayer data files unencrypted and thus unprotected from
hackers, and some people are concerned about the possibility of
identity theft. http://www.accountingweb.com
Guess What
Happened to Professor Jane Reimers at Florida State University?
How to Guard Against Identity Theft and Pretexting
After hearing about what
happened to Jane, the most important thing that I am doing is to start
paying for a credit report notification service that will send me
email messages whenever my the data about me in a credit database
changes. The second thing I am going to do is to have my credit
card companies notify me by email whenever charges of over $500 are
received by my credit card companies. The next thing I will do
is hide in New Hampshire's White Mountains where nobody can find me!
On October 4, 2002 at Indian
Rocks Beach in Florida at a conference of the Florida Association of
Accounting Educators (FAAE), my presentation on education technology
followed an eye-opening presentation on Identity Theft by John W.
Joyce, Special Agent in Charge, U.S. Secret Service in the Tampa Field
Office of the Secret Service. He revealed how theft of identity
has become a truly scary organized crime.
The first thing I did when I
got home is to photocopy every card in my billfold and my wife's
purse. Be certain that you copy both sides of each card.
Then carry a copy of your copies on trips and well has keeping copies
filed in your home and office. Make it as simple as possible to
report lost cards! What to do if your purse or wallet is stolen --- http://faculty.trinity.edu/rjensen/fraud.htm#ThingsToKnow
One of the most common check
writing frauds is really simple. Criminals simply find your bank
account number (which is not difficult) and then duplicate our checks
using VersaCheck printing software and supplies --- http://www.g7ps.com/
Of course you can detect this if you reconcile your bank account
regularly.
You should learn more about 'pretexting" and the Gramm Leach
Bliley Act --- http://www.ftc.gov/privacy/glbact/
What amazed me is the rising
frequency in which our identities are being stolen for crimes ranging
from illegal use of our credit cards to borrowing money in our names.
In an audience of roughly forty people, I was amazed at the number who
had their identities actually stolen in one way or another, including
Professor Jane Reimers from Florida State University who discovered in
a credit report that a huge amount of money had been borrowed using
her social security number (but not her name). She
discovered this in a credit report. You should start ordering
credit reports.
How to
find out if you qualify for a Free Credit Report
According
to the Fair Credit Reporting Act, the only way that you can receive
a Free Credit Report is if you meet the following conditions:
You have
been denied credit, insurance, or employment within the past
sixty (60) days as a result of your credit history.
You can
certify in writing that you are unemployed and intend to apply
for employment in the 60-day period beginning on the date in
which you made the certification.
You are
a recipient of public welfare assistance or have reason to
believe that your file at the agency contains inaccurate
information due to fraud.
Residency
Clause:
If you are a resident of Colorado, Massachusetts, Maryland, New
Jersey, or Vermont, you may receive one free copy of your credit
report each year from the each of the credit bureaus. If you are a
resident of Georgia, you may receive two free copies of your credit
report each year from the credit bureaus.
If
you meet the above conditions, here is the information that you will
need to receive a Free copy of your Credit Report:
To
obtain a copy of your credit report from Experian --- http://www.experian.com/
Mail request to: P.O. Box 2002, Allen, TX 75013
Or call toll-free (888) Experian (888-397-3742)
To
obtain a copy of your credit report from Equifax --- http://www.equifax.com/
Mail request to: P.O. Box 740241, Atlanta, GA 30374
Or call toll-free (800) 685-1111
To
obtain a copy of your credit report from TransUnion --- http://www.transunion.com/index.jsp
Mail request to: 2 Baldwin Place, P.O. Box 1000, Chester, PA 19022
Or call toll-free (800) 888-4213
What
to do if you do not meet the above requirements
There are a variety of inexpensive online
Credit Report Services that you can choose from. Here are some of
the benefits that you will receive:
Online
access at the time of purchase -
usually viewable within 5 minutes from the time you start
filling out the application.
Your
Credit Score -
free credit reports from the Credit Bureaus do not include a
credit score option.
Overall
better service and experience -
Credit Bureaus are run just like any other company, and are not
interested in giving products away. They only do this because
the FCRA requires it; this means that their level of product
support is limited. Other companies are looking to keep you as a
customer, and thus provide an elevated level of service.
For
more information on fee-based credit report options, visit our Credit
Report section, or select a service from the box presented
below.
When
evaluating Free Credit Reporting options, it is important to
consider how far you are willing to go in order to receive a
"free" credit report. It also depends on what you consider
to be free! Many services such as Consumer
Info or Privista
offer a Free credit report with a trial subscription to their Credit
Monitoring Service. The "Free" aspect of this offer is
that you have the option of canceling your subscription over a
specified trial period for a full refund. Sounds good, right?
Well,
that depends. First off, you should not discount your personal time
as "Free" (remember the saying "time is money.")
If your are a busy person, you might not be too interested in taking
the time to contact a Credit Provider to cancel a Monitoring
Service.
Furthermore,
when you call you should expect various questions regarding why it
is you want to cancel the service, and plenty of reasons why you
shouldn't. Many of us would put this task off, possibly beyond the
trial period (AKA refund period) - which incidentally is what these
companies are counting on. This is not a big secret folks; it's
called marketing.
So
what should you do?
You have a decision to make. First off,
are you truly interested in receiving a "Free Credit
Report"? If you answer yes to this question, make sure you
factor in the time it will take to cancel the $40-$100 subscription
before it is billed to your credit card (usually 30 days from the
purchase date). Also, don't expect to receive any free add-ons such
as a Credit Score or detailed analysis - these companies will give
away as little as possible to get your business.
Finally,
if you do go for the Free Credit Report, and fail to cancel your
subscription thinking that it will only cost you the initial price -
think again! Most of these companies have automatic renewal policies
built into their service agreements (read
"Free" Credit Reports really free?), so after a year
your card will get hit with an additional yearly fee - OUCH!
If
this doesn't sound too good, consider the alternative; part with the
$8.50 that it will cost for a online Credit Report. Affordable
services are offered below, or you can view additional options in
ACL's Credit Report Section.
In
short, don't underestimate your time, and be aware that nothing
comes for free - there is always a catch. Keep in mind that you are
entitled to a Free Credit Report directly from the Credit Bureaus if
you meet
these requirements.
October 21 message from Linda
Specht
(Linda and Don chose to pay for email notification of any change in
their credit database at Equifax.
Bob:
Here is the
text of the info that is sent to us periodically. As you can see, we
use Equifax.
Linda
********************************************************
Equifax Credit Watch is your front-line defense against identity
theft. Over
the past
month, we have monitored your credit file daily. CREDIT WATCH DID
NOT DETECTED ANY CHANGES TO YOUR FILE DURING THIS PERIOD. Please
consider this your "No News is Good News" report. If
there are any changes in the future, we will send
you an
e-mail notification within 24 hours.
Please
call us at 1-888-532-0179, 7 days a week between the hours of
8:00am - 12:00 midnight Eastern Time Zone. You may email us
anytime at customer.care@equifax.com
We look
forward to continuing to serve you.
Your
Equifax Customer Care Team
What are
you doing to protect yourself against identity theft? Try Equifax
Credit
Watch(TM) FREE FOR 30 DAYS! Equifax Credit Watch monitors your
credit file and provides you with email notification of changes -
which could be a sign of identity theft. Credit Watch also
includes unlimited access to your
credit
score, credit report and FREE identity theft insurance. Click
below for more information. http://www.creditalert.equifax.com
********************************************************
What
amazes ME is the utter blindness of the population at large for not
embracing the already-proven technological solutions to this
problem: biometric identity authentication. It’s here,
it’s proven workable and reliable, it’s economically feasible,
and it’s being shunned by an ignorant and populace which is
paranoid about the *wrong*
problem.
Anyone
familiar with security (especially information security) knows that
there is no such thing as total (100%) security. But proven,
workable biometric identification technology is on the market today,
and has been for several years, and is even affordable at the
individual consumer level. (In my advanced technology class,
student groups present the “state of the art” of commercial,
off-the-shelf (COTS) biometric solutions (as some of their student
research presentations). In some cases, students have
demonstrated the workability of these products – for at least five
years!) Why the heck aren’t they catching on? Plain
and simple: Luddites who have been fooled into believing that George
Orwell was a prophet rather than a writer of fiction stories.
Fingerprint
recognition devices are now being offered as options on the IBM
thinkpads. While retinal scans have been used for years in
government applications, it is the iris scans which appear to be
more efficient and just as effective. Palm-geometry solutions
are now workable and on the market. Voice-print recognition
has been around in commercial HP products for about five years.
Facial geometry, while not yet perfected, is advanced enough to at
least be used for “elimination” purposes in a commercial
environment. Handwriting analysis (speed, pressure,
relationships) has its problems, but is already being used in some
applications. There are a plethora of commercial companies
marketing these products, but the public seems disinterested and
skeptical at best, adamantly paranoid at worst.
Six
years ago, a student group reported on the commercial availability
of reliable fingerprint identification devices, and predicted that
the days of “may I see your driver’s license please” were
limited to less than five years. I see it as poignant that had
the students prediction been accepted by society, perhaps the events
of 9/11 might be different.
Nothing,
I repeat, nothing, is ever going to be 100% secure. To quote
Shrek from his movie, the secret is “layers”. You add
layers of security, and at each layer, you eliminate some of the
criminal element. Biometric identification is a very thick
layer. You have to be very sophisticated to get through it.
Estimates are that identify theft will become less common than
lightning deaths if we were to widely adopt the existing levels of
technology, let alone what’s coming down the pike.
When
will the world wake up and smell the coffee?
David
R. Fordham
PBGH Faculty Fellow
James Madison University
One problem
with biometrics, as Bruce Schneier says, is that, although biometric
indexes are unique, they're not secure. With respect to
fingerprints, see T. Matsumoto, H. Matsumoto, K. Yamada, S. Hoshino,
"Impact of Artificial Gummy Fingers on Fingerprint
Systems," Proceedings of SPIE Vol. #4677, Optical Security and
Counterfeit Deterrence Techniques IV, 2002. (Some slides from the
presentation are at
George, the
paper is well-known in Information Security circles, and is used as
an example of "old technology used to support paranoia".
The gummy-bear works on the older fingerprint sensors which detected
only shapes and patterns. The current ones also detect pressure
patterns, relative heat distributions, conductivity, and a host of
other biometric measurements, combining them all in a heuristic,
moving-average type of mathematical model similar to the
voice-recognition moving-average algorithms.
Again,
**anything** can be fooled, faked, and forged. But the more layers
you add, the more security you provide. Iris scans are more secure
than fingerprints. Handwriting analysis, palm geometry, etc. may not
be as secure. But when you COMBINE them, you then exponentially
increase the trouble that a mischiefmaker has to go to in order to
forge or fake an identity. Criminals, while often ignoring risks and
chance, often do consider certain costs vs. benefits.
Yep,
George, I agree with most of these points.
One
argument that I laugh at is those well-meaning, but apparently
clueless types who are worried about "Big Brother" getting
their information! Anyone who has done any genealogy already knows
that there is no such thing as "private" information
anymore. Big brother, little brother, aunt, nephew, they all have
it! Already! Some paranoid types are worried that government will
get access to something that ANYBODY, government or non-government,
probably already has!
I wrote a
very-distant relative this past summer to ask if she had saved any
photos which might have been in possession of a deceased ancestor of
hers who was also a distant relative of mine. This lady asked me to
prove my relationship to her by giving her some details that she
would recognize.
Say what?
So, since
she asked, I wrote her with some of the info I had on her: addresses
of her previous residences, former husbands, all her children's
names and birthdates, marriage dates and locations, where her
ancestors were buried, what occupations she had held and for how
long, her husbands' (plural) occupations and employers and position
titles, her old apartment numbers, old phone numbers, schools
attended and graduated, the ancestors we share in common, etc. etc.
I even gave her the social security number of our common deceased
relative, and the post office box number where his last social
security check had gone.
She was
shocked, but convinced. Of course, none of this, not one iota,
"proved" my identity. All of this information had been
gained from public sources! All of it. About 90% came from the
Savannah public library and Savannah Historical Society public
archives, coupled with some DAR references. Newspaper microfilms and
the City Directories together provided about 75% of it. And if I had
done some internet searches, I could have found lots more, such as
the lawsuit she had filed over a traffic accident two years ago, and
won a $500,000 judgment, along with the appeal and remanding of the
case! The court disposition record even had the name of her bank!
Yes, on the Internet! Found with a simple Google search!
What makes
me laugh till my sides hurt are people who list the types of
above-sampled information, and then say, "if Big Brother ever
gets access to personal information like this, kiss your liberty
goodbye! The "Government" will screw you with it."
Ha, ha. Jokes on them. Government already *has* the information, and
I haven't yet met anyone who's been screwed by the government with
it.
George
Bernard Shaw is reported to have once said about New York Harbor,
"How utterly ironic that a statue commemorating Liberty should
be provided by the French, who suffer from too little of it, to the
Americans, who are suffering from too much of it."
Yep,
identity theft will continue until we wake up and come to our
senses. I will gladly trade a government database of my iris pattern
and palmprint for better sleep at night knowing that another layer
of security has made it just a little bit harder for someone to pose
as me to an airline attendant. And made it a little harder for the
mischievous gentlemen in the third row to pose as someone he isn't.
I can
personally name names of my friends who have died because of lack of
security. I can't name one acquaintance who has died because of
misuse of government information. I go with the odds of fact rather
than a blind Orwellian disciple's crying wolf.
David R.
Fordham
PBGH Faculty Fellow
James Madison University
May I
recommend the video feature film comedy, "Hot Millions",
starring Peter Ustinov and Maggie Smith (then a cutie and now Dame
Maggie), as well as Karl Malden and former CPA Bob Newhart. Ustinov
gets out of prison (after doing the warden's income tax return), and
steals the identity of a computer expert who is on a sabbatical.
Involves computer security, phony payees, building security,
corporate ethics, and much more. A great film.
There are
several copies available from Amazon.com and a couple at Half.com. I
usually show some scenes for the chapter on Internal Control in
Principles I.
Donald D.
Ramsey, CPA,
Associate Professor of Accounting,
School of Business and Public Administration,
University of the District of Columbia, 4200 Connecticut Avenue, N.
W., Washington, D. C. 20008.
Department of Accounting, Finance, and Economics, Room 404A,
Building 52 (Connecticut and Yuma St.)
The people
charged last week with stealing the identities of at least 30,000
Americans weren't criminal masterminds.
They simply
took advantage of sloppy security practices that allowed them easy
and unrestricted access to sensitive data.
Security
experts worry that the slipshod safety measures haven't been
corrected, and warn that unless companies get serious about
security, identity thefts
will continue to rise.
Investigators
in Manhattan said they have identified about 12,000 additional
people whose credit reports may have fallen into criminal hands
during the almost three years that the New York-based identity fraud
ring was active. The scam was first detected eight months ago.
But victims
and potential victims wonder why it took authorities so long to nab
the criminals, whom federal prosecutors described as
"brazen" and "sloppy."
Consumers
suggest the credit bureaus that failed to protect their personal
data from the criminals are equally at fault.
"Credit
report companies act like they own the data they collected about me
and can use it however they want," said Nicholas Pastore, a New
York graphic designer who was a victim of identity fraud two years
ago.
"I've
had a hellish time fixing their screwup, and have lost a job and
been turned down by a landlord due to my wrecked credit,"
Pastore said. "Shouldn't the credit report companies have
notified me before they released my data? Shouldn't they bear the
cost of fixing the problems they caused?"
"Consumer
privacy and corporate accountability are the major issues
here," said Harvey Jacobs, a Washington, D.C., attorney.
"The credit bureaus have to reevaluate how they release
information, and they have to be held financially and legally
accountable if the information is misused."
Some also
see a conflict of interest in the fact that credit bureaus profit
from consumers' security concerns. The three major credit-reporting
bureaus each sell consumer services they promote as protection
against identity fraud.
For $80 a
year, Experian's Credit
Manager, for example, scans a subscriber's credit report daily
and sends alerts of "potential fraudulent items and other
critical changes" in the report. Credit bureaus Equifax
and TransUnion
offer similar services.
"It's
kind of like an e-commerce site that stores my credit card number,
and then offers me a fee-based service to protect that
information," fumed Tina Bechon, a secretary in Illinois who
was a victim of identity theft last year.
Bechon said
she's spent about $1,000 "in registered mail, notary and phone
fees," but her fraud-impaired credit report still haunts her.
"The
first bit of advice you get is to put a fraud alert into your credit
bureau records," Bechon said. "But once you do that, all
your credit accounts are frozen for a few months, and it's insanely
difficult to get
new credit for a few years after."
"Some Simple Solutions to Identity Theft Credit agencies
must be more vigilant. A first step: quickly and routinely alerting
consumers that their credit histories have changed," by Alex
Salkever, Business Week, November 27, 2002 --- http://www.businessweek.com/technology/content/nov2002/tc20021127_4748.htm
So it has
come to this. On Nov. 25, federal prosecutors charged three men with
operating an identity-theft ring that had stolen credit reports of
more than 30,000 people -- the largest case in history. The
defendants include a computer help-desk employee at a Long Island
software outfit who had access to sensitive passwords for banks and
credit companies. The ring allegedly emptied bank accounts, took out
loans with stolen identities, and ran up fraudulent charges on
credit cards.
The
most appalling part of the whole mess? Most of the damage could
easily have been prevented if the credit agencies adopted the
common-sense practice of directly notifying individuals whenever a
change on his or her report occurs, and whenever a third party
accesses their credit report. Yes, it might cost the credit agencies
more in overhead. But credit agencies spread such costs around to
customers, banks, car dealerships, and others that pay to access
consumer credit ratings. How hard is that?
GLARING HOLES. This criminal case
has many security experts worried because it points up some glaring
weaknesses in credit reporting. Your credit information -- in
effect, your financial identity -- can easily be stolen by alert
thieves with access to sensitive information. Yet, credit agencies
don't share with individuals what's going on with their credit
reports -- unless consumers ask. This anomaly will become a national
economic issue as identity theft grows.
That's the bad news. The good news is that the solution is pretty
simple. Tighten up internal handling of credit information, while
making individual reports even more transparent to consumers -- in
real time if possible, with password-protected access, just like
banks and other financial institutions.
Truth is, identity theft remains more an offline problem. Someone
steals your mail. A restaurant worker double-swipes your credit
card. That's theft, pure and simple, and not the stuff of a national
crisis. But when identity thieves get sophisticated and use the
power of the digital revolution to leverage their operations, such
fraud could become massive. Many financial institutions pull
thousands of credit reports each day. And most of them have Web
access to credit reports. So if a thief were able to score a
password from a big bank, it would be fairly simple to write a
computer program allowing someone to log in with the bank's ID and
download thousands of these reports in a heartbeat.
INEXCUSABLE RESISTANCE. Identity
theft's direct cost is already considerable -- police estimated that
the latest ring defrauded victims of at least $2.7 million, and
investigators aren't done counting. Indirect costs could be even
higher in lost productivity. If the problem isn't checked, many
thousands of victims over the next decade will have to take on the
equivalent of a second full-time job cleaning up their credit
histories. This latest case had 30,000 victims -- that's the size of
Cisco Systems' workforce.
Consumers can now pay between $70 and $80 a year to receive timely
e-mail updates of any activity on their credit report. An important
step toward fuller disclosure, yes, but more should be done. There
are three main credit agencies today -- TransUnion, Equifax, and
Experian. As anyone trying to get a credit card these days can
attest, credit approvals and denials are coming faster and faster
thanks to high-speed data links.
A savvy thief could do a lot of damage by applying for a credit card
or loan and using a report through, say, TransUnion, but not Equifax
or Experian. Even if you're paying Equifax for the updates, you
might not find out until it's too late. Yet, the three credit
agencies have resisted creating a unified format to allow consumers
to easily observe changes in any of the three profiles. If credit
agencies won't act, then the federal government should step in and
mandate changes.
Then, there's the issue of snail mail vs. e-mail for notifying
consumers of suspicious activity involving their credit history.
More than half the U.S. population now has an e-mail address, and
such correspondence is free. The rest of the country could be
contacted via regular mail -- an expensive process, but one that
should be considered a cost of doing business.
On their Web sites, each of the three credit-reporting agencies
should offer to send consumers an e-mail notification whenever their
credit reports change. They could even charge a nominal fee for the
service. The fees that Equifax and Experian now charge for timely
updates are way too high. This shouldn't be a profit center. In the
Digital Age, this should be a universally available service, just
like a dial tone.
SECURING ACCESS. As I have pointed
out in past
columns, American Express provides an ideal model. Whenever
someone makes an account change, Amex sends a letter informing its
customer of it. If the customer changes address, Amex sends a letter
to both the old and the new addresses. That would tip off a customer
to any untoward changes. Applied to e-mail, the same principle works
beautifully. Yet credit agencies don't collect e-mail addresses.
That, too, should change. All credit agencies would have to do is
send out letters to consumers requesting their e-mail address. A
consumer response would be voluntary.
None of this is to say the credit-reporting outfits aren't
concerned. Equifax played a major role in helping to break up the
Long Island identity-theft ring. After years of consumer complaints
and government prodding, they're allowing individuals easier access
to their credit histories than ever before. But the age of
ubiquitous connectivity and high-speed information movement means
high-speed identity crime will likely become more damaging. The best
way to combat this scourge is by making access to credit histories
tougher for thieves -- and easier for individuals.
After years of worrying about viruses and
trojans, users have a new nemesis: spyware. This term refers to any
program that distributes information from a user's computer without
that user's knowledge.
To be sure, most of this software is more
annoying than harmful. However, as Jamie Garrison, co-owner of Aluria
Software, which produces the spyware stopper, put it, "Some
spyware can ruin your life. It's that invasive."
So, what can a user do to avoid the
onslaught of underhanded tracking programs?
Garrison said the most pressing issue
related to spyware is that people do not take it seriously enough.
Part of the problem is awareness. Many people are only now finding
out about spyware. "Few users are aware that everything they do
on the Net or even while not connected to the Internet can be
tracked," Ken Lloyd, lead developer at Aluria, told NewsFactor.
After all, spyware can range from a
stealthy program that runs in the background, transmitting your
surfing habits to a company for marketing purposes, to keylogging
software installed by a spouse to monitor communications.
"Well over 85 percent of people have
spyware on their computer," Lloyd said.
Gartner
analyst Richard Stiennon told NewsFactor that while antivirus
products from companies like McAfee and Symantec
(Nasdaq: SYMC) can be used to detect spyware, the user is also
an important ingredient in stopping spyware. He or she must
recognize spyware programs -- and know enough to remove them -- when
they are detected.
Of course, most users do not know much
about spyware. Stiennon recommended that users get a desktop
firewall program that blocks unwanted outgoing connections. Then,
even if spyware is running, it will be unable to connect to a server
to transmit information.
One personal firewall, ZoneAlarm,
can make sure spyware cannot communicate with the outside world.
According to Fred Felman, vice president of marketing at Zone Labs,
ZoneAlarm "shuts down Internet connectivity instead of losing
control of the system" when an unauthorized application tries
to send information from a user's PC. Felman told NewsFactor that
ZoneAlarm allows users to specify which programs are allowed to send
and receive data over the network. Users even can restrict programs
to certain ports or domains.
And in addition to antivirus vendors and
personal firewalls, a number of companies like Aluria make spyware
detection and removal software.
Even when a person recognizes spyware on
his or her computer, removing it may be tricky business. According
to Garrison, some spyware manages to "embed" itself into
the software Windows uses to provide TCP/IP (Internet networking)
services. She said that removing such spyware "actually removes
your Internet connection. It's fixable, but it's a real pain."
This makes sense, considering that malware
authors are always trying to stay one step ahead of users and
spyware stoppers. The latest rash of annoyware consists of programs
that send pop-ups to instant messaging programs like MSN
Messenger. Even more irritating, many of those pop-ups simply inform
users that they are vulnerable to unwanted messages.
And it gets worse: Stiennon said that
programs being sold to block this plague of IM pop-ups are scams,
too. "Just go into the admin functions in the control panel
[and do it yourself]," he said, noting that the program vendors
are taking advantage of people who do not know they can turn off the
function by themselves.
In fact, according to Garrison, most
spyware is installed by users voluntarily, even if they do not know
it. She blames free products like Grokster and Kazaa
for piggybacking spyware onto users' computers, though she noted
that it is all disclosed in the fine print. "Here's the really
dirty part of it. Let's say you go out and download a free program.
It's almost certainly going to have spyware.... Very rarely does
spyware get on your computer without your consent."
So, what is the solution? "Stop using
free products... Don't download it if it's free."
Lloyd agreed. "The latest trend for
software companies is to give their software away for free. By doing
this they bundle ad software within it. They usually tell the
customer in the EULA (end user license agreement) ... that some
additional ad-tracking software will be installed, but they bury it
so deep that the average person has no idea.
Continued in the article.
Hi Bill,
Here are a
few quotes and links on double swiping scams:
Unscrupulous
store owners can also double swipe your card. Look for
"double swiping", which may indicate you will be charged
twice for an item, or that your credit card's magnetic stripe is
being copied for counterfeiting ---- http://www.efc.ca/pages/media/globe.
A crooked
merchant can duplicate the data on a credit card through an illegal
device the size of a cigarette lighter that transmits the
information and allows it to be copied. --- http://www.efc.ca/pages/media/globe.10dec99.html
Hultquist
said, citing the more-real possibility of a waiter double-swiping a
Visa. He noted that most out-of-the-box servers have a built-in
capacity for stringent security --- http://www.bcbr.com/dec3199/ereport2.htm
There are countless other
such stories on the Web.
Bob Jensen
I read
Bob's identity theft piece and it raised a question. How does double
swiping of your credit card leave you vulnerable? It happens to me
all the time. Usually with the excuse "it didn't read."
Having been
a victim of small-scale identity theft myself, I always use the
experience as a teaching tool in auditing. It points out the dangers
of using social security for identification and the cost of poor
internal controls for banks. If you like war stories, read on . . .
When I
applied for a mortgage in 1996, I was told there was an $8,000
charged off account on my credit record. I did some detective work
and figured out the story. While a faculty member at LSU-Shreveport
in 1994, I went to LSU-Baton Rouge to visit the library. Seeing that
we honored their faculty tags in Shreveport, I incorrectly assumed
that Baton Rouge did the same. Of course I got a parking ticket,
which I threw away in disgust. Because I had been a doctoral
student, though, they had my license in their system and began
sending bills to my old address. The problem? I didn't live there
anymore, my forwarding order had expired some three years before,
and worst, the billing contained my student i.d., which was my
social security number.
At about
the same time, Capital One (I still won't do business with them, and
tell my students so) started sending credit card applications to
that same address. Whoever lived there got both pieces of mail, put
two and two together, and got a credit card in my name. She ran up
several thousand dollars of debt and skipped out on the bill. I
never heard of the account until I started applying for a mortgage
here in New York.
So what
were the internal control lapses at Capital One? First, they used
severely outdated mailing lists, as I had not been living there for
3 years. Second, they obviously did not do a credit check on my
social security number, as my name changed in 1991 and I had taken
out a mortgage in Shreveport earlier that same year. This
information was clearly stated on my credit report. Third, they made
no effort to find me to collect the bill, since there were no
records on my credit report that they had checked my report in the
period following the fraudulent application. Fourth, after I had
filed my affidavit disclaiming the debt and received a letter from
Capital One absolving me (so I could get that mortgage here), they
started trying to collect the debt from me. I received about five
phone calls at work and at home from their collections department.
Perhaps I
shouldn't have been, but as an accountant I was stunned by the
compounding of fundamental failures of internal control at Capital
One.
Of course
now I staunchly refuse to give my social security number to anyone
who does not have an absolute need to know, and I will not allow
anyone to use it as the basis of an i.d. number for me.
And how
about LSU? Did they get paid for the parking ticket? Once their
bills found me in 1995, I wrote to dispute the bill three times and
never heard back. I finally paid it to get a transcript! But I'm
saving my snide letter to their development office until I know
they've spent at least that much money trying to get some out of me.
I save my alumna contributions for Smith College.
Whew! It
always feels good to get that off my chest!
I am
constantly entertained by the whimsy exhibited by the designers of
"internal controls" and "security measures" at
major corporations.
Using
"mother's maiden name" as a security measure is laughable.
Give me an idea of what part of the country they are from, and give
me ten minutes in a public library in that part of the country, and
I can get you the maiden name of almost anyone you want. And for the
last 10% of the population that I can't get from a public library,
$5 at a state department of health will get it for me in less than
15 minutes. The time goes down if the individual in question (not
his/her mother!) has an unusual last name. Foreign-born nationals
might be a bit harder, however, but being near Washington DC, I
still believe that within a day or two, I could get it if they have
become U. S. Citizens in the last 50 years. If I had evil intent,
I'd surely be willing to spend the 10 minutes or day or two it would
take to abscond with someone's mother's maiden name.
Ditto with
previous addresses. Most Americans are unaware of a reference book
titled, "City Directory", which used to come out every
year or two, for every single city in the country of any size. (Even
Hagerstown Maryland!)
This series
of directories started back before the turn of the century, and
practically all public libraries have their old copies in their
archives. The City Directory lists every house, by street and
number, and gives the owner, renter, and current occupant, their
occupation(s) and employer(s), children's names, and in many cases,
lots of other information, too.
Most city
directories are cross-indexed by name. I have used city directories
in Savannah GA, Hagerstown MD, Statesboro GA, Atlanta, Greensboro
NC, Spartanburg SC, and Jacksonville FL to ascertain a LOT of
information about my ancestors. Baltimore Maryland even has their
1864 city directory on-line... I used it a few days ago to discover
that my great-great grandfather was a "hatter" whose
haberdashery was located at 329 Broadway in 1864. On the Internet!
Take a look at: http://www.bcpl.net/~pely/1864/
By using
city directories in sequence, you can discover the approximate dates
(year) your relatives moved, married, divorced, had children, and
died. With the approximate dates, you can then go to state offices
and get copies of the certificates of birth, death, marriage,
divorcement, and other stuff. You can find deeds, property
transfers, liens, loans, judgments, and wills at the courthouses.
You can look in newspapers for
announcements
of births, marriages, movements, etc. Many old
newspapers'
society columns even reported on vacations, trips to Europe, kids
going to college (including which college and what major) and lots
of other neat stuff.
(The public
libraries keep microfilm copies of newspapers, in some cases, all
the way back to the 1700s!)
As I've
said before, so-called "Privacy advocates" in general,
make me laugh (or scoff would be a better word) at their ignorance,
not because I don't value privacy, but because the
"information" they want to "keep secret" isn't
secret at all. The analogy is that of "closing the barn door
after the horse is gone." Depending on the city, lots of city
directories are available right up to last year! You don't have to
prove relations to get a copy of vital statistics certificates,
either.
And calling
from the home phone to ascertain identity is just as laughable. How
many "tombstones" (or "pedestals") are there in
your neighborhood? These are the little green boxes sticking up out
of the ground containing telephone connections. Buy a $10 phone from
radio shack, cut off the end of the modular cord, and put alligator
clips on the red and green wires. Then, go to the tombstone nearest
your "Target's" home, and under cover of darkness, use a
screwdriver to get into the tombstone. If you are lucky, your
target's phone wire pair will be identified. If not, it might take a
couple of tries to find the right one. Clip your alligator clips
onto the connection, and presto, you are "calling from the
target's phone". (It helps if you drive a white minivan and
dress in coveralls!) This is trespassing, and it is against the law.
But it is almost as easy as running a red light, if you have
criminal intent and blatantly disregard the laws, as do most
individuals bent on stealing identity, stealing credit cards, and
stealing other things!
I'm
reporting this tongue-in-cheek. I don't actually do any trespassing,
and I definitely do not suggest you try it. I merely want to make
everyone aware of how easy it is for a rogue evil-doer to overcome
the farcical "controls" which today's companies are
passing off as "security measures".
Teaching
our information security class is so rewarding because so many
people take these "security measures" at face value and
assume they are being protected when in fact, their environment is
full of situations, like in the Snow White movie, where Dopey locks
the vault and then hangs the key on a nail beside the door. Only by
being aware of the ease with which an evil-doer can operate can we
begin designing workable protections and controls.
David R.
Fordham
PBGH Faculty Fellow
James Madison University
Don't carry your Social Security card,
birth certificate, passport or extra credit cards. Carry only
what you absolutely need.
Make sure your mail box is secure. If it
isn't, rent a P.O. Box and have your new checks and credit cards
sent to that location.
Cancel all credit cards you do not use.
Keep a list or photocopy of all your credit cards so you can
contact the company if the card should become lost or stolen.
Remember, never give your credit card information out over the
telephone unless you initiated the call and it is a company you
trust.
On the back of your credit cards write
the words 'Show ID' instead of signing them.
Order a credit report once a year. Study
it! Make sure you know each company listed.
Add security fraud alerts to your credit
reports from the three major credit bureaus.
Order your Social Security Earnings and
Benefits Statement once a year. Review it for any fraud.
Shield that screen when using an ATM
machine. Criminals may be watching with binoculars or a camera.
CAREFULLY select your PIN. Don't use obvious numbers like
birthdays, social security numbers or consecutive numbers.
Ask your financial institution for extra
security on your account. Pick a special word or code that only
you would know (no, not your mother's maiden name).
Never print your Driver's License or
Social Security number on your checks.
Review credit card statements and phone
bills (including cell phone bills) for any unauthorized use.
Shred or tear into small pieces all of
those pre-approved credit offers. If you fill out credit or loan
applications, find out how the company disposes of those forms.
You would be amazed how many businesses and banks don't shred
documents that are filled with your important information.
When filling out checks, use a
fine-point permanent marker. This prevents check washing, which
erases your writing and allows the criminal to write his own
check that has already been signed by you.
Pay your bills by electronic bill
payment. They are assured to be paid on time without ever having
to write a check.
Carl Hubbard suggested
Identity Restoration, Inc. --- http://www.identityrestoration.com/
There are various pricing options. If you really need the
full service, the $60 per hour fee seems to be a pretty good deal
according to some San Antonio attorneys who are outsourcing work
to this company.
It’s
the fastest-growing crime in America; this year alone,
law enforcement agencies will be overwhelmed with an
estimated 750,000 to 900,00 cases. Statistically, it
could easily happen to you.
Maybe
it already has?
What
do you do now? Whom do you contact first? Can you get
your hands on the information they’ll need right away?
How do you get your life back?
If
you’ve already been victimized, Identity Restoration
can streamline the monumental job of clearing your name,
or show you how to do it yourself. If you’re taking
steps to prevent this crime from happening to you, we
can simplify the process. . .
The
most through, user friendly identity protection software
on the market
IDentity
SecurityNet
is your simplest way to route critical personal
information to all the organizations that need it now -
before more damage is done.
Outlines
measures to take to prevent identity theft
Walks
you step by step through the process of clearing
your name and credit
Organizes
and tracks your vital information
Completes
letters and forms required to clear your record
Provides
a complete report for law enforcement
Links
you directly to the Internet, and all necessary
websites
WHAT TO DO IF YOUR PURSE OR
WALLET IS MISSING
Hi
Bob,
We've all heard
horror stories about fraud that's committed on us by people who use your
name, address, SS#, credit, etc. Unfortunately I (the author of this
piece who happens to be an attorney) have firsthand knowledge, because
my wallet was stolen last month and within a week the thieve(s) ordered
an expensive monthly cell phone package, applied for a VISA credit card,
had a credit line approved to buy a Gateway computer, received a PIN
number from DMV to change my driving record information online, and
more.
Place the contents of
your wallet on a photocopy machine. Do both sides of each license,
credit card, etc. You will know what you had in your wallet and all of
the account numbers and phone numbers to call and cancel. Keep the
photocopy in a safe place.
Here's some
added critical information to limit the damage in case this happens to
you or someone you know. As everyone always advises, cancel your credit
cards immediately, but the key is having the toll free numbers and your
card numbers handy so you know whom to call. Keep those where you can
find them easily. File a police report immediately in the jurisdiction
where it was stolen, this proves to credit providers you were diligent,
and is a first step toward an investigation (if there ever is one).
But here's what
is perhaps most important: (I never ever thought to do this) - Call the
three national credit reporting organizations immediately to place a
fraud alert on your name and SS#. I had never heard of doing that until
advised by a bank that called to tell me an application for credit was
made over the Internet in my name. The alert means any company that
checks your credit knows your information was stolen and they have to
contact you by phone to authorize new credit. By the time I was advised
to do this, almost 2 weeks after the theft, all the damage had been
done.
There are
records of all the credit checks initiated by the thieves' purchases,
none of which I knew about before placing the alert. Since then, no
additional damage has been done, and the thieves threw my wallet away
this weekend (someone turned it in). It seems to have stopped them in
their tracks.
The numbers
are:
Equifax:
1-800-525-6285
Experian
(formerly TRW): 1-888-397-3742
Trans Union:
1-800-680-7289
Social
Security Administration (fraud line): 1-800-269-0271
We pass along
just about everything. Do think about passing this information along. It
could really help someone?
Bob Jensen Advice:
As soon as possible, take photocopies of every card (both sides) in your
wallet or purse. Also photocopy your passport and other documents
that might be lost while traveling. Then carry and/or store them
in a safe place. Better yet, scan the images into an MS Word
document. Add Website, phone, email, and postal address
information not on each card.
In your MS Word document recommended
above, add password protection to that document using the menu choices
(Tools, Protect Document). Then carry two or more floppy disks
that contain copies of your MS Word file. Then if you lose your wallet
or purse on a trip, you can beg somebody at a hotel or airport to let
you read your file in an emergency. In doing so, you will have
convenient access to vital information that you need. You can ship
at least one copy in your shipped luggage, and you and your spouse might
carry copies in carry-on luggage. You may have trouble with a floppy
disk in your pockets if you walk through a metal detector at the
airport. However, if you have a copy burned onto a CD, the metal
detector will not affect the disk.
I suggest
that you add this entire table to the MS Word document containing images
of your cards.
For stopping
incoming telemarketing calls, I have had great results using my
Telezapper that I purchased from Radio Shack for about $50 --- http://www.telezapper.com/default.asp
The Telezapper is a one-time purchase and very easy to install.
No preventative is perfect,
but for Texans the new preventatives offered by the Texas PUC-Customer
Protection Division are the best opportunities for putting an end to
unwanted telemarketing calls.
The main new option is to get
on the Texas "No Call Lists" and renew these registrations
every three years at http://www.texasnocall.com/
(or phone 1-866-896-6225)
Beginning
on January 1, 2002, you can add your name, address and telephone
number to state-sponsored “No Call Lists,” which will identify
you as someone who does not wish to receive telemarketing calls. You
can choose to register a residential telephone number for one or
both of two “No Call Lists” sponsored by the Public Utility
Commission (PUC.)
STATEWIDE
“DO NOT CALL” LIST
The first
list, a statewide “Do Not Call List,” will apply to all
telephone marketers operating in Texas. There is a registration
charge of $2.25 for each residential phone number to be included in
this list only. Your registered residential telephone number(s) will
remain on this list for three years.
“ELECTRIC
NO CALL LIST”
The
second list has been created to prevent calls only from Retail
Electric Providers (REPs) and telemarketers calling about your
electric service. There is a registration charge of $2.55 for each
number placed on the “Electric No Call List.” Numbers placed on
this list will remain on the list for five years. Both residential
and business numbers can be registered for the “Electric No Call
List.”
HOW
DO I SIGN-UP?
At www.TexasNoCall.com
- Utilize the Internet for an easy, automated method that
provides instant registration. The site is available 24
hours a day, 7 days a week, 365 days a year. To register by
mail, use the printable
registration form at www.TexasNoCall.com, or request a
registration form by calling 1-866-TXNOCAL(L)
(1-866-896-6225) or writing: TEXAS NO CALL, P.O. Box 313, E.
Walpole, MA 02032. To register by phone, call toll-free
1-866-TXNOCAL(L) (1-866-896-6225.)
Online
and telephone registrations must be paid by credit card.
Mailed applications may be paid by personal check or credit
card. Residential customers may register for both “No Call
Lists” at a cost of $4.80.
Companies that conduct telemarketing activities should call
1-866-896-6225, or read the Telemarketing
FAQ for compliance information and additional details
regarding Texas’ “No Call Lists
I think that it ranks second next to oil as Nigeria's leading
source of foreign exchange. Many leading nations have tried
unsuccessfully to pressure Nigeria to close this down, but to no
avail. This is not the first murder connected with 419 frauds.
Actually closing this down in Nigeria will not automatically stop
the similar action from South Africa, Sierra Leone, and other nations
who have begun to make it big in Internet fraud.
What is impressive about these 419-type scams is how hard it is to
block the fraud messages from entering into your machine. The
technicians involved are very sophisticated --- the best that
billionaire crime leaders can buy.
A MUTUAL FRIEND HAS RECOMMENDED YOU AS A MOST TRUSTY AND SERIOUS
PERSON TO DO BUSINESS WITH.
I AM THE WIDOW OF THE LATE SANI ABACHA OR HEAD OF THE PAN-AFRICA
BANK IN LAGOS OR EXECUTOR OF THE WILL OF THE LATE SIR WALDO
POPPYSOCKS.
I AM IN THE UNFORTUNATE POSITION OF NEEDING TO MOVE $315 MILLION OF
SOMEONE ELSE’S MONEY OUT OF MY COUNTRY. AS THIS IS HUGELY ILLEGAL
I NEED THE HELP OF AN ACCOMPLICE BASED ABROAD. OBVIOUSLY I HAVE
CHOSEN YOU, A COMPLETE STRANGER.
FOR YOUR HELP IN THIS MATTER, YOU WILL RECEIVE 50% OF THE TOTAL SUM.
BUT WE WILL NEED TO PAY EXPENSES OF $5,000 TO MOVE THE MONEY. SADLY,
I CANNOT PAY THIS EVEN THOUGH I HAVE JUST TOLD YOU I HAVE MILLIONS
IN THE BANK.
WE NEED TO ACT QUICKLY SO COULD YOU SEND ME YOUR NAME, ADDRESS, FAX
NUMBER, BANK DETAILS, INSIDE LEG MEASUREMENT AND A NOTE OF WHEN YOUR
HOUSE WILL BE UNOCCUPIED.
ALSO I WILL NEED A MONEY TRANSFER OF SEVERAL THOUSAND DOLLARS FOR
THE ABOVE CHARGES.
OH AND DON’T TELL ANYONE YOU’RE DOING THIS BECAUSE IT’S ALL
ILLEGAL.
FINALLY, COULD YOU FLY OUT TO AFRICA SO THAT SEVERAL LARGE AND
VIOLENT ACCOMPLICES OF MINE CAN BEAT SEVEN SHADES OF SHIATSU OUT OF
YOU AND HOLD YOU HOSTAGE UNTIL YOUR POOR RELATIVES PAY US A HUGE
RANSOM FOR YOUR GULLIBLE CARCASE.
MAY THE LORD BLESS YOU, ETC, ETC, ETC
If you have not received an email similar to this then you either do
not have a computer or are a programming genius who has developed
some kind of wonder anti-spam software that is worth billions.
The above parody is a distilled version of the classic Nigerian 419
scam. The name reflects such cons’ usual country of origin and the
section of its penal code that they violate. The deception is also
known as West African advance fee fraud.
The details differ but the offer is always the same: earn millions
by helping strangers illegally move money, don’t tell anyone and
send sensitive financial information followed by thousands of
dollars.
NB: if your IQ is slightly lower than that of the average goldfish
it is worth reinforcing such offers are a total con. The only
money that will be moving is yours. The endgame can involve a trip
to a foreign country where you will be beaten up and held hostage.
The scam has been
around for years and has evolved in parallel with communication
technology. First the letters came by post, then by fax. Now they
have embraced email and flood in-boxes around the world like some
kind of e-Biblical plague.
Such letters from Maryam Abacha, corrupt Nigerian government
officials and over-charging West African contractors are among the
most common forms of spam, rivalling porn, free "Viagra"
and "intimate enhancement" products.
419s are easy to spot. Many of them use a lot of religious language
to show how sincere they are, their approach to spelling is
refreshingly free form and a disproportionate number of them have a
penchant for WRITING IN CAPITALS.
The peculiar style of these messages has attracted a cult following.
They offer fertile ground for parody. There is even a site that
randomly generates personalised 419 spam based on a few key words
you have chosen. Have a go here.
Despite all this, people still fall for these ridiculous gambits and
greed induces gullibility in the face of reason. In 2002, some 150
Britons were taken in by these fraudsters to the tune of £8.4
million. The US Secret Service estimates that Americans lose $100
million dollars a year to these scams. That’s an awful lot of
money and not very much sense.
Unsurprisingly, the police take this issue very seriously. The
Metropolitan Police have a comprehensive guide to the fraud here.
Others however, are fighting back outside the law by tying the
fraudsters up in pointless correspondence. This is known as Nigerian
Scam Baiting.
It has been dubbed the new Internet bloodsport.
One group of scam baiters, the
Chaos Project, invites others to join in thus: "Perhaps
you too will be inspired to adopt a 'pet Nigerian fraudster'.
Remember, as well as amusing yourself and your friends, you are
doing the world a service by monopolising the time and frustrating
the efforts of these people."
Of course, there are risks associated with this kind of behaviour.
The fraudsters are, after all, criminals and don’t take kindly to
interference.
Wannabe e-vigilantes
set up email accounts under assumed names (it's very important not
to use a traceable account) and use these to play the fraudsters
along. They answer the invitation enthusiastically, send off false
details and see how long they can keep the pretence up. They even
forge receipts for money transfers and airline tickets to show the
criminals that they are serious.
Some online crime fighters don’t just restrict themselves to
wasting the fraudsters’ time. They mock them – and post the
results on websites like hunters displaying the heads of prey on
walls. You can read some examples on Scamorama,
which celebrates scam baiters.
Clueless 419 criminals have carried out extensive correspondence
with such individuals as R U Sirrius, Hans Gneesunt-Boompsadazi and
Stew de Baker Hawke (the Studebaker Hawk was a 1950s car).
One 419 perpetrator demanded a photograph of the person he was
trying to defraud and was rewarded with a picture of the male model
Fabio. After some questions, he accepted this as proof of identity
and the email relationship continued until the penny finally
dropped.
We are not dealing here with a criminal mastermind to rival
Professor Moriarty.
These email exchanges are like a game of tennis. The fraudster wants
to conclude matters quickly. The art of the baiter is to stretch
things out for as long as possible without arousing suspicion. The
"victim" may also make bizarre demands of their would-be
beneficiary. The fraudster has to keep their correspondent happy and
has no choice but to play along, often answering questions of a
sexual nature.
However, the Everest of scam baiting is to con the conmen and get
the fraudsters to part with cold hard cash. Only a few have managed
this. One, writing
under the moniker Bart Simpson, managed it by telling his
Nigerian criminal target that he was being courted by another offer
from West Africa. Bart said that this other correspondent had sent
him $5 in a greeting card and he would sever his relationship unless
the fraudster did the same thing.
The money duly arrived. While $5 is not much, it's the principle
that counts.
Particularly vindictive anti-spammers will also send
"supporting documents" to the fraudsters. When downloaded,
these are found to contain not helpful bank details but particularly
vicious viruses that cripple the criminal’s computers.
One scam baiter managed to get her target to fall for this seven
times before he got the message. Read
how here. This means he either saw seven expensive PCs
reduced to smoking rubble or spent an awful lot of money on repairs.
It's hard to feel much sympathy for him.
Of course, this kind of vigilanteism is utterly reprehensible and
legally questionable.
She's a
widow, he's a high-ranking government official. They have fallen on
hard times and urgently request your assistance to get a large sum
of money out of Nigeria. They will reward you handsomely for your
help.
Chances are
you've seen something like that in your e-mail box. Perhaps in a
bored moment you've wondered who sends them and why they bother;
after all, no one could be gullible enough to buy into such an
obvious con game.
But sources
close to some of the so-called Nigerian e-mail scam's perpetrators
insist that those overwrought messages fuel a thriving industry,
employing thousands of people around the world who successfully
manage to extract money from a multitude of Internet pen pals.
A Nigerian
student who asked to be identified only as "Taiwo" (the
twin), detailed the workings of the business, which he said his
family has been involved in for over 15 years. Taiwo is a very large
man, with a voice and mannerisms to match. He claims that his recent
interest in the traditional religion of the Yoruba people has led
him to publicly speak out about his past.
"One
cannot speak to the gods with a mouth that is already full of
lies," Taiwo proclaimed loudly, after devoting an hour to
explaining his need for anonymity.
He fears
that his student visa would be revoked if his past participation in
the scam were publicly revealed. But his request for anonymity was
also delivered in close to deafening tones, much to the amusement of
some patrons in the Manhattan coffee shop where this interview was
conducted.
While
swearing he needed to clear his conscience and "make
amends" by revealing how the scam works, Taiwo was also quick
to insist that he did nothing more than write letters intended to
lure victims into the scam. He said the con game is profitable
enough to "nicely support" several dozen of his family
members.
"We
have the letter writers and the people who create the official
documentation, the people who talk to our clients on the phone, the
people who arrange travel and meetings and tours of government
offices in Africa, Canada, Japan and the United States ... no, it's
not a small business," Taiwo said.
"But I
want to make clear that very few Nigerians are barawo (criminals).
Nigerians, too, are the victims of these crimes," Taiwo said.
"This is not just something that Nigerians do; the business is
organized and run throughout the world by people of all races."
The
business is officially known to law enforcement agents as
"Advance Fee fraud" or "419 fraud," after the
section of the Nigerian penal code that specifically prohibits the
con game. Taiwo's family usually refers to it as the "Arrangee"
(Plan).
It begins
with a carefully crafted message, previously sent by postal service
or fax but now almost always by e-mail. The message purports to come
from an important person who needs to move money quickly out of
Nigeria.
Taiwo said
he began composing letters for his family's 419 operations eight
years ago when he was 11, after discovering he enjoyed "playing
with words." He's now attending school in New York City and
plans to become a journalist.
He swears
he will never be involved in the family business again. But he
guiltily admits to taking pride in the letters he created, and said
he worked very hard to "suit the form."
The letters
are intended to resemble soap operas that are popular in Nigeria,
Taiwo said, but with language that evokes someone who is
"educated, upper-class, out of touch with the common
people."
According to State Department
figures (PDF), 25 murders or disappearances of Americans abroad have
been directly linked to 419 fraud.
Other people have been held
against their will, beaten and blackmailed, according to information
provided by the U.S. Embassy in Lagos.
The United States Secret
Service has established "Operation 4-1-9," an international
task force targeting the crime. The Nigerian government also
frequently promises crackdowns on 419 fraudsters.
"There have been some
more arrests recently. Six people were taken away in April."
Taiwo said. "But I think there's no stopping the game."
The Nigerian bank account
scam, one of the best-known e-mail frauds, is taking on new forms.
Recent versions involve a U.S. commando and a World Trade Center
survivor, among others --- http://www.wired.com/news/business/0,1367,53115,00.html
It used to
surprise me that anyone would possibly fall for such ruses; -- until
I volunteered to take over the affairs of a destitute elderly man
who had squandered a lifetime's earnings in all kinds of foreign
scams like this. The poor man sold his last bit of furniture for
$200, and before I could get to him, he had purchased $200 worth of
lottery tickets at a convenience store, PLAYING THE SAME SET OF SIX
NUMBERS on all 200 tickets! When I incredulously asked him why, he
said it improves his chances of winning. "Not if you play the
same numbers!" I shouted. He smiled & pointed his finger at
me and said with a wink, 'that's what they want you to think! That's
what they want you to think!"
Mine was a personally addressed handwritten
airmail letter from South Africa recounting how they needed to
smuggle several million dollars out of Kenya, and suggesting that if
I aided them I would receive 1/2. I forwarded it to the local
consumer affairs people, who said the country (Australia) was
swamped in them, and reverse scamming was a waste of time as the
local authorities were not interested. There was an implied hint
that the local authorities were in the game. Interestingly, the
letter did not ask for money, bank account details, etc. I was
tempted to reply to find out exactly when they would ask for
valuables, and what valuables, (bank details or money) they would
ask for. The Australian consumer affairs guys seemed to think bank
account or credit card details would be requested rather than money,
and then the bank account stripped or the card maxed out. They
appeared to be using my business card as a data source, though how
they got it is beyond me.
You don't
have to ignore it; there's a product out that will make sure you
never see it---or any other spam---again.
Walter
Mosberg's column in the WSJ recently mentioned a product called
ChoiceMail ( http://www.digiportal.com/product4.html
), available for $30, that completely eliminates spam for POP3/SMTP
users (i.e., Outlook Express, Outlook, Eudora, et al.; doesn't work
for AOL and proprietary systems).
The program
interposes itself between your client and its server. When
ChoiceMail gets a message from somebody not on your approved sender
list, it auto-replies to the effect that the recipient is screening
for spam so click on this link to request permission to send.
Needless to say, the friends who you forgot to put on your approved
sender list reply, but the spammers don't. And even if they did, you
still can refuse permission to receive from them.
What about
mailing lists like AECM? Well, my apologies to AECM members who got
ChoiceMail follow-ups before I learned out to allow in mailing list
traffic. Just enter a rule to accept from any sender so long as the
TO: field contains AECM@LISTSERV.LOYOLA.EDU.
What about
students? If you want to receive from any sender at your school you
specify that all traffic from (in my case) LOYOLA.EDU be received,
regardless of sender.
The only
downside I've encountered is that, since I use Outlook instead of
Outlook Express, I couldn't simply import my address book of
approved senders. I had to add them manually. Nevertheless it was
well worth the effort.
Hardly know
what to do with all my spare time now that I no longer have to
delete messages about hot babes, LaserJet refills, Nigerian cash
transfers, and low home mortgage refinancing.
Check it
out. (Standard disclaimer: I have no connection with DigiPortal;
derive no benefit, blah, blah, blah.)
Geo
In the latest iteration of the Nigerian e-mail swindle, scammers
pose as buyers interested in big-ticket items for sale on the Net.
Thanks to a little-known U.S. banking loophole, they're bilking
Americans out of thousands --- http://www.wired.com/news/culture/0,1284,56829,00.html
Individuals
and companies are victims of newer versions of Nigerian scams. The
Sacramento Bee reported the latest variation yesterday. A credit union
honored a Nigerian check for $45,000. See the full article at http://www.sacbee.com/content/news/story/6213872p-7168495c.html (Paul Krause alerted me to the above link.)
The old version of the Nigerian scam
consists of e-mails that request help in moving a fortune out of
Nigeria. Anyone providing their bank account number to the
solicitors is promised a big payoff -- but the victims end up losing
money.
The latest offshoot involves the mailing of
bogus checks that recipients are urged to cash at their banks. It
says they can keep a portion of the money, then wire the rest to
Nigeria.
"The bad guys are recruiting people
... who have good credit and good banking relations" to pass
rubber checks without knowing it, said Jerry Kinlock, president and
CEO of the Sacramento Credit Union.
Five weeks ago, the Credit Union
unwittingly honored a $45,000 phony check that one of its members
had received from Nigerian con artists, he said.
The top 10 internet
frauds reported to the NCL last year were:
Bogus online
auctions, where the items purchased are never delivered.
Deliberate
misrepresentation or non-delivery of general merchandise purchased online.
Nigerian money
offers.
Deliberate
misrepresentation or non-delivery of computer equipment or software
purchased online.
Internet access
scams, where bogus internet service providers fraudulently charge for
services that were never ordered or received.
Credit card or
telephone charges for services that were never ordered or misrepresented
as free. These often include charges for accessing 'adult' material.
Work-at-home
schemes promising wildly exaggerated sales and profits.
Advance fee loans,
where consumers are duped into paying upfront charges for loans which
never materialise.
Phoney offers of
cheap-rate credit card deals, once again on payment of upfront fees.
Business
opportunities or franchises sold on the basis of exaggerated profit
estimates.
You can get more information
about a car mechanic online than a doctor with malpractice history,
says a patient who backs a bill to force physicians to make full
disclosures --- http://www.wired.com/news/medtech/0,1286,52605,00.html
Plan S is an initiative for open-access science
publishing that was launched by Science Europe on 4 September 2018 ---
https://en.wikipedia.org/wiki/Plan_S
It is an industry like no other, with profit
margins to rival Google – and it was created by one of Britain’s
most notorious tycoons: Robert Maxwell
April 2020
Following the lead of North Carolina and some other research universities
worldwide, The State University of New York (SUNY) has opted not to renew its
“big deal” with Elsevier for ScienceDirect in favor of a short list of titles to
which campuses across the system will have access ---
http://slcny.libguides.com/slc/elsevier2020update
Jensen Comment
This initiative is serious because it's funded by 13 research
funding agencies that have the power to require open sharing of funded
research.
Jensen Comment
As "research and publication" took over as the leading criterion for
promotion and tenure the academic world experienced and exposion of
so-called refereed journals, many of them from profit-seeking
publishers. The result was an explosion in quantity and an a bifurcation
of quality from extremes of highest quality to garbage with sham
refereeing. The good news was an increase in specialty journals. The bad
news was a shortage of dedicated referees.
One controversial factor was the impact of technology on
publication and distribution costs, especially in the rise of e-journals
that did not even entail hard copy printing of journals. This made it
possible for libraries to be almost the entire source of revenue for
some journals. My point here is that journals no longer had to rely on
reader subscriptions to foot the bill in a market of supply and demand.
Interestingly, the market of supply and demand now applies to blogs
rather than "refereed" publications. For a blog to be successful it has
to satisfy the needs of readers rather than libraries that fail to
allocate resources based upon user demand. For example, one faculty
member may be responsible for a campus library's subscription to an
obscure journal.
What the above PLOS One Website fails to get across is
that opposing the benefits of publishing many papers are the frauds
perpetrated by making it so easy for faculty to get promotions and
tenure based on the many P&T committees and administrators who are
willing to count publication records rather than read the publications.
Following the lead taken by the Cornell University Library some years ago in
saying no to rip off prices of scholarly journals
Harvard University says it can't afford
journal publishers' prices (at least not from price rip off publishers)---
http://lisnews.org/node/43679/
Exasperated
by rising
subscription
costs
charged by
academic
publishers,
Harvard
University
has
encouraged
its faculty
members to
make their
research
freely
available
through open
access
journals and
to resign
from
publications
that keep
articles
behind
paywalls.
A memo from
Harvard
Library to
the
university's
2,100
teaching and
research
staff called
for action
after
warning it
could no
longer
afford the
price hikes
imposed by
many large
journal
publishers,
which bill
the library
around $3.5m
a year.
Bob Jensen's threads on how the journal
publishing oligopoly rips off libraries ---
http://faculty.trinity.edu/rjensen/FraudReporting.htm#ScholarlyJournals
I'm suspicious of how those oligopoly publishers persuade top name researchers
to become editors of their rip off journals. Is there an independence issue
here?
Jensen Comment The Harvard Business School is
operating on the margin and cannot afford to open share or price
fairly. Yeah right!
At any price I view most HBS books and the Harvard
Business Review as best used in place of sleeping aids.
Jensen Comment The Harvard Business School is operating on the margin and cannot afford to open
share or price fairly. Yeah right!
At any price I view most HBS books and the Harvard Business Review as
best used in place of sleeping aids.
Giving Research Findings Away for
Free When Submitting Journal Articles and then Having to Buy It
Back from the Publishers
The university is forced to give away information for free and
then to buy it back at a huge markup," he said. "The whole thing
is just completely screwed up. The only alternative the
university has is to strike back at what Nature (the
journal) really values. Publish or perish? Not at these prices, UC says," by Matt
Krupnick, Contra Costa Times, June 10, 2010 ---
http://www.contracostatimes.com/top-stories/ci_15270766?nclick_check=1
A new state law will give open
access to the research conducted at public universities in
Illinois.
The Open Access to Research
Articles Act requires each public university to set up a
task force by Jan. 1, 2014, that will consider how to meet
open access goals. Traditionally, faculty research is not
available publically, but is published in scholarly academic
journals that charge subscription fees.
But Illinois universities will now
consider making their research available at no charge
online. They'll also look at how other universities and the
federal government are handling open access. The news comes
on the heels of the University of California's recent
announcement that its faculty adopted an open access policy.
The Illinois legislation went
through significant changes since it was introduced in
February. Initially, the language required universities to
develop an open access policy within 12 months. But it later
scratched the mandatory policy and left it up to university
task forces to come up with their own ideas.
Continued in article
Jensen Comment
This law could adversely affect such accounting research
journals as JAR, JAE, AOS, and many others. I say "adversely" in
the sense that if those journals refuse open access, accounting
researchers in Illinois may no longer submit articles to those
journals. Of course those journals are incresingly providing
some open access on a limited basis. Perhaps open access will
also be extended to articles having one or more authors from
Illinois.
This law could eventually restrain campus libraries from
subscribing to closed-access research journals.
Unethical Publishers: Among the dubious acts is selling
open source materials
Many academic authors by now have
heard the phrase “predatory publishers.” It’s usually
associated with
a list of fraudulent pseudo-publishing operations
maintained by Jeffrey Beall, whose
crusade to name and shame these shady opportunists has made
it to
The New York Times.
What worries me far more than these fairly obvious scams
are the emerging business practices being used by highly
profitable publishers with long and distinguished pedigrees
that are treating open access as a new revenue stream that
can be both open and closed – earning money through
subscriptions and author fees. (Monica Berger and and Jill
Cirasella
have just published an excellent
article on why we need a broader understanding of predatory
publishing practices.) But double-dipping isn't
enough. Witness a blogger’s report that Elsevier (founded in
1880) is
selling articles published by Wiley (founded
in 1807) as open access articles. Elsevier’s PR team
responded quickly by removing the article from its for-sale
options. Apparently, though, the company continues
to sell open access articles
originally published by Wiley under the same terms.
So far as I can tell, here’s how it
went down (and hat tip to
David Flander for alerting me to
this curious story): Whoever funded the author paid Wiley
something like $3,000 to make the work open access. Wiley
published it as an open access work, and then apparently
turned around and licensed the same work for an unknown sum
to Elsevier so that Elsevier could sell it through
its Science Direct platform for upwards of $30.
Apparently through some clever
language in the
author agreement, Wiley retains
the rights to license open access works for a fee under its
contracts with authors when Wiley take money from them (or
more accurately, from the authors’ funders) to make an
article open access. Though it is an unethical practice on
its face, it may be legal. Toward the bottom of the lengthy
document is the phrase “Use of Wiley Open Access articles
for commercial, promotional, or marketing
purposes requires further explicit permission from Wiley and
will be subject to a fee” (my emphasis).
It's entirely possible that
mistakes were made, that giant publishers ingesting paid-for
open access articles into massive piles of content that they
license without noticing that some of it has had its freedom
ransomed for a fee. It may be that bit of author agreement
language got left in by mistake. It could be these
publishers are so big and so deeply involved in swapping
intellectual property rights that they are unable to keep
their records straight, rather like those bankers
who couldn't keep track of mortgages as they were bundled, rebundled
and resold, contributing to a global financial catastrophe.
Even if this relicensing and selling of open access articles
was in error, it would be a worrying sign of incompetence
by publishers who may well feel too big to fail.
One of the McGuffins in this caper
is the Creative Commons license under which these open
access articles are published. The article first written
about was published under a
CC-NC-ND license, which is quite
restrictive and, as such, made this commercial reuse seem a
breach of contract - except for that pesky language in the
agreement which seems to give Wiley the right to exploit the
work commercially post-publication anyway. CC-BY
allows anyone to reuse a work with
attribution. A lot of scientists and scholars
have argued the fewer restrictions
on scholarly publications, the better, but it makes some
scholars nervous.
I personally am in favor of
reserving as few right as possible for my scholarly and even
frivolous work (like this blog). Yes, at times I’ve been
surprised to see where things I wrote turns up, but I
haven't been harmed by this reuse. It’s my small way of
shaking my fist at the many ways that copyright has been
distorted by moneyed interests since the power to grant
limited monopolies to authors to encourage creativity was
granted to congress in the U.S. constitution. At the
time, the copyright term was 14 years (with a one-time
renewal) and it required action on the part of the copyright
holder. Now everything is all rights reserved by default,
unless you takes steps to reserve fewer than all rights, and
the copyright term is much longer. Most of the cultural
production of the past century is either copyrighted or
potentially under a copyright held by people or companies
you cannot identify to seek permission to use it. This is
not what the founders had in mind when they gave Congress
this tool "to promote the Progress of Science and useful
Arts.”
Likewise, reselling open access
articles is not what the authors (or funders) of those
articles intended. Fooling people into paying for open
access articles is conduct unbecoming. Scholars, funding
agencies, and the scholarly societies that often outsource
their publishing program to commercial firms should hold
publishers' feet to the fire and prohibit this triple
dipping.
Meanwhile, our best bet is to avoid
predatory publishers, including those not on Beall’s list -
Elsevier, Wiley, or any other “legitimate” publisher that
knowingly or carelessly resells work that was intended by
its authors to be available for free. It may be legal, but
it isn’t right.
The Obama administration
announced on Friday a
major new policy aimed at increasing
public access to federally financed research. The policy, delivered
in a
memorandum from John P. Holdren, director
of the White House Office of Science and Technology Policy, applies
to federal agencies that spend more than $100-million a year to
support research and development.
In the memo, Mr. Holdren
directed those agencies to develop "clear and coordinated policies"
to make the results of research they support publicly available
within a year of publication. The new policy also requires
scientific data from unclassified, federally supported research to
be made available to the public "to search, retrieve, and analyze."
Affected agencies have six months to decide how to carry out the
policy.
The White House's announcement
emphasized the practical and economic benefits of sharing research.
"Scientific research supported by the federal government catalyzes
innovative breakthroughs that drive our economy," Mr. Holdren's memo
stated. "The results of that research become the grist for new
insights and are assets for progress in areas such as health,
energy, the environment, agriculture, and national security."
The memo also nodded to
scientific publishers, saying the Obama administration recognizes
that publishers provide "valuable services," such as coordinating
peer review, "that are essential for ensuring the high quality and
integrity of many scholarly publications." The memo called it
"critical that these services continue to be made available."
In a
statement issued on Friday, the
Association of American Publishers praised the new policy, which it
said "outlines a reasonable, balanced resolution of issues around
public access to research funded by federal agencies."
Tom Allen, the group's
president and chief executive officer, said that, "in stark contrast
to angry rhetoric and unreasonable legislation offered by some," the
Office of Science and Technology Policy had chosen "a fair path that
would enhance access for the public" while recognizing "the critical
role publishers play" in the process.
Mr. Allen cautioned, however,
that the policy's success depended on "how the agencies use their
flexibility to avoid negative impacts to the successful system of
scholarly communication that advances science, technology, and
innovation."
'New Business Models'
It was clear that a number of
federal agencies already had preparations under way for how they
would observe the new policy. For instance, the National Science
Foundation immediately sent out a statement affirming its commitment
to the principle of public access, saying it had already established
a timetable for consultation and planning. It noted that the
"implementation details" were likely to vary by discipline "and that
new business models for universities, libraries, publishers, and
scholarly and professional societies could emerge."
Friday's announcement capped a
lengthy process of consultation with various stakeholders that
sought public input on access to federally financed research and
data. More than 65,000 people have signed a
petition on the White House's We the
People Web site calling for free online access to scientific-journal
articles based on taxpayer-supported research.
In a
separate statement, Mr. Holdren responded
directly to the petitioners. "The Obama administration agrees that
citizens deserve easy access to the results of research their tax
dollars have paid for," he wrote. "Your petition has been important
to our discussions of this issue."
Continued in article
Jensen Comment
Don't start searching for free issues of TAR, JAR, JAE, AOS, etc. The
USA has almost never deemed accounting research worthy of government
funding. We may like to think of accountics science as science, but the
government does not agree.
In the old days, some business schools like the ones at
Carnegie-Mellon and Stanford received military research grants that
allowed a few business school researchers to milk the government tit,
but I've not heard about any such grants in recent years. These grants
were sometimes in the areas of operations research where assorted
accounting professors had some expertise.
There are government grants in health care that some
accounting researchers, especially in the Harvard Business School, have
participated in teams of researchers. I suspect they are continuing to
do so.
At the University of Denver, my good friend and
accounting professor Jim Sorensen received a number of government
research grants over the years, some of which I think were human
services costing research grants ---
http://daniels.du.edu/faculty-staff/james-sorensen/
In various ways Jim shows accounting researchers that they don't get
government research grants because they don't know how to go about
getting government grants --- and they don't try. Jim has always had a
low-key knack for nosing out government and other funding for research.
He's always been willing to try.
Years ago Jim Sorensen, Bob Swieringa, John Simmons, Bob
Jensen, and Keith Shwayder were together in the DU's MBA program. Two
went on for PhD degrees at Ohio State and three received PhD degrees
from Stanford. Only Keith additionally ended up in prison ---
http://caselaw.findlaw.com/us-9th-circuit/1262881.html
For months rumors have been
circulating that the publishing giant Elsevier was going to acquire
Mendeley, the popular reference-management and PDF-organizer
platform. Now both companies have confirmed that the rumors are
true: Elsevier has bought Mendeley for an undisclosed sum.
The Financial Times
reported that the purchase price was £45-million (about
$69-million), but neither company would confirm that.
Both companies said combining
forces and integrating platforms would allow them to serve scholarly
users better. "Good things are about to happen!" was the headline on
the
Mendeley blog post announcing the move.
(The publisher went with a more muted headline for
its announcement: "Elsevier Welcomes
Mendeley.")
But the news triggered dismay
among some researchers concerned about what the acquisition would
mean for Mendeley's commitment to openness. Some of its 2.3 million
users said on Twitter that they were going to delete their Mendeley
accounts (many used the hashtag #mendelete) or that they were
considering alternative services, such as Zotero, run by the Roy
Rosenzweig Center for History and New Media at George Mason
University.
Victor Henning, chief
executive and co-founder of Mendeley, said in an interview that
joining forces with Elsevier would make it possible for Mendeley to
do several things it has wanted to do. First is to make it easier
for users to actually view content. One big item on the agenda is to
integrate Mendeley with Elsevier's Scopus bibliographic database and
the ScienceDirect repository of more than 11 million journal
articles.
"The goal is to make it
completely seamless," Mr. Henning said. Elsevier's authentication
software will make it easier to identify whether users already have
access to those services through institutional subscriptions, he
said.
Second, merging into Elsevier
will put more resources at Mendeley's disposal. What that means is
"we can take the long perspective again," without having to figure
out how to pay for each new iteration or feature, Mr. Henning said.
For instance, Mendeley will be hiring a team of developers
immediately to come up with a mobile version for Android phones.
"Third is the new stuff we can
do now," Mr. Henning said. Mendeley can use Elsevier's "amazing,
structured database" to clean up and complete its perhaps messier
but uniquely rich crowd-sourced data.
Skeptical About Intentions
Olivier Dumon, Elsevier's
managing director of academic and government markets, said in the
same interview that Elsevier wanted not just Mendeley's data but its
talent and workflow. Mendeley's employees can stay on, and Mr.
Henning will become part of Elsevier's strategic team.
Both Mr. Dumon and Mr. Henning
said that a shared vision had ultimately brought the two companies
together. After collaborating with Elsevier on several projects, the
Mendeley team realized that "they were as obsessed as we are with
plugging gaps in users' workflow," he said.
In his Elsevier-welcomes-Mendeley
blog post, Mr. Dumon explained that vision: "We can make this
combined platform the central workflow and collaboration site for
authors," he wrote. "In addition, we will be able to provide greater
access to a growing repository of user-generated content while
building tools that will enable researchers to search this growing
body of research more precisely."
Mr. Henning acknowledged that
many researchers are skeptical about Elsevier and its intentions.
The Cost of Knowledge boycott last year, for instance, made that
skepticism very public.
"Certainly Elsevier has gotten
criticism for their actions in the past, but my feeling is they've
taken those criticism to heart," he said. According to Mr. Henning,
Mendeley intends to keep offering a free version as well as premium
services to both users and institutions. (The Mendeley Institutional
Edition went live last year.) "The API remains free," he said. "I'm
hoping that the people who are very skeptical today will give us a
few weeks and months" to make good on those promises and demonstrate
the benefits of the arrangement with Elsevier.
In discussing the implications
of the Elsevier acquisition, Mr. Henning emphasized both openness
and business concerns. "Does it mean we will stop being a provider
of open data through our API? We can tell people that Mendeley will
remain free," he said. But Mendeley has "from the start been a
business model," he added. "All the data that's there now will
remain under an open license, but if we introduce new data, we might
charge for that. That's always been the case, independent of
Elsevier."
No Longer an Open-Access Darling?
One high-profile skeptic is
Jason Hoyt, co-founder of the new open-access publishing platform
PeerJ. Mr. Hoyt worked for Mendeley from 2009 to 2011. In a
blog post on Tuesday, he called the news
"a win for the Mendeley team." As an early employee, he still holds
shares in Mendeley, he said. But he expressed doubts about what
joining forces with Elsevier would mean for the company's long-term
values.
"In terms of mission success,
however, I am uncertain if this was a win," Mr. Hoyt wrote. "Mendeley
had become known as the darling of openness, which in my view was
already closing off when I left. Selling to Elsevier sets up a new
challenge to maintain that open ethos, and unfortunately we can't
immediately gauge what the outcome will look like."
The battle over public access to
federally financed research is heating up again. The basic
question is this: When taxpayers help pay for scholarly
research, should those taxpayers get to see the results in
the form of free access to the resulting journal articles?
Actions in Washington this month
highlight how far from settled the question is, even among
publishers. A major trade group, the Association of American
Publishers, has thrown its weight behind proposed new
legislative limits on requiring public access, while several
of its members, including the Massachusetts Institute of
Technology's press, have publicly disagreed with that
position.
The White House's Office of Science
and Technology Policy just closed a period of public comment
on public access to what it called "peer-reviewed scholarly
publications resulting from federally funded research." The
office hasn't set a timetable for what happens now, but its
next moves could also determine whether federal mandates
that govern public access have much of a future.
In Congress, meanwhile, U.S. Reps.
Darrell E. Issa, a Republican of California, and Carolyn B.
Maloney, a Democrat of New York, introduced the Research
Works Act (HR 3699) last month. The bill would forbid
federal agencies to do anything that would result in the
sharing of privately published research—even if that
research is done with the help of taxpayer dollars—unless
the publisher of the work agrees first. That would spell the
end of policies such as the National Institutes of Health's
public-access mandate, which requires that the results of
federally supported research be made publicly available via
its PubMed Central database within 12 months of publication.
The publishers' association came
out with a strong
statement of support for the
proposed legislation. Many commercial publishers of research
journals, including major players such as Elsevier, belong
to the group.
A number of university presses are
members of the association's Professional and Scholarly
Publishing division, including the presses of MIT, the
University of California, and the University of Oxford.
The MIT Press was the first to say
it didn't agree with the association's endorsement of the
bill. Other academic presses, including California's, have
said the same.
The Nature Publishing Group and
Digital Science issued a joint statement last week saying
that they do not support the Research Works Act. "We seek to
enable the open exchange of ideas, especially in scientific
communities, in line with the requirements and objectives of
relevant stakeholders," the statement said, noting that the
Nature group "encourages self-archiving of the author's
accepted manuscript" in PubMed Central six months after
publication.
The American Association for the
Advancement of Science, which publishes the journal
Science, also issued a statement saying it is not in
favor of the bill. "We believe the current NIH public-access
policy provides an important mechanism for ensuring that the
public has access to biomedical research findings," said
Alan I. Leshner, chief executive officer. "At the same time,
the NIH policy provides appropriate support for the
intellectual-property rights of publishers who have invested
much in science communication."
Both the AAAS and the Nature group
are members of the publishers' association.
More Than Words
The debate over mandates is not
just administrative and legislative but also rhetorical. In
this case, rhetoric does matter. What does "resulting from"
federally financed research mean, exactly? Who gets to claim
credit for—and control of—research products?
A new analysis released by the
National Bureau of Economic Research (abstract available
here) tracks the changes among the five leading
economics journals from 1970 to 2012. Among the trends over
that time span:
Annual submissions to the
top-5 journals nearly doubled.
The total number of articles
published declined from 400 per year to 300 per year.
One journal, American Economic
Review, now accounts for 40 percent of publications
among these five publications, up from 25 percent.
Jensen Comment
I think the reason that most academic disciplines, including
accounting, experienced an explosion in the number of journals
is is that increasingly publication in refereed journals became
a necessary condition for both tenure and annual performance-pay
evaluations. As of getting a hit in a top-tier journal declined
(for reasons mentioned above) faculty became increasingly
desperate for publication in refereed journals not quite in the
top tier. At the same time large commercial oligopoly publishers
drooled over charging hundreds of dollars (often rip-offs) to
college libraries for new journals ---
http://faculty.trinity.edu/rjensen/FraudReporting.htm#ScholarlyJournals
Most of these new journals tried to justify their existence
by asserting that they were publishing articles that were too
specialized for top-tier journals. This is certainly true in
some instances, but the fact of the matter is that top-tier
journals in most instances are still publishing some well-chosen
articles in those specialties.
The bottom line is that when it comes to tenure decisions and
performance evaluation in general, having some refereed journal
hits beats having no journal publications.
The lobbies prestigious academic journal publishers ripping
off libraries with absurd library subscription prices won.
The only thing left for us is to support the campus librarian
boycott appeals.
The science-publishing giant
Elsevier pulled its support on Monday from the controversial
Research Works Act, hours before the bill's co-sponsors in
the U.S. House of Representatives declared the legislation
dead.
The bill,
HR 3699, would have prevented
agencies of the federal government from requiring public
access to federally subsidized research. In a
statement released on Monday
morning, the publisher reiterated its opposition to
government mandates even as it backed away from the bill. On
Monday afternoon, the bill's co-sponsors, Rep. Darrell Issa,
a Republican of California, and Rep. Carolyn Maloney, a
Democrat of New York, issued a statement of their own saying
that they would not push for action on the bill after all.
"As the costs of publishing
continue to be driven down by new technology, we will
continue to see a growth in open-access publishers. This new
and innovative model appears to be the wave of the future,"
the Issa-Maloney statement said. "The American people
deserve to have access to research for which they have paid.
This conversation needs to continue, and we have come to the
conclusion that the Research Works Act has exhausted the
useful role it can play in the debate."
Before the news broke that the bill
was dead, open-access advocates credited a growing
scholarly boycott of Elsevier for
the publisher's change of course. But Elsevier said its
shift on the legislation was a response to feedback from the
scholars who continue to work with it.
"While we continue to oppose
government mandates in this area, Elsevier is withdrawing
support for the Research Works Act itself," the publisher
said. "We hope this will address some of the concerns
expressed and help create a less heated and more productive
climate for our ongoing discussions with research funders."
Effect of a Boycott
More than 7,400 scholars so far
have signed an online petition, the
Cost of Knowledge, inspired by the
mathematician Timothy Gowers and organized by Tyler Neylon,
who has a Ph.D. in applied mathematics from New York
University and is a co-founder of Zillabyte, a big-data
startup. The signers come from many disciplines, but
mathematicians and biologists have made the strongest
showing.
The boycotters say they will not
edit, contribute to, and/or review for Elsevier journals.
They object to what they call "exorbitantly high prices for
subscriptions to individual journals," to how Elsevier
markets bundled journal subscriptions to libraries, and to
its support for anti-public-access legislation.
Boycott organizers and access
advocates celebrated Monday's news. "I see this as a victory
won by popular awareness and support," Mr. Neylon said in an
e-mail.
Heather Joseph, executive director
of the Scholarly Publishing and Academic Resources
Coalition, said the boycott had helped spur Elsevier's
turnabout. "You don't get almost 8,000 scientists saying 'We
think this is a lousy idea' so vocally without taking that
seriously," she said.
Alicia Wise, Elsevier's director of
universal access, played down the boycott's effect. "It's
something that we're clearly aware of," she said. But she
emphasized that Elsevier had been sounding out the authors,
editors, and reviewers who continue to work with it. "Those
are the voices we have been listening to," she said.
'Still a Bit Suspect'
If Elsevier hopes that renouncing
the controversial bill will make the boycott go away, it's
likely to be disappointed. "Elsevier's sincerity is still a
bit suspect," Mr. Neylon said.
"I think the boycott or, at very
least, the solidarity and commitment of the research
community will continue to push for more-serious changes in
the direction of open access," he said. "Ultimately, it is
up to those who keep publishers in business to decide what
they will do."
Mr. Neylon would like to see the
rise of more open journals' publishing platforms. "In
practical, tech-friendly fields like computer science and
math, I think we are very close to these changes, which is
an additional motivation for the community to put effort
into bringing about change," he said. "I'm concerned that
other fields, such as biology/medicine, may be more
entrenched in a profit-supportive culture, so that it may
take much longer to realize widespread support of open
access there."
Ms. Wise said Elsevier wanted to be
part of the conversation about creative models of scholarly
access. For instance, "there's a broad discourse right now
about how data sets can be made more broadly accessible,"
she said. "We're quite keen on playing a constructive role
there."
The company issued an
open letter to the mathematics
community on Monday, addressing changes it says it will make
to its pricing and access arrangements. "We want to stress
that this is just the beginning," the letter said.
Meanwhile, attention has shifted to
another proposed bill: the reintroduced Federal Research
Public Access Act, which would require public access.
Elsevier will "continue to join with those many other
nonprofit and commercial publishers and scholarly societies
that oppose repeated efforts to extend mandates through
legislation," the publisher's statement said.
Asked about the reintroduced bill,
Ms. Wise said she expected that "a broad spectrum of
different types of publishers will have some concerns" about
it.
For now, she said, "what we are
really trying to do is create a better atmosphere and
environment" for conversations about access. "If this move
back from RWA will help us all work together better, than
that's a good thing."
A
survey
published today in Science shows that journal editors often ask prospective
authors to add superfluous citations of the journal to articles, and authors
feel they can’t refuse. (The Science paper is for subscribers only, but you
can read a summary here.) The extra citations artificially inflate a
journal’s impact and prestige. About 6,600 academics responded to the
survey, and about 20 percent said they had been asked to add such citations
even though no editor or reviewer had said their article was deficient
without them. About 60 percent of those surveyed said they would comply with
such a request, which was most often aimed at junior faculty members.
A coalition of 10 library and
open-access advocacy groups has sent
a letter to Congress opposing HR
3699, the
controversial Research Works Act.
The American Library Association, the Association of
Research Libraries, the Association of College and Research
Libraries, Creative Commons, the Public Library of Science,
and the Scholarly Publishing and Academic Resources
Coalition, or Sparc, are among those who signed the letter.
The proposed bill “would unfairly and unnecessarily prohibit
federal agencies from conditioning research grants to ensure
that all members of the public receive timely, equitable,
online access to articles that report the results of
federally funded research that their tax dollars directly
support,” the letter says. “Unfortunately, HR 3699 is
designed to protect the business interests of a small subset
of the publishing industry, failing to ensure that the
interests of all stakeholders in the research process are
adequately balanced.” Some scholarly associations and
researchers have also
weighed in against the Research
Works Act.
University of California librarians
are urging professors not to submit research to Nature or 66
related journals to protest a 400 percent increase in the
publisher's prices.
A new contract with Nature
Publishing Group would raise the university's subscription
costs by more than $1 million, library and faculty leaders
wrote in a letter this week to professors throughout the
10-campus system. With recent budget cuts, UC libraries
simply can't handle the higher price, which would take
effect in 2011, the letter said.
Boycotting the Nature group would
be a huge step for a university that, according to UC
estimates, has provided 5,300 articles to the 67 journals in
the past six years. Nearly 640 of those articles went to
Nature itself, one of the world's premier scientific
journals.
"We understand that it's an
important journal," said Laine Farley, executive director of
UC's California Digital Library, which manages most
systemwide journal subscriptions. "But we can't simply wipe
out our savings on one publisher."
In a written response to the
university, London-based Nature Publishing Group criticized
UC's "sensationalist use of data out of context" and said
the negotiations were supposed to be confidential. The
pricing dispute is rooted in confusion over whether UC is
one institution or many, Nature's response said. that (UC)
is paying an unfair rate."
This week's volleys represented an
escalation of a long-simmering battle between universities
and journal publishers, who have been criticized for
charging thousands of dollars for annual subscriptions to
some publications. Many titles have been consolidated under
a handful of major publishers, including Nature, making it
more difficult for universities to negotiate lower prices.
Several UC professors have fought
back against publishers, refusing to contribute work to
highly priced journals. But a widespread boycott of one of
the most prestigious journals would present a dilemma for
faculty members under pressure to publish research in order
to gain promotions.
The so-called publish-or-perish
structure is fundamentally unfair to professors, said
Michael Eisen, a UC Berkeley biology professor who refuses
to publish his research group's work in Nature's journals.
"The university is forced to give
away information for free and then to buy it back at a huge
markup," he said. "The whole thing is just completely
screwed up. The only alternative the university has is to
strike back at what Nature really values."
A boycott of the Nature group would
not hurt UC professors' careers, said Lawrence Pitts, the
university's provost.
"The reality is that there is a
number of quality publications," said Pitts, UC's chief
academic officer. "Nature Publishing Group isn't the only
game in town."
Some journals, recognizing that
universities are struggling to afford them, have cut prices
in recent years. Others have invented ways to give away
their articles for free.
The Proceedings of the National
Academy of Sciences, for example, makes its contributions
available for free six months after publication, said its
editor-in-chief, UC Berkeley biologist Randy Schekman.
"Nature's just being tone-deaf,"
said Schekman, who is considering writing an article for
Nature. "They have to know that California is in a perilous
financial state. They can't win this one."
University of California librarians
are urging professors not to submit research to Nature or 66
related journals to protest a 400 percent increase in the
publisher's prices.
A new contract with Nature
Publishing Group would raise the university's subscription
costs by more than $1 million, library and faculty leaders
wrote in a letter this week to professors throughout the
10-campus system. With recent budget cuts, UC libraries
simply can't handle the higher price, which would take
effect in 2011, the letter said.
Boycotting the Nature group would
be a huge step for a university that, according to UC
estimates, has provided 5,300 articles to the 67 journals in
the past six years. Nearly 640 of those articles went to
Nature itself, one of the world's premier scientific
journals.
"We understand that it's an
important journal," said Laine Farley, executive director of
UC's California Digital Library, which manages most
systemwide journal subscriptions. "But we can't simply wipe
out our savings on one publisher."
In a written response to the
university, London-based Nature Publishing Group criticized
UC's "sensationalist use of data out of context" and said
the negotiations were supposed to be confidential. The
pricing dispute is rooted in confusion over whether UC is
one institution or many, Nature's response said. that (UC)
is paying an unfair rate."
This week's volleys represented an
escalation of a long-simmering battle between universities
and journal publishers, who have been criticized for
charging thousands of dollars for annual subscriptions to
some publications. Many titles have been consolidated under
a handful of major publishers, including Nature, making it
more difficult for universities to negotiate lower prices.
Several UC professors have fought
back against publishers, refusing to contribute work to
highly priced journals. But a widespread boycott of one of
the most prestigious journals would present a dilemma for
faculty members under pressure to publish research in order
to gain promotions.
The so-called publish-or-perish
structure is fundamentally unfair to professors, said
Michael Eisen, a UC Berkeley biology professor who refuses
to publish his research group's work in Nature's journals.
"The university is forced to give
away information for free and then to buy it back at a huge
markup," he said. "The whole thing is just completely
screwed up. The only alternative the university has is to
strike back at what Nature really values."
A boycott of the Nature group would
not hurt UC professors' careers, said Lawrence Pitts, the
university's provost.
"The reality is that there is a
number of quality publications," said Pitts, UC's chief
academic officer. "Nature Publishing Group isn't the only
game in town."
Some journals, recognizing that
universities are struggling to afford them, have cut prices
in recent years. Others have invented ways to give away
their articles for free.
The Proceedings of the National
Academy of Sciences, for example, makes its contributions
available for free six months after publication, said its
editor-in-chief, UC Berkeley biologist Randy Schekman.
"Nature's just being tone-deaf,"
said Schekman, who is considering writing an article for
Nature. "They have to know that California is in a perilous
financial state. They can't win this one."
A
survey published today in Science
shows that journal editors often ask prospective authors to
add superfluous citations of the journal to articles, and
authors feel they can’t refuse. (The Science paper is for
subscribers only, but you can read a summary here.) The
extra citations artificially inflate a journal’s impact and
prestige. About 6,600 academics responded to the survey, and
about 20 percent said they had been asked to add such
citations even though no editor or reviewer had said their
article was deficient without them. About 60 percent of
those surveyed said they would comply with such a request,
which was most often aimed at junior faculty members.
A major British library
group announced today that it has struck new deals with Elsevier
and Wiley-Blackwell, two of the largest publishers of academic
journals. The group, Research Libraries U.K., had
threatened to discontinue so-called
Big Deal subscription arrangements with the two publishers
because of what it called unsustainable price increases. U.S.
libraries have also been
re-examining whether Big Deals are
really worth what they cost.
The new deals with
Elsevier and Wiley-Blackwell “serve as new benchmarks for our
relations with other publishers, as RLUK’s members will no
longer accept massive unjustified price rises,” Phil Sykes,
chair of the group, said in a statement. “We will continue to
scrutinize all offers carefully in the future to make sure we
get best value for money and to ensure that we do not pay for
new, untested journal titles as part of ‘all-or-nothing’
packages.” The new deal was negotiated on behalf of the group’s
30 member libraries by
JISC Collections, an organization that
helps provide digital resources for British education and
research.
Continued in article
About those nondisclosure agreements in journal
subscription contracts
"Cornell U. Library Takes a Stand With Journal Vendors: Prices Will
Be Made Public," by Jennifer Howard, Chronicle of Higher
Education, March 24, 2011 ---
http://chronicle.com/article/Cornell-U-Library-Takes-a/126852/
Librarians have long
complained about the nondisclosure agreements, or NDA's, that some
publishers and vendors require them to sign, making it difficult to
share information about how much they pay to subscribe to journal
databases and other scholarly material. Some state universities'
libraries have been able to reveal licensing terms anyway because
their institutions are subject to sunshine laws. Now one major
private institution, Cornell University, has publicly declared it's
had enough of confidentiality agreements, too.
"To promote openness and
fairness among libraries licensing scholarly resources, Cornell
University Library will not enter into vendor contracts that require
nondisclosure of pricing information or other information that does
not constitute a trade secret," the library said in a
statement
posted on its Web site. "The more that libraries are able to
communicate with one another about vendor offers, the better they
are able to weigh the costs and benefits of any individual offer. An
open market will result in better licensing terms."
Anne R. Kenney, Cornell's
university librarian, said that with purchasing decisions under
close scrutiny, it felt like the right moment to take a stand.
Enough major publishers have agreed to drop nondisclosure clauses
"that it was time to bite the bullet and make that a principle
moving forward," she said. "Publishers are beginning to get it."
At the end of its statement,
the Cornell library listed some of the publishers that do not
request confidentiality clauses when they negotiate licenses. They
include the American Physical Society, the American Chemical
Society, Cambridge University Press, EBSCO, Elsevier, Oxford
University Press, ProQuest, Sage, Taylor & Francis, and Wiley. (If a
publisher does not appear on the list, that doesn't necessarily mean
it requires NDA's, just that it hasn't been in recent contract
negotiations with Cornell's library.)
Ms. Kenney said that Cornell
is joining "a groundswell among academic libraries to start to
routinely ask for the removal of NDA's." In June 2009, the
Association of Research Libraries urged its members to steer clear
of
nondisclosure
or confidentiality clauses.
"Part of our rationale in
going public with this is to make evident that private institutions
are also starting to feel that this is not a good way of doing
business," Ms. Kenney said.
Support for the Move
Several librarians at other
universities said their institutions had taken positions similar to
Cornell's, even if they haven't publicly posted their policy on
NDA's. "Yes, we have taken a similar approach for the past year,"
said Winston Tabb, the dean of university libraries and museums at
the Johns Hopkins University. He wrote in an e-mail that "we believe
that transparency is appropriate for libraries generally; and in
particular that we should not agree to withhold information about
how we are spending an increasingly huge—and ever-growing—percentage
of our stretched library budgets."
Continued in article
Textbooks three and four decades ago were
even more pricey after inflation adjustments. This was true even in
those glorious years of many competing publishers.
Textbooks were pricey in those competitive
years (before the days of computer supplements) largely due to the
expensive way in which they were marketed. Unlike pulp fiction
novels that are marketed to street bookstores through wholesale
distribution networks, textbooks were marketed by all those many
book representatives/salesmen (I mean men in those days) who gave us
a lot of time and free samples. This was a very expensive way to
market textbooks, and it also badly disrupted many of our days on
campus.
Now the monopolist publisher (is there more
than one?) still has book representatives and salespersons, but the
cost is much lower because there are so few textbook salespersons in the nation, along with fewer choices of books. Instead on three reps per week, I now maybe see three per
semester standing in my doorway.
Some years back almost every large
accounting program (Texas, Michigan State, Illinois, Indiana,
Missouri, etc.) each had at least one author with a name on a
Principles of Accounting textbook. There was almost enough of a
market in two large universities to justify the fixed cost of
publishing the home author's book.
Publishers deliberately tried to get at
least two authors from two large universities on a book. A book hit
gold if each partner author was from a large university such as the
Eureka Success of signing a Texas and an Illinois professor to
"author" an accounting textbook.
In some cases, my suspicious mind wonders if
some of those "authors" mostly lent their names and affiliations
rather than their sweat. In fairness, I think the books that stuck
around edition after edition after edition were really authored
legitimately by hardworking professors. Even in those cases,
however, the test banks and other supplements were cheaply
outsourced, which generally meant that the test banks were much
lower in quality than the textbook's illustrations and problems.
My point is that textbooks cost more because
of the way they were/are marketed.
I might add that I am slow to blame the
campus bookstore for the price of textbooks. Typically the
bookstore's margin is relatively small given the cost of shelving
and handling so many books. What saves the butts of campus
bookstores is the publishing company's tradition of buying back
unsold new books. But even that entails a lot of un-boxing,
shelving, storage, and re-boxing.
If campus bookstores had to survive only on
textbooks they would go out of business. On our campus the bookstore
is selling textbooks almost at a net loss. What keeps it going is
the extremely high (and I do mean high) markups on other items like
logo-clothing, supplies, and electronic goods.
And I don't buy into the publishers'
arguments today that the high accounting textbook prices are due to
the computer supplements. Virtually all the accounting textbook
supplements today (the CDs, the online test banks, the videos, etc.)
are really cheap shots. The accounting textbook market just isn't
big enough to warrant what publishers spend dearly for in large
markets of economics, mathematics, biology, and other disciplines
having courses in a college's core curriculum taken by every student
on every campus (not just business majors).
What is hurting the publishers badly is the
used book market. So what? The used car market is also
eating the lunch of GM, Ford, and Chrysler new car plants in spite
of built-in obsolescence ploys used by publishers and car
manufacturers. McDonalds has a field day because there is no
second hand market for a Big Mac and fries.
Bob Jensen
Obama Does Not Think Much of Professors Who Sell Their Own Learning
Materials to Students If Barack Obama is elected president, students upset
about textbook prices may have an ally. While he hasn’t proposed any legislation
on the topic, he used an appearance Friday at the University of Texas-Pan
American to criticize the way professors benefit from writing expensive texts.
The Chicago Tribune
quoted him as saying: “Books are a big scam. I taught law at the University of
Chicago for 10 years, and one of the biggest scams is law professors write their
own textbooks and then assign it to their students. They make a mint. It’s a
huge racket.The Wall Street Journalreported that in a
discussion in which Obama reiterated his criticism of private student loans, he
also urged students to be careful about their own spending. “Just be careful
about those credit cards, all right? Don’t eat out as much,” the Journal quoted
him saying. Inside Higher Ed, February 25, 2008 ---
http://www.insidehighered.com/news/2008/02/25/qt
"As Textbooks Go 'Custom,' Students Pay Colleges Receive
Royalties For School-Specific Editions; Barrier to Secondhand
Sales," by Diana Hacker, The Wall Street Journal, July 10, 2008,
Page B10 ---
http://online.wsj.com/article_print/SB121565135185141235.html
The University of Alabama, for
instance, requires freshman composition students at its main
campus to buy a $59.35 writing textbook titled "A Writer's
Reference,"
The spiral-bound book is nearly
identical to the same "A Writer's Reference" that goes for $30
in the used-book market and costs about $54 new. The only
difference in the Alabama version: a 32-page section describing
the school's writing program -- which is available for free on
the university's Web site. This
version also has the University of Alabama's name printed across
the top of the front cover, and a notice on the back that reads:
"This book may not be bought or sold used."
Custom textbooks like this one are
proliferating on U.S. college campuses, guaranteeing hefty sales
for publishers -- and payments to colleges that are generally
undisclosed to students. The publisher of the Alabama book --
Bedford/St. Martin's, based in Boston -- pays the Tuscaloosa
school's English department a $3 royalty on each of the 4,000
copies sold each year. And
though the prohibition on selling the book used can't be legally
enforced, the college bookstore won't buy the books back, making
it more difficult for students to find used copies.
Textbook companies and college
officials involved in such deals say custom textbooks provide
needed resources for academic departments and more-useful
materials for students.
But Ann Marie Wagoner, a 19-year-old
University of Alabama freshman who pays $1,200 a year for
textbooks, calls the cost of new custom books "ridiculous" and
complains that students aren't told about the royalties.
"They're hiding it so there isn't a huge uproar," she says.
The custom-textbook business has become
the fastest-growing segment of the $3.5 billion market for U.S.
new college texts, comprising 12% of sales for 2006, the latest
year for which data is available. Royalty deals generate tens of
thousands of dollars for some big academic departments. The
arrangements have drawn little attention, despite increasing
legislative and regulatory scrutiny of the spiraling price of
textbooks, which have been rising at twice the rate of inflation
over the past two decades.
In 2005, a report by the U.S.
Government Accountability Office criticized several textbook
industry practices -- including frequent new editions and the
"bundling" of books with extras like CDs and workbooks -- that
discourage the purchase of used books and inflate prices for
students.
The agency found that college students
spend an average of about $900 a year on textbooks. That's the
equivalent of 8% of tuition and fees at the average private
four-year college, 26% at a state university and 72% at a
community college.
Controlling Textbook Costs
In recent years, 34 states have
proposed or passed legislation to control textbook costs,
including measures to prohibit inducements to professors for
adopting textbooks, according to a May 2007 congressional study.
A bill pending in Congress would require more disclosure of
textbook pricing, in part by requiring publishers to sell
textbooks separately from the bundles of extras with which they
are now often packaged.
The book-royalty arrangements resemble
a practice exposed during last year's student-loan scandal, when
some universities steered students to particular lending firms
and received a secret cut of the loans. New York Attorney
General Andrew Cuomo called those payments "kickbacks" and
forced universities, many of which said they used the money to
fund scholarships, to halt the practice. Mr. Cuomo recently
launched a broad conflict-of-interest investigation of the
relationship between colleges and vendors, including book
publishers.
For publishers, the custom market is a
way to thwart used-book sales, which cut deeply into their
profits. Though used books have been around for decades, they
have become a much bigger industry threat in the Internet age.
Web sites for used books, such as Amazon.com1 and eBay, have
transformed fragmented, campus-by-campus dealings in old texts
into a national market, where discounts of 50% off the new-book
price are common. Because of their limited audience, custom
books are difficult to resell -- and they sometimes aren't
eligible for authorized campus book-buyback programs.
James V. Koch, former president of Old
Dominion University and the University of Montana, says that
colleges, rather than requiring students to buy custom texts,
should post exclusive material free on university Web sites.
Prof. Koch, an economist who studied textbook costs for a
Congressional advisory committee last year, says royalty
arrangements involving specially made books may violate
colleges' conflict-of-interest rules because they appear to
benefit universities more than students.
'Unethical Behavior'
"It treads right on the edge of what I
would call unethical behavior," he says. "I'm not sure it passes
the smell test." Many colleges forbid professors from personally
accepting royalties when they assign their own books for
classes; others have no rules.
At the University of Alabama, Carolyn
Handa, who until recently directed the school's writing program,
acknowledges that students can save money if they buy used
standard editions or sell their books at the end of the term.
But Prof. Handa says the university edition is designed as a
long-term reference. "You don't sell back your dictionary after
your first year of college," she says. "It should be a resource
they have on their shelf."
The writing program so far has
collected about $20,000 in royalties in the two years since it
started requiring custom textbooks, Prof. Handa says. She adds
that she regularly declines pitches from other publishers
offering even higher royalties. "I feel bad enough getting $3,"
she says.
Prof. Handa says the royalty money
helps pay for trips to conferences for graduate students and
will underwrite teaching awards. This year, three graduate
students received about $500 apiece to attend the April
convention of the Conference on College Composition and
Communication in New Orleans.
Bedford/St. Martin's is a unit of
Macmillan, which is owned by German publishing giant
Verlagsgruppe Georg von Holtzbrinck GmbH. Brian Napack,
president of Macmillan, says university departments deserve
royalties because of the time they spend putting together custom
texts. "We didn't come to the market to give departments
royalties," he says. "We think there's a decent argument to be
made for it. It's a nice bonus for colleges to have a couple of
extra bucks to use for education."
Attracted to 15% annual sales growth,
big players such as Pearson PLC, McGraw-Hill Cos. and Macmillan
are all making major pushes into the custom-book field. In part,
that's because technology has made it cost-effective for
customers to create specialized books for relatively few
students. Proponents say students often complain that professors
use only a few chapters of standard texts, whereas custom books
can follow a course precisely.
Searching Facebook
Nicole Allen, textbooks advocate for
U.S. Public Interest Research Groups -- a consumer organization
-- says students, faced with buying a custom textbook, should
ask the professor whether they can instead make do with a used
standard version. If a custom text is required, students can try
to find it used through local book exchanges or by searching
social-networking sites such as Facebook for students who have
recently taken the course and may want to sell a copy, Ms. Allen
says.
Some custom books involve more than
just little tweaks of established texts. At Virginia Tech, about
3,000 first-year students annually buy a required composition
guide created by its faculty. The school distributes a new
edition each year featuring student work. At the university
bookstore, the text, published by Pearson, sells for about $50.
Carolyn Rude, who chairs the English department, says the book
helps provide consistency across more than 100 sections of
freshman composition by ensuring a standard curriculum. She
wouldn't disclose the precise amount of the royalty but said it
was "several dollars" per book and generated about $20,000
annually. The university uses the money to bring in expert
speakers and pay for $600 research and travel stipends for
instructors, Prof. Rude says.
A $10 Royalty per Book
Pennsylvania State University recently
ended a contract with Pearson for the roughly 10,000 students
taking introductory economics courses. The economics department
received a $10 royalty for each custom textbook students
purchased, generating about $50,000 a year for the program, says
Susan Welch, dean of the college of liberal arts. But, Prof.
Welch says, the school was uncomfortable "making money on
students like that," and the arrangement discouraged students
from buying cheaper, used books. Under a new contract with
Pearson, Penn State now uses standard texts with no royalties,
as well as custom course packs.
Don Kilburn, chief executive of
Pearson's custom-publishing division, says royalties are
justified when professors and others "put in a fair amount of
time and effort." Pearson says it pays royalties on 300 of
roughly 9,000 custom projects. Mr. Kilburn acknowledged that
custom books have lower resale value for students. But with
custom books, he says, students "get something better suited for
their needs."
Yesterday, President Bush signed into
law the Consolidated Appropriations Act of 2008 (H.R.
2764), which includes a provision
directing the National Institutes of Health to provide the
public with open online access to findings from its funded
research. This is the first time the U.S. government has
mandated public access to research funded by a major agency.
Readers may recall that the NIH's
existing public access policy was implemented as a voluntary
measure in 2005. With the enactment of this new law, researchers
will be required to deposit electronic copies of their
peer-reviewed manuscripts into
PubMed Central, the National Library
of Medicine's online repository, no later than 12 months after
publication in a journal.
Many leading scientists, patient
advocates, librarians, and others had lobbied for years to make
research funded by tax dollars accessible to the public. This
new mandate now will provide unfettered access to scientific
findings for everyone seeking them.
What if scholarly books
were peer reviewed by anonymous blog comments rather than by
traditional, selected peer reviewers?
That's the question being posed by an
unusual experiment that begins today. It involves a scholar
studying video games, a popular academic blog with the playful
name Grand Text Auto, a nonprofit group designing blog tools for
scholars, and MIT Press.
The idea took shape when Noah
Wardrip-Fruin, an assistant professor of communication at the
University of California at San Diego, was talking with his
editor at the press about peer reviewers for the book he was
finishing, The book, with the not-so-playful title Expressive
Processing: Digital Fictions, Computer Games, and Software
Studies, examines the importance of using both software
design and traditional media-studies methods in the study of
video games.
One group of reviewers jumped to his
mind: "I immediately thought, you know it's the people on Grand
Text Auto."
The blog,
which takes its moniker from the controversial video game Grand
Theft Auto, is run by Mr. Wardrip-Fruin and five colleagues. It
offers an academic take on interactive fiction and video games.
Inviting More Critics
The blog is read by many
of the same scholars he sees at academic conferences, and also
attracts readers from the video-game industry and teenagers who
are hard-core video-game players. At its peak, the blog has had
more than 200,000 visitors per month, he says.
"This is the community whose response I
want, not just the small circle of academics," Mr. Wardrip-Fruin
says.
So he called up the folks at the
Institute for the Future of the Book, who developed CommentPress,
a tool for adding digital margin notes to blogs (The
Chronicle, September 28, 2007).
Would they help out? He wondered if he could post sections of
his book on Grand Text Auto and allow readers, using
CommentPress, to add critiques right in the margins.
The idea was to tap the wisdom of his
crowd. Visitors to the blog might not read the whole manuscript,
as traditional reviewers do, but they might weigh in on a
section in which they have some expertise.
The institute, an unusual academic
center run by the University of Southern California but based in
Brooklyn, N.Y., was game. So was Mr. Wardrip-Fruin's editor at
MIT Press, Doug Sery, but with one important caveat. He insisted
on running the manuscript through the traditional peer-review
process as well. "We are a peer-review press—we're always going
to want to have an honest peer review," says Mr. Sery, senior
editor for new media and game studies. "The reputation of MIT
Press, or any good academic press, is based on a peer-review
model."
So the experiment will provide a
side-by-side comparison of reviewing—old school versus new blog.
Mr. Wardrip-Fruin calls the new method "blog-based peer review."
Each day he will post a new chunk of
his draft to the blog, and readers will be invited to comment.
That should open the floodgates of input, possibly generating
thousands of responses by the time all 300-plus pages of the
book are posted. "My plan is to respond to everything that seems
substantial," says the author.
The institute is modifying its
CommentPress software for the project, with the help of a
$10,000 grant from San Diego's Academic Senate, to create a
version that bloggers can more easily add to their existing
academic blogs.
A Cautious Look Forward
Mr. Wardrip-Fruin's
friends have warned him that sorting through all those comments
will take over his life, or at least take far more time than he
expects. "It's been said to me enough times by people who are
not just naysayers that it is in the back of my mind," he
acknowledges. Still, the book's review process "will pale in
comparison to the work of writing it."
He expects the blog-based review to be
more helpful than the traditional peer review because of the
variety of voices contributing. "I am dead certain it will make
the book better," he says.
Mr. Sery isn't so sure. "I don't know
how this general peer review is going to help," the editor says,
except maybe to catch small errors that have slipped through the
cracks. Traditional peer review involves carefully chosen
experts in the same subject area, who can point to big-picture
issues as well as nitpick details. He bets that the blog reviews
might merely spark flame wars or other unhelpful arguments about
minor points. "I'm curious to see what kind of comments we get
back," he says.
That probably "depends on what you're
writing about," says Clifford A. Lynch, executive director of
the Coalition for Networked Information, a group that supports
the use of technology in scholarly communication. "If, God help
you, you're writing about current religious or political issues,
you're going to get a lot of people with agendas who aren't
interested in having a rational discussion. Some of them are
just psychos."
Even without flame wars, Mr. Sery
equates the blog review with the kind of informal sharing of
drafts that many academics do with close friends. It's useful,
but it's still not formal peer review, he argues. Carefully
choosing reviewers "really allows for the expression of their
ideas on the book," he says. Scholars can say with authority,
for instance, that a book just isn't worth publishing.
Ben Vershbow, editorial director at the
Institute for the Future of the Book, concedes that comments on
blogs are unlikely to fully replace peer review. But he says
academic blogging can play a role in the publishing process.
Continued in article
Jensen Comment
This is one of those experiments that is impossible to extrapolate.
Blog comments are totally voluntary and impulsive such that blog
comments are going to be highly variable with respect to topics,
errors in the original document, and extent of the readership in the
blog. Few blog activists are going to give time and attention to
reviews that are not going to be widely read.
Peer reviews are likely to be less impulsive since
the reviewer generally agrees ahead of time to conduct a review. But
they are more variable than blog comments. The reason is that peer
reviewers spend less time reviewing manuscripts that are outliers
(i.e., those that are so good that there are few recommendations for
change or those that are so bad that there's little hope for a
future positive recommendation to publish). More time may be spend
on manuscripts that need a lot of repair but have high hopes.
The main problem with peer reviews is that there
are so few reviewers. Much depends upon which two or three reviewers
are assigned to review the manuscript. Three reviewers' garbage may
be another three reviewers' treasure. Another problem is that peer
reviews are seldom published in the name of the anonymous reviewers.
Blog commentators generally do so in their own names and get some
reputation enhancement among their blog peers, especially if their
are praiseworthy replies on the blog to the blog review. Anonymous
reviewers get little incremental reputation enhancement for their
unpublished reviews.
Still another problem with peer reviews is that
editors and their hand picked reviewers may be a biased subset of a
scholarly community. Others in the community may be shut out, which
is now a raging problem in academic accountancy ---
http://faculty.trinity.edu/rjensen/Theory01.htm#DoctoralPrograms
"Course Requirement: Extortion," bu Michael Granof (Professor of
Accounting at the University of Texas), The New York Times, August 12,
2007 ---
Click Here
By now, entering college students and
their parents have been warned: textbooks are outrageously
expensive. Few textbooks for semester-long courses retail for
less than $120, and those for science and math courses typically
approach $180. Contrast this with the $20 to $30 cost of most
hardcover best sellers and other trade books.
Perhaps these students and their
parents can take comfort in knowing that the federal government
empathizes with them, and in an attempt to ease their pain
Congress asked its Advisory Committee on Student Financial
Assistance to suggest a cure for the problem. Unfortunately
though, the committee has proposed a remedy that would only
worsen the problem.
The committee’s report, released in
May, mainly proposes strengthening the market for used textbooks
— by encouraging college bookstores to guarantee that they will
buy back textbooks, establishing online book swaps among
students and urging faculty to avoid switching textbooks from
one semester to the next. The fatal flaw in that proposal (and
similar ones made by many State Legislatures) is that used books
are the cause of, not the cure for, high textbook prices.
Yet there is a way to lighten the load
for students in their budgets, if not their backpacks. With
small modifications to the institutional arrangements between
universities, publishers and students, textbook costs could be
reduced — and these changes could be made without government
intervention.
Today the used-book market is
exceedingly well organized and efficient. Campus bookstores buy
back not only the books that will be used at their university
the next semester but also those that will not. Those that are
no longer on their lists of required books they resell to
national wholesalers, which in turn sell them to college
bookstores on campuses where they will be required. This means
that even if a text is being adopted for the first time at a
particular college, there is almost certain to be an ample
supply of used copies.
As a result, publishers have the chance
to sell a book to only one of the multiple students who
eventually use it. Hence, publishers must cover their costs and
make their profit in the first semester their books are sold —
before used copies swamp the market. That’s why the prices are
so high.
As might be expected, publishers do
what they can to undermine the used-book market, principally by
coming out with new editions every three or four years. To be
sure, in rapidly changing fields like biology and physics, the
new editions may be academically defensible. But in areas like
algebra and calculus, they are nothing more than a transparent
attempt to ensure premature textbook obsolescence. Publishers
also try to discourage students from buying used books by
bundling the text with extra materials like workbooks and CDs
that are not reusable and therefore cannot be passed from one
student to another.
The system could be much improved if,
first of all, colleges and publishers would acknowledge that
textbooks are more akin to computer software than to trade
books. A textbook’s value, like that of a software program, is
not in its physical form, but rather in its intellectual
content. Therefore, just as software companies typically “site
license” to colleges, so should textbook publishers.
Here’s how it would work: A teacher
would pick a textbook, and the college would pay a negotiated
fee to the publisher based on the number of students enrolled in
the class. If there were 50 students in the class, for example,
the fee might be $15 per student, or $750 for the semester. If
the text were used for 10 semesters, the publisher would
ultimately receive a total of $150 ($15 x 10) for each student
enrolled in the course, or as much as $7,500.
In other words, the publisher would
have a stream of revenue for as long as the text was in use.
Presumably, the university would pass on this fee to the
students, just as it does the cost of laboratory supplies and
computer software. But the students would pay much less than the
$900 a semester they now typically pay for textbooks.
Once the university had paid the
license fee, each student would have the option of using the
text in electronic format or paying more to purchase a hard copy
through the usual channels. The publisher could set the price of
hard copies low enough to cover only its production and
distribution costs plus a small profit, because it would be
covering most of its costs and making most of its profit by way
of the license fees. The hard copies could then be resold to
other students or back to the bookstore, but that would be of
little concern to the publisher.
A further benefit of this approach is
that it would not affect the way courses are taught. The same
cannot be said for other recommendations from the Congressional
committee and from State Legislatures, like placing teaching
materials on electronic reserve, urging faculty to adopt cheaper
“no frills” textbooks and assigning mainly electronic textbooks.
While each of these suggestions may have merit, they force
faculty to weigh students’ academic interests against their
fiscal concerns, and encourage them to rely less on new
textbooks.
Textbook Publishers Scrutinized By
Congress There's an interesting
short article in today's
Chronicle of
Higher Educationabout a briefing by textbook
publishers. Congressional staff members pelted company officials with questions
about the high costs of college textbooks and asserted that the publishers did
not have students' best interests in mind during a briefing on Capitol Hill on
Tuesday.But the publishers said they offer professors hundreds of books to
choose from for a specific subject, varying in cost from only $30 to upwards of
$100, and in some cases even let the professor purchase certain chapters of a
book that will not be wholly used. Data offered by both sides about the amount
students pay for textbooks varied from $644 to $900 a year. Congressional staff
members, many of whose children are college students, complained about the
frequency of new editions of text books that students have no choice but to
purchase. Publishers described new online products that they contend will be
more effective and less costly than traditional printed textbooks,
but in general, these staffers seemed cautious about the efficacy of online
learning tools.
The University of Illinois Issues in Scholarly Communication Blog, July 11, 2007
---
http://www.library.uiuc.edu/blog/scholcomm/
Accounting Students
Launch Online Discount Book Store Justin Tomevi and Ryan Ward, accounting and
finance majors at Eastern University near Philadelphia, brainstormed
the site,
www.halfcollegebooks.com,
during an accounting test study session. Founded on the premise of
"the most book for the buck," the store's prices are typically 15
percent less than the average college book store price. The online
store carries a large selection of discounted textbooks from major
publishers, including Houghton Mifflin and Addison Wesley, in many
subject areas, including accounting and math. SmartPros, August 16, 2007 ---
http://accounting.smartpros.com/x58785.xml
Jensen Comment
I recommend careful price comparisons before jumping on this. First
of all, online bookstores like Amazon may have better deals,
especially on used books. Sometimes there are used books available
within weeks after the new books are first published. Amazon and
Barnes & Noble in particular sell a lot of used books at very
reasonable prices. Some local college bookstores may have better
deals on used books as well as new books since there is no added
shipping fee. Huge book markups arise from the monopoly publishers
supplying the books to bookstores. Many local college bookstores,
especially bookstores owned by the colleges themselves, do not make
much, if any, profits on textbooks. Campus bookstores often use
textbooks as loss leaders drawing students into browsing high markup
items like sweatshirts, mugs, supplies, shoes, etc.
I find that Half College
Books does even have the most expensive and popular textbooks. For
example, today there are nearly 200 used copies of Horngren's Cost
Accounting (12th Edition by Horngren, Datar, and Foster) book at
Amazon at under $80 per copy plus shipping. Barnes and Noble sells
it new for $127 per copy plus shipping. Horngren has many books
available from the major online bookstores like Amazon. I couldn't
find a single one of Horngren's books available from Half College
Books.
As a matter of fact there
is an absolutely miserable set of books available under the category
Business&Economics at Half College Books.
But Adam Smith's Wealth of
Nations is for sale for a reasonable price of $15.23 plus shipping.
The problem is that this book is also available for free online ---
http://geolib.pair.com/smith.adam/woncont.html
In any case always compare
shipping costs as well as prices. Some online companies use low
prices as a come on but make it up in exorbitant shipping and
handling fees. Half College Books does seem to have reasonable
shipping costs.
August 31 reply from Eileen
Taylor [eileen_taylor@NCSU.EDU]
The
following article is related to the discussion about the future of
textbook publishing. It was included in the Raleigh News and
Observer this week and can be found at:
Basic conclusion is that textbook
publishers reward faculty for content more than universities reward
faculty for content. Thus, faculty sell textbook content to
publishers, who then sell it back to students for a profit. Students
pay for this "service"and publishers stay in business.
A possible solution is for universities
to reward faculty directly for producing content, and pass the
savings on to students. The issue I see with that solution is that
publishers are good at distributing the knowledge, so that there is
no duplication of efforts across universities. If e-publishing and
improved communication (like online education journals and the AECM
itself) can address distribution, then I think publishers are in
trouble.
Excerpt from article: "Generally the
faculty still produce the content and sell it to a publisher. The
publisher shrink wraps it and sells it back to students (at an
inflated price). Thirty years ago this arrangement made sense
because the 'hard copy"'that was the textbook represented true value
added. In the present age, the value added by the publisher is often
virtually nil, yet publishers want to maintain the same revenue
stream."
While this may be the natural goal for
the publisher, it hardly makes sense any longer for the university
or for students.
The reality is that the burden of the
present textbook scam falls primarily on students, and faculty have
up until now been provided better incentives by publishing companies
than by the colleges and universities that employ them. It's time
for some dialogue on this issue.
From the standpoint of
cost-effectiveness, it makes no sense for colleges and universities
to be both the producers and consumers of intellectual content for
which students receive a large bill from a middleman who
orchestrates a process designed to maximize off-campus profits."
(Lavon B. Page is retired as a professor
of mathematics at N.C. State University but still teaches part-time.
He served as special assistant to the provost for implementing the
university's "Learning in a Technology-Rich Environment" plan.)
Eileen Taylor
Eileen Z. Taylor, PhD
Assistant Professor,
Department of Accounting
North Carolina State University Campus
Box 8113, Nelson Hall
Raleigh, NC 27695-8113
919-513-2476
eileen_taylor@ncsu.edu
26 Nobel Laureates Support Open Access to NIH and Other
Government Funded Studies
Twenty-six US Nobel laureates in science
have written an open letter to Congress calling for an OA mandate at
the NIH (July 8, 2007). This is actually their second such letter.
The first letter (PDF), signed by 25 Nobel laureates, was sent on
August 26, 2004.
"26 Nobel Laureates Support Open Access Mandate at NIH," The
University of Illinois Issues in Scholarly Communication Blog,
July 13, 2007 ---
http://www.library.uiuc.edu/blog/scholcomm/
Journal-Value
Analyzers, Ted and Carl Bergstrom, Recognized as
SPARC Innovators
Washington, DC - June 5, 2007 - SPARC (the Scholarly
Publishing and Academic Resources Coalition) has
recognized Ted Bergstrom and Carl Bergstrom as the
new SPARC Innovators. The father-son team advances
the open sharing of scholarly information through
original research and the creation of innovative
tools that are used widely by the academic community
to assess the value of research.
Ted and Carl are best known
for their collaborations on Ted's
journal pricing Web pages
and, more recently, on the
Eigenfactor.org Web site
produced by Carl's research lab.
Ted's
journal pricing page,
which offers data reporting price per article and
price per citation for about 5,000 academic
journals, has centralized pricing information so it
can be explored and compared in ways that were
previously impossible. The site has become a vital
resource for researchers and librarians alike.
Carl's
Eigenfactor.org
site offers a completely new
and innovative approach to assessing the value of
journals; it provides researchers, librarians and
others a new mechanism to evaluate based on a
diverse array of criteria. As explained at the
Eigenfacter web site.
anks the influence of web pages. By this
approach, journals are considered to be
influential if they are cited often by other
influential journals.
Ted, an
economist, holds the Aaron and Cherie Raznick Chair
of Economics in the Economics Department at the
University of California Santa Barbara. Ted's son,
Carl, a theoretical and evolutionary biologist, is
an Associate Professor in the Department of Biology
at the University of Washington.
A Desperation Effort by Monopoly Publishers to Beat Down Open Access to
Scholarly Research Papers
What they never explain is why peer review cannot be accomplished for open
access publishing of papers!
Open access simply means that the papers, especially research funded by
taxpayers, themselves are eventually made available without having to pay
publishing companies for an obsolete service?
It's time for libraries to boycott journal publishers extracting gigantic
monopoly profits!
From the University of Illinois Issues in Scholarly Communcation
Blog on September 7, 2007 ---
http://www.library.uiuc.edu/blog/scholcomm/
SPARC on PRISM As reported in Open Access News... SPARC has released
a letter to its members about PRISM, September 6, 2007. It was
written by Heather Joseph, SPARC’s Executive Director. Excerpt:
I'm writing to bring to your attention
the recent launch of an anti-open access lobbying effort. The
initiative, called
PRISM – the Partnership for
Research Integrity in Science and Medicine”, was launched with
development support from the Association of American Publishers
and specifically targets efforts to expand public access to
federally funded research results – including the National
Institute of Health’s Public Access Policy.
The messaging on the PRISM Web site, which is aimed at key
policy makers, directly corresponds to the PR campaign
reportedly undertaken by the AAP earlier this year. As
Nature reported in January,
AAP publishers met with PR “pit bull” Eric Dezenhall to develop
a campaign against the “free-information movement” that focuses
on simple messages, such as “public access equals government
censorship,” and suggested that “the publishers should attempt
to equate traditional publishing models with peer review”. News
of this proposed campaign met with immediate and
heavy criticism
in the academic community.
The new PRISM Web site closely tracks
with the recommended PR strategy, highlighting messages that
include:
* Public access/open access will destroy the peer review
system
* Public access equals government censorship
* The government is trying to expropriate publishers’
intellectual property
This campaign is clearly focused on the
preservation of the status quo in scholarly publishing, (along
with the attendant revenues), and not on ensuring that
scientific research results are distributed and used as widely
as possible. The launch of this initiative provides a timely
opportunity for engaging faculty members, researchers, students
and administrators in dialogue on important issues in scholarly
communications.
To assist in this conversation, the Association of Research
Libraries has prepared a series of
talking points that explicitly address
each of the PRISM messages listed above....
The reaction to the launch of PRISM by the academic research
community has been immediate and quite strong. Of particular
note are reactions by these important constituencies:
1) Some publishers have called for the AAP to post a disclaimer
on the PRISM Web site, indicating that PRISM does *not*
represent their views on the issues of open access and public
access. (See
open letter from Mike Rossner, Executive Director of
Rockefeller University Press.)
2) Some journal editors have also
expressed displeasure with the initiative. For example, Tom
Wilson, Editor (and Founder) of the International Journal of
Information Management,
resigned from that editorial board in protest
of Elsevier's involvement with PRISM.
Others, including Peter Murray Rust of the University of
Cambridge (UK), have
written to publishers with which they
are affiliated as author or editor and asked them to take action
to publicly disassociate themselves with PRISM.
3) Researchers are also questioning how
their choices may result in unwanted association with PRISM.
Some are
calling for colleagues to register
displeasure over publishers’
involvement with PRISM by reconsidering submitting work,
reviewing, or editing for publishers who support the coalition
(See
). Others
are going even further,
calling for a boycott of those
publishers....
PRISM developments will be of interest to many on campus –
including those who follow open access and anyone who is
involved with PRISM publishers as an author, editor, or
subscriber. Please feel free to share this information. To stay
abreast of related news, visit the
SPARC Web site or
Peter Suber’s
Open Access News blog....
In March, Sen. Richard
Durbin (D-Ill.) introduced a textbook
affordability bill that would require publishers
to include the price of textbooks and
supplemental material when providing information
to faculty. It also calls on the companies to
list a history of revisions and to offer
textbooks and supplemental material in unbundled
forms. (Many of the proposals mirror those
listed in
state bills.)
Last summer, Rep. David Wu
(D-Ore.), one of two lawmakers to call for the
report, which is out today, and for a
prior Government Accountability Office study
of textbook costs, also
took the legislative route. When the 109th
Congress considered legislation to renew the
Higher Education Act, Wu proposed an amendment
that listed steps that all parties could take to
provide more price transparency and options for
students.
He pointed to the GAO report, which showed that
college textbook prices nearly tripled between
1986 and 2004, rising 186 percent, or an average
of 6 percent a year, during that time. By
comparison, tuition and fees rose 7 percent a
year and prices for all good rose an average of
3 percent a year in that span.
Both Durbin’s and Wu’s camps said they would
like to push for textbook affordability language
in pending Higher Education Act reauthorization
bills — though spokeswomen in each case said it
is too early to offer specific details.
But there are plenty of people who prefer lists
of best practices and voluntary recommendations
to binding resolutions. Rep. Howard P. (Buck)
McKeon, the California Republican and
then-chairman of the U.S. House of
Representatives Committee on Education and
Labor, along with Wu called last spring for a
series of hearings and a final report that would
yield cost-saving solutions for students.
“Turn the Page: Making
College Textbooks More Affordable,” is the
result of a yearlong study by the
Advisory Committee on Student Financial
Assistance, a
nonpartisan federal panel that advises Congress
on issues of access.
The advisory group adopts a common framing of
the issue. The textbook market, it says, is
driven by supply rather than demand. Publishers
set the price. Bookstores order the products.
Students have little, if any, direct influence
over the final cost, format and quality of the
textbook. The common retort from publishers: Pay
more attention to the faculty role. They are
free to choose cheaper editions or unbundled
material but resoundingly say educational value
trumps price in their purchasing decisions.
Officials at both the Association of American
Publishers and the Student Public Interest
Research Groups, the latter having lobbied hard
for changes in the textbook market, said they
are pleased with the report’s explanation of the
issues and lack of finger pointing.
“Blaming or punishing any stakeholder for market
failure is not the answer,” the report says.
. . .
Among the report’s other
recommendations for decreasing
student costs:
Expanding both textbook
rental programs and buying
consortiums that would
strengthen the used book
market.
Increasing no-cost content
options and the use of
“no-frills” textbooks and
custom course packets.
Creating more textbook
lending libraries.
Urging faculty to keep books
longer, retain older
editions and send
information earlier to
students and bookstores
about what texts are being
used.
Creating need-based grants
or emergency vouchers that
needy students could use to
purchase material.
Continued in article
Research and Publishing: The Future of Scholarly Communications
"UC Berkeley Awarded A.W. Mellon Grant to Assess the Future
Landscape of Scholarly Communication," The University of Illinois
Blog Issues in Scholarly Communication, March 2, 2007 ---
http://www.library.uiuc.edu/blog/scholcomm/
The
Center for Studies in Higher Education
(CSHE) of the University of California,
Berkeley has been recently
awarded a grant of more than $400,000 from the Andrew W.
Mellon Foundation to continue its research
into the changing nature of scholarly communication and
publication practices in the networked age. The new project,
Assessing the Future Landscape of Scholarly Communication: An
In-depth Study of Faculty Needs and Ways of Meeting Them,
under the direction of principal
investigators Jud King and Diane Harley
will extend and complement CSHE’s first phase of research, which
considered the importance of faculty values and the vital role
of peer review in faculty attitudes about their publishing
behavior, especially as it relates to the viability of new
electronic and open access publication models. Capabilities
afforded by new technologies, pressures associated with the
purchasing power of library budgets, challenges to economic
viability for university presses, and the pricing structures of
the publishing industry make this research especially timely for
the academic and publication communities at large.
Continued in article
Oligopoly Textbook Publishers are Aided by Faculty in Ripping
Off Students
The fall rush to buy textbooks is over,
but a campaign led by the State Public Interest Research Groups
to rally against the practices of the college textbook
publishing industry is not.
In a report released today that is
largely a summary of previous findings, PIRG accuses publishers
of undermining the used book market and unnecessarily inflating
prices. Studies show that the cost of textbooks is rising faster
than the rate of inflation, and the price issue has gained
traction with at least
one lawmaker this year.
“Required Reading: A Look at the Worst
Publishing Tactics at Work,” and a
preceding report, released in August,
are part of the
Make Textbooks Affordable Campaign.
The latest report draws on anecdotal information from bookstore
managers and faculty members across the country, and includes
examples (identifying colleges, publisher names and book titles)
of practices that PIRG says drive up textbook costs for
students.
Among the culprits, according to PIRG:
professors who customize their own textbooks by choosing the
material to include. The report says that while custom books are
often less expensive to purchase, the texts are so particular to
an instructor or a college that they have no value in the
greater used book market.
“There is no chance for sale on Amazon
or eBay, and some books have built-in workbook pages,” said
Sabrina Case, affordable textbooks coordinator for the PIRGs.
“Students can’t recoup their expenses. If our responses are any
indication, custom books are a major concern.”
Bruce Hildebrand, executive director
for higher education at the Association of American Publishers,
blasted the report’s lack of empirical data or independent
information, saying that it “reeks of desperation” and is
another case of PIRG cherry-picking examples that are largely
exceptions to the rules.
Hildebrand said many custom books — and
particularly those that are used by professors who teach courses
year after year — are designed to be resold. “Custom books don’t
go into the wholesale used book cycle — so what?” Hildebrand
said. “If the faculty member chooses the material, it’s more
likely to be used again on the same campus. If that’s not the
best of both worlds, I don’t know what is.”
Hildebrand said that students’
complaints tend to be less about price than use — that they are
getting a poor value because their professors assign only a
portion of a book. Custom books meet the demand for effective
use of material and lower cost, he added.
A
report put out by the publishers’
organization earlier this fall showed that by a 17 to 1 ratio,
professors weigh the academic merits of a textbook more strongly
than they do its price. The PIRG report says that “faculty
should give preference to the lowest cost option when the
educational content is comparable.”
“Valuable books can be affordable,”
Case added. “The two aren’t mutually exclusive.”
The report summarizes many of the
concerns that PIRG and other groups have about the publishing
industry, including the practices of bundling additional
material (such as CD-ROMs) with textbooks and of introducing new
textbook editions that have few substantive updates.
Among the report’s suggestions are
that:
Publishers should keep each
textbook edition and related ancillary items on the market
as long as possible without sacrificing educational content.
Publishers should give preference
to print or online supplements to current editions over
producing entirely new editions.
Colleges should encourage students
to use online book swaps so that students can buy and sell
used books and set their own prices.
Case said that some textbooks are bound
with material that includes an identification number used for
finding online material for the class. Once that code comes off
the book, she said the next student can’t access the same
material, thus eliminating the buy-back potential.
Hildebrand said publishers that put out
books with electronic keys generally allow students to access
the same homework assignment for multiple semesters. And as for
bundling: “There’s no way to compare streamlined paperback
versions with little or no art with hardbound for-color editions
with massive supplements,” he said. “It’s like saying a computer
that comes with software costs more. Well, yeah.”
PIRG and the publishers’ group have
been at odds for months over the interest group’s recent
campaign. Citing data from the State PIRGs, that report said
that students spend an average of $900 a year on books. But the
publishers’ association, in
Why PIRG is Wrong,”
called out PIRG for misleading readers — saying that a 2005 GAO
study shows that the $900 amount also includes fees. Another
national research group has estimated that books alone amount to
roughly $650 a year per student.
The latest PIRG report again uses $900,
and Case said the group stands by its own research and the
original figure.
Five major UK research funders which require open access to
the published results
October 1st 2006 is a major milestone
for the open access movement. There are now five major UK
research funders which require open access to the published
results of all the research that they fund.
The Medical Research Council (MRC),
Biotechnology & Biological Sciences Research Council (BBSRC),
Economic & Social Research Council (ESRC) and National
Environmental Research Council (NERC) have all introduced
policies requiring deposition in an open access repository,
which took effect on October 1st 2006.
These new policies come into effect on
the anniversary of the introduction of the Wellcome Trust's
policy on open access, on October 1st 2005.
Matthew Cockerill,
PhD Publisher, BioMed Central
Oligopoly academic journal publishers brought this on themselves by
price gouging research libraries
When the
Federal Public Research Access Act was
proposed this year, scholarly society after scholarly society
came out against the legislation, which would require federal
agencies to publish their findings, online and free, within six
months of their publication elsewhere. The future of academic
research was at stake, the societies said, and both their
journals and the peer review system could collapse if the
legislation passed.
is increasingly hard, however, to say
that those societies reflect the views of academe on the issue.
In July, the provosts of 25 research universities
came out in favor of the legislation,
saying that the current system of research publishing leads to
outrageously high journal costs that are harming libraries and
making it impossible for people to follow research. Now the
presidents of 53 liberal arts colleges — at the behest of their
librarians — are issuing
a joint letter backing the
legislation. And while it is unlikely that the bill will pass
this year, the new letter that was released Tuesday is part of a
broader effort by open access supporters to place higher
education in a new position when the debate is renewed next
year.
Nancy S. Dye, president of Oberlin
College, where the new letter was organized, said that her
interest was in part — but only in part — financial. “All
liberal arts colleges are finding it more and more difficult to
purchase the materials we need,” she said. But Dye stressed that
there is also “a philosophical view” that is spreading:
“Knowledge is made to be shared.” And while that may sound
idealistic, Dye said there is another “underlying view” that
makes sense to her and other presidents. “If this research is
being done with federal money, it would only seem right that the
people who are paying taxes have access to the research
findings.”
In another sign of the shifting debate
on open access, the American Chemical Society — a major journal
publisher and a strong critic of the open access legislation —
announced that it was creating an “author choice” program where
authors for its journals could pay a fee to have their articles
available online and free should the authors “wish or need” to
do so.
Society officials denied that this was
an attempt to compromise, but said that the change was needed
because of other shifts in journal publishing. Pushed by the
National Institutes of Health, biology journals have been
speedier to move toward open access than have chemistry
journals, and with more chemistry work these days linked to
biology, the move was seen as key to promoting healthy
interaction between the disciplines. (The fees would range from
$1,000 to $3,000 and would not be discussed until after an
article had been accepted, to prevent financial incentives from
entering into the peer review process.)
The letter from the liberal arts
college presidents is straightforward. It says that their
institutions can’t afford rising journal prices, that their
faculties and students want more access to journals than the
institutions can provide, and that liberal arts colleges play a
key role in producing future Ph.D.’s, so their exposure to
journals matters. Oberlin is among many liberal arts colleges
with unusually high percentages of graduates who go on to earn
doctorates.
“Adoption of the Federal Research
Public Access Act will democratize access to research
information funded by tax dollars,” the letter says. “It will
benefit education, research, and the general public.”
Presidents signing the letter come from
all over the country. Among them are the heads of Amherst,
Barnard, Bowdoin, Coe, Dickinson, Franklin & Marshall,
Kalamazoo, Lake Forest, Middlebury, Occidental, Reed, Rhodes,
Vassar, Wabash and Whitman Colleges. They were organized by the
Oberlin Group, an organization of the libraries of liberal arts
colleges.
Ray English, director of libraries at
Oberlin, said that the current system is “fundamentally
unstable,” adding that “I’ve been looking at these issues for
more than a decade now, and it’s clear that there are problems
of access to research that are such that we need
transformational strategies.”
Diane Graves,
university librarian at Trinity University, in Texas, another of
the institutions backing the letter, agreed. “The current model
is broken so it’s time for new models. Staying with the status
quo is unsustainable.”
Graves said that in five years in her
position, her library has received “generous” overall budget
increases from the university, but that they are never enough to
keep up with journal inflation. Dozens of journals have been
cut, and she is forced each year to go to each academic
department to seek agreement on what to eliminate. What
frustrates her the most, she said, is continuing to cut off
access to information professors and students want — when the
model being pushed by the legislation would provide that
knowledge without increasing the college’s costs.
As for the scholarly societies, Graves
said that she knew that they did valuable work, but questioned
why that work needed to be subsidized by journals. “A lot of
societies have relied on journals to fund other activities. But
why should libraries at colleges — nonprofit entities within
nonprofit entities — fund those activities? Shouldn’t members be
funding those activities? We need to have this conversation.”
Could
this be a conflict of interest because some of these scholars get
paid to review submissions Several groups of provosts — some
from liberal arts colleges, others from research universities — have
been
endorsing federal legislationthat
would require most federally backed research to be made available
online, free within six months of publication elsewhere. Now a group
of academic leaders is
coming out against the legislation,
saying that it would harm scholarly journals and hurt the peer
review process. This letter features endorsements from senior
officials at the State University of New York, the University of
Alabama at Birmingham, the University of Chicago and elsewhere.
Supporters of the legislation are attacking the new letter. Inside Higher Ed, September 26, 2006 ---
http://www.insidehighered.com/news/2006/09/26/qt
Jensen Comment
This makes no sense to me, because there are alternative ways to
conduct the refereeing process.
At last editorial boards are protesting rip-offs of oligopoly publishers Another journal declaration of independence is in
progress. The entire editorial board of Topology has resigned to protest
Elsevier's refusal to lower the subscription price.
University of Illinois Issues in Scholarly Communications Blog, August
14, 2006 ---
http://www.library.uiuc.edu/blog/scholcomm/
Students entering college in 2006 can
expect to pay more than $500 for textbooks for their first
semester courses, a huge outlay of cash for many who have
already taken out student loans to pay for tuition and fees.
University of Connecticut freshman Ben March returned to UConn’s
Co-op bookstore for an accounting textbook last February, after
having already spent $400 on other textbooks. The book cost
$101. “I was trying not to buy it, but I ended up needing it,"
March said, according to boston.com. “The prices are depressing,
but you really don’t have a choice.”
Full-time students in a four-year
public college paid $898 for books in 2003-2004, equal to 26
percent of the cost of tuition and fees, according to a
Government Accountability Office report issued in 2005. Congress
is looking at the problem, and Virginia and California have
passed legislation, but these measures have had little impact on
student costs so far.
Faculty members are now being asked by
state legislatures to consider pricing in their selection of
textbooks and study materials. Is it necessary, for example, for
an introductory accounting course to use the latest edition of a
text that comes from the publisher bundled with a CD-ROM and
study aids, which jack up the price?
New editions, which now come out every
three or four years, cost students up to 45 percent more, the
Washington Post says. The most popular accounting textbooks have
been through many editions, and changes from the previous
editions may be limited to the use of color and graphics.
Accounting, by Warren, Reeves and Fess, published by
South-Western Press, is now in its 22nd edition.
Publishing companies market their wares
directly to professors at regional and national meetings of
groups like the American Accounting Association, where
professors sign up to receive complimentary copies of new
textbooks. Large sales teams from companies like McGraw-Hill,
publisher of Principles of Financial Accounting, 18th edition,
and Prentice-Hall, publisher of Introduction to Financial
Accounting, 9th edition, attend the national meetings.
A survey conducted by the California
Student Public Interest Research Group reported that faculty
members in all disciplines at Stanford University said that the
replacement of old editions by new ones was “rarely” or “never”
justified. But many continued to order them for their classes
anyway, according to the American Intelligence Wire.
Eighty-seven percent of faculty surveyed in the entire
California system favored publishing new information in the form
of paperbound supplements.
A Textbook Task Force at Western
Connecticut State University (WCSU), recommended not buying new
editions or bundled products, but faculty peers did not endorse
these proposals. The faculty senate, while acknowledging that
textbook pricing was a persistent problem, did not agree with
the Task Force’s opposition to bundling or to new editions,
saying that educators in the professions use evidence-based
materials and needed to consider the requirements of
professional licensing.
The senate found that providing
“faculty and students with more comprehensive, current pricing
information in a timely, easily-accessible fashion is not only
critical, but the most practical first step to take.” The WCSU
task force recommendations and responses are published on the
university’s Web site.
In fields like accounting, where older
editions might work in introductory courses, professors have
individual goals for more advanced courses, and texts should
include current law, research or cases, instructors say. The
text should be considered an investment, a reference that the
student will want to keep. Additional resources may also prove a
good investment for many students.
Publishers determine wholesale prices
for textbooks, and college bookstores determine the final price
for the book. The average mark-up college bookstores add to new
books is 33 percent, and the mark-up for used books is 50
percent, Bruce Hildebrand, executive director at the Association
for American Publisher says, according to MSNBC.
Peg Godwin, manager of the University
of Idaho’s Bookstore, told the university newspaper, the
Argonaut, that it is hard to break even. “If we buy 100 books,
we have to sell 80 books just to pay for those books and then we
have to sell another four or five books to pay for the freight
on them. And then we have to pay all our salaries, and salaries
run around 12 to 13 percent, so we have to sell those last three
books.”
Most college bookstores have textbook
buyback programs, but with new editions coming out so
frequently, there are not many books stores can accept for
resale. University of Texas Co-op President, George H. Mitchell,
says that UT students buy an average of 40 percent used books,
much higher that the national average of 25 percent, the
Financial Times reports. The process is successful in Texas,
says Jennifer Libertowsky, spokeswoman with the National
Association of College Stores, because instructors provide lists
of books that will be used in classes well in advance of the
buying period.
Students are finding that purchasing
online provides substantial savings on both new and used books,
the Washington Post says. Popular sites, in addition to
Amazon.com, include www.campusbookswap.com, which allows
students to buy and sell used books directly, and
www.textbookx.com.
And like other products, some textbooks
are cheaper in Canada. In some cases savings can equal 90
percent of the U.S. retail price, the Post says, although
AccountingWeb found prices for accounting textbooks were only
slightly lower than U.S. prices. Shipping time is estimated to
be three to six weeks. Buyers can go to www.amazon.ca.
But shop early or pay full price. As of
August 1st, Amazon had only one new copy of Principles of
Financial Accounting by Wild, Larson and Chiapetta, (Chapters
1-17) now in its 18th edition and selling for $113. McGraw-Hill
does not list their price for the book. There were only four new
copies of Introduction to Financial Accounting by Horngren,
Sundem, Elliott and Philbrick available on Amazon for $106.70.
The book lists on the Prentice-Hall Web site at $149.50 and
costs $165 with Peachtree software.
And the most successful textbook in
history, according to Amazon, Warren, Reeves and Fess’s
Accounting, published by South-Western Publishing in a number of
different formats, is also nearly sold out. Amazon says they
have more copies of all of these books on order.
"In today's
Wall Street Journal (online subscription required) Sharon Begley
provides a rare look into the world of academic journal rankings.
She describes some of the ways that scientific journals manipulate
their "impact factors"."
and later describing his/her (I would imagine
people know, but I won't out anything) own experiences (I would add to
his below comment by saying I would be surprised if anyone who has
published a few papers has not had the reference coaching happen now and
then).
"One [way] is to ask authors to include additional citations to
other pieces in the journal. I've seen this tactic used several
times (both on my pieces and on those of colleagues). Typically,
once a piece is either accepted or in the "last round", the editor
might "suggest" other articles in the same journal which might
possibly be cited. In one case, the editor gave a colleague of mine
a list of eight possible
citations (which would have increased the total citations in the
author's bibliography by almost 50%). However, this doesn't happen
as much as you'd think, because I use my bibliography as one of the
criteria I use in deciding which journal to submit a piece to: if I
cite a good number of articles from a particular journal, it's
probably a good fit for the piece"
John B. West has had his share of requests,
suggestions and demands from the scientific journals where he submits his
research papers, but this one stopped him cold.
Dr. West, the Distinguished Professor of Medicine
and Physiology at the University of California, San Diego, School of
Medicine, is one of the world's leading authorities on respiratory
physiology and was a member of Sir Edmund Hillary's 1960 expedition to the
Himalayas. After he submitted a paper on the design of the human lung to the
American Journal of Respiratory and Critical Care Medicine, an editor
emailed him that the paper was basically fine. There was just one thing: Dr.
West should cite more studies that had appeared in the respiratory journal.
If that seems like a surprising request, in the
world of scientific publishing it no longer is. Scientists and editors say
scientific journals increasingly are manipulating rankings -- called "impact
factors" -- that are based on how often papers they publish are cited by
other researchers.
"I was appalled," says Dr. West of the request.
"This was a clear abuse of the system because they were trying to rig their
impact factor."
Just as television shows have Nielsen ratings and
colleges have the U.S. News rankings, science journals have impact factors.
Now there is mounting concern that attempts to manipulate impact factors are
harming scientific research.
Conceived 40 years ago, impact factors are
essentially a grading system of how important the papers a journal publishes
are. "Importance" is measured by how many other papers cite it, indicating
that the discoveries, methodologies or insights it describes are advancing
science.
Impact factors are calculated annually for some
5,900 science journals by Thomson Scientific, part of the Thomson Corp., of
Stamford, Conn. Numbers less than 2 are considered low. Top journals, such
as the Journal of the American Medical Association, score in the double
digits. Researchers and editors say manipulating the score is more common
among smaller, newer journals, which struggle for visibility against more
established rivals.
Thomson Scientific is set to release the latest
impact factors this month. Thomson has long advocated that journal editors
respect the integrity of the rankings. "The energy that's put into efforts
to game the system would be better spent publishing excellent papers," says
Jim Testa, director of editorial development at the company.
Impact factors matter to publishers' bottom lines
because librarians rely on them to make purchasing decisions. Annual
subscriptions to some journals can cost upwards of $10,000.
The result, says Martin Frank, executive director
of the American Physiological Society, which publishes 14 journals, is that
"we have become whores to the impact factor." He adds that his society
doesn't engage in these practices.
Journals can manipulate impact factors with
legitimate editorial decisions. One strategy is to publish many review
articles, says Vicki Cohn, managing editor of Mary Ann Liebert Inc., a
closely held New Rochelle, N.Y., company that publishes 59 journals. Reviews
don't report new results but instead summarize recent findings in a field.
Since it is easier for scientists to cite one review than the dozens of
studies that it summarizes, reviews get a lot of citations, raising a
journal's impact score.
"Journal editors know how to increase their impact
factor legitimately," says Ms. Cohn. "But there is growing suspicion that
journals are using nefarious means to pump it up."
One questionable tactic is to ask authors to cite
papers the journal already has published, as happened to UCSD's Dr. West,
who says that he has great respect for the journal and its editors despite
this episode. He declined the request, and the journal published his paper
anyway, in March.
Richard Albert, the deputy editor of the American
Journal of Respiratory and Critical Care Medicine, says that the request
goes out to every scientist who submits a paper. "It's boilerplate, a form
letter," he says. The letter has been in use for many years, according to
Dr. Albert, who says he has always opposed the inclusion of the passage but
was overruled by the journal's former editor.
Journals also can resort to "best-of" features,
such as running annual summaries of their most notable papers. When
Artificial Organs did this in 2005, all 145 citations were to other
Artificial Organs papers. Editor Paul Malchesky says the feature was
conceived "as a service to the readership. It was not my intention to affect
our impact factor. In terms of how we run our operation, I don't base that
on impact factor."
Self-citation can go too far. In 2005, Thomson
Scientific dropped the World Journal of Gastroenterology from its rankings
because 85% of the citations it published were to its own papers and because
few other journals cited it. Editors of the journal, which is based in
Beijing, did not answer emails requesting comment.
Journals can limit citations to papers published by
competitors, keeping the rivals' impact factors down. An analysis of
citations in the Journal of Telemedicine and Telecare shows very few
citations of papers in a competitor, Telemedicine and e-Health, "while we
cited them liberally," says editor Rashid Bashshur, director of telemedicine
at the University of Michigan, Ann Arbor.
Richard Wootton, editor of JTT, says that he
believes it's true that his journal cites its competitor less frequently
than Dr. Bashshur's journal cites JTT, "but it doesn't seem to me that there
is a sinister explanation." Dr. Wootton adds that "when we edit a paper...we
sometimes ask authors to ensure that the relevant literature is cited." But
"I can state unequivocally that we do not attempt to manipulate the JTT's
impact factor. For a start, I wouldn't know how to."
Scientists and publishers worry that the cult of
the impact factor is skewing the direction of research. One concern, says
Mary Ann Liebert, president and chief executive of her publishing company,
is that scientists may jump on research bandwagons, because journals prefer
popular, mainstream topics, and eschew less-popular approaches for fear that
only a lesser-tier journal will take their papers. When scientists are
discouraged from pursuing unpopular ideas, finding the correct explanation
of a phenomenon or a disease takes longer.
"If you look at journals that have a high impact
factor, they tend to be trendy," says immunologist David Woodland of the
nonprofit Trudeau Institute, of Saranac Lake, N.Y., and the incoming editor
of Viral Immunology. He recalls one journal that accepted immunology papers
only if they focused on the development of thymus cells, a once-hot topic.
"It's hard to get into them if you're ahead of the curve."
As examples of that, Ms. Liebert cites early
research on AIDS, gene therapy and psychopharmacology, all of which had
trouble finding homes in established journals. "How much that relates to
impact factor is hard to know," she says. "But editors and publishers both
know that papers related to cutting-edge and perhaps obscure research are
not going to be highly cited."
Another concern is that impact factors, since they
measure only how many times other scientists cite a paper, say nothing about
whether journals publish studies that lead to something useful. As a result,
there is pressure to publish studies that appeal to an academic audience
oriented toward basic research.
Journals' "questionable" steps to raise their
impact factors "affect the public," Ms. Liebert says. "Ultimately, funding
is allocated to scientists and topics perceived to be of the greatest
importance. If impact factor is being manipulated, then scientists and
studies that seem important will be funded perhaps at the expense of those
that seem less important."
SSRN interview with
PrawfsBlawg via Financial Rounds
Since I get so much material from
them, giving SSRN a plug is the least I can do.
Prawfsblog has an interesting
interview with Gregg Gordon of SSRN. Probably interesting
mainly to academics, but....
On look-in:
SSRN was founded in 1994 by
Michael Jensen and Wayne Marr to provide an efficient
means to distribute scholarly research.Our motto, Tomorrow’s Research Today, drives what
we do every day.Tomorrow’s Research
Today means rapidly distributing research worldwide
enabling researchers around the world to be on the
cutting edge of new ideas.
Bob Jensen Comment
The SSRN home page is at
http://www.ssrn.com/
Since I am such a huge fan of open sharing, a major disappointment
for me is that SSRN became a huge business operation charging fees
per download or for annual subscriptions. Many professors who
previously would not charge to send copies of their working papers
for free now refer students and other interested researchers to the
fee-based SSRN. SSRN does provide a useful service, but it has been
at the expense of free open sharing. In fairness, the SSRN has
become a free site for some announcements and news.
I agree with your comment about huge
business operation.
I am not a particularly enthusiastic
fan of SSRN (the profit thing bothers me, and the fact that it
is not comprehensive of all SS disciplines also bothers me).
Perhaps the model in 1 or 3 could be
emulated much better in Accounting.
It is difficult to marry openness and
profit motive (except in successful marriages in humans).
Regards,
Jagdish
Many scientists oppose open access publishing At first glance, it seems that the
research world is united against the
Federal Research Public Access Act.
Scholarly associations are lining up to express their anger over the
bill, which would have federal agencies require grant recipients to
publish their research papers — online and free — within six months
of their publication elsewhere. Dozens of scholarly groups have
joined in two letters — one organized by the
Association of American Publishersand
one by the
Federation of American Societies for Experimental Biology.
To look at the signatories (and the tones of
the letters), it would appear that there’s a wide consensus that the
legislation is bad for research. The cancer researchers are against
it. The education researchers are against it. The biologists are
against it. The ornithologists are against it. The anthropologists
are against it. All of these groups are joining to warn that the
bill could undermine the quality and economic viability of scholarly
publishing.
Scott Jaschik, "In Whose Interest?" Inside Higher Ed, June
15, 2006 ---
http://www.insidehighered.com/news/2006/06/15/open
Controversies Over Oligopoly Pricing of Textbooks As students come back to campus and get
their spring semester assignments, many will pause in the bookstore
and make a choice. They can buy everything on the syllabus -- or
take a chance. Sometimes the math is easy: $189.75 for a thick text
on principles of management? No thanks. Textbook prices have been
rising at double the rate of inflation for the past two decades,
according to a Government Accountability Office study. In Virginia,
more than 40 percent of students surveyed by the State Council of
Higher Education for Virginia said they sometimes just do without.
Susan Kinzie, "Swelling Textbook Costs Have College Students Saying
'Pass'," The Washington Post, January 23, 2006 ---
http://www.washingtonpost.com/wp-dyn/content/article/2006/01/22/AR2006012201290.html?sub=new
I think the antitrust lawyers need to
look at the publishing oligopoly and the illegal (????) tying of
textbook bundles. The use of the bundled-ISBN has been one of
the biggest ripofffs in the history of sales techniques.
Even authors get ripped off.
Richard J. Campbell
Publisher and Education Fraud
Buy up and close down the competition: It seems like this is
what robber barons used to do in the 1900s and why the U.S. passed
antitrust laws that don't seem to be working very well these days.
MANY executives dream of dominating
their industries the way BAR/BRI does the business of helping
law school graduates prepare for bar examinations. Every law
student knows BAR/BRI. Hundreds of thousands of them have taken
its courses to pass the bar, an essential step in most states
before a law school graduate can practice law. Some of the best
law professors in the country teach segments of the company's
courses, which are offered live in select locations and on
videotape at others.
But now BAR/BRI could use a few lawyers
itself. Some of the people who paid the fees, took the courses
and passed the bar have turned on the company, which is owned by
the Thomson Corporation of Stamford, Conn. Represented by an
aggressive Los Angeles lawyer named Eliot G. Disner, they have
filed a lawsuit charging that the company that helped them to
become lawyers has operated an illegal monopoly and has
overcharged hundreds of thousands of students by an average of
$1,000 each - or, collectively, by hundreds of millions of
dollars.
In complaints filed in the spring
and summer, different groups of students charged that BAR/BRI
has paid competitors to shut down and negotiated illegal
agreements with potential competitors to divide the market. In
particular, they cite a 2003 agreement with Louisiana State
University, which until 2004 operated its own bar review course;
under the deal, BAR/BRI promised to pay tens of thousands of
dollars each year to the school, and the school promised not to
run a competing bar review course.
Continued in article
Big trouble in store for academic journal monopolists The European Commission, the executive
arm of the European Union, has issued a
report that
recommends open access to all publicly financed research, according
to an article in The
Guardian. The report calls for a
“guarantee” of open access. It recommends creating that guarantee by
having researchers put copies of published articles in online
archives that are free to all. Such a step would be stronger than
the one taken nearly a year ago by the National Institutes of
Health, which merely requested that its grantees put copies of their
published articles in the agency’s own online repository, PubMed
Central (The Chronicle, February 4, 2005). Open-access advocates,
including Peter Suber, director of the Open Access Project at Public
Knowledge, a nonprofit group that advocates the free flow of
information, hope the report will spur national governments—or even
all of Europe—to make such public archiving mandatory. (Mr. Suber
has blogged about the report
here) But scientific publishers fear
that if research papers are free on the Web, readers may stop paying
for subscriptions (The Chronicle, January 30,
2004).
Chronicle of Higher Education News Blog 4/19/06
"European Panel Endorses Broad Open Access Policy for Research,"
Scholarly Communication Blog from the University of Illinois, April
20, 2006 ---
http://www.library.uiuc.edu/blog/scholcomm/
What’s the state of open-access science
publishing today? Depending on who’s counting, 95 percent of
research papers in the life sciences are still locked up by the big
commercial publishers—Elsevier, Springer, and the rest. It’s
ludicrous at a time when the Internet has pushed the actual cost of
distributing a research paper close to zero . . . Scientific
publishing is a $10 billion global business, growing 10 percent a
year. They’re not going to let go without a fight. The Association
of American Publishers has hired [former congressperson] Pat
Schroeder as its president and chief lobbyist—the queen of darkness.
They went up to Capitol Hill and said we were socializing scientific
publishing. NIH knows where its purse strings are.
Spencer Reiss, "Science Wants to Be Free," MIT's Technology
Magazine, May 2006 ---
http://www.technologyreview.com/articles/05/05/issue/forward_science.asp?trk=nl
Jensen Comment: We looked for the enemy and according to Pogo
"he is us." In an instant scientific papers could be posted
free to everybody at Web sites, and scientific associations could
set up refereeing processes that work much like the way refereeing
works to day. In fact the refereeing process itself could even
become more open and subject the research findings to a broader
audience of critics. The problem is that reputations, tenure,
and performance rewards are currently built upon the "elitist
rankings" of journals where professors publish. The enemy is
the system itself that cannot break the bindings of tradition.
The open-access method of
distributing scientific journals, says John E. Cox, a
publishing-industry consultant, "is the most articulate and
serious threat to the conventional publishing market that we've
seen."
Lila Gutterman, "The Promise and Peril of 'Open
Access,'" The Chronicle of Higher Education, January
30, 2004, Page A10.
To access an article that appeared in
the Journal of Inorganic Biochemistry, for example, users will
still need to visit a research library that subscribed to the
publication. Those who live near Harvard University, though, would
be out of luck: the school cancelled its subscription in January
as a cost-cutting measure. So did Cornell University, citing the
$2,178-a-year subscription cost. "The Search for Science," Technology
Review From MIT, December 2, 2004 --- http://www.technologyreview.com/articles/04/12/wo_asbrand120204.asp?trk=nl
GAO reports that astounding prices of our textbooks are not
justified on the basis of the costs of supplementary materials
In time for the new school year, the
Government Accountability Office has released a sobering report
on the soaring price of textbooks. Over the past two decades,
the report tells us, "college textbook prices have risen at
double the rate of inflation."
We're used to paying $25 for a
hardcover novel, but my casebook on contracts now sells to
students for $103, and the best-selling general chemistry
textbook (co-authored by my father-in-law) costs $148. At state
universities, textbooks and supplies account for 26 percent of
all student fees, including tuition. At junior colleges, they
are a whopping 72 percent.
The G.A.O. report falls short, however,
by attributing this run-up in prices to the development of
"CD-ROM's and other instructional supplements." The real problem
is the lack of price competition. A series of mergers has
ensured that although there are hundreds of textbooks to choose
from, the five largest publishers control 80 percent of the
market.
It's easy for prices to drift upward
when the person choosing the product doesn't really care how
much it costs. Instead of competing on price, publishers compete
for professors' attention with an excess of computerized bells
and whistles.
Indeed, the pricing problems with
textbooks are eerily analogous to those affecting prescription
drugs. In both cases you have doctors (Ph.D.'s or M.D.'s)
prescribing products. In neither case does the doctor pay for
the product prescribed - in many cases, he or she doesn't even
know what it costs. And the clincher is that in both cases, the
manufacturers sell the same product at substantially reduced
prices abroad.
The analogy to prescription drugs
suggests a possible solution. Perhaps universities can take a
lesson from managed health care. Health maintenance
organizations are often criticized for being too stingy, but
let's not forget that they've played an important role in
containing health care costs.
So just imagine what would happen if
universities started to provide textbooks to their students as
part of the tuition package. Of course tuition would have to
rise, but for the first time universities would start caring
about whether their professors were too extravagant in the
selection of class materials.
This "textbook maintenance
organization" wouldn't require a huge centralized bureaucracy.
Universities would probably give professors a textbook budget
per student. Those who exceeded the budget would have to seek
their deans' approval. Some enlightened colleges might even give
a share of the savings to professors who don't use up all of
their budgets.
Even publishers might not do so badly
under this new system. Under the current arrangement, many
students protest exorbitant prices by simply refusing to buy
textbooks. They make do with slightly older editions, read
library copies or share with other students.
Not only do publishers lose these
sales, but teachers are irritated because students cannot read
along in class or look up information that is relevant to the
discussion. Under textbook maintenance organizations, we'd
return to the old days where everyone was on the same page.
Still think a system where schools
provide free textbooks would never work? Well, we already have
one at the elementary and secondary levels. Unlike Hogwarts,
which requires Harry Potter to buy books each year, most
American public schools own their assigned books and buy new
editions only when it's absolutely necessary.
Continued in article
Jensen Comment:
In fairness, there may be something to the claims by textbook
publishers that profits are cut hard by costs of sales
representatives and losses of new book sales in used book markets
that return nothing to the original publishers. Whether or not
we want the sales representatives stopping by our offices every
semester, these sales representatives are paid only from the new
book sales. This does not, however, justify the occasional
practice of publishers to come out with "new" editions that are not
very new in content and are solely aimed at destroying the used book
market for an "older" edition. A new addition should have
substantial new material and substantive rewrites.
Hopes of opening up research findings
to a wider readership and breaking the stranglehold of
publishers over academic journals will be aired at a conference
at Southampton University today.
Southampton, the first UK university to
make all of its academic and scientific output freely available,
announced that its repository will in future be an integral part
of its research infrastructure.
Advocates of open access won the
backing of MPs last year but have not yet succeeded in
convincing ministers. The escalating cost of journals - and the
rising number published - is a major headache for university
libraries, but supporters of open access argue there is a moral
case for making findings freely available. They hope it will
increase the influence of British science internationally and
help researchers in developing countries where expensive
journals are hard to access.
The Commons science and technology
committee backed experiments with open access publishing where
the author pays and it is free to the reader but this was
rejected by the government after determined lobbying by
publishers. The MPs also suggested trials of open access
repositories where the researcher publishes in a paid-for
journal but archives his paper at his or her university. This
was ignored by the government.
Faced with the reluctance of
governments in the UK and abroad to push for open access by
attaching conditions to research grants, the open access
movement is trying to get self-archiving off the ground on a
large scale.
Following a technical seminar yesterday
discussing the lessons learned at Southampton, senior librarians
and university managers will debate future developments today.
Robert Campbell, president of Blackwell Publishing, is due to
consider how author self-archiving of journal articles might
affect learned society journals, and reflect on the balance
between providing open access to articles and protecting the
journals which publish them.
Professor Stevan Harnad, one of the
founders of the open access (OA) movement, argues there are two
roads to open access - the 'golden road' of publishing in an OA
journal (author-institution pays publication costs instead of
user-institution) and the 'green road' of publishing in a non-OA
journal but also self-archiving the article in an OA archive.
He believes self-archiving by
researchers should be mandated by universities and funders such
as the research councils. (The influential Wellcome Trust, which
awards grants of £1.2bn a year, has come out strongly in favour
of open access publishing.)
Academic journals are anxious about
these developments. One of the most prestigious, Nature, is
encouraging self-archiving - but only after six months, meaning
that fellow researchers would have no realistic choice but to
subscribe.
The joint information systems committee
(Jisc), which coordinates information technology at UK
universities, is encouraging the creation of open access
journals and has funded free access for universities to journals
published by BioMed Central. Jisc said that since it first
signed up for BioMed Central membership in July 2003, there had
been a huge increase in support and usage from researchers in
the UK.
Submissions to BioMed Central's
journals by UK academics have increased by 180%, and
publications have increased by 210%. Downloads of BioMed Central
journal articles by the UK community have more than doubled
since July 2003. "These results demonstrate that the Jisc
membership has had a huge impact on the awareness of open access
publishing in just one year," said a spokesman.
This month Jisc awarded a total of
£150,000 to some of the key scholarly publications in their
fields: the New Journal of Physics (published by the Institute
of Physics Publishing); Nucleic Acids Research (Oxford
University Press); Journal of Medical Genetics (BMJ publishing
group Ltd); the journals of the International Union of
Crystallography (IUCr); and The Journal of Experimental Botany
(The Society for Experimental Biology). Jisc funding will ensure
the waiving of all or part of the submission/publication fees
for all UK HE authors.
In the US the Public Library of Science
(PLoS) announced it was embarking on a new phase of "its
ambitious plan to transform scientific publishing", with
the launch in 2005 of three new open-access journals: PLoS
Computational Biology, PLoS Genetics, and PLoS Pathogens.
"College Textbook Prices Criticized," by Stuart
Silverstein, Los Angeles Times, February 2, 2005 --- http://snipurl.com/textbookFeb_4
A national student activist
organization stepped up its criticism of college textbook
publishers Tuesday, asserting that the industry imposed
exorbitant wholesale price increases totaling 62% over the last
decade on top-selling books. That amounts to more than double
the nation's overall rise in consumer prices during the same
period.
"Textbook prices are skyrocketing,
and publishers continue to use gimmicks to inflate the price,
making higher education less affordable," said Merriah
Fairchild, a Sacramento-based higher education advocate. She
worked with the national State Public Interest Research Groups
organization in preparing a new report on textbook pricing
released Tuesday.
The activist organization also
complained that the textbook publishing industry charged U.S.
students more than foreign students for the same texts. It found
that the average textbook cost 17% more in the United States
than it did in Britain. In all, it estimated that the average
U.S. college student spent about $900 a year on textbooks,
although industry officials put the figure at $625.
The college textbook industry called
much of the report badly flawed, saying the findings were based
on a small sampling of popular but costly textbooks that
exaggerated the overall rise in prices to students. Industry
officials also maintained that the price of textbooks had risen
more slowly than college tuition and fees.
They also sought to shift some blame
for costs onto college instructors and their faculty committees,
saying that they were free to order less expensive texts for
their students. Professors "are in control of that
choice," said Bruce Hildebrand, executive director for
higher education with the Assn. of American Publishers.
But Hildebrand also said that the
student organization's estimated 17% gap in prices of texts sold
in the U.S. compared with those in Britain "seems
reasonable."
The United States "is the richest
market in the world. You sell into what the market will handle.
It's like Coca-Cola sold for less overseas," he said.
The report — titled "Ripoff 101:
2nd Edition" — is a follow-up to a smaller-scale study
released a year ago. Like the previous version, it accused the
industry of a variety of ploys to inflate textbook prices.
Among other things, it said publishers
released unnecessary new editions of texts every few years as a
way to push up prices and make less expensive used books
obsolete.
The activist organization also repeated
its contention that publishers often packaged textbooks with
unneeded instructional materials such as CD-ROMs and workbooks
to drive up the price.
As you may have read on AECM, I've
aready used this new Google search to assess it against my own
interests in Cash Flow Statements.
It would be wise for us "wise
men" to put Google to the test:
Could a number of readers, in different
aspects of accounting research, put the system to the test?
My own very quick test on Cash Flow
research presented a huge majority of articles from magazines
without a research focus. - Some of them considered the possible
application of research articles to business situations - which
isn't the same thing, is it? - I was mystified at the low
proportion of articles from the "recognised" research
journals: perhaps someone might correlate the "hit
rate" for their topic of interest back to the journals? (I
have records of articles over the period reported that did not
reach their site).
The whole job took me less the two
hours! What about some other analyses to spread our knowledge?
One of the real problems of scholarly
research is that scholarly research journals think the only way
they can make money and control copying losses is to restrict
publications to hard copy. This
prevents Internet search crawlers like Google from finding key
words buried in text.
Pogo got it right."The enemy is us."In particular the our worst enemies are faculties who
still insist on publication in "elite" journals that
shut out easy searches for literature via the Internet. What
is worse is that scholarly journal publication has become a
monopoly of the worst kind (rip off pricing of libraries) that
some universities and virtually all librarians are fighting as
best they can.
Bob Jensen
April 2, 2004 message from the Director of the Trinity
University Library
For those members of the
faculty who are concerned by the continuing problem of scholarly
journal price inflation, you may be interested to see this list
of actions by various universities in response to the problem.
It has been compiled and will be maintained by a colleague at
Earlham College.
You’ll be hearing soon from
your library liaison, who will provide information about
expected increases for 2005 renewals. As directed by the Library
Activities Committee last year, we will now provide this
information annually in the Spring, to allow departments more
time to consider their needs and options for journal
subscriptions.
Diane J.
Graves, Professor & University Librarian
Elizabeth M. Coates Library, Trinity University
One Trinity Place, San Antonio, TX 78212
Phone: 210-999-8166 Fax: 210-999-8182
email: diane.graves@trinity.edu
November 29, 2004 message from Diane Graves
You may have already heard of the
Creative Commons licenses, but if not, take a look at this site:
http://creativecommons.org/
Creative Commons licenses allow the author/creator to retain
some rights, but don’t lock down the rights the way the
traditional copyright agreements do. Here is how the site
describes the options: “With a Creative Commons license, you
keep your copyright but allow people to copy and distribute your
work provided they give you credit -- and only on the conditions
you specify here. If you want to offer your work with no
conditions, choose the public domain.” You may want to look at
the EDUCATION section on the site: http://creativecommons.org/education/
The Creative Commons has been
enormously successful since it debuted in 2001. It has the
potential to be very helpful in the higher education arena; it
is already in use at MIT’s Open CourseWare and DSpace projects
and at Rice University’s Connexions Project.
I encourage you to browse through the
Creative Commons site and think about how you could use their
licensing options with your own work. It’s an exciting
development with the potential to revolutionize the way we share
information in higher education.
Diane J. Graves, Professor & University Librarian
Elizabeth M. Coates Library, TrinityUniversity One Trinity Place, San Antonio, TX78212
email: diane.graves@trinity.edu
Great News!
September 17, 2004 message from
Diane Graves
Yesterday, the National Academy of
Sciences endorsed the proposed National Institutes of Health (NIH)
proposal that research supported by NIH be made freely available
online at PubMed Central within six months after publication in
a peer-reviewed journal. The text of their statement is online
at http://www4.nationalacademies.org/news.nsf/isbn/s09162004?OpenDocument
Thanks to those of you who wrote to NIH
in support of this decision. It’s a timely one for us,
occurring at the journal renewal and cancellation season. This
will not solve the serials pricing problem by any means, but it
could have a positive impact that will provide some relief.
Diane
Diane J. Graves,
Professor & University Librarian
Elizabeth M. Coates Library,
Trinity University One Trinity Place, San Antonio, TX 78212
Members of the Academy Unite:
Create Change Right Now
The biggest academic rip-off of all time is coming to your
academic society, if it's not already there, and it will affect
your ability to transfer knowledge to your students. I want
to thank Diane Graves from the Trinity University Library and
other presenters on February 6 who opened my eyes wider to the
magnitude of this pending disaster. Decades ago the large
journal publishers did the world a favor by disseminating highly
specialized research that did not have a large subscription
market.But times
have changed in this networked age where the need for hard copy
printing of specialized journals is no longer needed.
Giant commercial publishers (especially in Europe) of academic
journals have been buying up small journal publishing firms to
where the only thing left for them to buy up is the publishing of
journals in your academic society. I will refer to these
buy-out publishers as the Greedy Monopolists.
For example, my main academic society is the American
Accounting Association (AAA). The AAA publishes a variety of
research, professional, and educational journals that I find very
informative to me and my students. They are reasonably
priced in hard copy and in electronic versions --- http://accounting.rutgers.edu/raw/aaa/pubs.htm
What is really great for education is
that the AAA will allow instructors to provide free copies or
selected articles to each student in a course. This is
common in other academic societies and is extremely important.
The
Greedy Monopolists will put an end to this!
What the Greedy Monopolists are doing in their latest strategy
to rip off academe is to approach an academic society like the AAA
and negotiate a takeover of the society's publishing and
copyrights of its various journals. They are offering
enormous purchase prices that appear to be manna from heaven to
societies that struggle to break even on publishing costs.
But there is a hitch. As soon as the Greedy Monopolists take
over, the prices of the subscriptions soar upwards of four, five,
or more times present subscription rates. And you can forget
that clause that says you can distribute multiple copies of
articles for free to your students.
Librarians of colleges and universities have seen this rip-off
by Greedy Monopolists coming for years and have had to deal with
the soaring subscription rates for academic journals. The
are fighting back on a number in a number of ways:
Librarians are dropping subscriptions to the journals viewed
as being excessively priced. The drop off solution is
taking place even in the most prestigious research
universities like Cornell, Stanford, and even Harvard.
This solution is frustrating to researchers, however, since
some of the top research papers are in those journals being
dropped.
Librarians have organized efforts on multiple fronts to
create an entire new approach to scholarly communication.
Scholarly communication exists for the
benefit of the world’s research and teaching community.
Authors want to share new findings with all their colleagues,
while researchers, students, and other readers want access to
all of the relevant literature.
However, the traditional system of
scholarly communication is not working. Libraries and their
institutions worldwide can no longer keep up with the increasing
volume and cost of scholarly resources. Authors communicate with
only those of their peers lucky enough to be at an institution
that can afford to purchase or license access to their work.
Readers only have access to a fraction of the relevant
literature, potentially missing vital papers in their fields.
Involvement by the academic community
is critical in ensuring that efforts to reclaim scholarly
communication for scholars and researchers succeed. Together we
can develop a new system that meets your needs and those of
future scholars and students. It's time to create change!
CREATE
CHANGE is a response to the
serious crisis in scholarly communication. A number of factors,
chiefly the dramatic increases in journal costs and the
increasing commercialization of scholarly publishing, have
decreased scholars' access to essential research resources all
over the world.
CREATE
CHANGE seeks to address the crisis in scholarly
communication by helping scholars regain control of the
scholarly communication system-- a system that should exist
chiefly for them, their students, and their colleagues in the
worldwide scholarly community, not primarily for the benefit of
publishing businesses and their shareholders.
CREATE
CHANGE has as its core goal to make scholarly
research as accessible as possible to scholars all over the
world, to their students, and to others who might derive value
from it. We believe this goal can be achieved by the following
strategies:
Shifting control of scholarly
publication away from commercial publishers and back to
scholars.
Influencing scholarly publishers to
embrace as their first goal the widest possible
dissemination of scholarly information and to abide by
pricing policies and practices that are friendly to scholars
and libraries.
Creating alternatives to commercial
scholarly publications, both competitive alternative
journals in more affordable electronic formats and programs
that make scholarly research more directly available to
scholars.
Fostering changes in the faculty
peer review system that will promote greater availability of
scholarly research: these changes might include both
movement away from quantity and toward quality
as a criterion for tenure and promotion and full
acknowledgment of electronic publication as a means of
communicating research.
CREATE
CHANGE promotes information exchange, discussion,
and action. Specifically, the program aims to accomplish the
following:
To help faculty, administrators, and
other stakeholders in the scholarly communication enterprise
become fully aware of the recent crisis in the scholarly
communication system.
To foster understanding among these
stakeholders of library decision processes and to engage
their support in those processes (e.g., journal
cancellations).
To stimulate discussion among the
stakeholders of scholarly communication issues, including
issues associated with intellectual property.
To motivate stakeholders to specific
actions, which might range from writing letters to
publishers to refusing to edit or submit articles to, or
review for, journals whose pricing is chronically
unacceptable.
CREATE
CHANGE is sponsored by the Association of
Research Libraries, the Association of College and Research
Libraries (a division of the American Library Association), and
SPARC (the Scholarly Publishing and Academic Resources
Coalition). Funding for this project has been provided by the
three organizations and the Gladys Krieble Delmas Foundation.
The most important things faculty from around the world can
do are the following:
If your college requires that publications for tenure be
published in hard copy journals, work to have this obsolete
criterion removed. In the age of technology, the
important criterion is the quality of refereeing. Highly
regarded refereeing can take place for electronic publishing.
Don't let your academic societies sell out to the Greedy
Monoplists.
If your society has already sold its academic soul, form
new avenues of scholarly refereeing and communication that
make your colleagues and students less dependent upon the
monopoly-priced journals.
Forwarded by Amy Dunbar on February 9, 2004
From
2/09/2004 Chronicle of Higher Education.
Editorial Board of Scientific Journal
Quits, Accusing Elsevier of Price-Gouging
The Board of Directors of a scholarly
journal popular with computer scientists and mathematicians has
resigned en masse, accusing its distributor, Elsevier, of making
the publication too expensive for many college libraries to
afford.
In a statement issued to readers,
members of the board of the Journal of Algorithms
announced that they would now devote their attention to a new
journal, to be called Transactions on Algorithms. The new
journal will be published by the Association for Computer
Machinery, which distributes a number of similar periodicals.
There is no timetable for the debut of
the new publication, but the departing directors said they hope
to make it available at a much lower price than what Elsevier
charged for the Journal of Algorithms. In 2003, a
yearlong subscription to the monthly journal cost $700 -- an
increase of more than $100 since Elsevier started publishing it,
in 2001.
In an October letter to the directors,
who functioned as the editorial board, Donald E. Knuth, an
editor of the journal and emeritus professor of computer science
at Stanford University, argued that the publication could reach
a broad base of academic libraries only if it switched to a
cheaper commercial publisher or a nonprofit one.
Zvi Galil, another editor of the
journal and dean of the school of engineering and applied
science at Columbia University, said that Elsevier had increased
the subscription rates unnecessarily, because production costs
for the journal had not risen recently. "Basically, we do
all the work," Mr. Galil said, "and the company makes
all the profit."
In a statement of its own, Elsevier
attributed the board's resignation to "an unresolved
dispute concerning the commercial aspects of scientific
publishing." Company representatives declined to comment
further.
Continued in the article.
Commercial journal
publishers will resort to almost anything to keep ripping off libraries and
scholars.
"Commercial publishers
used to object to OA [open access] journals on the ground that
they bypassed peer review. But that was clearly false. The
latest refinement of the objection is that peer review at OA
journals cannot be trusted. It must be compromised or corrupted
by the business model, which covers expenses by charging an
upfront fee on accepted articles. Such journals will have an
incentive, the argument goes, to accept any paper from a paying
author."
In the March 2004 issue of the
SPARC OPEN ACCESS NEWSLETTER, Peter Suber examines the topic of
open-access journals and dismisses many of the publishers'
arguments against them. The issue also includes numerous links
to other open access resources. The newsletter is available
online, at no cost, at http://www.earlham.edu/~peters/fos/newsletter/03-02-04.htm.
SPARC Open Access Newsletter
[ISSN 1546-7821] is written by Peter Suber and published by
SPARC. Suber, who writes and consults in the area of open access
to scientific and scholarly research literature, is a research
professor at Earlham College.
The Scholarly Publishing and
Academic Resources Coalition [SPARC] is "an alliance of
academic and research libraries and organizations working to
correct market dysfunctions in the scholarly publishing
system." For more information, contact: SPARC, 21 Dupont
Circle, NW, Suite 800, Washington, DC 20036 USA; tel:
202-296-2296; fax 202-872-0884; email: sparc@arl.org; Web: http://www.arl.org/sparc/.
Instead, she judges the newest
Calculus 101 text by what's inside: a CD-ROM, flashy color
photographs and a bubble-wrapped study manual. All those extras
bring the price tag to $126, she says.
"The textbook companies
are adding bells and whistles that students don't need -- it's
making the cost of education unaffordable," said Connolly,
a student at Portland State University.
A study spearheaded by
students in Oregon and California found that the cost of
textbooks has skyrocketed because of the bundling of ancillary
products like CD-ROMs. It also claims that publishers roll out
new editions year after year, forcing students to buy new books
although the content scarcely changes.
Pat Schroeder, president of
the Association of American Publishers and a former
congresswoman, said the report was one-sided and flawed.
Fifteen members of Congress
have asked for an investigation into the pricing policies of U.S
textbook publishers. The General Accounting Office, which is the
investigative arm of Congress, has given the request high
priority, said Cornelia Ashby, the director of the office's
education branch.
The study was conducted by the
California Student Public Interest Research Group, Oregon
Student Public Interest Research Group and the OSPIRG
Foundation. The groups conducted a survey of the most widely
assigned books in the fall of 2003 at 10 public colleges in
Oregon and California.
According to the study,
college students today spend about $900 on textbooks every year.
On average, textbook publishers keep books on the shelf for 31/2
years before issuing a new one. Over half of faculty members
surveyed said the new editions are "rarely" to
"never" justified.
"Calculus hasn't changed
much since Isaac Newton. The question needs to be asked -- do we
really need a new edition every few years?" said U.S. Rep.
David Wu, an Oregon Democrat who was the first lawmaker to ask
for the investigation last fall.
Information age
Textbook publishers say the
students' recommendations, which include a five-year minimum
before the release of a new edition, fail to take the need for
updates into account.
"Imagine a government
textbook that had Bill Clinton as president. Or an accounting
textbook that didn't include Enron. Or a biology textbook that
didn't have cloning or stem cell research. The world changes so
fast," said Jessica Dee Rohm, spokeswoman for Thomson
Learning, the Stamford, Connecticut-based textbook giant.
Publishers say that even if
the subject is calculus or art history, and by nature doesn't
change as radically as genetics, the revised editions are always
different.
"We have a revision diary
that's hundreds of pages long for that book -- we invested
$300,000 of research to change it," said Rohm, referring to
the Calculus 101 book that Connolly held up at a news conference
in Portland on Wednesday.
Rohm said that the information
age has changed everything, and the CD-ROM is only the tip of
the iceberg in staying on top of that trend.
The spiraling price of
textbooks has led to all sorts of strategies to reduce the
financial hit, said Merriah Fairchild of the California Student
Public Interest Research Group.
"I know stories of
students pooling together to buy a single book -- students just
can't afford it anymore," Fairchild said.
The office of New York
Attorney General Eliot Spitzer has opened an investigation into
the ways global music companies secure radio airplay for their
releases, according to people familiar with the matter.
Beginning shortly after
Labor Day, the attorney general began requesting documents and
information from Warner Music Group; EMI
Group PLC; Vivendi
Universal SA's Universal Music Group; and Sony
Corp. and Bertelsmann AG's Sony BMG Music Entertainment.
Warner Music was served
with a subpoena; it is unclear whether the other companies
received subpoenas also.
The inquiry concerns the
use of so-called independent promoters, middlemen between record
companies and radio stations, whom the labels pay -- sometimes
handsomely -- to help them secure better airplay for their
releases.
This isn't the first time
Mr. Spitzer has gone after the global music companies. Over the
summer, his office announced a plan to distribute royalty
payments the music companies owed to musicians -- some of them
very high-profile -- the music companies said they couldn't
locate.
People familiar with the
matter said they weren't sure how much progress the
investigation had made in the nearly two months it has been
under way. The inquiry was reported late yesterday by the New
York Times' Web site.
Officials from Mr.
Spitzer's office couldn't be reached to comment.
The independent-promotion
system has long been viewed as a way around laws against payola,
which is undisclosed cash payments to individuals in exchange
for airplay. If station owners charge money directly for
airplay, they must disclose the transaction over the air. The
illegal practice of payola resulted in a series of scandals that
shook the music and radio worlds in the 1950s and 1960s.
Continued in the article
Mortgage Advice
Advice about mortgages from Jane Bryant Quinn, Newsweek,
June 6, 2005, Page 41.
Reported incidents of mortgage
fraud in the U.S. are at an all-time high and increased by
26 percent from 2007 to 2008 according to a new report
released by the Mortgage Asset Research Institute (MARI).
Rhode Island, Florida and Illinois
top the list of states with highest mortgage fraud rates.
The 11th Periodic Mortgage Fraud Case Report to the Mortgage
Banker's Association (MBA) examines the current state of
residential mortgage fraud and misrepresentation in the U.S.
based on data submitted by MARI subscribers.
The report found that, for the
first time, Rhode Island ranked first in the country for
mortgage fraud with more than three times the expected
amount of reported mortgage fraud for its origination
volume. This is also Rhode Island's first appearance on the
MARI report Top-Ten list, indicating a problematic and
overlooked mortgage fraud problem in the state. Florida,
ranked first in 2007 and 2006, dropped to second place and
is followed by Illinois, Georgia, Maryland, New York,
Michigan, California, Missouri and Colorado. The report was
presented during MBA's annual National Fraud Issues
Conference in Las Vegas. It is available on the MARI Web
site at: www.marisolutions.com.
“With fewer loan originations
today, the data suggests that the economic downturn may have
created more desperation, causing more people than ever
before to try to commit mortgage fraud,” said Denise James,
LexisNexis Risk & Information Analytics Group director of
Residential Mortgage Solutions. “Not only are we seeing
traditional fraud trends, such as application fraud, but we
are also seeing new types of emerging fraud occur,” said
James. “It is therefore imperative that the mortgage
industry continue to share information and insights, and
collaborate in the fight against mortgage fraud.”
The top fraud incident type in 2008
– representing 61% of all reported frauds – was application
fraud, the fifth year in a row it topped the list. Second
were frauds related to tax returns and financial statements
which jumped 60% from 17% of reported frauds in 2007, to 28%
of reported frauds in 2008. Additional documented fraud
types included, in order of volume, frauds related to
appraisals or valuations, verifications of deposit,
verifications of employment, escrow or closing costs, and
credit reports.
“MARI data shows that mortgage
fraud is more prevalent today than it was at the height of
the boom in mortgage loan originations,” said John Courson,
president and chief executive officer of the Mortgage
Bankers Association. “This report is essential reading for
mortgage bankers who need to understand where mortgage fraud
is coming from, what to watch for and how to protect our
companies and communities.”
The report also found that:
After improving in 2006 and 2007,
Georgia jumped from seventh to fourth place in 2008;
California, ranked fourth in 2007, declined to eighth in
2008; Maryland jumped from fifteenth in 2007 to fifth in
2008; and The volume of reported frauds related to credit
reports dropped from 9% to 4% between 2007 and 2008.
Borrowers Hoodwinked by Deceptive Ads Many borrowers in trouble were pulled in by
deceptive ads such as LowerMyBills.com. The ads featured dancing
figures, apparently happy about low-loan rates. One ad claimed a
"$145,000 mortgage for under $499 a month!" Scroll to the bottom to see
payments actually double over time. NPR (audio), September 13, 2007 ---
http://www.npr.org/templates/story/story.php?storyId=14379609
The more common problem is that mortgage brokers lead
borrowers on with very low teaser rates and then tack on fees and higher
rates by the time of the closing. Don't fall for it! Check the online
reviews of the the mortgage brokering company!
Prosecutors in New York have charged 13 people with running a
massive mortgage fraud scheme. They say everyone was in on the
alleged scheme: lawyers, appraisers and mortgage brokers.
According
to the indictment, mortgage company AFG Financial Group, based
on Long Island, targeted properties whose owners were starting
to default on their mortgages.
The
company recruited "straw buyers" — people with good credit
scores — to apply for a loan to buy the target property, while
promising the distressed owners that they'd get to stay in the
home.
The
indictment says they paid appraisers to inflate the value of the
property. Then they allegedly paid off lawyers to represent all
parties: the seller, the buyer and the bank at the closing.
Manhattan
District Attorney Robert Morgenthau says the group fraudulently
obtained $100 million in mortgage loans.
"One of
the morals of this case is there is no free lunch," Morgenthau
says. "People with distressed properties thought they were being
bailed out. They didn't look carefully at all at what the
transaction was."
Morgenthau says 25 people were involved in the scheme, and 12
already have pleaded guilty.
The Senate voted Tuesday to hire
hundreds more FBI agents and prosecutors to investigate the
estimated 5,000 allegations of mortgage fraud reported each
month.
The 92-4 bipartisan vote came as a
House panel considered an anti-predatory lending bill that
attempts to ban the type of subprime mortgage loans that
contributed to the nation's economic slide. It also came as
the former head of a one-time leading mortgage lender,
American Home Mortgage Investment Corp., agreed to pay
nearly $2.5 million to settle allegations of accounting
fraud.
"As foreclosures menace more and
more hardworking homeowners, they become more desperate for
help," said Senate Majority Leader Harry Reid, D-Nev.
"Unfortunately, schemers, swindlers and scam artists are all
too happy to pounce."
The Senate bill, sponsored by Sens.
Patrick Leahy, D-Vt., and Chuck Grassley, R-Iowa, is
estimated to cost more than $265 million a year for the next
two years. Supporters, including President Barack Obama, say
the legislation would more than pay for itself because of
the fines and penalties that would result from more
aggressive government investigations.
Bill supporters anticipate that the
money would hire another 160 special FBI agents and more
than 200 support staff, including forensic analysts.
Currently, the FBI has fewer than 250 special agents
assigned to financial fraud cases, despite caseloads that
have more than doubled in the past three years.
Under the bill, the Justice
Department would hire 200 more prosecutors and civil
enforcement attorneys, along with 100 support staff.
Other government entities in line
to receive money include the Secret Service, Postal
Inspection Service and the inspector general for the Housing
and Urban Development Department.
An amendment by Sens. Chuck
Schumer, D-N.Y., and Richard Shelby, R-Ala., added $21
million to the bill's original $245 million-a-year total for
the Securities and Exchange Commission to boost its
enforcement capabilities.
The measure covers the 2010 and
2011 budget years, which begin Oct. 1.
Another amendment added $5 million
to create a congressionally appointed, independent
commission to investigate the cause of the economic crisis.
The bill also calls for a new Senate committee focused on
improving regulations.
In the House, North Carolina
Democratic Reps. Melvin Watt and Brad Miller on Tuesday
pushed their proposal to try to prohibit banks from lending
to consumers considered at risk for default. Lenders would
have to make a "reasonable and good faith determination"
effort to ascertain whether the customer can pay back the
money.
The bill, which the full House
could vote on as early as next week, encourages lenders to
refocus their business on the kind of traditional 30-year,
fixed-rate loans that require consumers to pay 20 percent of
their house upfront. Other mortgages would be restricted in
how they are sold.
Proponents of the bill say that if
banks are required to retain some of the risk of the
mortgages they sell, they would be less likely to lend to
consumers with bad credit histories.
The bill also tries to protect
consumers from exorbitant interest rates by limiting the
amount of money a mortgage broker can earn from selling
high-rate loans.
The House Financial Services
Committee was on track to approve the measure on Wednesday,
despite industry concerns that the new regulations would
restrict the flow of available credit.
Also on Tuesday, the Securities and
Exchange Commission announced that former American Home
Chairman and Chief Executive Michael Strauss had agreed to
the $2.5 million settlement. Strauss had been accused of
concealing the company's deteriorating finances as the
subprime mortgage crisis hit and before the company filed
for bankruptcy in August 2007.
Charges against the company's
former chief financial officer, Stephen Hozie, also accused
of accounting fraud and misleading investors, are pending.
Moral Hazard in Mortgage Brokering In the old days, most homeowners obtained
mortgages from their local bank or credit union, which adhered to strict
lending rules. Nowadays, the lion's share of homebuyers' business (70
percent) goes to independent mortgage brokers — some of whom get bonuses
for steering borrowers to higher-interest loans. Experts say many recent
borrowers were put into ARMs that are likely to cost far more over the
life of the loan than if they'd chosen a fixed-rate option. Often,
consumers could have locked in fixed-rate loans at low interest rates,
but lenders downplayed the advantages of these loans.
Chris Arnold, "Mass. Homeowners Rally Against Foreclosures," NPR,
April 27, 2007 ---
http://www.npr.org/templates/story/story.php?storyId=9870466
Subprime Mortgages: A Primer Lawmakers on Capitol Hill are demanding answers
from regulators and lenders about subprime mortgages. Many worry that
rising mortgage defaults and lender failures could hurt America's
overall banking system. Already, the subprime crisis has been blamed for
steep declines in the stock market. But just what is a subprime loan —
and why should you care? Here, a primer:
"Subprime Mortgages: A Primer," NPR, March 23, 2007 ---
http://www.npr.org/templates/story/story.php?storyId=9085408
Question
If the current appraised value on your house is less than the balance due on
your mortgage, what might discourage you from walking away from your house even
if you can afford the mortgage payments? Hint: Keep in mind that most housing lenders in the U.S. will only lent if
they can resell the mortgage to Fannie Mae or Freddie Mac.
The country's two largest
sources of mortgage money have a blunt warning for anyone thinking
about joining the growing "walkaway" trend, where homeowners stop
making payments and months later send the house keys back to their
lender: You will feel the pain.
On March 31, Fannie Mae sent
out new guidelines to lenders intended for walkaways and other
foreclosure situations. Fannie will now prohibit foreclosed
borrowers from getting another mortgage through the giant investor
for five years, unless there are "documented extenuating
circumstances." In those cases, the mortgage prohibition is for
three years.
Even after five years,
borrowers with foreclosures in their files will be required to make
at least a 10 percent down payment, and will need minimum FICO
credit scores of 680.
Freddie Mac, Fannie's rival,
counts foreclosures as major credit blots for seven years, and a
senior official said the company is now aggressively pursuing some
walkaway borrowers "to preserve our deficiency rights" where
permitted under state law.
The walkaway trend is
particularly noteworthy in former housing boom markets - including
California, Florida and Nevada - where many homeowners find
themselves upside down on their loans, owing tens of thousands more
than the current market value of their houses. If they invested
little or nothing in down payments, some owners reason, continuing
to make payments - even if they can afford to - may be throwing good
money after bad.
"Heed these tips to guard against mortgage fraud," Market Watch,
January 4, 2006 ---
Click Here
Beware of the So-Called Investor Education Programs
(especially beware of infomercials) "I don't see frankly much out there
that really does the job, and that's partially because investors
are their own worst enemy," says former SEC Chairman Arthur
Levitt. "They refuse to invest skeptically, and are too easily
seduced by all the purveyors of financial products that prey
upon their worst instincts." "Investor Education 101: How to Avoid Scams:
Outreach Programs Target Most-Vulnerable Americans, But Success
Is Hard to Assess," By Lynn Cowan, The Wall Street Journal,
May 9, 2006; Page D3 ---
http://online.wsj.com/article/SB114713241888747241.html?mod=todays_us_personal_journal
Jensen Comment I personally do not trust the highly-advertised DiTech ---
http://www.ditech.com/
Home Owners Increasingly Betting on Interest-Only Loans
Scott Horsley, NPR, July 12, 2005 ---
http://www.npr.org/templates/story/story.php?storyId=4749061
Hopefully many potential borrowers will heed Scott Horsley's
warnings and think twice about such loans.
Beware of the So-Called Investor Education Programs
(especially beware of infomercials)
"I don't see frankly much out there
that really does the job, and that's partially because investors
are their own worst enemy," says former SEC Chairman Arthur
Levitt. "They refuse to invest skeptically, and are too easily
seduced by all the purveyors of financial products that prey
upon their worst instincts." "Investor Education 101: How to Avoid Scams:
Outreach Programs Target Most-Vulnerable Americans, But Success
Is Hard to Assess," By Lynn Cowan, The Wall Street Journal,
May 9, 2006; Page D3 ---
http://online.wsj.com/article/SB114713241888747241.html?mod=todays_us_personal_journal
An onslaught of investor education
is being unleashed, thanks to an ever-growing stockpile of
money set aside for this purpose by regulators.
Senior-citizen investors being
preyed upon? The nonprofit Investor Protection Trust is
financing a Florida state program that teaches retirees to
identify and report suspected scams.
Military families feeling pressured
into buying unnecessary financial products? The National
Association of Securities Dealers' Investor Education
Foundation has launched a specialized Web site:
saveandinvest.org.
Auto workers receiving lump-sum
retirement buyouts in coming months? There is a new
Securities and Exchange Commission publication that warns
that they could be prime targets for fraud.
There seems to be no end to the
list of publications, public-service announcements and
seminars being funded in the wake of a landmark settlement
in 2003 between regulators and Wall Street over stock
analysts' conflicts of interest. The settlement provided $80
million in investor-education funds, and regulators add to
that amount every year with more penalties for new
securities-industry transgressions.
Unfortunately, there's also a
seemingly infinite trove of outright hucksters and smooth
marketing materials bombarding investors every day, say
regulators and observers. And no one knows how effective
investor-education programs are in combating them.
"I don't see frankly much out there
that really does the job, and that's partially because
investors are their own worst enemy," says former SEC
Chairman Arthur Levitt. "They refuse to invest skeptically,
and are too easily seduced by all the purveyors of financial
products that prey upon their worst instincts."
There's also little information
available about what kinds of programs really work to
educate and protect investors. Regulators and
investor-education specialists say they are working hard to
expand their materials beyond brochures with basic
information to encompass interactive games for students,
television programs and in-person seminars.
But regulators add that they are
also fighting against strong forces in their battle to
educate and protect investors from scam artists, their own
emotions and a legacy of conflicts of interest in the
brokerage industry.
Scam artists are the most easily
identified investor-protection issue: Often organized in
pyramid, or "Ponzi," structures, the schemes promise
outsized returns and can exist for years before collapsing.
Investor-protection programs can easily focus on warning
about this kind of threat because it has some obvious
hallmarks.
Regulators' second villain is
trickier: investors' own inertia and greed. Getting most
people in the U.S. to learn the basics of a careful
investing strategy is akin to asking them to read a legal
footnote, but there is no shortage of people willing to sign
up for the chance to earn 130% on ersatz securities.
Possibly the most innovative
investor-education program in existence today targets
investors who are drawn to these get-rich-quick scams. The
SEC runs several Web sites that pose as can't-fail
investment schemes. One,
growthventure.com, outlines the
business dealings of a fake construction-supply company,
Growth Venture, which invites viewers to invest and receive
returns of 350% a year. Anyone falling for the bait is
linked to an SEC page that gently chides them and describes
how to avoid scams.
But such educational tools aren't
as easy to construct for one of the thorniest issues facing
investor-education programs: teaching people about
protecting themselves in daily interactions with the
legitimate brokerage industry.
Although larger Ponzi scams, such
as the Financial Advisory Consultants bust in California in
2004, are headlined for bilking investors out of as much as
$300 million, industry wide brokerage scandals involving
well-known firms have surpassed $1 billion apiece. From
Prudential Securities' abusive sales of limited partnerships
in the early 1990s to the conflicts of interest in analyst
research in the late 1990s, major Wall Street firms appear
to be struggling with improper systematic conduct every
decade.
Yet investor educators often
express concern about finding the right balance between
warning investors and condemning a highly regulated industry
that provides legitimate advice and services.
Continued in article
Jensen Comment
Also be careful what mutual fund or brokerage firm you deal
with. My advice is to avoid high-commission brokerage firms. My
advice is to also compare the mutual fund expense rates with
benchmark rates of Vangaard and Fidelity.
The following if my personal off-the-wall advice that
certainly does not apply to all circumstances in life.
In general, for people who expect to stay in one
community for a relatively long time, I recommend getting
the largest mortgage you can afford for a long time frame
such as a 30-year mortgage. The tax shield from mortgage
interest payments is enormous. And interest rates are more
likely to creep up than down such that you end up with a
relatively low rate of interest in future years.
A large mortgage is also forced savings for people
inclined to spend money that�s �left over� from their
paychecks. Using more of this money to pay off a home is
tantamount to forcing yourself to consume less and save
more. Getting a larger mortgage allows you to buy a more
expensive house and then forces you to make the payments to
pay it off. In the end you have a more valuable house
investment than if you had purchased a cheaper house with a
smaller mortgage. In general people do not save enough for
retirement, so forced savings are a good idea.
My philosophy is to buy an expensive house and a cheap
car. Nobody makes money on cars. Most people make money on
houses as long as they own them for a relatively long period
of time. Use care, however, when choosing a location and
type of home. Condos and garden homes tend to be worse
investments than full houses in desirable parts of town such
as being close to a university or a medical center. Gated
neighborhoods generally add a lot of resale value to houses.
I think I would buy into a gated community if I bought a
house in San Antonio these days. In rural New Hampshire
there are no gated neighborhoods.
If interest rates decline substantially it�s a good idea
to consider refinancing at a lower market rate. But
refinancing charges tend to be a rip-off that you should
avoid paying unless the drop in interest rates is
substantial.
Generally paying off a mortgage before it matures is not
a good idea due to having to pay more income taxes unless
you have other tremendous tax shields.
After the time remaining on a mortgage gets very short
(say five years left on a 30-year mortgage) it often does
not matter much whether you pay it off or not. The interest
portion of your payments becomes so small that the tax
advantages wane.
If you only have a few years left on your mortgage, I
would consider refinancing for a tax advantage as long as
interest rates remain relatively low as they are right now.
You have to make calculations regarding those rip-off
refinancing charges, but for somebody your age, the present
value of the tax shield often is much larger than the
refinancing costs.
You must keep in mind that I hate to pay any more income
tax than necessary. Hence I have a preference for that
mortgage interest tax shield. Remember that a wise woman has
lots of house and a reliable but cheap car (never a new car
or truck).
Of course all of this ignores your liquidity preferences.
If your income is expected to decline substantially (e.g.,
when one spouse has to quit working), perhaps it is a good
idea to pay off the mortgage that places an undue burden on
a reduced monthly income. Also if one spouse quits working,
you may end up in a lower tax bracket such that the tax
advantages of a mortgage interest are reduced.
Being conservative, I like to consider what you would do
with the savings that remain if you do not pay off your
mortgage. For example, suppose you have $100,000 in CDs that
you could use to pay off a $100,000 mortgage. If you keep
the mortgage and then consume the savings on a new luxury
car and trips to Europe, then I suggest you instead pay off
your mortgage. If you invest the savings wisely (I�m not the
one to tell you how to invest your savings), then I would
not pay off the mortgage.
My final bit of advice is to become your own money
manager. I tend to discourage people from getting personal
finance advisors. The commissions paid generally are too
high relative to the value of the advice. There is much
advice available for free. And there is a lot of fraud in
the investment advisor industry. One common type of fraud is
a kick back received for advising you to invest in a
relatively bad investment alternative.
Bob
Popular Mortgage Web Site Under Scrutiny A lawsuit against Bankrate.com, which alleges
that the Web site has become a haven for "bait-and-switch" loan pitches,
underlines the difficulty consumers can have in locating reliable
financial information online.
Michael Hudson, "Popular Mortgage Web Site Under Scrutiny: Lawsuit
Against Bankrate Spotlights Difficulty of Getting Sound Financial Data
Online," The Wall Street Journal, July 12, 2006 ---
http://online.wsj.com/article/SB115266435444704096.html?mod=todays_us_personal_journal
The average American
consumer/homeowner has little to no chance of getting an honest or
fairly priced mortgage in today's double standard, murky mortgage
environment. That is if you are a consumer/homeowner attempting to
discover what is fair from a mortgage fee/interst rate pricing
standpoint and what is not. As a result The Homeowners Consumer
Center & its partner The Mortgage Inspection Service are recruiting
honest mortgage brokers/lenders who are ready to compete in their
local markets with an honest approach in working with
consumers/homeowners.
(PRWEB) May 31, 2006 -- The
Homeowners Consumer Center (Http://www.HomeownersConsumerCenter.Com)
along with its partner the Mortgage Inspection
service (Http://www.MortgageInspectionService.com)
have called for a national consumer alert to
all homeowners about the realities of the current US mortgage
market, in the form of five critical consumer tips they need to
know. At the same time the Homeowners Consumer Center is seeking
information about locally owned mortgage firms/lenders that are
tired of trying to compete against dishonest mortgage lenders. The
targets of this campaign are as follow:
1. TV Pitchmen promising consumers/homeowners they will get numerous
mortgage firms to compete for a mortgage deal, or that someone
should have called so and so. The problem; the sales pitch does not
always measure up to what the consumer actually gets ( a much higher
than market interest rate, ridiculous fees or both).
These same types of ads often times say, or talk about a "no point"
gimmick, which is not exactly "no fees", if you are a consumer. The
actual translation is the consumer just got a higher interest rate
and a higher monthly mortgage payment.
2. National Homebuilders in many to most cases exclude borrowers
from getting a competitive quote from local mortgage lenders.
Typically the homebuilder prices the home buyers mortgage products
25 to 125 basis points over par (par=the best available interest
rate for the borrower) and frequently these transactions are loaded
with junk mortgage fees. If the borrower wants to get a competitive
quote he/she or they get told, " the house will cost more", or they
will not get a "bonus". What the homebuilder failed to tell the
consumer is that because they are a "mortgage banker", they are not
required to disclose the "yield spread premium" to the
borrower=higher monthly mortgage payment. Mortgage brokers are
required to disclose yield spreads to consumers.
A second severe problem with homebuilders is that they frequently
tell appraisers what they want their homes to sell for, rather than
allow the appraiser/appraisal firm to their job. "Either hit our
values", the homebuilder wants (real or not), or they find another
appraiser/appraisal firm that will. If there is a real estate bubble
burst this year, it will start with homebuilders slashing their in
some cases false valuations. Inflating real estate
appraisals/massive appraisal fraud is the ticking time bomb that
could potentially crush the US economy/real estate markets
nationwide. Once again Wall Street was asleep at the switch for a
disaster that could be worse than the S&L crisis of the 1980's.
3. Mortgage Lead generation scams on the Internet.: Once again the
consumer/homeowner can get taken for a ride, or ends up with a much
more expensive mortgage product. Most Internet providers have gladly
sold advertising space to just about any lender, honest or not. Do
business with local or well known mortgage firms.
4. Real Estate firms that also want to be the consumer's mortgage
lender. We feel it is the ultimate conflict of interest for a real
estate agent/firm to also be wearing the hat of mortgage lender. We
believe the functions of real estate sales & real estate financing
need to be separate. Next to national homebuilders blackmailing
appraisal firms into unrealistic valuations, are real estate agents
acting as mortgage lenders doing the same thing. Consumers are
advised to steer clear of real estate agents/brokers also acting as
mortgage bankers.
5. If anyone is looking to the Bush Administration, HUD, or the US
Senate or House Banking Committees for help, don't hold your breath.
In light of the Abramoff & Duke Cunningham Congressional bribery
scandals one would hope that a consumer/homeowner friendly
environment might exist. Nothing could be further from the truth.
In reality banks and mortgage bankers are not held to the same
standards as are mortgage brokers with respect to serious consumer
disclosure issues. At the very top of this list are 'yield spread
premiums" (a kick back for increasing the mortgage interest rate).
Many have concluded, unlike mortgage brokers, banks and mortgage
bankers are not being required to disclose these kick-backs because,
they are the number one contributer to US House & Senate Banking
Committees. President Bush had his Gala re-election campaign party
in part financed by a mortgage lender that has been ordered to pay
$300 million+ back to consumers.
The Homeowners Consumer Center (Http://HomeownersConsumerCenter.Com)
and The Mortgage Inspection Service (Http://MortgageInspectionService.Com)
want consumers/homeowners to understand these realities and at the
same time they would like to partner with local, reputable mortgage
firms/lenders that are interested in advancing educational campaigns
in their communities so that consumers will be better educated when
making application for mortgages or refinances. The goal of this
campaign is to increase originations for participating mortgage
firms/lenders & at the same time give the consumer an honest
mortgage product/refinance.
The Homeowners Consumer Center also think it important that states
and the federal government eliminate loop holes that prevent
transparency in a mortgage transaction, regardless of a lenders
status as broker, banker or the amount of money they
contributed/paid to a politician.
Honest mortgage lenders/brokers who want to treat their customers
with honesty are encouraged to contact the Homeowners Consumer
Center (
Http://HomeownersConsumerCenter.Com ) for
more information about a state by state campaign to get the word out
about honest or hard working mortgage lenders. To join the
Homeowners Consumer Center in this campaign, mortgage firms/ lenders
will be required to agree to a realistic consumer disclosure
agreement. A straight forward approach like this is long over due in
todays mortgage world. Homeowners & consumers deserve better, and
The Homeowners Consumer Center and its partner, The Mortgage
Inspection Service think this is a very solid step to try to cure
problems associated with an out of control mortgage industry.
How to Avoid Predatory Loans
The following helper
sites were recommended by Time Magazine, March 26, 2007,
Page 79:
Subprime Mortgages: A Primer Lawmakers on Capitol Hill are demanding answers
from regulators and lenders about subprime mortgages. Many worry that rising
mortgage defaults and lender failures could hurt America's overall banking
system. Already, the subprime crisis has been blamed for steep declines in
the stock market. But just what is a subprime loan — and why should you
care? Here, a primer:
"Subprime Mortgages: A Primer," NPR, March 23, 2007 ---
http://www.npr.org/templates/story/story.php?storyId=9085408
Stock markets world-wide have sold off the past
few weeks over concerns the collapse of the subprime mortgage industry
could prolong and deepen the housing slump and threaten the health of
the U.S. economy. Federal Reserve officials and most economists believe
the problems in the subprime mortgage market will remain relatively
contained, but there is compelling evidence that the failure of subprime
loans may be the start of a painful unwinding of a housing bubble that
was fueled by easy money and loose lending practices.
Whether measured in absolute terms or
time-tested metrics such as price-to-income or price-to-rent ratios, the
rise in U.S. home prices during the past six years is unprecedented.
What's more, not only has mortgage debt doubled during this time, but
loans have been offered on imprudent terms (for instance, a no down
payment, no income verification loan to a borrower with a checkered
credit history).
It's no coincidence that the five-fold growth
in subprime lending occurred at a time when home prices soared to
nosebleed territory. As home prices kept rising, fewer loans went bad
because the homeowner could almost always refinance or sell the property
at a profit. (Until the past year or so, it seems the only person in
California who sold his house at a loss was the convicted lobbyist who
in 2003 bribed former Rep. Randy "Duke" Cunningham by buying his house
at an inflated price and selling it six months later for $700,000 less.)
As the home price boom gained momentum and
delinquencies dropped, lenders offered progressively easier and riskier
lending terms. Common sense suggests that the boom-time mania that led
banks (and investors in mortgage-backed securities) to offer dangerous
loans to individuals with poor credit histories also led them to offer
the same kinds of risky loans (no income verification, no down payments,
high payments as a share of income, low teaser rates) to individuals
with good credit scores.
Far from being limited to the subprime market,
the data show these risky loan features have become widespread.
According to Credit Suisse, the number of no or low documentation loans
-- so-called "liar loans" -- has increased to 49% last year from 18% of
purchase loans in 2001, a nearly three-fold increase. The investment
bank also found that borrowers put up less than a 5% down payment in 46%
of all home purchases last year. Inside Mortgage Finance estimates that
nontraditional mortgages -- mostly interest-only and pay-option ARMs
that allow the borrower to defer paying back principal or even increase
the loan balance each month -- which barely existed five years ago, grew
to close to a third of all mortgages last year.
The Alt-A market, a middle ground between
subprime and prime, has increased seven-fold since 2001 and accounted
for 20% of home-purchase loans last year. Fully 81% of Alt-A loans last
year were no or low documentation loans, according to First American
Loan Performance. Why have borrowers employed this kind of risky
financing? Because it was the only way many of them could afford a home
in some of the hottest housing markets, where prices more than doubled
in five years.
It should come as no surprise that
delinquencies on these unconventional loans have increased sharply.
Investors were shaken last week by a Mortgage Bankers Association report
which found that mortgage delinquencies hit nearly 5% at the end of last
year and that prime adjustable rate loans deteriorated at a faster rate
than subprime ARMs. A recent UBS report finds that the 2006 Alt-A loans
are "on track to be one of the worst vintages ever." This is no subprime
niche problem.
Even if bad loans are more widespread than
previously expected, many housing bulls say, the impact on the housing
market and the economy will be minimal because total losses due to
foreclosures will be a small percentage of outstanding mortgage debt and
a still smaller share of the economy. A similar argument holds that bad
loans won't lead to a broader foreclosure problem because the average
American has plenty of equity in his home.
Foreclosure losses as a share of the economy
will be small and most homeowners have a comfortable amount of equity in
their homes. In fact, about one-third of homeowners have no mortgage and
own their homes outright, but they are not the reason home prices have
been driven to the stratosphere. Home prices -- like all prices -- are
set at the margin. It was the marginal buyer, particularly the subprime
borrower and housing speculator, who drove prices higher. The easing of
lending terms increased the demand for homes, and since the supply of
homes is relatively fixed (or inelastic), this increase in demand
quickly translated into higher prices. As the loose lending practices
are inevitably reversed -- and there is a wide chasm between current
lending practices and prudent lending terms -- fewer people will be able
to afford to buy a house, which will reduce demand and push home prices
lower.
It's not the size of foreclosure losses as a
share of the economy that matters, it is the effect those losses have on
the availability of credit. When banks (and investors in mortgage-backed
securities) begin suffering losses, they inevitably pull back. This is
why so many subprime companies have gone bankrupt virtually overnight;
investors balked at buying subprime loans except at a steep discount,
which produced immediate losses. In effect, their ability to profitably
finance new loans was eliminated.
What's more, the bank regulators are only now
beginning to tighten lending standards and will be under increasing
pressure from Congress to do more. After growing by nearly 50% in the
first half of 2006, nontraditional loan growth has turned negative since
the bank regulators issued new guidelines last September. The CFO of
Countrywide recently told an investor conference that 60% of the
subprime loans the company is making won't meet proposed federal rules
likely to take effect during the summer. The concern that tighter
lending standards could reduce access to financing is the reason a
widely watched survey of homebuilders conducted by the National
Association of Homebuilders dropped earlier this week.
PRECISELY one year ago, we
lucky taxpayers took over Fannie Mae and Freddie Mac, the
mortgage finance giants that contributed mightily to the
wild and crazy home-loan-boom-turned-bust. In that rescue
operation, the Treasury agreed to pony up as much as $200
billion to keep Fannie in the black, coughing up cash
whenever its liabilities exceed its assets. According to the
company’s most recent quarterly financial statement, the
Treasury will, by Sept. 30, have handed over $45 billion to
shore up the company’s net worth.
It is still unclear what
the ultimate cost of this bailout will be. But thanks to
inquiries by Representative Alan Grayson, a Florida
Democrat, we do know of another, simply outrageous cost. As
a result of the Fannie takeover, taxpayers are paying
millions of dollars in legal defense bills for three top
former executives, including Franklin D. Raines, who left
the company in late 2004 under accusations of accounting
improprieties. From Sept. 6, 2008, to July 21, these legal
payments totaled $6.3 million.
With all the turmoil of
the financial crisis, you may have forgotten about the
book-cooking that went on at Fannie Mae. Government
inquiries found that between 1998 and 2004, senior
executives at Fannie manipulated its results to hit earnings
targets and generate $115 million in bonus compensation.
Fannie had to restate its financial results by $6.3 billion.
Almost two years later, in
2006, Fannie’s regulator concluded an investigation of the
accounting with a scathing report. “The conduct of Mr.
Raines, chief financial officer J. Timothy Howard, and other
members of the inner circle of senior executives at Fannie
Mae was inconsistent with the values of responsibility,
accountability, and integrity,” it said.
That year, the government
sued Mr. Raines, Mr. Howard and Leanne Spencer, Fannie’s
former controller, seeking $100 million in fines and $115
million in restitution from bonuses the government contended
were not earned. Without admitting wrongdoing, Mr. Raines,
Mr. Howard and Ms. Spencer paid $31.4 million in 2008 to
settle the litigation.
When these top executives
left Fannie, the company was obligated to cover the legal
costs associated with shareholder suits brought against them
in the wake of the accounting scandal.
Now those costs are ours.
Between Sept. 6, 2008, and July 21, we taxpayers spent $2.43
million to defend Mr. Raines, $1.35 million for Mr. Howard,
and $2.52 million to defend Ms. Spencer.
“I cannot see the
justification of people who led these organizations into
insolvency getting a free ride,” Mr. Grayson said. “It goes
right to the heart of what people find most disturbing in
this situation — the absolute lack of justice.”
Lawyers for the three
executives did not returns calls seeking comment.
An additional $16.8
million was paid in the period to cover legal expenses of
workers at the Office of Federal Housing Enterprise
Oversight, Fannie’s former regulator. These costs are
associated with defending the regulator in litigation
against former Fannie executives.
This tally of taxpayer
legal costs took several months for Mr. Grayson to extract.
On June 4, after Congressional hearings on the current and
future status of Fannie and Freddie, he requested the
information from the Federal Housing Finance Agency, now
their regulator. He got its response on Aug. 26.
A spokeswoman for the
agency said it would not comment for this article.
THE lawyers’ billable
hours, meanwhile, keep piling up. As the F.H.F.A. explained
to Mr. Grayson, the $6.3 million in costs generated by 10
months of legal defense work for Mr. Raines, Mr. Howard and
Ms. Spencer includes not a single deposition for any of
them. Instead, those bills covered 33 depositions of “other
parties” relating to the shareholder suits and requiring the
presence of the three executives’ counsel.
One of Mr. Grayson’s
questions about these payments remains unanswered — whether
placing Fannie Mae into receivership, rather than
conservatorship, would have negated the agreement to cover
the former executives’ legal costs. Choosing conservatorship
allowed Fannie to stabilize and meant that it was going to
continue to operate, not wind down immediately.
But, Mr. Grayson pointed
out: “If these companies had gone into receivership instead
of conservatorship, the trustee in bankruptcy or the
receiver would have been free, legally, to reject these
contracts that called for indemnification. Raines, Howard
and Spencer would have had to pay their own fees.”
When asked about this,
Fannie’s regulator, the F.H.F.A., waffled. “Whether these
costs could have been avoided would depend on the facts and
circumstances surrounding any receivership,” it said. “It is
possible that receiverships could have reduced the costs of
the litigation, but by no means certain.”
Mr. Grayson said he
intended to find out whether there are any legal options
under the conservatorship to stop paying for the defense of
the Fannie Mae three. “When did Uncle Sam become Uncle Sap?”
he said. “In a situation where billions of losses have
already occurred, is it really asking too much that people
pay their own legal fees?”
While the $6.3 million
paid to defend Mr. Raines, Mr. Howard and Ms. Spencer is a
pittance compared with other bills coming due in the bailout
binge, it is still disturbing for these costs to be covered
by those who had nothing to do with the problems and
certainly did not benefit from them. The money may be small,
but the episode’s message looms large: those who presided
over this debacle aren’t being held accountable.
“It is wrong in a very
deep sense,” Mr. Grayson said. “The essence of our society
is that people who do good things are rewarded and people
who do bad things are punished. Where is the punishment for
Raines, Howard and Spencer? There is none.”
Mortgage Fraud Increasing Despite the attention paid to mortgage fraud committed
by borrowers and lenders since declines in the real estate values and the
subprime loan crisis triggered severe problems in the banking industry, the
number of Federal Bureau of Investigation’s (FBI) investigations of mortgage
fraud and associated financial crimes is increasing. “The FBI has experienced
and continues to experience an exponential rise in mortgage fraud
investigations,” John Pistole, Deputy Director, told the Senate Judiciary
Committee in April. AccountingWeb, August 18, 2009 ---
http://www.accountingweb.com/topic/mortgage-loan-fraud-increasing
Jensen Comment
I think mortgage fraud will continue to rise as long as remote third parties
like Fannie Mae, Freddie Mac, and FHA continue to buy up mortgages negotiated by
banks and mortgage companies basking in moral hazard. The biggest hazards are
fraudulent real estate appraisals and lies about income in mortgage
applications. We need to bring back George Bailey (James Stewart) in It's a
Wonderful Life ---
http://en.wikipedia.org/wiki/It%27s_a_Wonderful_Life
The banks that negotiate the mortgages should have to hang on to those
mortgages. Watch the video at
http://www.youtube.com/watch?v=MJJN9qwhkkE
Millions of elderly homeowners
grappling with poor health could tap billions of dollars through
reverse mortgages to help them stay in their homes, but most are
reluctant to do so, a new study finds.
Only 13% of older homeowners who
were surveyed say they are likely or very likely to use such loans,
citing fears of losing their homes or depleting their children's
inheritance -- despite the fact that adult children of such homeowners
said "that using home equity [to pay for long-term-care needs]
was a great idea," says Barbara Stucki, a consultant who led the
research effort for the National Council on the Aging, a Washington
advocacy group.
In fact, almost two-thirds of
the adult children surveyed believe a reverse mortgage can help older
people continue to live at home, compared with less than half of older
homeowners, the research found.
Two hundred homeowners, half in
the 65-plus age group and half between the ages of 35 to 60 with older
parents, were interviewed last year. The survey has a 10
percentage-point margin of error.
"It shows what those of us
dealing with this in our own families already know -- that the
majority of adult children care more about the quality of life of
their parents than they do about their inheritance," says Jay
Greenberg, the group's executive vice president.
By analyzing 2000 homeownership
data collected for the federal Health and Retirement Study, the group
found that, overall, 13.2 million households in which the homeowner or
the homeowner's spouse was at least 62 years old could qualify for at
least $20,000, and $72,128 on average, in reverse-mortgage loans, or a
total of $953 billion.
A reverse mortgage lets
homeowners who are 62 years old or older borrow against the equity in
their property. They can take the proceeds as a monthly check, lump
sum or line of credit. So, instead of a homeowner making payments to a
bank, as with a traditional mortgage loan, the bank makes payments to
the homeowner. The loan is repaid, with interest, when the borrower
sells the house, moves or dies. The fees involved are typically 7% to
11% of the home's value.
In 9.8 million of the households
that qualified for reverse mortgages, the study found, either the
homeowner or the homeowner's spouse already had difficulty with or
needed help with personal care or household activities (3.8 million),
or suffered from a functional limitation (six million), such as having
trouble climbing stairs or carrying groceries.
In fact, people with a
functional limitation "are at higher risk of having an accident,
like a fall, causing them to need long-term care immediately,"
Dr. Stucki says. "If they can take out reverse mortgages to help
them take preventive measures, that can be a very important group that
can benefit."
Instead of being forced to seek
government-funded care in a nursing home, families could extract their
home equity to pay for long-term care that would be provided directly
within their homes -- where the overwhelming majority of elderly
people want to receive care, the council contends.
Continued in the article
Vegetarian Food Frauds
If you think that you have been a vegetarian, think
again!
While preparing dinner one night last
February, Supriya Kelkar didn’t think twice before tearing open
a package of Lipton SideKicks Broccoli and White Cheddar Pasta
mix.
Kelkar, a vegetarian, had read the package’s label in the
supermarket earlier. Among the ingredients listed on the package
were pasta, salt, cornstarch, cheddar and blue cheese, whey,
broccoli, MSG, spices, autolyzed yeast extract, maltodextrin, and
natural flavors.
What came next shocked Kelkar.
“I had a taste of the pasta, and I immediately sensed something
‘meaty,’” she told India-West.
So she called the 800 number of Lipton’s customer service to ask
if the product contained meat as one of its “natural flavors.”
She was told by a representative that it was safe to assume that
it did. Kelkar, 23, a vegetarian since her teens, decided to write
a letter to complain.
“[The customer service rep] explained that Lipton does not need
to disclose that information to the public because meat is not a
common allergen,” Kelkar wrote in her letter. “I find this
completely and utterly offensive.”
Two months later, she received a reply from Warren Blume, a
spokesperson for Lipton’s parent company, Unilever Bestfoods:
“We cannot always guarantee that the ingredients are dairy, meat
and egg free,” he wrote. “In speaking to our consumers, a
majority of people found this to be an acceptable solution.”
“His email was infuriating,” Kelkar told India-West by phone
last week from her home in Detroit. “To say, ‘We tested it,
and most consumers thought it was okay,’ was very
patronizing.”
Kelkar began to suspect that meat was hiding in many packaged
foods on her shelf, such as Knorr soup and sauce mixes, Prego
spaghetti sauces and Campbell soups, so she started writing
letters to food companies, and even to the Food and Drug
Administration, expressing her concern. She learned that not only
was there no law requiring the disclosure of meat as an ingredient
on food labels, but that few companies seemed to care. “With a
lot of companies, such as Kraft, their indifference was almost
insulting,” she said. Many companies cite “proprietary
reasons” for their refusal to disclose whether their natural
flavors contain meat.
On the surface, the solution to her problem would seem quite
simple — stop buying MSG-laden processed foods and cook
everything from scratch; seek out frozen or packaged foods from
natural foods companies such as Amy’s Kitchen or Cascadian Farm,
which offer a wide range of vegetarian entrees; or shop only in
Indian grocery stores, where vegetarian foods are more likely to
be clearly labeled and easy to find.
But that’s not always convenient or practical. Kelkar, a member
of the screenwriting team on Vidhu Vinod Chopra’s Move 5 film
project, often finds herself too busy to drive across town to
search out a health food store. Busy working parents have even
less time. And for vegetarians who live outside a major American
city, their choices are fewer still.
“In this country, it seems like that sort of information should
be disclosed,” Kelkar said. “It seems like it should be a
natural consideration.”
HIDDEN MEAT IN RESTAURANTS
Tejas Mehta, a CPA living in Anaheim, Calif., was a regular
customer at a Marie Callender’s restaurant there. “I used to
go there regularly for Lions Club meetings,” he recalled, “and
I used to eat the same Fettucini Alfredo due to the lack of
vegetarian choices.”
He asked a waitress to check that the dish was vegetarian, and she
“specifically confirmed” that it was, he said. Mehta, an
adherent to the strictly vegetarian Jain religion, had heard from
an acquaintance that some restaurants added chicken stock to their
Alfredo sauce to keep it moist, so he asked the waitress to
doublecheck. His fears were confirmed when she returned from the
kitchen. “It had been non-vegetarian all along,” he told
India-West.
Mehta shared his concerns with others in the Jain community, and
found that the practice was widespread. In an article he wrote and
circulated on the Internet, he quoted other Jains with similar
experiences: “We were shocked to find out that the beans and
rice at El Torito Grill in Irvine, Calif., are made with chicken
and/or beef stock,” said Hansni Kamdar. “I have found out that
soups, mashed potatoes, hash browns and rice are mostly made with
beef/chicken broth,” said Aarti Mehta. “I tell every Jain not
to eat in any Mexican restaurant,” said Geeta Khona.
“Some popular items that look vegetarian are really not what
they appear to be,” said Mehta. “Tortilla chips, rice and
beans generally appear vegetarian on the face of it, but many
restaurants use lard, chicken or beef stocks to make these items.
I used to eat Caesar salad for a long time before I realized it is
not vegetarian.” (Many Caesar dressings contain anchovy and raw
egg.)
“Isn’t this an eye opener? It’s about time issues like this
are taken up with government agencies and consumer interest
groups,” said Mehta.
Continued in the article
Deed Swapping and Other Home Equity Scams
Question
What is deed swapping and why is it becoming a serious scam?
Answer
You think you own the property, but it is unlikely that you will
ever really own it. The scam is that balloon payment at the
end that the borrower has less than 1% chance of paying. The
lender is virtually assured of having his cake and eating it too.
WFMY News Consumer Alert: Deed Swapping Web Producer: Dawn
Murphy Modified: 11/30/2002 --- http://www.wfmynews2.com/2wk/2wk.asp?ID=878
Anna
Duboise was the perfect target a single mom with three kids, who
was desperate for a chance to call somewhere home.
"I
always figured if I had the opportunity, just one little
opportunity to get me a home, that's what I was going to
do."
That
opportunity came when Joe Seeman entered her life He had a home
to sell and he was even willing to provide Anna a loan.
"I
thought it was great, he was like a little God, ya know, thank
you very much."
Seeman
is a realtor, he says "she was given quite a sweetheart
deal."
Seeman's
'deal' offered Anna monthly payments of just under $475 a month.
He charted how at that rate, it would take her 30 years to pay
off the loan.
But
that was not the case. The actual mortgage he sold her expired
in just five years at which time Anna's balance was due in
full;a balloon payment that totaled more than $40,000.
"It's
not fair, it's not right."
It was
a financial impossibility right from the start.
"She
wasn't that good of a buyer in terms," says Seeman,
"of what, for example, a bank would say. "
Simply
put: Anna was a high risk borrower. So Seeman found a way to
make the deal virtually risk free...to himself.
He had
Anna sign the deed of the house back over to him; in effect,
retaining control of the house, in case she couldn't make the
payments.
It's
called 'deed swapping.' "It was a way to protect me."
Anna's
attorney calls it something else. "Deceptive. Highly highly
deceptive. Ownership is never delivered. It's a phantom
idea."
And an
idea that's growing in popularity. The Federal Trade Commission
now lists 'deed swapping' among the most popular predatory
lending schemes. It means every legal right you have as a
homeowner is lost. In short the borrower becomes a tenant; and
the lender, becomes a landlord."
So when
Anna started falling behind in her payments Seeman simply took
the house back. "At that point I told her, hey, you no
longer own the house, and you have to leave or you're going to
be evicted."
Leaving
Anna with nothing but questions: "It was never mine in the
first place. So what am I striving for? What was it that I got
into? Why didn't I pay attention?"
A
mistake that may cost Anna everything she's put into her home
and leave the lender in a position to put the house on the
market again.
Hi David,
You are correct in that deed swapping is not a scam if the
buyer has a decent probability of making the monthly payments and
the ending balloon payment. But the FTC contends that this is
becoming one of the nation's rising scams due to the nature of the
lenders and the targeted buyers. With the newer type of
"buyer" (typically a person who is very poor,
uninformed, and lacking in hope of home ownership under a
conventional mortgage), deed swapping becomes a way for a sneaky
landlord to extract higher rent.
The scam is that a portion of the payment is supposedly a
reduction of the amount owed as in a conventional mortgage.
However, the targeted "buyer" never really has a
recorded deed to the property (thereby making foreclosure easy)
and never really has a chance of making the ending balloon
payment. Hence, the monthly payments are really
artificially-inflated rental payments because the
"buyer" is led to believe that he or she is really
"owns" the property. The "buyer" also
becomes responsible for property taxes, insurance, and maintenance
normally paid by the landlord in a rental situation. When
the "owner" cannot make the enormous balloon payment at
the contracted time, the property remains with the land
"lord" who really had title all along.
I learned about this because of the above story on CBS
television. The problem is that deed swapping is a very
difficult "scam" to prosecute for the very reasons you
state in your message. It can be a very legitimate way of
purchasing property when the buyer has a reasonable probability of
making all payments.
********************************************* Hidden Loan Terms: The Balloon Payment
You've fallen behind in your mortgage
payments and may face foreclosure. Another lender offers to save
you from foreclosure by refinancing your mortgage and lowering
your monthly payments. Look carefully at the loan terms. The
payments may be lower because the lender is offering a loan on
which you repay only the interest each month. At the end of the
loan term, the principal-that is, the entire amount that you
borrowed-is due in one lump sum called a balloon payment. If you
can't make the balloon payment or refinance, you face
foreclosure and the loss of your home.
*********************************************
By the way, I highly recommend the FTC site for warnings about
scams and deceptive trade practices. Like most Federal Government
Websites, it is outstanding --- http://www.ftc.gov/
-----Original Message-----
From: David R. Fordham [mailto:fordhadr@JMU.EDU]
Sent: Tuesday, December 10, 2002 8:00 AM
To: AECM@LISTSERV.LOYOLA.EDU
Subject: Re: Why deed swapping is a growing scam?
This is the first I've heard of
"deed swapping", but I wonder if it is similar to what
Virginia calls, "Deed of Trust", where the deed is in
the name of the lender, "in trust", to be tendered to
the buyer once the loan is paid off.
If that is the case, then, I'm not sure
I'd call it a scam. I used one of these when I purchased some
mountain property with a vacation home on it, a few years ago.
The seller sold me the property for a pittance down payment,
with a five year balloon loan, using a 30-year amortization to
calculate the monthly payment. The monthly payment was tiny. Of
course, over 95% of the purchase price would be "due"
in five years. Again, this sounds just like what the lady in the
WFMY article had.
Unlike the "victim" in the
example, however, I made the monthly payments I had agreed to
make. The loan was at 8%, which was under the market rate at the
time I purchased. Before the balloon payment came due, however,
I refinanced the loan, at 5.75%. (Now I wish I'd held off a
little longer and gotten a 5.25% rate like I just got on
refinancing my primary house!) The new deed of trust is in the
name of a new lender, but I've got a 15-year fixed-rate standard
mortgage now.
This sounds like the "deed
swapping" in Bob's example. If it is the same thing, I'm
not sure where the word "scam" comes in. ? This seems
like a legitimate, ethical, above-board, financing arrangement.
I think of a "scam" as a situation where one of the
parties lies, cheats, or steals. In this case, the WFMY article
sounds like the buyer should have made out like a bandit because
of the precipitous drop in mortgage rates over the past few
years. What is the difference between "deed swapping"
and "foreclosure", which would happen when the buyer
failed to make payments on a traditional mortgage? In fact, it
sounds like 'deed swapping' is the same thing as foreclosure,
except that that attorneys might not make as much money.
I don't pretend to be a lawyer, and if
a lawyer has determined that this practice is illegal or someone
lied, well, then, I guess I must have missed something. But in
my mind, I can't see where the scam is. Except perhaps that a
realtor sold a person some real estate that she couldn't have
afforded in the first place, knowing that she couldn't make the
payments. But that could happen with a traditional mortgage just
as easily, so I still don't see the distinction, or why the
financing arrangement is in question? Bob, can you help me out?
What am I missing?
David R. Fordham
PBGH Faculty Fellow
James Madison University
Diploma Legitimacy Versus Fraud
Onsite and Online College Directory by State in
the U.S. ---
http://www.college-scholarships.com/index.html#collegestate
Always investigate the credibility of any
college you're interested in before assuming all college degrees are accepted
for employment and further study.
It’s surprising how many house pets hold
advanced degrees. Last year, a dog received his M.B.A. from the
American University of London, a non-accredited distance-learning
institution. It feels as if I should add “not to be confused with the
American University in London,” but getting people to confuse them
seems like a pretty basic feature of the whole AUOL marketing strategy.
The dog, identified as “Peter Smith” on his
diploma, goes by Pete. He was granted his degree on the basis of “previous
experiential learning,” along with payment of £4500. The funds were provided
by a
BBC news program, which also helped Pete fill out
the paperwork. The American University of London required that Pete submit
evidence of his qualifications as well as a photograph. The applicant
submitted neither, as the BBC website explains, “since the qualifications
did not exist and the applicant was a dog.”
The program found hundreds of people listing AUOL
degrees in their profiles on social networking sites, including “a senior
nuclear industry executive who was in charge of selling a new generation of
reactors in the UK.” (For more examples of suspiciously credentialed dogs
and cats, see
this list.)
Inside Higher Ed reports
on diploma mills and fake degrees from time to time but can’t possibly cover
every revelation that some professor or state official has a bogus degree,
or that a “university” turns out to be run by a convicted felon from his
prison cell. Even a blog dedicated to the topic,
Diploma Mill News, links to just a fraction of the
stories out there. Keeping up with every case is just too much; nobody has
that much Schaudenfreude in them.
By contrast, scholarly work on the topic of
counterfeit credentials has appeared at a glacial pace. Allen Ezell and John
Bear’s expose Degree Mills: The Billion-Dollar Industry -- first
published by
Prometheus Books in 2005 and updated in 2012 –
points out that academic research on the phenomenon amounts is conspicuously
lacking, despite the scale of the problem. (Ezell headed up the Federal
Bureau of Investigation's “DipScam” investigation of diploma mills that ran
from 1980 through 1991.)
The one notable exception to that blind spot is the
history of medical quackery, which enjoyed its golden age in the United
States during the late 19th and early 20th centuries. Thousands of dubious
practitioners throughout the United States got their degrees from
correspondence course or fly-by-night medical schools. The fight to put both
the quacks and the quack academies out of business reached its peak during
the 1920s and ‘30s, under the tireless leadership of Morris Fishbein, editor
of the Journal of the American Medical Association.
H.L. Mencken was not persuaded that getting rid of
medical charlatans was such a good idea. “As the old-time family doctor dies
out in the country towns,” he wrote in a newspaper column from 1924, “with
no competent successor willing to take over his dismal business, he is
followed by some hearty blacksmith or ice-wagon driver, turned into a
chiropractor in six months, often by correspondence.... It eases and soothes
me to see [the quacks] so prosperous, for they counteract the evil work of
the so-called science of public hygiene, which now seeks to make imbeciles
immortal.” (On the other hand, he did point out quacks worth pursuing to
Fishbein.)
The pioneering scholar of American medical
shadiness was James Harvey Young, an emeritus professor of history at Emory
University when he died in 2006, who
first published on the subject in the early 1950s.
Princeton University Press is reissuing American Health Quackery:
Collected Essays of James Harvey Young in
paperback this month. But while patent medicines
and dubious treatments are now routinely discussed in books and papers on
medical history, very little research has appeared on the institutions -- or
businesses, if you prefer -- that sold credentials to the snake-oil
merchants of yesteryear.
There are plenty still around, incidentally. In
Degree Mills, Ezell and Bear cite a Congressional committee’s estimate
from 1986 that there were more than 5,000 fake doctors practicing in the
United States. The figure must be several times that by now.
The demand for fraudulent diplomas
comes from a much wider range of aspiring professionals now than in the
patent-medicine era – as the example of Pete, the canine MBA, may suggest.
The most general social-scientific study of the problem seems to be “An
Introduction to the Economics of Fake Degrees,”
published in the Journal of Economic Issues in 2008.
The authors -- Gilles Grolleau, Tarik Lakhal, and
Naoufel Mzoughi – are French economists who do what they can with the
available pool of data, which is neither wide nor deep. “While the problem
of diploma mills and fake degrees is acknowledged to be serious,” they
write, “it is difficult to estimate their full impact because it is an
illegal activity and there is an obvious lack of data and rigorous studies.
Several official investigations point to the magnitude and implications of
this dubious activity. These investigations appear to underestimate the
expanding scale and dimensions of this multimillion-dollar industry.”
As
Enron and Bernie Madoff once showed us the depths that people will go to
hide who they really are, there are many others out there who have created
entire academic profiles... and even careers... under false pretenses. This
is the story of only a few of them.
From foolish fibs to full-on fraud, lying on your
résumé is one of the most common ways that people stretch the truth. But
think twice before you ship off your next half-baked job application. Even
if your moral compass doesn't keep you from deceit, the fact that human
resources is on to the game should.
The percentage of people who lie to potential
employers is substantial, says Sunny Bates, CEO of New York-based executive
recruitment firm Sunny Bates Associates. She estimates that 40% of all
résumés aren't altogether aboveboard.
And this game of employment Russian roulette is
getting riskier and riskier. Almost 40% of human resources professionals
surveyed last year by the Society for Human Resource Management reported
they've increased the amount of time they spend checking references over the
past three years.
Executive Lies About His MBA from the University of Southern California Officials at the University of Southern California --
responding to an inquiry from the Journal -- told the company it had no record
that Mr. Lanni had earned a master's degree in business administration from the
school. A corporate biography of Mr. Lanni on MGM Mirage's Web site says he
holds an MBA in finance from USC. Mr. Lanni is a longtime patron of USC, joining
boards and speaking at the school over the years, Mr. Murren and others said.
For example, he is currently a member of the Board of Overseers of USC's Keck
School of Medicine. The university contacted MGM Mirage on Wednesday following
the Journal's inquiries about a recent discovery by Barry Minkow, a private
fraud investigator in San Diego, of a discrepancy between Mr. Lanni's corporate
biography and a database of college degrees accessible to private investigators.
(Please
see related article.) Mr. Minkow said he has no
investment position in MGM Mirage, but one of his employees has bought "put"
options betting against the company's stock.
"MGM Mirage CEO to Resign Amid Questions About MBA," by Keith J. Winstein and
Tamara Audi, The Wall Street Journal, The Wall Street Journal, November
14, 2008 ---
http://online.wsj.com/article_email/SB122661583489225999-lMyQjAxMDI4MjE2NDYxMTQ1Wj.html
Jensen Comment
An anonymous tip revealed that Lanni was a major fund raiser at one time for the
USC School of Accountancy. Although Lanni has claimed on his resume that he has
a BS in speech, it turns out that he does have a BS in Business (not from the
USC School of Accountancy where he was a fund raiser).
In terms of wealth Lanni can still claim he gambled and won at the MGM Mirage
in Las Vegas.
Alan Contreras, a longtime critic
of diploma mills in the United States, returns to discuss whether much has
changed in the four years since The Chronicle published a long report on the
booming industry in spurious degrees. Join us for a live online chat, on
Thursday, July 24, at noon, U.S. Eastern
time. Four years ago, The Chronicle published a
lengthy report on the
booming businessof diploma
mills. The report described how some sophisticated purveyors of spurious
degrees were making millions of dollars a year, how intertwined the schemes
often were with legitimate higher education, how frequently those operations
used fake accreditors and other trappings of legitimacy to mask their
frauds, and how many professors had made use of bogus diplomas to advance
their careers. Four years later, how much has changed? Is it easier to tell
a diploma mill from a real university? What about international
institutions? Or online ones? What should be the role of state and federal
governments in policing nonaccredited institutions? What does a diploma even
mean anymore?
Early on a Friday morning,
four college students stand shivering in the parking lot of an office
complex in Sterling, Va. The building itself is unremarkable, red brick and
dark glass, but security cameras are bolted to the walls, cement posts line
the perimeter, and coils of concertina wire surround the trash bins. This is
a branch of U.S. Immigration and Customs Enforcement, the investigative arm
of the U.S. Department of Homeland Security.
The students arrived more
than an hour early for their appointment. They haven't slept or eaten in two
days, passing time instead by obsessively organizing their documents and
drinking cup after cup of strong black tea. Their eyelids are at half- mast,
their hands shoved in jacket pockets. They are all Indian, all from the city
of Hyderabad, and all possibly in deep trouble.
These students, like roughly
1,500 others from India, were enrolled at Tri-Valley University, a
California institution that was raided by federal agents in January. The
government seized property, threatened to deport students, and in legal
filings called Tri-Valley a "sham university" that admitted and collected
tuition from foreign students but didn't require them to attend class. (The
president of Tri-Valley, Susan Xiao-Ping Su, denies the charges.) Many
students allegedly worked full-time, low-level retail jobs—in one case, at a
7-Eleven in New Jersey—that were passed off as career training so they could
be employed while on student visas. The university listed 553 students as
living in a single two-bedroom apartment near the college; in fact, students
were spread out across the country, from Texas to Illinois to Maryland.
As the students move inside
and await their interview, a deliveryman wheels in a hand truck stacked with
nine boxes of .44-caliber ammunition. On a table nearby rests a brochure
titled "Targeting Terrorists," which features the famous image of Mohammed
Atta breezing through airport security. When an agent emerges and asks who
is going to be first, the four students stare at the carpet. "Come on," the
agent says, trying to break the tension. "No one is going to beat you with a
rubber hose."
The joke does not go over
well.
The raid on Tri-Valley
received limited attention in the United States, but it was and remains a
big story in India, where newspapers and television shows portray U.S.
officials as callous, and oversight of the student-visa program as
incompetent. After weeks of bad publicity, Secretary of State Hillary Rodham
Clinton felt compelled to assure Indian officials that the situation would
be resolved fairly. Meanwhile, immigration officials have pointed to the
shuttering of Tri-Valley as proof of their vigilance.
"Diploma-Mill
Operator Is Sentenced to 3 Years in Prison,"
by Thomas Bartlett, Chronicle of Higher Education,
One of the operators
of a notorious diploma mill, Dixie E. Randock, was sentenced today to three
years in prison, according to the federal prosecutor’s office in Spokane,
Wash. Ms. Randock, along with her husband, Steven K. Randock,
had
pleaded guilty to fraud-conspiracy charges in
March.
The Randocks made
millions of dollars selling fake degrees online, usually issued under the
name Saint Regis University. The bogus institution was based in Spokane but
had ties to the government of Liberia and claimed accreditation through that
country’s ministry of education. Representatives of the fake university
bribed Liberian officials and created seals and
stamps to make their diplomas appear authentic, according to court
documents.
A good deal of the
credit for bringing down Saint Regis belongs to George Gollin, a physics
professor at the University of Illinois at Urbana-Champaign who
investigates diploma mills as a pastime and helped
bring the fraudulent operation to
federal attention.
Jensen Comment
Millions of return for three years sounds like a pretty good deal
Those Deceptive For-Profit University Promotional Websites
Almost daily I get requests to link to commercial sites disguised to be
academic helper sites. Over half these requests are on behalf of for-profit
universities, although the sites themselves are getting more and more clever
about hiding the fact that they are promotional sites for for-profit
universities. At the same time, I'm getting smarter about detecting these sites
and no longer link to them on my Website or on the AECM.
I think that for-profit universities pay people to promote their sites on
some basis such as pay-per-click.
To get more eyeballs, these for-profit university promotion sites are adding
so called helpers that I've discovered in some cases have simply plagiarized
material from other sites such as the History of Pacioli. In some instances the
efforts to provide helpers are more legitimate. Nevertheless it galls me to link
to these deceptive for-profit university sites. By "deceptive" I mean such
thinks as providing links to distance education programs in selected fields like
accounting, nursing, pharmacy, etc. Even though there are better and nearly
always cheaper distance education degree programs from state-supported
universities, those universities are excluded from the for-profit distance
education promotional sites. For example, the only distance education degree
programs in accounting will those degree programs available from for-profit
universities.
At the same time, there is much misleading information at this
AccountingDegree.com site. For example, consider the various rankings of online
universities at http://oedb.org/rankings
In most cases the various better and cheaper non-profit colleges and
universities are not even mentioned by AccountingDegree.com.
But it's deceptive when those sites never mention that there are cheaper and
better distance education degree programs from nonprofit state universities.
Some of the better and cheaper non-profit distance education programs have been
highlighted by US News are listed below. You will never find these
programs mentioned by AccountingDebree.com or most any for-profit university
promotional Website.
U.S. News & World Report has published its
first-ever guide to online degree programs—but distance-education leaders
looking to trumpet their high rankings may find it more difficult to brag
about how they placed than do their colleagues at residential institutions.
Unlike the magazine's annual rankings of
residential colleges, which cause consternation among many administrators
for reducing the value of each program into a single headline-friendly
number, the new guide does not provide lists based on overall program
quality; no university can claim it hosts the top online bachelor's or
online master's program. Instead, U.S. News produced "honor rolls"
highlighting colleges that consistently performed well across the ranking
criteria.
Eric Brooks, a U.S. News data research
analyst, said the breakdown of the rankings into several categories was
intentional; his team chose its categories based on areas with enough
responses to make fair comparisons.
"We're only ranking things that we felt the
response rates justified ranking this year," he said.
The rankings, which will be published today,
represent a new chapter in the 28-year history of the U.S. News
guide. The expansion was brought on by the rapid growth of online learning.
More than six million students are now taking at least one course online,
according to a recent survey of more than 2,500 academic leaders by the
Babson Survey Research Group and the College Board.
U.S. News ranked colleges with bachelor's
programs according to their performance in three categories: student
services, student engagement, and faculty credentials. For programs at the
master's level, U.S. News added a fourth category, admissions
selectivity, to produce rankings of five different disciplines: business,
nursing, education, engineering, and computer information technology.
To ensure that the inaugural rankings were
reliable, Mr. Brooks said, U.S. News developed its ranking
methodology after the survey data was collected. Doing so, he said, allowed
researchers to be fair to institutions that interpreted questions
differently.
Some distance-learning experts criticized that
technique, however, arguing that the methodology should have been
established before surveys were distributed.
Russell Poulin, deputy director of research and
analysis for the WICHE Cooperative for Educational Technologies, which
promotes online education as part of the Western Interstate Commission for
Higher Education, said that approach allowed U.S. News to ask the
wrong questions, resulting in an incomplete picture of distance-learning
programs.
"It sort of makes me feel like I don't know who won
the baseball game, but I'll give you the batting average and the number of
steals and I'll tell you who won," he said. Mr. Poulin and other critics
said any useful rankings of online programs should include information on
outcomes like retention rates, employment prospects, and debt
load—statistics, Mr. Brooks said, that few universities provided for this
first edition of the U.S. News rankings. He noted that the surveys
will evolve in future years as U.S. News learns to better tailor
its questions to the unique characteristics of online programs.
W. Andrew McCollough, associate provost for
information technology, e-learning, and distance education at the University
of Florida, said he was "delighted" to discover that his institution's
bachelor's program was among the four chosen for honor-roll inclusion. He
noted that U.S. News would have to customize its questions in the
future, since he found some of them didn't apply to online programs. He
attributed that mismatch to the wide age distribution and other diverse
demographic characteristics of the online student body.
The homogeneity that exists in many residential
programs "just doesn't exist in the distance-learning environment," he said.
Despite the survey's flaws, Mr. McCollough said, the effort to add to the
body of information about online programs is helpful for prospective
students.
Turnout for the surveys varied, from a 50 percent
response rate among nursing programs to a 75 percent response rate among
engineering programs. At for-profit institutions—which sometimes have a
reputation for guarding their data closely—cooperation was mixed, said Mr.
Brooks. Some, like the American Public University System, chose to
participate. But Kaplan University, one of the largest providers of online
education, decided to wait until the first rankings were published before
deciding whether to join in, a spokesperson for the institution said.
Though this year's rankings do not make definitive
statements about program quality, Mr. Brooks said the research team was
cautious for a reason and hopes the new guide can help students make
informed decisions about the quality of online degrees.
"We'd rather not produce something in its first
year that's headline-grabbing for the wrong reasons," he said.
'Honor Roll' From 'U.S. News' of Online Graduate Programs
in Business
Institution
Teaching
Practices and Student Engagement
Student
Services and Technology
Faculty
Credentials and Training
Admissions
Selectivity
Arizona State U., W.P. Carey School of Business
24
32
37
11
Arkansas State U.
9
21
1
36
Brandman U. (Part of the Chapman U. system)
40
24
29
n/a
Central Michigan U.
11
3
56
9
Clarkson U.
4
24
2
23
Florida Institute of Technology
43
16
23
n/a
Gardner-Webb U.
27
1
15
n/a
George Washington U.
20
9
7
n/a
Indiana U. at Bloomington, Kelley School of Business
Alan Contreras is an
increasing rarity these days: a knowledgeable public official who says what
he thinks without worrying too much about whom he offends. That trait has
him in a scrape over free speech with his superiors in Oregon’s state
government. And while they backed away Thursday from the action that had
most troubled him, Contreras isn’t backing down from the fight.
Contreras oversees the
state’s
Office of Degree Authorization, which decides
which academic degrees and programs may be offered within Oregon’s
boundaries. Through his position in that office, which is part of the Oregon
Student Assistance Commission, Contreras has become a widely cited expert
for policy makers and journalists, on issues such as diploma mills,
accreditation, and state regulation of higher education. He also writes
widely on those and other topics for general interest newspapers and higher
education publications — including
Inside Higher Ed.
Contreras’s writings
and outspoken comments over the years have earned him his share of enemies,
particularly among proprietors of unaccredited institutions that he strives
to shut down. And while his wide-ranging opinion making has allowed some
critics to write him off as a gadfly, he testifies as an expert before
Congress and delivers keynote addresses at
meetings of higher education accrediting associations.
Those writings have raised
some hackles in Oregon. About a year ago, Contreras says, Bridget Burns, the
appointed head of the Oregon Student Aid Commission, told Contreras that she
wanted him to seek her approval before he did any outside writing that
identified him as a state employee. Contreras balked, and after numerous
discussions among commission officials in the months that followed, he says,
he was told during his annual review last December that “they realized I had
the right to do my writing,” Contreras says. “I thought it was all done.”
But this week, Contreras
says he was contacted by several acquaintances who had received an annual
survey that the commission does, as part of his annual review, to assess the
quality of his and his office’s work. In addition to the usual two questions
of the “how are we doing?” variety, as Contreras calls them, the survey that
began circulating last week contained two new ones:
“Alan occasionally
writes opinion pieces in newspapers and professional journals. Do you
have any concerns about a state employee expressing personal opinions in
this way?”
“Do Alan’s writings
affect your perception of OSAC?”
Contreras says that several
of those who contacted him asked him whether he was under fire from his
superiors. The official of one institution that is involved in a case before
him, he says, “asked if I was the victim of a witch hunt by my own agency.”
One recipient of the survey, Michael B. Goldstein, a Washington lawyer who
serves on an accreditation panel with Contreras and has appeared on
conference panels with him, says he was surprised both to have been asked to
assess Contreras and by the tenor of the questions.
“It’s not uncommon for
people who work closely with someone to be asked to comment on his or her
performance, but I have never seen it cast like this to people who are
pretty far removed,” Goldstein says.
Contreras characterizes the
commission’s inquiry as an attempt “to unconstitutionally interfere with my
free speech rights under the Oregon Constitution,” which reads in part: “No
law shall be passed restraining the free expression of opinion, or
restricting the right to speak, write, or print freely on any subject
whatever; but every person shall be responsible for the abuse of this
right.” The commission’s inquiry, he says, “damaged my reputation with the
people I work with” in and around Oregon. “It’s clear that it’s perceived
out there as some show of ‘no confidence’ in me.”
Contreras says that he
complained Wednesday to the staff of Gov. Ted Kulongoski about the
commission’s actions, and that he had asked for Burns’s resignation.
Kulongoski’s higher education aide could not be reached for comment late
Thursday.
Public Employees’ Free
Speech Rights
The legal situation
surrounding the free speech rights of public employees is in a state of
flux. A
2006 Supreme Court decision altered 35 years of
settled jurisprudence by finding that when public employees make statements
that relate to their official duties, “the employees are not speaking as
citizens for First Amendment purposes, and the Constitution does not
insulate their communications from employer discipline,” as Justice Anthony
M. Kennedy wrote in the majority opinion in Garcetti v. Ceballos.
That ruling modified the court’s 1968 decision in
Pickering v. Board of Education, which had
mandated that public employees have a right to speak about matters of public
concern that must be balanced against the government’s ability to operate
effectively and efficiently.
Contreras acknowledges that,
both legally (even under Oregon’s expansive constitutional provision) and
otherwise, he might be on shaky ground if he “went around trashing” the
Oregon Student Assistance Commission’s scholarship and other financial aid
programs. “It would be completely inappropriate for me to go around saying
that these programs are terrible programs and shouldn’t be supported,” he
says.
But “99 percent of what I
write doesn’t have to do with anything the agency is doing,” Contreras says.
“So what if I said the University of Oregon’s affirmative action plan is
awful, or that the level of academic planning in most colleges is
insufficient. That is legitimate comment on public policy issues, and it is
perfectly normal comment by a citizen.”
A legislative staff
analysis of Senate Bill 823 declares that during the 1980s, California
acquired the reputation of being "the diploma mill capital of the
world."
That's not quite true.
There were a couple of states, including neighboring Arizona, with worse
reputations as redoubts for private, for-profit, trade and professional
schools that charged big fees to students and offered little educational
value. But California was right up there as a haven for diploma mills.
In response to a ruckus
from defrauded students, consumer groups and the media, the Legislature
tightened regulation of private schools and colleges a couple of decades
ago. But the regulatory law expired a year ago, which would have been an
open invitation for diploma mills to crank up again.
Gov. Arnold
Schwarzenegger had vetoed a bill to extend regulation, saying he wanted
"meaningful protections for students" and promising that he would
propose "comprehensive reform" himself. But like many of the governor's
grandiose pledges, it came to naught. The only thing Capitol politicians
could do was extend the existing regulatory system for a year and say
they'd work to do what needed to be done.
Senate President Pro Tem
Don Perata has been the leading political figure involved. He did, in
fact, work on it, finally developing a new regulatory scheme that he
wrote into Senate Bill 823. But it's faced rough sailing in the
Legislature. The up-and-up private schools – and there are many –
dislike some of its regulatory provisions. And the diploma mills don't
want anything to impede their shoddy operations, such as the bill's
requirement that they disclose more information to students, including
their rates of success of students in gaining licenses and getting jobs.
This is no small matter.
There are hundreds of schools ranging from those that train truck
drivers to those offering advanced professional degrees. They collect
untold millions of dollars from at least 400,000 students. It's not
uncommon for students to commit their life's savings or go deeply into
debt to finance their schooling in hopes of bettering their lives.
"With no regulation for
these schools, many students find themselves tens of thousands of
dollars in debt with no jobs or marketable skills or who paid tuition
only to have the school close and no refunds given," Perata says.
A case in point occurred
in the past year when an outfit called Corinthian Colleges, based in
Santa Ana, paid $6.5 million to settle a lawsuit alleging that it had
exaggerated its record of placing students in jobs. Four years ago, the
state's best known for-profit college, the University of Phoenix, paid a
$9.8 million fine to the federal Department of Education after an
investigation into its recruitment practices.
The University of
Phoenix's billionaire founder, John Sperling, often dabbles in
California politics, both on matters affecting private schools and on
other causes, such as easing marijuana laws. He and son Peter are the
prime sponsors of Proposition 7, a November ballot measure that would
push the state more deeply into renewable power.
Perata's bill would
create a "Bureau of Private Secondary Education" in the Department of
Education to regulate the industry. The measure is being denounced by
lobbyists for the private schools as a mishmash of regulation with
punishments that could cripple smaller trade schools.
The bill reached the
Assembly floor Monday, the last day before the one-year extension of the
old regulatory scheme would expire. As an urgency bill, it needed a
two-thirds vote. With Republicans solidly opposed, it failed to gain
passage.
Perata may have to amend
the measure so that it wouldn't take effect until January, which
Democrats could pass without Republican votes. Schwarzenegger's
position, however, is still uncertain.
The unsavory world of
diploma mills is a complex one, and a number of government agencies have
attempted to regulate their activities with varying degrees of success. The
Internet has aided operators of these educational "institutions" who
frequently offer advanced degrees for little, or more often, no coursework.
This past Sunday the New York Times reported on the case of Dixie and Steven
K. Randock Sr. from the town of Colbert, Washington. The Randocks have been
accused of operating more than 120 fictitious universities, and the federal
government's concern goes beyond the mere matter of a phony degree.
Law-enforcement officials fear that the growth of such diploma mills offers
terrorists the potential to obtain bogus degrees in order to obtain visas in
the United States. At the state level, about 20 states have passed laws to
prohibit the trade in phony diplomas, but the U.S. Congress seems to be
moving a bit more slowly on the issue.
The first link will take
visitors to a New York Times article from this Sunday about the world of
diploma mills. The second link leads to a piece from Dan Walters of The
Modesto Bee which talks about a bill in California that would effectively
crack down on diploma mills. Moving on, the third link leads to a timely
piece of commentary from former university president Stephen Joel
Trachtenberg on diploma mills, which appeared in the Chronicle of Higher
Education this week. The fourth link leads to another special report from
the Chronicle of Higher Education by Thomas Bartlett and Scott Smallwood,
which investigates the profusion of dubious doctorates in the education
sector. The fifth link will lead visitors to the U.S. Department of
Education's Database of Accredited Postsecondary Institutions and Programs,
which can help those wondering about the authenticity of an institution.
Lastly, a link to the Federal Trade Commission's page on how to avoid
"fake-degree burns" is offered for additional information and assistance.
Diploma Mills: Beware of training and education snake oil claims
on television
Guess who's buying fake diplomas? Lawyers defending those accused in a federal court
of running a diploma mill revealed on October 11 that 135 federal employees,
including a White House official, purchased degrees from the operation, the
Associated Press reported. The names of the
federal officials were not revealed. Inside Higher Ed, October 13, 2006
Jensen Comment
The largest market for fake diplomas is among K-12 teachers who benefit from
automatic pay raises when receiving graduate degrees.
The dubious Pacific Western distance education "university" is at it
again lan Contreras, an administrator with the Oregon
Office of Degree Authorization, noted that Pacific Western grants many of
its degrees to people in Asia, where the distinction between the “University
of California” and “California University” will be lost in translation.
“It’s a perfectly rational business decision,” he said of the move by PWU to
change its name. “Because people who see this are going to think it is the
UC.” Contreras added that California’sBureau for Private
Postsecondary and Vocational Educationwill
have to approve the switch in title . . . Meanwhile, newspapers in Korea
report that lawmakers and police have opened an inquiry into more than
150 high-ranking national figureswho have
received degrees at unauthorized foreign colleges. The Korea Times reported
that 34 of those individuals received doctorates from Pacific Western. Those
officials currently work at the education ministry and an agency affiliated
with the Ministry of Science and Technology.
Paul D. Thacker, "What’s in a Name?" Inside Higher Ed, December 15,
2006 ---
http://www.insidehighered.com/news/2006/12/15/calu
I also learned about
Keiser College,
an institution that doesn't show up in
US News & World Report's annual rankings of the nation's colleges.
Why so? Because
Keiser College and a growing number of other vocational training schools
not only operate under the radar but also just beyond the law. What
they promise, in television ads that regularly interrupted "Law &
Order," is a chance to get a high paying job -- as a medical coding and
billing specialist, a fingerprint analyst, or a nurse's aide -- all in
eight months or less.
Each of the ads featured
satisfied graduates who looked into the camera and got right down to
business. "I didn't want to waste four years in college. So, I enrolled
in Keiser College and four months later, I graduated as a billing and
coding specialist. Keiser College even helped me land my dream job.
They could do the same for you." At that point, the camera pans to a
bank of telephone operators as an 866 number flashes across the screen.
What's wrong with this
picture? Well, for one thing, I had world-class trouble with the medical
billing and coding person at the hospital when I tried to get myself
discharged. I would not have been surprised if this person was a recent
graduate of Keiser College's accelerated medical billing and coding
program. But more importantly, proprietary for-profit institutions that
promise to change lives in a matter of a few months rank with the
television ads that show people who have lost 60, 70, or 80 pounds --
all without changing their diets or exercising.
In short, the claims of
Keiser College and its cousins often are so much snake oil. The sad
part is that they fleece the very people who can least afford it -- or
they fleece a government that does not seem to know the difference
between a real college and those that offer questionable vocational
programs.
As the distance learning market continues to
grow, state agencies charged with regulating the industry continue to
operate in a “fragmented environment,” according to a report presented
Thursday at the
2006 Education Industry Finance & Investment Summit,
in Washington.
One of the main questions these agencies must
consider is what constitutes an institution having a “physical presence”
in their state. In other words, what is an appropriate test to determine
whether regulation is needed?
More than 80 percent of agencies that are
included in the report said that they use some sort of “physical
presence” test. But few agree on how to define the word “presence,” in
part because there are so many elements to consider.
Inquiry Into Florida For-Profit University Widens Florida's attorney general expanded his
investigation of allegedly misleading sales tactics at for-profit Florida
Metropolitan University, demanding records detailing the school's
job-placement rates, grading, instructor qualifications, financial aid and
course prices. The inquiry by Charlie Crist, the state's top legal officer,
intensifies government scrutiny of for-profit career colleges, whose success
has sparked fierce debate among educators and in Congress. U.S. lawmakers
are considering legislation that would ease longstanding restrictions that
curbed at least some of their rapid growth. Unlike the trade schools of the
past, these for-profits have moved aggressively to offer bachelor's,
master's and even professional degrees, taking on conventional universities.
"Inquiry Into Florida For-Profit University Widens," by John Hechinger,
The Wall Street Journal, June 22, 2006; Page A12 ---
http://online.wsj.com/article/SB115093577533487007.html?mod=todays_us_page_one
The director of one of the state's worst elementary
school special education programs purchased her Ph.D. for about $250 from an
Internet diploma mill specializing in metaphysical theology. This is one of
three apparently fake credentials on Judith Blakely's resume, the Daily
Southtown has learned.
Blakely, who earns $75,000 a year as director of
student services at Calumet Park School District 132, claims to be a 2000
graduate of the business ethics doctorate program at the American College of
Metaphysical Theology, according to a copy of her resume obtained by the
Southtown.
The suburban Minneapolis, Minn., outfit advertises
a Ph.D. for a fee of $249 on its Web site, up from the $199 deal it offered
when Blakely purchased hers.
The school has no campus, awards credit for "life
experiences," and boasts most students graduate in 60 days.
Getting a Ph.D., according to the school's Web
site, could mean increased salary, enhanced prestige and heightened
credibility for recipients.
"Psychologically, the title 'Doctor' and the word
'healing' have a natural affinity in one's mind," it reads.
The Daily Southtown performed a background check on
Blakely — turning up this fake degree and other false information — after
reviewing state reports that outlined compliance problems within the Calumet
Park School District 132 special education program, many of which predated
her hire in 2003.
The Illinois State Board of Education is
threatening to "nonrecognize" the district and withhold as much as $6.7
million this year and next if the issues are not corrected.
Blakely oversees $500,000 in grant money and the
1,300-student district's special education, bilingual and tutoring programs.
Diploma mill operators often manage to stay one
step ahead of the law, changing their location or how they operate
whenever state or other authorities zero in for a crackdown. And the
laws and other tools available to regulators, higher education
officials, students and others to stop degree mill operators are few and
flimsy. So occasionally they turn to alternative tactics to fight the
degree mills and other companies that help them do business.
Last month, the American Association of
Collegiate Registrars and Admissions Officers filed a federal trademark
infringement lawsuit against the American Universities Admission
Program. The program, which says it is based in Sarasota, Fla., operates
among other things a service in which it evaluates the academic
credentials of foreign students to help them gain admission to American
universities. ("AUAP guarantees your admission into the best American
universities possible with the best available conditions!” it boasts on
its Web site).
On the site, and on the analyses it does of
individuals’ credentials, the program lists itself as a member of the
American Council on Education, NASFA: Association of International
Educators, and the registrars’ association, which is among the leading
evaluators of foreign students’ academic credentials. (Evaluators of
foreign degrees in the United States are not regulated, and most
traditional colleges use AACRAO or a service that belongs to the
National Association of Credential Evaluation Services. )
None of the groups listed by AUAP claim it as a
member, and AACRAO’s lawsuit aims to stop the program and its owner,
Jean-Noel Prade, from suggesting otherwise. “The harm to AACRAO is real
and present,” the association argues in its legal complaint. “Defendants
are providing evaluations of foreign academic credentials of less than
adequate quality,” and the program’s use of the AACRAO name “will
mislead academic institutions into believing that AACRAO has reviewed or
endorsed AUAP’s services.” The lawsuit asks a federal court to stop AUAP
from using the name or logos of the registrar’s group.
Exactly what is the connection between AUAP’s
credentialing of foreign students and the diploma mill industry? AACRAO
officials declined to comment directly on the case or on the target of
its lawsuit, but in a memo to its members about the suit, the
association said the following: “AACRAO and other legitimate higher
education organizations are under constant assault by diploma mills,
fake accrediting bodies and/or credential evaluation mills. These
entities typically attempt to misappropriate AACRAO’s respected and
reputable name to further their fraudulent and deceptive activities.
Unfortunately, many such operations are beyond the reach of American
law. Where AACRAO can take action, however, it will do so with the full
force of the law to preserve the association’s reputation and its
intellectual property rights in its trademarks.”
Continued in article
In the past I’ve bemoaned how athletics in Division 1 universities has
turned “education” into a fraud in countless instances. It’s also a fraud at the
admissions level from questionable K-12 schools.
The New York Times Uncovers Schools Where the Only Meaningful
Curriculum id Basketball An investigation by The New York Times found more
than a dozen of these institutions, some of which closed soon after opening. The
Times found that at least 200 players had enrolled at such places in the past 10
years and that dozens had gone on to play at N.C.A.A. Division I universities
like Mississippi State, George Washington, Georgetown and Texas-El Paso. "I
would say that in my 21 years, the number of those schools has quadrupled, and I
would put schools in quotation marks," Phil Martelli, the men's basketball coach
at St. Joseph's University in Philadelphia, said. "They're not all academic
institutions."
Pete Thamel, "Schools Where the Only Real Test Is Basketball," The New York
Times, February 25, 2006 ---
Click Here
The National Collegiate Athletic Association
acknowledges that it has not acted as such places have proliferated. For
years, its Clearinghouse has approved transcripts from these institutions
without questioning them.
Until revelations last year about a diploma mill in
Florida and concerns about other schools like it, the N.C.A.A. chose not to
police high schools. Although the N.C.A.A. recently commissioned a task
force charged with curbing academic abuse, it still faces the tricky task of
separating the legitimate from the nonlegitimate schools.
The Times found several schools with curious
student populations.
¶Genesis One Christian Academy in Mendenhall,
Miss.: Two years ago, this kindergarten-to-Grade 8 school added a high
school and a Grade 13, for basketball players who did not graduate to raise
their grade-point averages. At least 33 of about 40 students at the
unaccredited high school play basketball, and its stars have signed letters
of intent to attend Oklahoma State, Arkansas and Alabama.
¶Boys to Men Academy in Chicago: The student body
consists of 16 basketball players, who can earn credit for the equivalent of
eight high school core courses in a year by studying online through an
accredited correspondence school.
¶Rise Academy in Philadelphia: Opened last fall, it
outsources lessons to others, including Lutheran Christian and two online
high schools.
¶God's Academy in Irving, Tex.: A summer basketball
coach started with three students in August. Now 40 students in Grades 6 to
12, all basketball players, meet with two full-time teachers four days a
week at a recreation center. The curriculum is provided and graded by an
education center 25 miles away. Its star player, Jeremy Mayfield, signed
with Oklahoma.
Some of these institutions recently joined other
private schools to form the National Elite Athletic Association. With more
than two dozen teams from Los Angeles to Toronto, this conference is seeking
a shoe contract and a television deal. Its teams sometimes travel thousands
of miles to play in tournaments that often attract more college coaches than
fans. Those coaches will pay $100 for booklets of information about the
players.
Continued in article
Jensen Comment
My question is how these students managed to qualify for admittance into
universities. I seriously doubt that many, if any, graduated after playing four
years of basket ball in "college."
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College Withdraws Credits Awarded in Distance Education Scheme Otterbein announced that it was revoking thousands
of credits awarded to hundreds of Florida teachers, enabling some of them to
receive certification, recertification or raises. The college also announced
that it would donate the funds it received for the courses to a charity in
Florida. The college’s involvement with the distance education programs in
Florida was “inconsistent with the standards and integrity long associated
with Otterbein,” said a statement from Thomas C. Morrison, chairman of the
college’s board.
Scott Jaschik, "College Withdraws Credits Awarded in Distance Education
Scheme," Inside Higher Ed, September 2, 2005 ---
http://www.insidehighered.com/news/2005/09/02/otterbein
"Do Online MBAs Make the Grade? Their popularity is soaring, but
some are diploma mills, making recruiters wary of virtual degrees. Here are
tips for picking a good program," by Jeffry Gangemi, Business Week,
August 18, 2005 ---
http://snipurl.com/Gangemy
"RIPE" FOR FRAUD.
Many of the online MBA programs are well-regarded and offer a way for busy
people, such as Bolger, to get advanced education without having to
sidetrack a career for a year or two. But, as in many growing fields,
cautions abound. Concerns about "diploma mills," or substandard institutions
without proper accreditation that offer degrees with little or no serious
work, are growing.
"There are now more fake online MBA programs in the U.S. than real ones,"
says Vicky Phillips, founder and CEO of
GetEducated.com,
a Web site that evaluates accredited online degree
programs and educates consumers about them. "It's an area that's ripe for
consumer fraud."
Diploma mills range from those practising outright deceit -- like St. Regis
University, which falsely asserted Liberian government approval and was
closed by court order in June, 2005 -- to organizations that require only a
modicum of work for a degree, says Alan Contreras, administrator of the
Oregon Office of Degree Authorization, a state organization that approves
individual degree programs. "In the case of diploma mills, I call the
schools 'suppliers' and the degree-holders 'users' because the educational
component is often minimal," notes Contreras.
CORPORATE SKEPTICS. Even with the best
programs, online students lack the means to build their professional network
or even interact in person with classmates. But the schools say that isn't a
problem.
"There's a really strong, off-the-radar network building up on its own,"
says Michael Goess, chairman of the Division of Business for Graduate
Programs at
Regis University in Denver. (Regis University is
not connected with the shuttered St. Regis school.) Goess points out that
students often arrange to meet on their own time, as well as trade e-mails
and network electronically.
Oregon law now requires admitting some academic degrees are phony In Oregon, degrees from unaccredited institutions that
are not licensed in the state are about to carry the higher ed version of a
scarlet letter. A bill, which would require disclaimers on any résumé bearing
suspect degrees, passed through the Oregon legislature last week, and is
expected to become law soon. The bill stems from a lawsuit against Oregon that
was settled earlier this year. Prior to the lawsuit, the state fined or
prosecuted anyone doing business in Oregon who claimed a degree from an
unaccredited institution not licensed in Oregon.
David Epstein, "Scarlet Letter," Inside Higher Ed, July 7, 2005 ---
http://www.insidehighered.com/news/2005/07/07/oregon
Jensen Comment: The problem is that diploma mills have already formed
phony accreditation agencies such that many diploma mills are dubiously
"accredited."
Oh! Oh!: Byrd's LaSalle University was in Mandeville, La. At the Fort Worth school district, colleagues refer to
district employee Michael J. Byrd as "Dr. Byrd." The intervention specialist,
who helps families in crisis, also has received a $600 annual doctoral stipend
every year since 2002, when he informed the district that he earned his doctoral
degree in psychology, district records show. But now, Dr. Byrd has been demoted
to Mr. Byrd. Byrd, 44, of Fort Worth received his degree from LaSalle
University. But not from the well-known LaSalle University in Philadelphia.
Rather, Byrd's LaSalle University was in Mandeville, La. There is no connection
between the two institutions. Fort Worth Star Telegram, May 16, 2005
It's too darn easy to alter the letter F into B? With artistic
talent, why not into an A? . . .many mentioned the ease of altering report cards
and transcripts using desktop publishing software like Adobe Photoshop, which
allows students to capture a school's seal off its Web site and paste it into a
file to create an official-looking document. One administrator told of a
student who was caught forging his report card when the nearby Kinko's called
the school to report that a student had left a copy of his grades on the copier.
One principal said he had heard of students forging transcripts with
generic-embossed seals to avoid paying for official transcripts. Jensen Comment: Students are really taking a chance on getting
caught for artfully doctoring the transcript of their dreams. In fact
that's really stupid. Why not order an authentic transcript from any
college or university at Back Alley Press?
--- http://www.backalleypress.com/
Pennsylvania state trooper issues both tickets and Berkley college
diplomas (even to dogs) Last year, the Pennsylvania attorney general’s office
decided to sue an institution its officials called a “diploma mill,” after Colby
Nolan, their undercover student, got his master’s degree in business
administration. The fact that Colby is a pet cat bolstered their case.In a
lawsuit filed Wednesday against another institution the
attorney general saidis a diploma mill, the office
is going for theUniversity of
Berkley’s jugular, and
it isn’t bothering with pet tricks.The lawsuit, filed in local court in Erie
County, where the business is based, charged a former New Mexico state trooper,
Dennis Globosky, 50, with selling thousands of fake degrees in the United States
and abroad, since the late 1990s, and operating under a bogus accreditation
institution. Along with the complaint, the attorney general asked the court to
immediately shut down Berkley’s operations. After several hours of review
Wednesday morning, the judge granted the request.
David Epstein, "Class Dismissed," Inside Higher Ed, July 8, 2005 ---
http://www.insidehighered.com/news/2005/07/08/mill
A county school board in Lawrenceville,
Ga., may demand that six teachers repay nearly $30,000 (U.S.) in
pay raises they received after obtaining fake degrees from an
on-line school in Liberia.
St. Regis University, the on-line
school, grants master's degrees and doctorates based on
"life experience." A master's degree costs $995 and a
doctorate costs $1,500.
Several school board members have
accused the teachers of fleecing the system, and some suggested
the teachers should lose their jobs.
Would you like to serve fries with your government education loan? The seven campuses of the Business Career Training
Institute shut down at the end of last week, leaving students confused and
regulators angry in Oregon and Washington State. BCTI, as it was known,
promoted itself as a school to prepare people for jobs in the technology
industry. But state officials questioned whether it was doing that. An
Oregon investigation found that the BCTI advertising was misleading and that
many of the graduates who found jobs -- after paying more than $20,000,
typically with federal student loans, for the program -- ended up in the fast
food industry or in other positions unrelated to the supposed training.
Scott Jaschick, "Trade School Chain Shuts Down," Inside Higher Ed,
March 16, 2005 --- http://www.insidehighered.com/insider/trade_school_chain_shuts_down
You should probably forward this link to your personnel office!
New Education Department Web Site Helps Combat Problem of Diploma Mills --- http://www.ope.ed.gov/accreditation/
The state of Oregon, which keeps a running tally of the institutions, estimates
that there are between 200 and 250 such 'schools' running at any one time
The government launched a Web site Tuesday to make it
easier for prospective students and employers to recognize fly-by-night
"diploma mills" that promise a college diploma, a master's degree,
even a doctorate in a matter of weeks.
More of these phony degrees are turning up in the
work force - from the "doctor" who killed an 8-year-old girl by
taking her off insulin, to the "nuclear engineers" holding down
top-security positions in federal facilities. These unaccredited online and
mail-order institutions sell phony degrees and fake transcripts and make wild
promises like "Earn a Genuine College Degree in Two Weeks!"
"These degrees are fraudulent and they are
worthless," said Rep. Michael Castle, R-Del., who spearheaded an
investigation by a House education subcommittee into the diploma mills last
year. "Diploma mills pose dangers to consumers and employers, as well as
the general public and to legitimate institutions of higher learning."
Castle earned his own undergraduate degree the hard
way - four years of study at Hamilton College in New York. If he wanted to
pick up another diploma the easy way, he could send a check to Hamilton
University in Wyoming, one of a growing number of institutions that charge a
flat fee for a degree, with little or no coursework and no questions asked.
Gary L. Wirt, vice president of Goldey-Beacom
College, doesn't look kindly on the so-called "diploma mills" that
offer shortcuts to a legitimate degree. On rare occasions, job applicants have
submitted transcripts to the college with degrees from unaccredited colleges
or universities, Wirt said. After a credential check, the applicants were told
they didn't meet the job requirements.
"My greatest concern is about people who don't
understand the importance of a degree that is accredited," Wirt said.
"They bring in a paper saying they have a bachelor's in economics, but
it's from Tom Jones University. I feel badly for the consumers who think by
paying $2,000 it will change their marketability in the work force, because it
won't."
The Delaware licensing board for professional
engineers had a recent experience with questionable credentials. Last year,
the board rejected the application of a man with bachelor's, master's and
doctoral "degrees" from Columbia S. (State) University, said Peggy
Abshagen, executive director of the Delaware Association for Professional
Engineers.
"We thought he had the name of the university
mixed up," she said. "We called Columbia University in New York and
they didn't know him. We did some investigative work on the Internet and found
out Columbia State University is one of the diploma mills."
The man withdrew his application, Abshagen said.
The Department of Education's new Web site is aimed
at making it easier for employers and would-be students to weed out fake
diplomas. The search engine allows visitors to double-check the credentials of
any post-secondary institution or trade school in the country.
Continued in article
Trinity University Settles Diploma Mill Law Suit
On November 10, 2004, Sixty Minutes (CBS mid-week) aired a module on diploma
mill frauds and why they can't be stopped. Estimates of the fraudulent revenue
range up to $500 million per year. The Hamilton (later Richardson) University
featured in the show operated out of a motel in Wyoming with the sole owner
living in Key West. There were no classes, examinations, or courses. Students
could write a four page essay and buy the diploma in any specialty they desired.
Masters and doctoral degrees were also available for a higher fee.
The real kicker is that this guy built a small empty
chapel in the motel's parking lot in order to get tax exemption on an estimated
$1 million to $2 million in diploma sales.
Diploma mills are selling phony degrees as fast as
they can print them. They're often nothing more than a Web site and a P.O.
box. But Correspondent Vicki Mabrey reports on one diploma mill that claims to
have an actual campus.
--------------------------------------------------------------------------------
Hamilton University is located in Evanston, Wyo., an old railroad town that
calls itself the hub of western hospitality. Just off the main road is
Hamilton’s campus. Hamilton University is not affiliated with Hamilton
College in New York.
On the day 60 Minutes Wednesday visited, the campus
was empty. There were only two cars in the parking lot, and no sign of faculty
or students. We spotted one employee and asked for a campus tour. The employee
told us to wait outside, then locked the door and called police.
We left, but not before noticing that Hamilton doesn’t
look like a typical university. It looks more like an old motel, which is
exactly what it was. But that's not mentioned on the university's Web site,
which looks very official, complete with a university seal and a list of
degree requirements. Hamilton, it says, has grown to be a truly international
institution.
"The campus doesn't exist," says Dawn
Curtis, who along with Tracy Robirds, once did clerical work for Hamilton
University. She says they were two-thirds of the entire staff, and they left
after realizing the school wasn't quite as advertised.
"We never saw any faculty advisers at all. We
never saw faculty at all, ever," says Curtis. "There aren't any
teachers."
When did she start to figure out that Hamilton Campus
wasn't a legitimate college? "When I started reading some of the
paperwork that started coming back from the students," says Curtis.
"And I started seeing that the turnaround between receiving the papers
and the graded papers, the promise, and the degrees going out was very fast
– pretty much as soon as the checks cleared."
How do you get a degree from Hamilton? You start by
filling out a form on a site that claims to be an independent referral
service. But it really was set up to funnel business to Hamilton. You’ll
then be offered dozens of degrees. If you’re accepted, and chances are good
you will be, it can take as little as a week or two to get a diploma. Your
main assignments are to write a short paper and a big check.
How were some of the papers? Are some of them pretty
good? "Probably 80 percent of them. It's not quality work," says
Curtis. "Some of them actually really put a lot of work into this, really
put a lot of work into their dissertation. I mean, seriously a lot of work. I
feel sorry for those people, because they thought this was the real
deal."
Laura Callahan says she thought Hamilton was real,
just one of many of legitimate schools that offer courses and degrees through
the Internet.
"I wanted to finish college. It was a completely
personal goal of mine," says Callahan. "All through my professional
career, there was never a job requirement that required me to have an
educational degree."
The former Homeland Security executive says she
couldn’t afford the time or the money for a traditional school, so she
checked the Internet for an online university: "Hamilton is advertising
themselves as being a four-year school, and even had advanced degrees in
computer information systems through their distance learning. Sounded like a
good match."
Hamilton’s Web site claims the school is
accredited, so Callahan says she thought it was a safe bet. She also thought
she knew her way around a campus, even if it was a cyber-campus. She'd taken
dozens of correspondence and distance learning courses, enough to earn a
junior college degree.
All those credits and her "life
experience," over 15 years with the government working with computers,
qualified her, according to Hamilton, to get her bachelor's and master's
degrees. All she needed was to take a 10-question ethics quiz and write a
2,000-word thesis, which amounts to just four pages.
Did that send a red flag? "To me, it wasn't a
matter of meeting the minimum," says Callahan. "To me, it was a
matter of satisfying my own personal sense of, 'Did I do it, the best job I
could?'"
With degrees in hand, Callahan wanted more, and
Hamilton was happy to oblige. She wrote a lengthy dissertation and sent
another check, and $7,000 later, she was Dr. Laura Callahan, Ph.D.
Did she feel like she was just buying a degree?
"I would feel that way if I didn't do the work, if I didn't transfer in
all the other prior learning experiences, and if I didn't put in an honest
effort into the papers and the work that I did with Hamilton," says
Callahan.
Though she didn’t know it, Callahan had put her
trust in Dr. Rudy Marn. You won’t find him on campus. He doesn’t live in
Wyoming. He runs the school from Key West, Fla., and he doesn't give
interviews.
But don’t let that empty parking lot fool you.
According to documents obtained by 60 Minutes Wednesday, Hamilton is making
between $500,000 and $2 million a year – tax-free.
Why is it tax-free? Because of a little church Marn
built in the parking lot. Even though it has no pews, and townspeople can’t
recall ever seeing services here, it qualifies Hamilton as a tax-exempt
religious institution.
Robirds and Curtis say thousands have gotten degrees
from Hamilton University, including business executives like Jack Pelton, CEO
of Cessna Aircraft, – who lists two Hamilton degrees on his resume.
There are also police officers, college professors,
and government workers. And then, there’s Andrew Michael. He has three
degrees from Hamilton, and he was enrolled in a Liberia-based online medical
school called St. Luke. He goes on trial in Nevada in November, charged with
practicing medicine without a license. If convicted, there’s a good chance
he could meet some other Hamilton alumni.
"A lot of these prospective students were in
prison," says Curtis.
"A lot. And then, the particular degree was
forensic psychology, criminology, some sort of justice field. And sent three
diplomas to a federal prison," says Robirds. "You need to know how
to do that. And then we find out they're on death row. It's like, 'Whoa, where
are you going to hang this?'"
And with hundreds of schools like Hamilton, it doesn’t
take a math major to figure out that online diploma mills are big business --
at least half a billion dollars a year.
How slick are these operations?
"As slick as you want it," says Allen
Ezell, who's retired, but used to track diploma mills for the FBI. "It
can range from an Internet ad. It can range from spam to a domestic telephone
number. You call the number, the registrar calls you back, asks you in 60
seconds, 'What have you done in life? How long you've been in your occupation?
Well, I find you qualified.' It's that simple. It took you less than two
minutes. He's qualified you for a bachelor's, master's and
doctorate."
And Americans are buying degrees as fast as they can
be printed, which has become an enormous problem for legitimate colleges and
universities. Distance learning is booming, and the Internet is providing
college at your convenience.
But as the Web becomes more sophisticated, it’s
also getting harder to tell the real schools from fakes. And while some people
know exactly what they’re doing when they buy a degree, John Bear, who’s
written books on diploma mills, says a lot of others are just being scammed.
"The line that the telemarketers use with the
little smirk, in fact, the telemarketing script we have actually says,
'chortle now.' I love that line. When they say, 'Well, of course, you know
Harvard Ph.D.s who can hardly tie their shoes and can't program their VCRs --
'chortle now,'" says Bear.
"So you, with all your experience and your 20
years in business in selling life insurance, or preachin,g or teaching, sure
that you know as much as a Harvard Ph.D. So 'chortle again,' we'll give it to
you. We'll honor your lifetime experience by giving you the doctorate."
Callahan thought Hamilton was legitimate because it
claimed to be fully accredited. But it turns out the accreditation board, like
the referral service, was set up by Hamilton, for Hamilton.
How did Callahan get taken in by this? "I think
it's just my willingness to believe in people and my naivete," she says.
Continued in the article
Trinity University in San Antonio sued a diploma mill in Louisiana where
degrees can be purchased under various names such as Trinity College, Trinity
University, etc. This suit was settled in favor of Trinity University in
San Antonio.
There is now only one Trinity University — and
there's the entity formerly known as Trinity College & University.
The San Antonio institution has reached a settlement
with Trinity College & University in which the alleged diploma mill is to
drop "Trinity" from its name.
The deal ends a lawsuit in which the university said
Trinity College & University — registered in the British Virgin Islands,
but with purported offices in Louisiana — infringed on the Trinity
University trademark.
"Trinity got everything it was asking for
without having to go forward with the lawsuit," said university
spokeswoman Sharon Jones. "The university will continue to uphold its
trademark in order to protect its reputation and its name."
Both parties pay their own costs, said lawyer Dan
Harkins, who represented the school.
Among other things, Trinity University alleged that
the use of "Trinity" by Trinity College & University caused
confusion in the higher education community, and that the confusion
"diminished" the value of a degree from Trinity University.
As part of the deal, Trinity College & University
President Thomas P. Williams agreed to a permanent injunction requiring his
business to destroy all materials — mugs, pens, pencils, sweatshirts, book
bags, bumper stickers, and other items — bearing "Trinity" in the
logo.
The agreement does not say what Trinity College &
University will be renamed, but Williams got permission to include
"Formerly Trinity College & University" at the bottom of the
business' home Web site for six months.
Attempts to reach Williams were unsuccessful. His
lawyer, Albert Nicaud of Metairie, La., did not return repeated phone calls
seeking comment.
U.S. News & World Report has ranked Trinity
University No. 1 for more than 10 years among colleges and universities that
offer a full range of undergraduate and master level programs in the western
United States.
Trinity College & University hasn't quite
received the same acclaim.
Recently, the Department of Defense joined the state
of Oregon in warning that Trinity College & University may be nothing more
than a diploma mill — an unaccredited entity that offers college credit for
life experiences rather than formal education. The warning came after the
Department of Defense noted that Trinity College & University was
targeting soldiers in Iraq.
Trinity College & University offers a bachelor's
degree for $695, according to its Web site.
Records show Trinity College & University is
registered with the Secretary of State in Louisiana, but officials there say
it is not licensed to operate as an educational institution.
Wyoming Toughens Up on Unaccredited State officials have argued that the perception isn’t
entirely fair. But they also recognize, as State Sen. Tex Boggs puts it, that
“the reality is whatever the perception is,” and that Wyoming’s reputation as a
haven for academically suspect institutions was damaging the overall view of the
state. So after much deliberation and a year of study, Wyoming’s Legislature
approved legislation — signed into law this month by Gov. Dave Freudenthal —
that bars private institutions from operating in the state unless they are
accredited by an agency recognized by the U.S. Education Department (or actively
seeking such accreditation).
Doug Lederman, "Wyoming Toughens Up on Unaccredited," Inside Higher Ed,
March 20, 2006 ---
http://www.insidehighered.com/news/2006/03/20/wyoming
Wyoming's Diploma Mills
“I just don't believe that the good should be
thrown out with the bad,” she says.
"Wyoming the home of online schools State law allows the operation of
unaccredited facilities," by Mead Gruver, USA Today, February 9,
2005 --- http://www.usatoday.com/printedition/news/20050209/a_wyoming09.art.htm
CHEYENNE, Wyo. — The campus of American Capital
University has no tree-shaded quadrangle, no stately old buildings or
libraries, no classrooms, no fraternity houses — not even a student curled
up with a book in a quiet corner.
There's just a middle-age man who sits at a computer
in a tiny, undecorated, windowless office in the basement of a downtown
building.
But in a sense, this fellow — Bill Allen, American
Capital University's chief academic officer — has lots of company: Wyoming
licenses 10 other online schools that are not accredited by any mainstream
organization and maintain only a token physical presence in the state.
Defenders of such schools say Wyoming is
forward-thinking for accepting a relatively inexpensive way for working adults
to get degrees in their spare time through mail and Internet courses. But
others say the state has become a haven for diploma mills, which offer degrees
for little or no academic work.
“People start to giggle if you say ‘Wyoming-licensed
school,' if you know about accreditation,” says George Gollin, a University
of Illinois physics professor and crusader against diploma mills.
Because of loose state requirements, more online
schools are popping up in Wyoming than any other state, according to Steven
Crow, executive director of the North Central Association of Colleges and
Schools, the regional agency that accredits schools. “Most other states have
enough rigor in how they determine who can operate as a college and grant
degrees that it's not as easy for places to get started,” he says. Cheyenne
is home to six distance-learning schools, five within a few blocks of one
another. A typical example is Paramount University of Technology, which has
offices in the basement of a downtown mall. At the end of the street, American
City University occupies a couple of rooms in a Victorian-era building.
Another school, Kennedy-Western University, was the
focus of a U.S. Senate Governmental Affairs Committee investigation last year.
At the school, only an open-book, multiple-choice test with 100 questions was
required in a course on hazardous waste management. Environmental law and
regulatory compliance courses had the same requirements.
“With just 16 hours of study, I had completed 40%
of the course requirements for a master's degree,” says Claudia Gelzer, a
committee staffer.
Kennedy-Western spokesman David Gering says the
committee did not invite the school to defend itself and did not note that
Kennedy-Western requires final papers, theses and dissertations of 100 to 200
pages. Moreover, 80% of Kennedy-Western's professors hold doctorates from
accredited universities, while the rest have master's degrees from accredited
schools, Gering says.
“In order for us to maintain our licensure, we have
to offer a very academically rigorous program,” he says.
Wyoming's private-school licensing laws say all
faculty members must have a bachelor's degree from an accredited school, and
at least half must have at least a master's degree from an accredited school.
The schools must maintain an office in the state, pay a $10,000 licensing fee
and post a $100,000 performance bond.
In December, state lawmakers abandoned a bill that
would have required private schools to have proper accreditation by 2010. That
was after two state senators were guests of Cheyenne-based Preston University
on an expenses-paid trip to Preston campuses in Pakistan and Dubai.
One of the lawmakers, Democrat Kathryn Sessions, says
that she supports tougher rules for distance learning but that accreditation
is not necessarily the answer.
“I just don't believe that the good should be
thrown out with the bad,” she says. “I know how much money accrediting
institutions charge universities and colleges — and I'm a little bit tired
that they think they're the end-all.”
Want a Harvard diploma? How
about a University of Virginia transcript. For a few hundred
dollars you can have either one---Or any other phony college
document you fancy. All you have o do is go to a Web site
called www.BackAlleyPress.com
whose office is in China.
Andrea Foster, The Chronicle of Higher Education, February
7, 2003, Page A25.
Anyone with a modem and
some spare cash can buy a fake degree over the Internet. But it's
often difficult to distinguish between a legitimate
distance-learning university and a diploma mill.
Welcome
to Harrington University (also known as the University of San
Moritz, University of Palmers Green and University of
Devonshire, among others), where anyone can purchase a
bachelor's or master's degree -- no tests or coursework required
-- for the bargain price of several thousand dollars. The
"university," owned by an American resident in
Romania, uses mail-drop addresses in the United Kingdom,
printing services in Jerusalem and banking options in Cyprus.
The operation has sold 70,000 diplomas in the United States
alone, raking in over $100 million, according to diploma mill
expert John Bear.
"No
country seems willing or able to do anything," said Bear,
founder of Degree.net.
While
Harrington may be the world's largest diploma mill, it's just
one of hundreds of operations on the Web offering degrees that
are seemingly legitimate, but often worthless on paper.
The
onslaught of spam, online advertising and overnight electronic
payment services has made it even more difficult to distinguish
between legitimate distance-learning institutions and diploma
mills.
"The
problem has worsened, owing to the ease of advertising via the
Internet and the ability of diploma mills to operate from
offshore and still get payment from U.S. users," said Alan
Contreras, administrator of Oregon's Office of Degree
Authorization.
"Where
it used to be some obviously fraudulent operators offering
academic degrees in exchange for money and minimal amount of
paperwork, it has morphed into a more sophisticated model, where
the degree mill offers tutoring and all the trappings of an
academic program, but in fact it is still an avenue to getting a
degree quickly," said Michael Lambert, executive director
of the Distance Education and Training Council.
Not all
unaccredited colleges are necessarily degree mills. In the
United States, an accrediting agency must be recognized by
either the Department of Education or the Council on Higher
Education Accreditation.
"Unfortunately,
the degree mill operators have seized on the use of the word
'accreditation,' and there are several dozen unrecognized and
probably worthless accrediting agencies being used to provide
legitimacy," Lambert said. "So there is an
accreditation mill problem as well now."
In the
United States, individual states must decide whether or not to
permit diploma mills to operate within their borders.
States
have made some headway in regulating diploma mills over the past
few years.
"Although
the level of enforcement varies from state to state, I think
that there has been great progress made across the board,"
Lambert said. "States like Louisiana, Hawaii and South
Dakota -- all once known as degree-mill havens -- have adopted
laws that now require recognized accreditation for any
institution in their state wishing to offer a degree."
Oregon
and New Jersey disallow use of degrees from institutions that
are not accredited by an agency recognized by the U.S.
Department of Education or approved by the state's authorization
agency.
While
Oregon's policy is among the strictest in the nation, other
states, like Wyoming and Montana, permit unaccredited
universities as long as they have a physical presence in the
state.
"The
Montana legislature does not seem to care that their state has
become the sinkhole for bogus degrees in the U.S.,"
Contreras said.
Receive Your Undergraduate or Graduate Diploma in Days Rather
Than Years
September 22, 2003 message from Sheri Shipley [ynvbgay0l@excite.com]
Improve your income and your life, with
increasing your earning power from a diploma within days from a
prestigious non-accredited university based on life experience.
There are no required tests, classes,
books, or interviews!
Get a Bachelors, Masters, MBA, and
Doctorate (PhD) diploma!
Receive the benefits and admiration
that comes with a diploma!
No one is turned down
Question
Who seriously buys a fake diploma?
Answer
I previously noted how teachers sometimes by fake diplomas in order to get
higher pay.
Now it turns out that many of our bureaucrats are also
shelling out for fake diplomas and transcripts. More than 400 government
employees, including many high-ranking officials, received fake degrees from
diploma mills, according to congressional investigators. The findings spur calls
for better means to vet academic credentials.
At least 28 high-ranking
government officials, including three managers
responsible for emergency operations at nuclear
facilities, have fake degrees from so-called diploma
mills, according to a government report issued Tuesday.
The investigation,
which was prompted by a request from Senate Governmental
Affairs Committee Chair Sen. Susan Collins (R-Maine),
found that these schools -- which charge a flat fee for
a degree -- received at least $170,000 in government
tuition-reimbursement funds.
The GAO noted that although it
was able to identify 28 high-level employees from eight
different agencies who had degree-mill diplomas,
"this number is believed to be an
understatement."
The report
(PDF) singled out three National Nuclear Security
Administration employees who have top-secret security
clearances and "emergency operations
responsibilities."
One bought a degree from known
diploma mill LaSalle University in Louisiana (not the
legitimate LaSalle University in Pennsylvania). Another
held a degree from the unaccredited Chadwick University,
while the third received a Ph.D. in engineering
administration from the unaccredited Columbia Pacific
University in 1985, though he completed his class work
at the fully accredited George Washington University.
Differences between diploma
mills and legitimate though unaccredited schools are not
easily defined.
The worst diploma mills simply
sell diplomas and fake transcripts, typically for a fee
of $1,000 or more. But unaccredited schools range from
legitimate distance-learning programs that include
course work, tests and teacher feedback to
"schools" that grant degrees solely based on
life and work experience.
Somewhere in between are
schools that give substantial credit for life experience
but require some course work, such as submitting book
reports.
California officials shut down
Columbia Pacific University, which was based in Marin
County, California, in 1999, but California considers
degrees awarded by the school before 1997 valid.
On Tuesday, during the first of
two days of hearings before the Governmental Affairs
Committee, Collins said the investigation calls into
question the trustworthiness and character of these
employees.
"We have clear evidence
that tax dollars are being wasted on bogus degrees from
unaccredited institutions that the federal government
does not even recognize. It is also cause for great
concern that federal officials who hold high-ranking
positions, and security clearances in some instances,
have degrees from diploma mills," Collins said.
"It calls into question their qualifications and
abilities to do their jobs."
Paul DeSaulniers, a senior
special agent at the GAO, told the committee that
high-level employees with fake degrees could also be
vulnerable to blackmail.
The most recent high-profile
diploma-mill scandal came in June 2003 when the Homeland
Security Department put Laura Callahan, an associate
deputy in the Chief Information Office, on paid
administrative leave, pending an investigation into
whether the Hamilton University bachelor's, master's and
Ph.D. degrees listed on her resume were legitimate.
Callahan has since resigned,
according to the GAO report.
Continued in the article
Those Gray Zone Schools That May or May
Not be Frauds
From Syllabus News on November 4, 2003
Graduate Program Popularity: And the winner is ---
Psychology!
Graduate School Rankings
Graduate studies in computer
science climbed from last place (20th) to thirteenth in
a ranking of the popularity of fields of post-graduate
academic study, according to Gradschools.com in its 2003
Third Quarter Top 20 list. The most popular field of
graduate study is now psychology, according to the
service. Electrical engineering came in second.
Mark Shay, president of
Educational Directories Unlimited, Inc., the parent
company of GradSchools.com, said the rankings reflect
fast changes occurring in the social and international
spheres.
"It is apparent that the
education world, in response to international public
affairs and ever-evolving digital technologies, is in a
pivotal position as top student interest is comprised of
a diverse mix including the social sciences,
engineering, humanities and business. The hoopla of the
digital world is stabilizing and students are once again
recognizing the arts and humanities."
Comment by Bob Jensen
I guess I'm suspicious of GradSchool.com because
of some of the questionable programs that are promoted at
GradSchools.com --- http://www.gradschool.com/
Many of the programs promoted at this site are
for-profit academic degree programs in the gray zone
between outright diploma mill frauds and legitimate
accredited programs in a traditional sense. The gray
zone for-profit programs tend to give academic credit for
life experience and claim licenses and accreditations of
dubious merit.
I shortened the above link to http://snurl.com/GradSchool It would be shame if my students missed this golden
opportunity.
I thought that I was at the only Trinity
University (i.e., the one is San Antonio, Texas that
for the past twelve years has been ranked
in first place in the West under a classification
scheme used by US News and World Reports).
Apparently this is not the only Trinity University
even though US News does not list any other Trinity
University.
I recommend taking the information at GradSchools.com with
a grain of salt (read that with skepticism).
For example, there is a promotion for Trinity
College/University (where you can choose whether you want
"College" or "University" in your
diploma). Trinity College/University offers degrees
based heavily of life experience --- http://trinity-college.edu/index.html
Trinity College and University
gives qualifying adults the opportunity to convert what
is learned in life into college degrees, whether that
knowledge is from professional or other accomplishments,
work, religious or military training or other sources.
You may have qualifications now to earn a college degree
or college credits by our assessment of your prior
learning, testing or portfolio. Our evaluation and
assessment may lead to the award of a degree! Or perhaps
a Certificate in certain specified areas of study.
There may be online partnering courses in some sense of
the word, but at Trinity College/University you can
receive an Executive MBA diploma in as little as six
months as follows:
Trinity College &
University announces a special collaborative arrangement
with Ashington
University, a state licensed graduate university in
a suburb of New Orleans, Louisiana, USA, that enables
students to earn their MBA degrees in as few as 6 months—without
interrupting careers to attend classes full-time!
Through on-line distance
learning using the Internet and other modern technology,
students can study at home, enroll anytime during the
year, and complete courses at their own pace, with the
guidance of qualified, experienced and real-world
professors.
Best of all, because there is
no need for buildings or classrooms, Ashington
University can offer tuition rates that are among the
lowest in the world. When combined with no residency
requirement, a whole new world is opening up for
countless middle managers who want to further their
education and advance their careers.
In fairness, GraduateSchool.com has a wealth of
information about both for-profit and not-for-profit
online graduate programs in colleges around the world.
However, the tendency to mix very legitimate accredited
programs among programs that I view with suspicion makes
me dubious of anything coming out of GradSchool.com.
This leads me to question reported surveys and most
anything else coming out of GradSchool.com.
For example, consider the survey mentioned above where
Psychology is reported to be the most popular graduate
program followed by Electrical Engineering. How
many of students got academic credit while learning
about people when bartending (for a Psychology degree)?
How many got academic credit for repairing television sets
(for an Electrical Engineering degree)?
Question
And lastly, is there any way a school like
Trinity
University
can prevent newer online programs from using the same name
on their diplomas?Historically,
there are prestigious Trinity Colleges around the world
(e.g. in
Dublin
and in
Hartford
), but I thought there was only one
Trinity
University
until now (other than an outright diploma mill fraud that
operated for a short time in Ireland).
"Trinity University Sues to Protect Name," by Guillermo Contreras, San
Antonio Express News, April 16, 2004
For $695, Trinity College &
University will send you a bachelor's degree, or you can
get an associate degree for $375 or a certificate of
achievement for $175.
There are no courses to take,
no classrooms to sit in and no tangible student body.
After the organization began
targeting soldiers in Iraq, the Army recently joined the
state of Oregon in warning that it may be nothing more
than a "diploma mill" — an entity that
operates only to make money, often offering college
credit for life experiences rather than formal
education.
And now, the prestigious
Trinity University in San Antonio is asking a federal
judge to forbid Trinity College & University from
using "Trinity" in its name.
In a lawsuit filed in federal
court this week, Trinity University said Trinity College
& University — registered in the British Virgin
Islands but purportedly based in Metairie, La., near New
Orleans — is infringing on the San Antonio school's
trademark and causing confusion.
"Trinity University has
filed this suit in an effort to preserve and protect the
university's good name," spokeswoman Sharon Jones
Schweitzer said Thursday.
"We consider what this
entity is doing to be an infringement on our trademark,
on the name of Trinity University. The name is very
important to the university's reputation.
"This entity is creating
confusion in the higher education community, and we're
tired of it," she said. "The confusion
diminishes the value of a Trinity University
degree."
The university has received
numerous calls and e-mails asking if the two are the
same school or if they work together, Schweitzer said.
That confusion came to a head
in January, when the Philadelphia Daily News mistakenly
lumped Trinity University with Trinity College &
University and referred to both as diploma mills.
The newspaper ran a correction
the following day after Trinity University officials
contacted the reporter.
A woman who answered the
toll-free number for Trinity College & University on
Thursday declined to provide the name of company
officials or further information about the business.
Instead, she said requests for comment should be
submitted via e-mail.
The organization did not
respond to an e-mail message sent by the San Antonio
Express-News.
"You're talking about a
school that has a very good reputation
scholastically," John Cave, who practices trademark
law in San Antonio, said about Trinity University.
"Any type of confusion
with (an entity) that doesn't have the same scholastic
standards as Trinity (University) would not be a good
thing for them."
In addition to asking that the
Web-based organization drop the name
"Trinity," the university wants the company to
deliver all items that have the word Trinity on it to be
destroyed and is seeking unspecified compensatory
damages.
No hearing on the request has
been set.
California-based author John
Bear, who for 12 years was the FBI's principal
consultant and expert witness on diploma mills and fake
degrees, said Trinity University is wise to bring suit.
He said some questionable
outfits are nothing more than fancy Web sites with a
mail drop registered to offshore companies that move
headquarters to whatever state offers the least
resistance. They may cite accreditation of their
programs from numerous organizations that often are
phony themselves.
"It's a very common thing
for fake entities to use the names of very well-known
schools in their own names," Bear said Thursday.
That, he said, can frustrate
officials of legitimate learning institutions, and also
confuse employers.
"The confusion is probably
at the gatekeeper level, the HR (human resources)
office, where somebody comes to their business and says,
like in this case, I have my degree from Trinity,"
Bear said.
"If somebody said Trinity,
they (HR person) would think, 'Oh yeah, Trinity, sure
San Antonio, great school.' They probably wouldn't check
any further."
Question
One protection that Congress has imposed to protect
against distance education frauds is to require that
schools must have at least 50% of their courses onsite
rather than online. The largest corporation with
combined training and education alternatives, Kaplan, and
others are lobbying hard to repeal this law. Should
it be repealed?
Answer
Kaplan is also lobbying Congress to repeal another federal
law -- the so-called 50% rule, which prohibits colleges
receiving federal financial aid from offering more than
half of their courses via distance education rather than
in the classroom. Kaplan, which has a waiver from the rule
until 2005, says the restriction -- aimed at fraudulent
correspondence colleges -- is an anachronism that could
impede its long-term growth.
Washington Post Co. Unit, Known for
Test Coaching, Bets on Online Learning
BOCA RATON, Fla.
-- In a call center here, 148 sales representatives work
the phones, following their training manual's
exhortation to "sell the dream." Their jobs
and raises hinge on meeting quarterly sales goals. They
adorn their cubicles with colored flags, denoting
completed interviews with prospects and allowing
supervisors to check progress at a glance.
These marketers
are pitching something unusual: an education. Known as
admissions advisers, they seek online students for
Kaplan College, the largest of 57 colleges owned by
Kaplan Inc., a company better known for coaching
students on entrance exams to selective colleges and
graduate schools.
Kaplan has
transformed itself into one of the fastest-growing
players in the booming business of for-profit higher
education. Its colleges, mostly two-year trade schools
and all acquired or opened in the past five years, serve
more than 40,000 students and generate $250 million in
annual revenue.
At the same time,
Kaplan's swift expansion into adult education has
transformed its parent, Washington
Post Co. Kaplan says it expects higher revenue this
year than Washington Post's venerable flagship newspaper
-- or any other unit of the company.
Kaplan's growth
is taking Washington Post into a market with a new set
of risks for the media giant. Trade schools such as
Kaplan's play an important economic role by giving
workers new skills that help them get jobs. But the
entire for-profit adult-education industry is rebounding
from scandals in the early 1990s involving schools that
didn't deliver on job training. Those failures saddled
many low-income students with debts they couldn't pay.
Because for-profit colleges depend heavily on federal
grants and loans for their tuition, the failures left
the U.S. government with piles of defaulted student
loans.
. . .
Lobbying
Congress
Mr. Grayer says
the federal-aid programs that boost Kaplan's revenue
were designed "to give individuals access to the
education they need to better their lives. That's
exactly what Kaplan does." In some months this
year, the share of Kaplan College's revenue coming from
the government has climbed to 87% or 88%, the company
says. The proximity to the federal 90% limit recently
motivated Kaplan officials to lobby Congress to abolish
or modify the ceiling.
Kaplan is also
lobbying Congress to repeal another federal law -- the
so-called 50% rule, which prohibits colleges receiving
federal financial aid from offering more than half of
their courses via distance education rather than in the
classroom. Kaplan, which has a waiver from the rule
until 2005, says the restriction -- aimed at fraudulent
correspondence colleges -- is an anachronism that could
impede its long-term growth.
The Department of
Education reported in July that not applying the 50%
rule to Kaplan and the 15 other educational institutions
with waivers hasn't "resulted in any
problems." Possible changes to the 50% rule and the
90% federal-funding limit are expected to be debated
next year when Congress reauthorizes overall federal aid
for higher education.
Oct. 21, 2002 (Internet World) — These are
not the best of times to be sitting in the chief executive's chair of a lot of
companies. If a bear market weren't bad enough, chief executives are being put
directly in the bull's eye of public and political ire over financial
accounting scandals that at their worst have sucked billions of dollars out of
the market, and at the least have depressed the market rebound.
That pressure will be felt far beyond just the 947
public companies whose CEOs and CFOs have been forced by the Securities and
Exchange Commission to certify the truthfulness of their financial reports.
And though that move by the SEC was largely a publicity stunt (you can even go
to the SEC's Web site and view the sworn statements from these executives),
the question arises about whether technology can play a part in providing
protection for investors and company executives.
"It's quite an interesting topic," says
Kraig Haberer, a former CPA at Price Waterhouse who now serves SAP AG as
director of product marketing for its mySAP Financials suite. "Technology
can be an enabler; however, it cannot replace good judgment." He notes
that the situations that have blackened corporate images today are primarily
caused, not by a lack of technology, but by bad judgement by a few key
executives.
"However, I do think technology can help
minimize the chance of occurrences of either outright fraud or purely
overlooking something in an account," Haberer says. "To some degree,
the more automated you can make your processes and your financial reporting
and accounting, the better off you are because technology can be that
independent third party. You have a lot of companies with multiple data feeds
they are pulling from. That process of recording, processing, and reporting on
that information is not automated, and you can introduce the likelihood of
just pure error, nothing fraudulent. So technology can be that third party
that can automate and integrate that process and minimize the opportunities
for error."
The mySAP response is to give the finance department
a number of automated tools for handling the complexity of financial reporting
in the modem global enterprise. That can make it more difficult for an
unscrupulous person somewhere in the mix to introduce unethical practices, but
it still may not be enough to let the CEO relax. "You also have to
empower that chief officer with the information at his desk," Haberer
says. MySAP offers an executive dashboard, where you can specify the key
indicators you want to track at a high level and see their performance over
time. Simply by having lowerlevel executives know they're being watched may
not eliminate the threat, but if you sense a problem, you will at least know
what questions to ask.
To others, the problem is a security matter related
to protecting the integrity of the data in the enterprise's financial systems.
In August, Datum Inc. and WetStone Technologies Inc. jointly announced a new
subscription service, called Time Lock for Microsoft Word that lets users
embed secure and auditable digital time stamps into their work. They then have
a document that can be verified for authenticity and time accuracy.
"If I was a CEO of a company and I had to sign
off on the financial statements, I would want to know that my records are
absolutely protected," says Steve Corie, who is in fact the CEO and
president of a company, Perimeter Data Inc. Perimeter recently began selling a
product that takes Datum's idea to its logical conclusion: it makes it so that
any files-email, video, a series of sequential documents, voice mail, etc.-are
stamped, signed, and archived in a way that makes it impossible to delete or
modify. "CEOs have a fear, that if they do sign off on something, they
have to rely on people down the organization," he adds.
For Comrie, the key point is that the data is viable
and can be proven legally in a court of law, if necessary. He sees a future in
which a brokerage house under investigation might say certain e-mails being
sought by investigators have been deleted or don't exist, but their auditor
steps in with the records it keeps from its collaboration with its brokerage
client, and produces the digitally signed, time stamped, and sealed files.
That might actually create a headache for an unscrupulous chief executive, but
that headache, at least, would be well deserved.
"There's no way even an administrator with
access can go in and delete or manipulate data" with Perimeter's system,
says Comrie. "We believe there is a vulnerability most corporations will
never talk about, that at the end of the day some of this stuff will be
challenged in a court of law-some will be brought forward as evidence."
The ultimate answer for corporate financial
accountability is not technological, of course. If a company's executives or
directors are concerned about their financials, the answer lies in the
integrity of the people managing the financial records. But company leaders
can invest in certain technology that can help them detect problems before
they become disastrous headaches, whether the problem was man-made or a simple
result of people tripping over too-complex financial regulations.
mySAP.com delivers a comprehensive e-business platform designed to help
companies collaborate and succeed -- regardless of their industry or network
environment. mySAP.com solutions include:
Flexible Solutions for Any
E-Business Problem
mySAP.com solutions are open and flexible, supporting databases, applications,
operating systems, and hardware platforms from most major vendors. They also
uphold the highest quality standards
and deliver unparalleled levels of performance. And they're appropriate for
virtually any organization, from global enterprise to small and midsize
business.
What's more, SAP provides Business
Maps to help you visualize, plan, and implement a coherent, integrated,
and comprehensive solution.
"What’s Your Fraud IQ? Think
you know enough about corruption to spot it in any of its myriad forms? Then rev
up your fraud detection radar and take this (deceptively) simple test." by
Joseph T. Wells, Journal of Accountancy, July 2006 ---
http://www.aicpa.org/pubs/jofa/jul2006/wells.htm
SECTION 206 OF THE INVESTMENT ADVISERS ACT
OF 1940 provides guidelines for
investment advisers on what constitutes
fraud.
THE SUPREME COURT HAS HELD THAT THE ACT
imposes a fiduciary duty on
investment advisers to act in the best
interest of their clients by fully
disclosing all potential conflicts of
interest.
INVESTMENT ADVISERS SHOULD REVIEW CAREFULLY
SEC and other disclosure
requirements to ensure they clearly
understand potential conflicts.
INVESTMENT ADVISERS SHOULD REVIEW ALL SEC
FILINGS, client marketing materials
and other significant documents to ensure
that they have appropriately disclosed all
potential conflicts.
Brian Carroll, CPA, is
special counsel with the SEC in Philadelphia
and an adjunct professor at Rutgers
University School of Law, Camden, N.J.
On-the-job theft goes beyond greed, according to
authorities in white-collar crime (criminologists, sociologists, auditors,
risk managers, etc.), who cite a large list of reasons for employee theft.
In fact, a new edition of Fraud Auditing and
Forensic Accounting lists a long list of 25 reasons -- some of which are
common knowledge, but others may surprise. They include:
The employee believes he can get away with it.
No one has ever been prosecuted for stealing
from the organization.
Employees are not encouraged to discuss
personal or financial problems at work or to seek management's advice
and counsel on such matters.
Read the entire list and check out Book Corner for
more details on the book.
SSARS NO. 12, Omnibus
Statement on Standards for Accounting
and Review Services—2005, amended
SSARS no. 1, making specific changes
regarding the practitioner’s
consideration of fraud and illegal acts
in compilation and review engagements.
ALTHOUGH COMPILATION AND REVIEW
performance standards don’t require CPAs
to assess the risk of fraud, they still
must inform the client of incorrect,
incomplete or otherwise unsatisfactory
information discovered during an
engagement.
ACCOUNTANTS NEED NOT REPORT
illegal acts that are clearly
inconsequential and may reach agreement
in advance with the entity regarding the
nature of such items to be communicated.
MISSTATEMENTS IN FINANCIAL STATEMENTS
may be intentional, thus
constituting fraud, or unintentional,
the result of error. Therefore, in a
review, CPAs must make specific
inquiries and obtain specific written
representations from management about
fraud.
IN ADDITION TO THE REVISIONS to
SSARS no. 1 related to fraud, SSARS no.
12 contains amendments to guidance on
updating management representation
letters, restricted-use reports and
restatement adjustments.
J. RUSSELL MADRAY, CPA,
is president of the Madray Group Inc.,
an accounting and auditing technical
consulting practice, and a senior
lecturer at Clemson University’s School
of Accountancy and Legal Studies in
Clemson, S.C. His e-mail address is
russ@madray.com.