Fraud

The Madoff debacle has many of us wondering just how so many sharp people made such a tragic mistake.

A pair of researchers from the University of Cambridge's Computer Loboratory recently released a report that explains just how we fall victim to scams like Madoff's: three-card monte, the ring reward rip-off, the money machine scam, and the shop phone call swindle. The key? Those darned inconvenient human emotions.

In their paper, Frank Stajano and Paul Wilson broke our vulnerabilities into seven principles:

I could see how the typical Hollywood star might be duped in a cattle investment scam, but Kiefer Sutherland? The man probably knows cows better than any other actor, since he's spent many a weekend chasing and roping them from horseback.

Unfortunately, this familiarity might have helped make him the perfect patsy for reputed scam artist Michael Wayne Carr. TMZ reports Carr has been charged with bilking Sutherland out of $869,000 in a cattle investment swindle.

Apparently Carr promised to deliver a windfall by buying Mexican cattle and importing them to the U.S., but all he really delivered was a load of bull. He's now charged with grand theft, embezzlement and other crimes.

Haitians living in the U.S. are being targeted by a scam that convinces them to pay money with the promise of getting their relatives to this country, the Embassy of Haiti and the Greater Washington Haiti Relief Committee announced.

Potential victims are contacted by phone or with fliers passed around in Haitian communities. They are told that if they wire $500, in return they will receive a package of documents and a confirmation number permitting them to go to the devastated island nation and bring five relatives to the U.S.

It is an unfortunate truth that those who can least afford to lose money are often targeted by businesses (and scams) intent on taking advantage of their weak position.

The folks at Mint.com put together an excellent graphic presentation of how lower income people get caught up in difficult situations and pay dearly called "The Shaft: How Companies Prey on the Poor." The raw deals users get with payday loans, "repair" credit cards and renting to own are detailed by the artist behind WallStats.com.

See it here. Be patient, the image is large and, depending on your browser, you might have to click on it to expand it for viewing.

It's a good primer on the perils of doing business with those who cater to those with lower incomes and the credit-challenged.

So what if that dude in the cubicle next to yours decides to get a masters degree, then grabs the promotion you wanted -- but the degree turns out to be fake? A number of high-profile cases over the years demonstrate that some people in middle and senior corporate, government and non-profit management are not above using a bogus credential to get ahead.

There's Sven Otto Littorin, for instance, a Swedish government official who got caught in 2007 boasting an MBA from "Fairfax University." (The degree has since disappeared from his CV.) Or Laura Callahan, a U.S. government executive who in 2003 stepped down from her job after claiming a doctorate in computer information systems from "Hamilton University." Two things are interesting about these two cases: One, anyone doing a background check could have discovered Fairfax and Hamilton are questionable alma maters. Two, Sven happens to be Sweden's minister for employment. And before the incident cost her career, Callahan was deputy chief information officer for the U.S. Department of Homeland Security.

Degree mills have been around a long time. Obviously they have allure. Who wouldn't want a real credential, for instance, for life experience? How many of us have earned the equivalent of a Ph.D in psychology just dealing with bosses and co-workers for a decade or two?

The U.S. Food and Drug Administration is warning consumers to beware that a counterfeit version of the over-the-counter diet drug alli is being sold on the Internet.

GlaxoSmithKline, which makes alli, told the FDA that its lab tests showed the counterfeit version does not contain orlistat -- the active ingredient in alli. Fake alli contains sibutramine, the main ingredient used in the prescription appetite suppressant Meridia.

In its warning the FDA said part of the danger of the fake alli is how the medication would interact with other drugs the user is taking. Sibutramine also should not be used by people with certain medical conditions and is supposed to be administered under the watch of a physician.

William Pollock was doing all the right things to set up his family's move from Texas to Pennsylvania.

He contacted reputable movers and he had them come out to his house and provide written estimates. But the estimates Pollock received were higher than he wanted to pay so he kept looking. On Craigslist, he saw an ad that pointed him to a professional-looking web site depicting a locally-based mover, Moo-ving.com, who could do it all for less. He went with them.

"It's easy now to look back and say this was a red flag and this was a red flag," Pollock says.

There was the tip off. Right in front of my face. How , I wondered, did the victims of this massive real estate fraud not recognize larceny as it stared them right in the face?

But there it was in the article I was reading as it came into full view on my laptop: Said the New York Times, "Mr. Puff drew investors by advertising guaranteed annual returns of 15% to 20% from his business of buying, renovating and reselling real estate."

Really! 15% to 20% annual returns!

That should have been the tip off right then and there. But it wasn't for more than 1,200 investors who, in total, handed over more than $123 million dollars to Wayne Puff's Ponzi scheme .... the investors ended up losing $55 million.

The FBI issued a warning to those wanting to donate money to help the victims of the earthquake in Haiti to make sure they are giving money to a legitimate charity.

Dog owners looking to get a free sleeping bag for their pet should stay away from the free offer at Pet Maxi, a Web site that offers free pet product samples that turn into pop-up ads for healthcare and other things. In September I wrote a short story for WalletPop about an offer for a free sleeping bag for small dogs.

The offer is bogus, and Pet Maxi is misrepresenting itself on its "Contact Us" page as Walter's World of Pets in Lubbock, Texas. The phone number it lists is out of order and the address is an old address for the legitimate Walter's World of Pets in Lubbock.

"I'm not affiliated with them and I don't know who they are," pet store owner Ryan Blakley told me in a telephone interview.

Abraham Shakespeare, a truck driver's assistant, who lived with his mother, won $30 million in the Florida lottery in 2006. It now appears that his good fortune may have cost his life. According to Associated Press, he vanished months ago and his case is now being investigated as a homicide.

Shakespeare, 43, took a lump-sum payment of $16.9 million instead of annual installments and bought a Nissan Altima, a Rolex from a pawn shop, and a $1 million home in a gated community. He insisted that the money "would not change" him, but it seemed to quickly cause him problems.

Koss Headphones, a small publicly-traded company based in Milwaukee, said last week it has fired Sujata "Sue" Sachdeva, the executive VP recently accused of embezzlement. Sachdeva, who is accused of spending millions on expensive clothing and jewelry, including more than $1.3 million over two years at a single Mequon boutique, told FBI agents that she directed her assistant to make fraudulent wire transfers -- paying down her credit card balances out of Koss' bank account, according to the complaint.

Further investigation by the company indicates that the total embezzlement may be closer to $20 million rather than the $4.5 million originally estimated. If $20 million has been stolen from Koss over the last four fiscal years, it would exceed the company's reported earnings -- $18.4 million -- during the same period. Big headaches for a small company.

I don't get it. It's not like the Sachdevas' didn't earn a nice living. Sachdeva's compensation from Koss Corp. totaled $173,000 in fiscal 2009 and $206,000 the previous year. Her husband, Ramesh, a pediatrician, is vice president for quality and outcomes at Children's Hospital of Wisconsin. He also holds a law degree and is an adjunct professor at Marquette University Law School. Together they probably brought in well over $500,000 per year.

Why do this? How exactly did Sachdeva come into work each day and look President and CEO, Michael Koss, in the eye without blinking? How much did her husband know as she rented a 1,000 square foot room in the Third Ward to house some of her purchases? Didn't he notice that over the last two years, her purchases included more than $1.3 million at Valentina in Mequon, $670,000 at Au Courant in Glendale and $649,000 at Zita in Whitefish Bay. That's a lot of stuff.

More than 356,000 victims of a massive nationwide telemarketing scam will be sent checks totaling more than $14 million, the Federal Trade Commission said.

The telemarketing operation was run by Suntasia Marketing of Largo, Fla., which allegedly deceived nearly a million people into joining buyers' and travel clubs between 1999 and 2007, the FTC said in a news release. A permanent injunction shutting down the operation, which took in more than $170 million, was filed in federal court a year ago. The company's principals also agreed to sell their homes, boats and vehicles to add to the compensation fund.

H&R Block agreed to refund up to $19.4 million in fees to settle charges the tax preparation giant steered hundreds of thousands of customers to put money into its "Express IRA" program knowing it was virtually guaranteed to lose money, the New York Attorney General's Office said.

Low interest rates and an array of fees prevented the accounts from benefiting the investors, primarily lower and middle income families, Attorney General Andrew M. Cuomo said in a written statement.

While you're probably well aware of identity theft and its impact on your credit, you may not be aware of a type of identify theft that can be even more harmful to you personally -- medical identity theft. You may not only end up with bills incurred by the person who steals your identity, but the crime can even prove fatal.

When someone uses your identity, incorrect information gets into your medical files. When you seek care you can end up with the wrong medical history, wrong blood type, wrong allergies and other errors that could end up being deadly for you.