There's a Sucker Born Every Minute

PART ONE

Chapter One

A TWO-WAY STREET CRIME

Fraud is a very simple crime to understand.

I tell you a lie, you give me money, that’s fraud.

And it is never any more complicated than that.

Whether you’re talking about someone who claims an extra $100 from his insurance company after a fender bender, a Nigerian government minister who is willing to share a just-discovered $40 million bounty with a perfect stranger like you, or scandals as big as Enron and Bernie Madoff, no matter how elaborate the scheme wrapped around the lie, no matter how complex the plot that a fraudster constructs to draw you into the lie, all frauds always boil down to just that - a lie.

Once upon a time, in a simpler, more gentle world, those lies revolved around wild-eyed, yet somehow-believable schemes that made you healthier or wealthier. There were elixirs that could cure snakebite and also grow hair, guaranteed-you-cannot-lose investments on patents for perpetual motion machines, phony royal titles for sale, and miles of beachfront Florida property that just happened to be under a swamp.

In that simpler world, the caveat was born, If it’s too good to be true, it ain’t.

These days, more than ever, the warning still applies.

Because, in our complex, globalized, hi-tech world, fraudsters are more skilled in their craft, more elusive through their use of technology, more erudite in their understanding of human desires and more sophisticated when it comes to pushing all the right buttons. In our complex, globalized, hi-tech world, fraudsters have become the most creative and the most capable liars in the history of the universe.

*****

Think of fraud as marketing, exactly like the advertising business. There is a product to sell, various tricks of the trade are used to entice you to buy, and once you buy, the Mad Men move on to the next customer.

This is not to suggest that advertising is a fraud. But Madison Avenue and conmen use the same techniques to arrive at the same end - to convince us to part with our money.

Consider this: Advertising is everywhere because it is, essentially, ego-gratifying. We like being told how unique we are, even if we are being asked to express that uniqueness by becoming part of a group. We are all looking for ways of fulfilling our dreams. We open to solutions that will eliminate our problems and change our lives.

Now reread that paragraph and for the word advertising substitute the word fraud.

Consciously or not, we accept advertising because it offers us new ideas and, until now, the old ideas haven’t always worked. Consciously or not, we recognize the fraudster’s premise that a problem exists - a lack of money, a lack of status, not enough sex - and he’s offering us a solution.

Academics suggest that the true power of Madison Avenue lies in the fact that so many people are fast to claim they cannot be influenced. They insist that they don’t pay attention to ads, never watch them, tune them out, and that ads have no effect on them. These are the same people who walk around wearing Budweiser baseball caps and Fruit of the Loom tee-shirts.

You hear similar things from people about fraud. I can’t be seduced into giving some stranger my money. I’m too smart. I’m not that stupid. These are the same people who buy into pyramid schemes - hey, if someone is going to send me $750 why not? - and order miracle overnight weight loss pills on the Internet.

Studies have shown that seven out of ten consumers believe companies use ads to exaggerate the benefits of their products. So if advertising lies to us and we know it, why do we still buy the products? Same question: If fraud is a lie, why do we fall for fraud?

The answer is because, even people who are innately suspicious can be reached with the right technique. In many cases, that may not be anything more than flattery. You see that in advertising all the time. You’re a rebel. You’re a maverick. You understand that you’re special, that you don’t go where everybody else goes, be unique and join us.

It’s like the scene from Monty Python’s Life of Brian when the Messiah shouts to the crowd, Don’t follow me. Don’t follow anyone. Think for yourselves. You are all individuals. And the crowd shouts back in unison, We are all individuals.

That’s advertising in a nutshell.

That’s fraud in a nutshell.

Why did an investor put his money into a gold mine buried under permafrost and unreachable in northern Canada? Because my friends wanted to get rich quick and so did I.

In the business of advertising, and in the business of fraud, men are the easiest to fool. That’s because inside every man there is a little boy screaming to get out, and inside that little boy there is a warrior trying to become a man. Advertisers play to that.

So do fraudsters.

Male sexuality and identity are wrapped around visions of a white charger, the rescue of a beautiful damsel and living happily ever after. Because male fantasies are really little boys’ fantasies, Madison Avenue knows it hardly pays to sell anything to the man, when the one doing most of the buying is the little boy warrior. He’s into winning and conquest, so Ralph Lauren and Rolex sell him polo. Not exactly the most popular sport in the world, but it offers strong images of a man alone, apart from the team, rugged, elite and on horseback. That’s also why Hilfiger sells him ice hockey - big, baggy team TOMMY shirts suitable for aggressive high sticking, body checking and slap shooting - and, also, yachting. The little boy warrior on the deck, alone against the gale force elements. And that’s why Nike ran their winning is everything campaign. They went straight to the little boy’s warrior heart by saying out loud what so many little boys know but aren’t supposed to say. You don’t win silver, you lose gold. And just so that no one could doubt Nike’s intentions, an athlete added, If I say I’m just thrilled to compete, blame my interpreter.

Polo, yachting, hockey, as boys become men, their toys become more expensive. They go from dungarees to $300 jeans, from Nikes to $850 running shoes and then don’t run in them. Playboy magazine used to put a one-page ad inside every issue selling itself under the heading What Sort of a Man Reads Playboy. A photo showed some dashing 29 year old in a $3000 suit, stepping out of a Learjet, with a knock-out blonde carrying his crocodile attaché case, while he checked his Gold Rolex Oyster before climbing into a nearby Maserati.

When they’re being honest with themselves, most men know that Miss October isn’t going to show up just like that. But if the woman in the ad looked like his fourth-year teacher - the spinster Miss Dribblenose with the horn-rimmed glasses and thick-ankle waddle - the boy warrior wouldn’t waste the candle on shoeing his white charger. Instead, he tells himself, maybe, just maybe, some Miss October lookalike might say, I’m yours if you buy this after shave. So he saddles up.

It’s the same reason he sends money to someone on the other end of an email addressed to Congratulations Dear Friend, announcing his $1.8 million second prize in a lottery that he never entered. Maybe, just maybe, this is going to make me into the dashing rich young warrior I’d really like to be.

Women can also be fooled, although not as easily. Women don’t tend to buy sex. True, there is no shortage of conmen playing sweetheart scams, looking for older women to whom they can promise love in exchange for expensive gifts, a place to live, a credit card or access to her checking account. But generally speaking, women buy into security and expectation. Which is why the cosmetic companies spend so much money trying to romance to them.

Back in the l950s, manufacturers of lipstick, nail polish, creams, powders, soaps and lotions realized that the woman who paid 25-cents for a bar of soap to get herself clean would just as willingly pay $2.50 for skin cream to make herself feel beautiful. The lesson was, women will buy into a promise. Charles Revson, the founder of Revlon, even said as much, We sell hope. Today, that’s the basis of the modern multi-billion dollar cosmetics trade.

It’s the same in the multi-billion dollar fraud trade. Hope is the pitch. But this time the end product is deception.

Thanks in large part to the development of the Internet - particularly over the two decades from 1988-2008 when the dot-com boom came and went and slowly started to rise again - fraud reached worldwide epidemic levels. However, it was the economic downturn at the end of 2008 that put a match to the tinder, turning an epidemic into a crisis of pandemic proportions.

Suddenly, the planet was filled with a huge supply of inspired offenders, an overflow of easily reached potential victims, and no sheriff in sight capable of keeping the peace. In the years since post-9/11 law enforcement was detoured into focusing primarily on terrorism and illicit drugs, fraud has become America’s largest single growth area of criminal enterprise.

So much so that over the next twelve months:

* Every man and woman in the United States - and, also, every child with an email address - will be targeted by professional fraudsters, multiple times.

* One in nine American adults will lose money as a victim of fraud.

* Seven out of every eight frauds that take place will go unreported.

* Most fraudsters will get away with their crime.

*****

Like advertising, fraud is a thriving multinational industry. But unlike the advertising business, or petroleum, foreign exchange or telecommunications, estimating the size of the trade is almost impossible. Besides the fact that there is no public accounting, what numbers are published turn out to be little more than best-guesses and vary wildly. Government agencies and crime watchdogs suggest that there will be anywhere from $2 billion to $100 billion worth of fraud in this country this year.

Actually, it doesn’t matter which figure you go with, or if you split the difference between top and bottom, because those numbers only reflect the actual amount of money that will be lost in the one-out-of-eight reported frauds. Add in unreported frauds, then include the cost of repairing your life after you fall victim to fraud - the time, energy and cash you have to shell out just to put your world back together - and the total skyrockets.

The tornado-like damage inflicted by a felony as common as, say, identity theft, can ruin most middle-class families. If your credit card is cloned and used by someone else, you may find thousands of dollars charged to you. Sure, you can report this to your bank or credit card company and, in many cases, they will be reversed. Under federal law, you're liable for no more than $50, and most credit card issuers will not obliged you to pay anything. However, if the phony charges are disputed, if the bank or credit card company suspects that you are trying to cheat - and they may not have any evidence to support their theory, just suspicions generated by an anonymous computer anti-fraud profiling program - or if you haven’t put a system in place to protect yourself, or if you don’t react quickly and efficiently enough, then it’s easy to find yourself caught in a deadly chain reaction. Suddenly, your bank account is overdrawn, additional credit cards have been opened in your name running up further debts, and your Social Security number is being used by someone to apply for jobs and IRS tax refunds.

It doesn’t matter that you’ve been robbed because the burden now falls squarely on you to prove that you’re the victim, not the crook.

To set the record straight, you suffer the debilitating frustration of battling your way through hundreds of hours of phone calls, letters, form filings, not to mention visits to banks, insurance companies, mortgage companies, government agencies, lawyers and law enforcement. While this is going on, your failure to pay the debts incurred in your name can land you in default. That opens the battle to a second front, with the risk of forced bankruptcy hanging over your head, meaning that your mortgage, your savings and the overall welfare of your family is in real jeopardy.

It is an all-too-common nightmare, faced by eight-to -ten million Americans each year.

Making matters worse, such is the nature of fraud that you don’t have to be a direct victim to suffer the consequences. At one small company in the Midwest, a fraudster convinced some of the company’s customers to pay out on false invoices. By the time the company discovered the crime, cashflow had dried up. Within months, the company was out of business. Forty people lost their jobs and their families suffered the consequences.

There’s no denying that the stakes are astronomically high. Yet, when you speak about crime to most people, it seems that our greatest fear is being attacked in the street, in our car or having someone break into our home. Understandably, we worry most about crimes of violence. Fraud is much lower on the list.

When you then mention fraud to people who have never been victims, what you often hear is, I’m too smart to fall for it. Or, Why would a fraudster bother with me, I’m not rich enough?

Like most disasters, until we’re actually touched by one, we tend to believe these things only happen to someone else.

The problem is exasperated by film, television and books which often depict fraudsters as clever and charming Robin Hoods, handsome, well-spoken rogues who steal from the rich. We hand them cute nicknames, like Paper Collar Joe. And we romanticize them, like Grand Central Pete, who used to hang out at the station to con people by pretending to be their long lost friend from home. Or, Victor Lustig, who sold the Eiffel Tower to scrap iron merchants. Or, George Parker, who sold the Brooklyn Bridge, Madison Square Garden, Grant’s Tomb and the Statue of Liberty to wealthy tourists. We turn catch me if you can Frank Abagnale into Leonardo DiCaprio.

Lost in the hype is that fraudsters are ruthless and incorrigible criminals who study, construct and master crimes of deception; who unscrupulously target the defenseless; who lack any conscience about the horrendous damage they inevitably cause. They don’t commit their crimes because it’s an amusing pastime or because they’re looking for 15 minutes of fame. They are players in a cut-throat business. They do it for the same reason that most criminals commit crimes - money.

Take a long list of criminal acts - murder, bank robbery, rape, extortion, car theft, burglary, assault, domestic violence, embezzlement, home invasion, tax evasion, drug trafficking, smuggling, fraudulent auto repairs, even pick-pocketing - lift sex and crimes of passion out it, and what you’re left with are illegal acts carried out for profit. Like the famous thief Willie Sutton supposedly answered after being asked why he robbed banks, Because that’s where the money is.

If there is a difference between fraudsters and other types of criminals, it’s down to the levels of violence that can occur. Not that fraudsters habitually avoid violence. The Nigerians, who have turned fraud into a national export, can be very violent. Every year, a handful of Americans who show up in Lagos trying to recoup their losses are murdered. But when two idiots in ski-masks barge into a 7-Eleven with a sawn-off shotgun to demand cash from the till, they aren’t interested in discussing the merits of canned beer versus bottled beer. They’re only interested in robbing the place, using their weapon if they think they have to - or sometimes just because they want to - and getting the hell out of there fast.

Fraudsters are robbers too, but their act is theft by stealth - where patience is a virtue - and they are more than happy to debate canned versus bottled if it helps them make the steal. The best of them understand that, when done in a calm, composed and proper way, this is a low risk, high reward trade. That violence only ups the ante and greatly increases the odds of getting caught and then being punished. That the absence of violence puts the risk-to-reward ratio totally in their favor.

However, unlike armed robbers, who simply have to show up, fraudsters need to prepare the ground. Before anyone can hoodwink you into parting with your money, you have to be susceptible to being duped. So the conman does whatever he can to prime you.

That’s because fraud is a two-way street crime. Somehow, somewhere along the line, you must be coaxed into participating.

Most of us would never open our front door and allow a stranger inside our home to steal the furniture. Yet every day, thousands of Americans allow total strangers into their life and then into their bank account. Most of us would never, knowingly and