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Credit
Card Fraud
Credit
card fraud often, but not always, involves the bank directly.
The most common kind of credit card fraud is the illegal
counterfeiting of credit cards. Sometimes defendants use
desktop computer systems to produce realistic-looking credit
cards with holograms and functioning magnetic strips. Lost or
stolen credit cards constitute another common fraudulent use
and bring many defendants before the law. Some people
obtain credit cards fraudulently through the mail, either by
illegally obtaining confidential information gleaned from
other peoples' mailboxes, or recovering cards or credit card
applications from the trash. The Internet has also
become a part of credit card fraud, as lists of stolen credit
card numbers are posted or sold in newsgroups and are
sometimes used to purchase goods online.
Forgery
(1) The crime of creating a false document, altering a
document, or writing a false signature for the illegal benefit
of the person making the forgery. This includes improperly
filling in a blank document, like an automobile purchase
contract, over a buyer's signature, with the terms different
from those agreed. It does not include such innocent
representation as a staff member autographing photos of
politicians or movie stars. While similar to forgery,
counterfeiting refers to the creation of phony money, stock
certificates or bonds which are negotiable for cash; (2) a
document or signature falsely created or altered.
Identity
Theft
Identity Theft primarily
involves either "true name" or "account
takeover" fraud. With "true name" someone uses
a consumer's personal information to open new accounts in his
or her name. With "account takeover" someone gains
access to a person's existing account(s) and makes fraudulent
charges. Another form of identity theft occurs when a criminal
provides a victim's personal information to law enforcement
when the criminal gets arrested. The victim may then have a
criminal record or outstanding warrants attached to their name
without even realizing it.
Insurance
Fraud
Insurance Fraud includes
everything from padding estimates, to under-reporting how many
employees work for a business.
Insurance fraud cases involve criminal acts surrounding
automobile property and personal injury, workers'
compensation, health insurance and residential and commercial
property claims. Some examples of the types of insurance fraud
include:
-Staged
Automobile Accidents
-Fraudulent Healthcare Billings
-False and/or Inflated Property Loss Claims
- Phony Workers' Compensation Claims
-Fraudulent Denial of Workers' Compensation Benefits
-Arson for Profit
-Fake Life Insurance Claims
-Workers' Compensation Premium Fraud by Employers
Home
repair fraud is related to disaster fraud. Home improvement
fraud can target roofing, furnace, driveway repairs, etc. A
common scheme is for a "so called" contractor to
convince a homeowner that a deposit must be made before their
repair work can begin. When the deposit is made the homeowner
never sees or hears from the con artist again.
Internet
Fraud
Internet fraud generally refers
to any type of fraudulent use of a computer and the Internet,
including the use of chat rooms, email, message boards,
discussion groups and web sites, to conduct fraudulent
transactions, transmit the proceeds of fraud to financial
institutions, or to steal, destroy or otherwise render
unusable (the proliferation of viruses for example) computer
data vital to the operation of a business.
Online auction and retail schemes, business
opportunity/"work-at-home" schemes, investment
schemes and market manipulation schemes are just a few of the
current known cybercrime abuses. Auction and retail schemes
sometimes offer luxury merchandise, from expensive watches to
high-end computers to collectible items. These schemes
encourage people to send money, but either the goods are never
delivered or the item is far less valuable that what the
purchaser thought he was buying. Business opportunity and
"work-at-home" schemes promise that individuals will
earn thousands of dollars but require upfront fees ranging
from $35 to hundreds of dollars. Often people never receive
anything in return, or find that the materials are not what
the seller warranted.
Securities
/ Investment Fraud
Securities/investment fraud may
include the following types of infractions:
(1)Unsuitability
- The broker must have reasonable grounds for believing each
recommendation to a customer is suitable on the basis of the
customer's other securities holdings, and financial situation,
among other factors.
(2)Churning - (excessive trading) - If a broker is buying and
selling securities in your account to generate commissions
that seem excessive, and the broker pressures you should take
quick profits, there is a strong possibility that your account
is being churned.
(3)Unauthorized Trades - Brokers must have expressed and
detailed permission of the customer unless the broker and the
broker's firm have been granted written discretionary
authority by the customer.
(4) Failure
to execute order (including online trading errors) - Brokers
can't refuse your order and are responsible for executing
orders in a timely fashion.
(5)High-Pressure Selling/Misinformation - Some brokers use
illegal techniques to sell their "house stocks."
(6)Over Concentration - Brokers must assure that the
portfolios of their clients are balanced with a diversity of
investments.
(7)Illegal Accounts - A broker cannot place a client's money
into his own personal account or set up false accounts.
Securities
fraud can be described as deceptive practices in the commodity
and stock markets. The Securities Act of 1933 and the
Securities Exchange Act of 1934 prohibit the use of
manipulative or deceptive devices, making false statements in
order to increase market share, conspiracy and other acts of
unfair market practices.
Like many other types of financial fraud, the web of offenders
in securities fraud can include stockbrokers, promoters,
traders, accountants, and lawyers. Professionals like these
working together can defraud stockholders out of billions of
dollars. Although the idea of boiler room schemes pushing
worthless penny stocks upon unsuspecting victims comprises
part of the problem, the SEC and federal courts have imposed
both civil and criminal sanctions upon such diverse groups
ranging from organized crime rings to high school students.
The four most prevalent types of securities crime include
"churning", insider trading fraud, outsider
training, and "pump and dump" fraud. Churning refers
to the buying and selling of stock in order to generate
commissions for the stockbroker at the expense of client's
profits. Insider trading refers to the misappropriation
of nonpublic information. While the original statutes made it
illegal for employees to directly benefit from
market-sensitive information, the definition of insider
trading has been expanded to disallow sharing privileged
information to a third party who might buy shares in the
company.
Outsider trading evolved from insider trading laws. The United
States Supreme Court first recognized a form of outsider
trading in the 1997 case United States v. O'Hara. The court in
that case applied what they called the "misappropriation
theory." The misappropriation theory, "subjects
individuals who trade on material, non-public information to
prosecution, regardless of whether they worked for the company
whose stock was being traded or otherwise owed the
corporation's shareholders a fiduciary duty. "While
originally involving a strict interpretation of the Securities
Exchange Act, Decisions from cases before O'Hara in the early
eighties limited the criminal liability of outside traders to
only those instances in which the outsider should have known
that the information resulted from a breach in the first
place.
One of the most common Internet scams is in fact, one of the
oldest investment schemes of all time: the "pump-and
dump" scam. Historically pump-and-dump schemes are run
out of makeshift offices staffed with fast talking
telemarketers that convince innocent investors to buy
debatable stock. The high pressure sales tactics generate
enough demand to push up the share price of stock. This phase
of the scheme is known as, the "pump". The
"dump" occurs when the price of the stock reaches a
specific objective and the operation that was originally
encouraging investors to buy, sells its shares for a
significant profit. The sell-off will also lower demand and
consequently the share price, leaving unsuspecting investors
with a loss.
Using online investment newsletters positioned as objective to
the trade, and which promote the purchase of specific
securities may constitute another form of investment fraud.
Tax
Evasion
Intentional
and fraudulent attempt to escape payment of taxes in whole or
in part. If proved to be intentional and not just an error or
difference of opinion, tax evasion can be a chargeable federal
crime. Evasion is distinguished from attempts to use
interpretation of tax laws and/or imaginative accounting to
reduce the amount of payable tax.
Tax Fraud
Many federal white-collar
prosecutions are for tax crimes, such as tax evasion, failure
to file income tax returns, or tax fraud. Because of the war
on drugs, and the war on terrorism, criminal investigations
into personal and business tax filings have become more
intense. As defense attorney and tax specialist Kathryn
Keneally writes in a recent issue of The Champion, "IRS
Criminal Investigation is uniquely entrusted with the
enforcement of criminal tax statutes." Adds Keneally,
"The IRS looks to criminal enforcement not only to punish
the small number whose wrongful acts are detected and can be
proven, but also to deter the majority of taxpayers from
attempting to cheat on their taxes.
There are some special considerations to keep in mind if you
are under investigation for violations of the Internal Revenue
Code, as Kathryn Keneally explains:
In a bank fraud case, for example, the federal investigative
agency is typically the FBI. The FBI usually works directly
with the local United States Attorney's office. When the FBI
has completed its investigation, it forwards its case to the
local U.S. Attorney's office, and the local office determines
whether to prosecute or not.
In tax crime cases, the procedure is significantly different.
The typical criminal tax case is investigated by the Internal
Revenue Service Criminal Investigation section. IRSCI
investigators are federal agents trained in law enforcement
techniques and tactics; they are also trained accountants, and
many have achieved their CPA. There are CID offices throughout
the country.
When an IRSCI agent completes an investigation and recommends
that an individual be prosecuted, there are at least two
stages of review by Internal Revenue Service attorneys prior
to the approval of prosecution. Once the Internal Revenue
Service approves prosecution at its highest level, the case is
forwarded to the United States Department of Justice Tax
Division in Washington, DC, where federal prosecutors
specializing in criminal tax violations review the case and
decide whether or not to authorize prosecution. If the
Department of Justice Tax Division in Washington approves
prosecution, the case is sent to the local US Attorney's
office with the direction that the individual or individuals
named be indicted and prosecuted for the offenses alleged.
In tax crime cases, the multi-tiered approval process can work
to your advantage. The process gives you a number of different
opportunities to derail a federal criminal case before it ever
gets to grand jury. At each of the IRS approval levels and at
the Department of Justice Tax Division level, your lawyer will
have the opportunity to schedule a conference where he or she
can sit down with government attorneys and attempt to convince
them to decline prosecution of the case. If the government has
a strong case against you, it is unlikely that he or she will
be successful in convincing either the IRS or the Department
of Justice Tax Division to refrain from prosecuting.
However, if there are misunderstandings that can be explained
away and the government can be convinced that there was no
criminal conduct, you have the opportunity to convince the
government to decline prosecution prior to grand jury. It is
always less stressful to have your attorney address matters in
meetings with government attorneys than to present your side
of the story to a jury at a federal criminal trial.
Also, in tax crime cases it is important to have an attorney
who is not only well experienced in federal criminal matters,
but who also has had significant experience in federal
criminal tax cases. If you are comfortable with a lawyer who
is experienced in federal criminal defense but lacks tax
experience, consider adding a former IRSCI agent to your
defense team. However you accomplish your objective, you will
want both federal criminal defense and tax crime experience on
your side.
Telemarketing
Fraud
Telemarketing Fraud is a term
that refers generally to any scheme to "deprive victims
dishonestly of money or property or to misrepresent the values
of goods or services."
Traditionally fraudulent telemarketers have operated out of
boiler rooms. "Boiler room" operations involve
rented offices with banks of telephones operated by
high-pressure salespersons who peddle investment offers,
charity solicitations, and telephone billing scams to name a
few. Some boiler rooms employ a multi-tier approach with
customers.
After a less experienced caller makes an initial contact, more
seasoned telemarketers handle sales, follow-ups,
verifications, and reloads. All fraudulent operators, however,
are persuasive and persistent in order to swindle as many
people as possible.
Boiler rooms represent the ideal office setup for fraudulent
telemarketers. Typically, such offices consist of an open
space with numerous phone lines and few furnishings. Once
fraudulent telemarketers suspect that they are under
investigation, or that their frauds are about to be detected,
they can quickly disband their operation and relocate.
The California Department of Corporations has reported that
100 new boiler rooms have opened in the last year in Los
Angeles alone. Other areas experiencing growth of boiler room
operations include Florida, Canada, and increasingly, the
Caribbean.
As law enforcement and regulatory authorities have become more
vigorous in prosecuting fraudulent telemarketing,
telemarketers have increasingly engaged in what's known as
"rip-and-tear." Rip-and-tear telemarketers will
utilize pay telephones, mobile phones, cloned phones, and long
distance cards to carry out their schemes. Fraudulent
telemarketers try to make it appear that their service or
charitable cause is worth the money that they are asking the
consumer to send.
Because these telemarketers' objective is to maximize their
profits, fraudulent telemarketers will typically adopt one or
both of two approaches. The first is to fail to give the
consumer anything of value in return for their money. The
second is to provide items far below what the consumer had
expected the value to be.
According to the National Fraud Information Center, the top
telemarketing "scams" for 2000 were:
-Prizes/Sweepstakes
-Magazine sales
-Credit Card Sales
-Work-at-Home
-Advance Fee Loans
-Telephone Slamming
-Credit Card Loss Protection
-Buyers Clubs
-Telephone Cramming
-Travel/Vacations
These
top ten frauds of 2000 make up 80 percent of all telemarketing
complaints received by the National Fraud Information Center.
As an example of law enforcement against alleged telemarketing
fraud, during "Operation Disconnect" a few years
ago, FBI undercover agents pretended to sell a special machine
that would allow fraudulent telemarketers to dial as many as
12,000 calls per hour. Such a machine would have increased the
ability of telemarketing schemes to contact large numbers of
prospective victims throughout the United States. Undercover
agents obtained many damaging and revealing admissions from
the telemarketers about the fraudulent and criminal nature of
their business activities.
As a result of Operation Disconnect, several hundred
fraudulent telemarketers were successfully prosecuted, in some
cases receiving prison sentences as high as ten years.
Wire
Fraud
Wire
fraud makes it a Federal crime or offense for anyone to use
interstate wire communications facilities in carrying out a
scheme to defraud. A person can be found guilty of that
offense only if all of the following facts are proved beyond a
reasonable doubt:
-First: That the person knowingly and willfully
devised a scheme to defraud, or for obtaining money or
property by means of false pretenses, representations or
promises; and
-Second: That the person knowingly transmitted or
caused to be transmitted by wire in interstate commerce some
sound for the purpose of executing the scheme to defraud.
It is not necessary that the Government prove all of the
details concerning the precise nature and purpose of the
scheme; or that the material transmitted by wire was itself
false or fraudulent; or that the alleged scheme actually
succeeded in defrauding anyone; or that the use of interstate
wire communications facilities was intended as the specific or
exclusive means of accomplishing the alleged fraud.
What must be proved is that the person knowingly and willfully
devised or intended to devise a scheme to defraud; and that
the use of the interstate wire communications facilities was
closely related to the scheme because the person either wired
something or caused it to be wired in interstate commerce in
an attempt to execute or carry out the scheme. To
"cause" interstate wire facilities to be used is to
do an act with knowledge that the use of the wires will follow
in the ordinary course of business or where such use can
reasonably be foreseen. Each separate use of the interstate
wire facilities in furtherance of a scheme to defraud
constitutes a separate offense.
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