Fraudulent Mailings Target Older Consumers Worldwide

One of the most important things to do in helping prevent older consumer from being fraud victims is simply to watch their incoming junk mail.  Millions of consumers around the world receive deceptive mailings for sweepstakes, supposed psychics, or bogus charities.  Victims often send $20-$30 each time, over months, and losses can mount into the tens of thousands of dollars.  In addition, the names and other information about these victims is then sold to other frauds, such as Jamaican sweepstakes scams, which can devastate elderly victims.  The bogus mailing business is truly organized worldwide, and victims collectively are losing (at least) tens of millions of dollars.

Unfortunately victims rarely complain about this fraud.  In one Federal Trade Commission case the FTC found after bringing suit that there were a thousand times as many actual victims as there were complaints.  In other words, only one of every thousand victims had ever filed a complaint.  Moreover, many caregivers (or even local police) do not necessarily understand this fraud, and may not provide help to repeat victims or assist them in filing a complaint with the FTC.

This is a worldwide fraud concentrating on older consumers in most countries around the world.  In another FTC case the fraud was sending its mailings to victims in 155 different countries around the world.  Moreover, it is common for different parts of one of these fraud operations to take place in several different countries.  Thus international cooperation is going to be needed to attack this fraud.

In late September 2016 the Justice Department announced a coordinated worldwide effort to attack this fraud at a press conference by Attorney General Loretta Lynch.  One of the enterprises challenged in this effort was collecting $50-$60 million every year

This DOJ-led effort is discussed in more detail below, along with a discussion of the organization of this industry, more detail on the different kinds of fraud mailings, and some pointers on how to avoid receiving such mail or how to address situations where victims have been defrauded.

What do these mailings look like?

 DOJ has provided an excellent sampling of these mailings. Take a look.

 

How is this industry structured?

Locating and taking action against those operating these frauds can be a challenge.  Not only are there those operating the fraud themselves, but there is a large supporting industry that plays an important role in disguising who is involved and which helps make these work.  Victims do not typically send money directly to those behind the fraud.  There are several steps in running this type of “business” and a variety of third parties assist with one or more of the steps in making these frauds work.  These may include:

  • Writing the mailings. Note that these mailings employ carefully crafted wording to avoid saying directly that the victim has won.  In addition, the “disclosure” needs to be written in such a way that it can helpfully avoid legal action.  In addition, these mailings need to be translated into a variety of different languages.
  • Printing the mailings. These mailings are often in several colors, and large volumes of them need to be mass printed.  In addition, most need to be personalized so that they contain the name of the actual recipient.
  • List of who to send to. The frauds need lists of names of who to send these to.  There are markets, some underground, where the frauds can buy and sell lists of potential victims – and past victims who can be targeted again.
  • Getting the mailings into the mail. There is, obviously, a cost for postage.  In addition, the frauds may have the mail shipped to another country and then placed into the mail — to disguise the source of this mail.
  • Post Office Boxes or mail drops to receive the mail back from victims. Of course the frauds are never going to have the return mail and accompanying money sent directly to them.  Instead they open, or hire others to open, mail drops such as Post Office boxes. These may well not even be in the United States.
  • Opening and sorting the mail from victims. There is a huge volume of mail coming back to these fraud enterprises, and simply opening it and removing the money can take considerable effort.  There are companies known as “caging services” that will perform these duties for the frauds.
  • Handling the money. Victims often send money in cash, from different currencies if the fraud operates worldwide. In addition, some victims send checks or money orders, which need to be cashed.  All of these funds must then go into some sort of bank account and then transferred to the actual fraud operators.  Some caging companies also perform this service.

Worldwide Crackdown

On September 22, 2016 Attorney General Loretta Lynch hosted a DOJ press conference announcing a set of coordinated actions against players in this industry round the world, including both civil and criminal charges, at a press conference hosted by.  DOJ asserts that those involved in this effort defrauded millions of elderly victims across the United States out of hundreds of millions of dollars. The actions taken by DOJ and other law enforcement partners addressed activity taking place in Canada, France, India, the Netherlands, Singapore, Switzerland, Turkey and the U.S.  They included actions against the companies operating this fraud themselves, the printers and mailers, and companies that open the mail and deal with the money.

.  In addition to actions by DOJ, other legal action announced was taken by the FTC, the Iowa Attorney General, and criminal search warrants by Dutch law enforcement.

Cases against the mailing operations themselves

 This effort included a new DOJ civil case against three individuals and three corporations operating as DCMS in Long Island:  .  The case alleges that this enterprise sent hundreds of thousands of mailing pieces and that it grossed $30.4 million since 2012.

  • DOJ also filed a civil action against an enterprise called BDK, based in Switzerland and Singapore with owners in France and Switzerland. The case alleges that BDK mailed millions of multi-piece solicitations to potential victims throughout the United States that profess to come from supposed psychics such as “Marie de Fortune.” The mailings told  recipients that they would receive large sums of money, guaranteed money-making methods and/or powerful talismans in return for payment of a fee of $50 to $55.  DOJ alleges that victims who responded received nothing in return except some worthless trinkets.  DOJ alleges that this enterprise was collecting $50-60 million every year.

 Printers/mailers

 MOSI in India. DOJ also brought a civil case against MOSI, an India based printer and mailer and the two individuals who operate it.  They allege that MOSI designs, proof reads, and edits mailings and then ships them to the Singapore, Fiji or Hungary to be mailed.  They allege MOSI has shipped at least 24.5 million of these mailings to the U.S.

 List sellers

 Both DOJ and the Iowa Attorney General’s office sued Macromark of Connecticut, which is alleged to have sold the names of at least 750,000 potential victim names and addresses to other defendants.

In addition, the FTC’s civil case included charges that the Defendant’s also sold victim lists to other schemes.

 Mail Drops and Caging companies

  •  This effort also included a settlement with two Dutch caging businesses that received the mailing from victims, opened them, and then converted the money. They allege that these defendants had mail boxes in the Netherlands to receive the mail from victims, and that they collected at least $18 million per year, just from U.S. victims.
  • And last, but certainly not least, DOJ’s Office of Foreign Assets Control (OFAC) designated PacNet in Canada as a “significant transnational criminal organization,” meaning that no U.S. entities can continue to do business with the company. PacNet is, or was, headquartered in Vancouver, Canada, but had a global network, operating in at least 18 countries including the U.K. and Ireland.  PacNet is alleged to have been processing and laundering money for twenty years, and in 2016 alone processed payments for more than 100 mail fraud campaigns.  The Postal Inspection Service also froze PacNet assets in the U.S.

CNN Money has aired an excellent piece on PacNet:

There are several different types of mailing that account for much of this fraud.  As noted, many of them are sweepstakes or psychic frauds.  Victims also receive many mailings from bogus charities.  We address each in turn.

How do the Sweepstakes/Lottery frauds work?

The FTC’s 2013 case against Liam Moran may help illustrate how this all works.  Moran sent millions of prize notifications through the mail to consumers around the world.  The “notifications” came in envelopes stamped “URGENT or TIME SENSITIVE.”  They

were personalized with the consumer’s name, and festooned with pin and approval numbers, seals, bar codes and approval numbers and carrying large print statements such as “Over TWO MILLION dollars has been reserved for you” and “This document will not be re-issued and is for your use alone to claim eligibility.”

Another tells consumer it is “an extraordinary day … [e]specially if you’ve never … experienced the opportunity of winning a major lottery or sweepstakes before,” and warns that most people “find this news startling at first so take a deep breath.”

Consumers were instructed to complete a short form and put a sum, usually $20-$30, into an enclosed preaddressed envelope within a specified ‘deadline’, and told not to delay.

Note that responses to these mailings are bar coded.  This allows the fraudsters to maintain a database telling them who has responded, and thus which victim will receive more mailings.

On the back of these mailings was a set of dense fine print.  Here is the “disclosure” used from another FTC case (Mail Tree).  But it was in only 6 point type, and thus almost impossible to read.

disclosure

Over a two year period Moran sent out 3.7 million pieces of mail.   He had some of his mail bulk shipped to England, where it was supposed to go into the Royal Mail and then sent around the world.  But the London Metropolitan Police (Scotland Yard) officials detected and seized that mail before it could be sent.

Victims who sent in their money never received anything.  The pre addressed envelopes containing the money went to a post office box in Ventura, California, not far from Moran’s home. (Canadian law enforcement had shut down a PO Box he had previously used in British Columbia).

If you work your way through the fine print it does suggest that by entering you will receive a pamphlet giving you lists of sweepstakes you can enter.  But there was no evidence Moran actually sent these, and even if consumers did receive this mailing it would be of no practical value.

Moran had been involved in deceptive mailings since at least 1995, and in the just the three years before the FTC shut him down he had taken in over $11 million.  Much of the money was in foreign currencies, so he had to have it converted to U.S. dollars.

Most of the complaints and victims the FTC could identify before going to Court were over 65 years old.

Unfortunately, Moran may be a smaller player on the worldwide stage of this type of fraud.

Note:  There is another whole category of prize/sweepstakes mailings that operate somewhat differently.  The mailings are designed to get the victim to call to claim supposed winnings.  These mailings provide a phone number for victims to call, and commonly include a cashier’s check that will supposedly cover taxes or other costs of receiving the money.   Those who call are assured that they have won.  They are instructed to deposit the cashier’s check into their bank account and then to withdraw money and send it by Western Union or MoneyGram to some supposed third party.  Victims are often told they can keep a small portion of the ‘advance on their winnings’ that is deposited.

This is a variation on a whole set of frauds that employ fake checks.  Often the checks mailed to victims use the names and routing numbers of real companies – but with the company phone number altered.  Under federal banking laws banks are required to credit the money to a person’s funds quickly, often within 24 hours.  Because the banks provide quick access to the funds, victims conclude that this means that the check is good.    But the checks are counterfeit, and it may take a week or two before the banking system concludes that the check is a counterfeit.  When this happens, the bank holds the depositor responsible for the ‘bad’ check and withdraws the money from the victim’s account.   Thus the victim has sent their own money to the fraudster, and the bank is generally not liable.  More information is available at: http://fakechecks.org/

How do the psychic mailings work?

 In November 2014 the Justice Department filed suit in federal court for an injunction against two different operations doing psychic mailings.  DOJ alleged that in each operation the letters to victims stated that the psychic had a “vision” that the recipient had the opportunity to dramatically improve their financial situation, including by claims about winning millions in a lottery.  These letters were personalized and contained the victim’s first name.  Portions of these mailings were made to look like they were handwritten personally to the targeted victim.

Victims were urged to purchase various products to ensure that the good fortune would come to pass.  Victims had to complete a form and submit a payment of $20-$50 by U.S. mail.  Victims also often wrote personal notes back to the “psychic” with their money. Victim’s letters were never opened, (they were just trashed) and victims were in return sent worthless trinkets. Victims may also have been sent repeated mailings by the same ‘psychic’ over a period of several months or years.  The operation using the names of psychics Maria DuVal and Patrick Guerin was taking in at least $13 million each year.  The second company was taking in $1.5 to $2 million per year.  Elderly victims are known to have marked their calendars for specific dates that these ‘fake psychics’ indicated that the ‘good fortune and business opportunities’ would come true.

 The psychic mailings are a bit different. Because they are personalized, and make it sound like the psychic has important information specifically for you, this again creates an aura of authenticity.  The psychics also provide a warning or promise a great positive event is coming into someone’s life.   It is easy to scoff at these, but again, look at how many people believe there is a basis in astrology.  Note that DOJ also alleges that the victims were elderly, ill, and often hurting financially.

DOJ also sued a Long Island business that was receiving and processing the mail from victims. They alleged that the company was taking in $500,000 every two weeks, for at least $13 million per year.  DOJ concludes that in total this scheme defrauded over 1 million U.S. consumers out of more than $180 million.  DOJ recently settled this case  banning them from this business.

CNN did a very extensive look at the Maria DuVal scheme:

Charity Fraud

 On May 19, 2015 the FTC and 58 state law enforcement partners sued alleging that sham cancer charities had bilked victims out of more than $187 million.  Some 85% of the money raised went to professional fundraisers.  Much of the rest of the money was spent by family members on cars, trips, luxury cruises, jet ski outings and tickets to sporting events.

Cancer Fund of America used both telemarketing and direct mail to raise money.

There are many other types of bogus charities.  Telemarketers often call pretending to be from police or firefighters.  Unfortunately some people worry that these services might not be as responsive if victims do not contribute. Those who wish to support such charities should check them out in advance and contact them directly.  Finally, it is not unusual to find bogus operations claiming to raise money for victims of hurricanes or other disasters.

Many people do not realize it, but there are several places where you can easily check out a charity before contributing money.  Here are two places you can check out a charity for free.

The BBB’s Wise Giving Alliance has reports on almost all real charities. Also try charity navigator or charitywatch.  In addition, many State Attorneys General track charities and can be contacted to see if they are legitimate.

Why do people fall for these?

 Not everyone necessarily does fall for these, and I doubt that those sending them expect a 100% success rate in deceiving recipients.  But enough do respond that it makes these schemes profitable.  The sweepstakes mailings tell people something that they want to hear; that they are going to receive a large sum of money.  Thus people want to believe.  Look at how many people buy lottery tickets every day.  When elderly victims are targeted, they may often have additional issues involved as well, including cognitive decline.  Many elderly victims responding to these targeted mailings admit that they would not have ‘fallen’ for the schemes if they had been mailed earlier in their lives. These victims are interested in the money for what it will allow them to do for their friends, families and communities more than they have massive desires to buy sports cars or other luxury items.

The mailings are a touch ambiguous about whether someone has actually won or not, but the use of seals, barcodes and other official-looking indicia give them a large patina of authority.  Moreover, many victims are not lawyers, and are not used to doing the very close reading needed to detect the softness in some of the claims.  And yes, elderly lawyers have also been victims of these targeted mailings.  Finally, if victims are in doubt, they may decide that a $20 investment is not a large sum of money against the possibility that they actually have won a huge sum of money, not realizing that their information will be sold and used against them in later fraud solicitations.

Charity mailings may be a bit different.  They call upon the generous impulses of consumers, who want to do good and help others.  The mailings look professional, and unless a consumer checks some reputable source they may not even realize they are dealing with a bogus charity, or a real charity that keeps most of the proceeds and spends very little on the actual charitable cause.

 Are these mailings illegal?

Needless to say, these mailings are clearly deceptive, and federal judges in FTC civil cases have had no trouble concluding that they are illegally deceptive.  Apparently those engaging in this fraud believe that since they don’t say directly that you have won, and they have the fine print disclaimer at the bottom, their lawyers can argue that the mailings are not deceptive.  But the FTC law on deception is clear. The FTC, and the courts, look not only at the literal words standing in isolation but at the overall net impression of an advertisement.  In other words, they look at the entire message conveyed the same way a real person would.    The law on deception is set out, for example, in this FTC court brief.

The law is also clear that fine print will not save an otherwise deceptive piece. Moreover, because the target audience is plainly older consumers, which may have difficulty reading fine print, a court will look at the mailing from the point of view of the group targeted for an advertisement.  Finally, the “disclosure” itself is extremely difficult to understand, and victims who sent money, often repeatedly to the same scammer, clearly did not read and understand it – and surely were not expected to.

Note that cases by the FTC are civil in nature, meaning the FTC can stop the mailings and get money back for victims, but does not have the ability to bring criminal charges.  Most other countries have equivalent agencies, and most of those also only have civil authority.

t seems likely that those that operate these frauds conclude that: 1) they can write these so that they are not literally deceptive; 2) this will provide some form of defense if brings a lawsuit challenging the fraud; 3) criminal authorities will not prosecute because defendants can argue that the claims made are ambiguous, and that no intelligent person would fall for them; and 4) if they operate from a different country it will be too much trouble to investigate and prosecute.

Here are a few other FTC cases against deceptive sweepstakes mailings:

 

National Prize Information,  A 2006 FTC case:

Consumer Direct, a 2007 FTC case:

Applied Marketing Science and Liam Moran, a 2013 FTC case:

2015 FTC case against Mail Tree.

Criminal charges

 Of course these mailings could also be prosecuted criminally, though before the recent DOJ effort they rarely have been.  After the FTC’s 2015 case against another such operation, based out of Miami, the U.S. Attorney’s office for South Florida brought criminal charges against the three owners.    To my knowledge these are the first criminal charges ever brought for these types of deceptive mailings.

These mailings can readily be prosecuted as mail fraud, which is a federal offense.  Mail fraud is typically enforced by the U.S. Postal Inspection Service.  The Postal Inspection Service is not nearly as well known as other federal investigative agencies such as the FBI and Secret Service.   But the Postal Inspection Service is the oldest law enforcement agency in the country.  Postal Inspectors have badges, carry guns, and do the same sort of criminal investigations as the FBI.  Central to their work is prosecuting mail fraud.  See:

So these are crimes.  Does the fine print save them? Is it a defense that they may send booklets with lists of sweepstakes victims can enter?   The short answer is no. These mailing can be found fraudulent even if the literal words, standing alone, are not false.  Here is an excerpt from a court ruling that provides an instruction on the law to a jury:

“In determining whether a scheme to defraud exists, you are entitled to consider not only the defendant’s words and statements, but also the circumstances in which they are used as a whole.

A defendant’s actions can constitute a scheme to defraud even if there are no specific false statements involved. The deception need not be premised upon words or statements standing alone. The arrangement of the words or the circumstances in which they are used may create an appearance which is false or deceptive, even if the words themselves fall short of this. Thus, even if statements as part of the scheme are not literally false, you may consider whether the statements taken as a whole were misleading and deceptive. Evidence beyond a reasonable doubt that a scheme was reasonably calculated to deceive is sufficient to establish a scheme to defraud.

United States v. Woods, 335 F.3d 993, 998 (9th Cir. 2003)

What can you do about these mailings?

 Consumer Education

  • DOJ has announced a consumer education campaign to address this type of fraud, involving a number of federal agencies as well as groups such as AARP, National Consumer’s League, and Adult Protective Services.

Tips

  • Never send money. Not only will you not win, but this will also get you on lists ensuring that you will get more fraudulent mail.
  • File a complaint. Call the FTC at 877-FTC-HELP (1-877-382-4357) or TTY 1-866-653-4261 or complain online at ftc.gov/complaint.  Note you can also send copies of deceptive mailings to the FTC and those can be posted with the complaint.   These go into the FTC’s Consumer Sentinel database, which is available online to over 3000 law enforcement agencies.
  • Pass it on to friends and relatives. Share this information with others and you can help prevent them from becoming victims.
  • If an elderly person is receiving a lot of this mail daily, for many it has become an important ‘habit and hope’ in their daily life.  Families and professionals working to help them to stop participating in these mailings will have to discover other alternatives to how these targeted victims can spend their time during the day.  Many report that waiting for the mail and opening/reading and responding to these solicitations are a very important part of their ‘work’ day.  This can be one of the biggest challenges facing those trying to help.

Can I stop the mail from coming?

  • Because these are frauds, there probably is no effective way to stop this mail from coming. But if no one responds to this mail it ought to stop coming eventually.
  • Sometimes family members have done a change of address so that they can receive and screen an older victim’s mail on their behalf.
  • You can stop a great deal of mail for catalogs and other advertising mail by going to the Direct Marketing Association. DMA members are typically legitimate businesses who would rather avoid the expense of sending mail to someone who does not want it.  You can get on a “do not mail” list at   This service is free on line; it costs $1 for those who respond to them by mail.
  • DMA also has a do not mail service specifically for caretakers:
  • To end credit card offers.

Steve Baker

November 4, 2016; updated 12/6/16

Steve recently retired from the Federal Trade Commission, where he was director of the FTC’s Midwest Region for more than 25 years.  He worked on consumer fraud issues for thirty years.   Steve was recently elected to the International board of directors of the Better Business Bureau.

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