Fighting Back Against Financial Crime

Sometimes it seems like we're fighting a losing battle against increasingly sophisticated fraud perps. But there have been some inroads, and I thought it was time for some good news.

My hometown paper, the St. Paul Pioneer Press, recently reported on a lawsuit filed by Minnesota Attorney General Lori Swanson against the giant international life insurance company Allianz for pressuring seniors into buying deferred annuities. Although good for some people, deferred annuities are bad for seniors who can't afford to have their money tied up or who are likely to die before the maturity date. In October, Allianz and the state settled, allowing more than 7,000 Minnesotans to get their money back for annuities they'd purchased, plus interest in some cases. Swanson has also filed a lawsuit against American Family Legal Plan and Heritage Marketing and Insurance Services for selling elderly people living trusts and annuities that don't make financial sense. According to Swanson, "They scare the begeezers out of senior citizens" by suggesting they won't be able to pass their savings on to relatives without giant penalties unless they invest their money in certain ways. Heritage agents are also trained to discourage elderly prospective customers from consulting with their children or financial advisers about the policies they're considering. For more, see Watchdog.

At the national level:

In September, the Securities and Exchange Commission issued a report on "free lunch" investment seminars for seniors based on a year-long study it conducted in collaboration with the Financial Industry Regulatory Authority (FINRA) and state securities regulators. Among the key findings was that 100% of the "seminars" reviewed were actually sales presentations, despite the fact that many were advertised as educational workshops or that participants had been assured that nothing would be sold. In fact, attendees were encouraged to open new accounts and buy investment products, if not at the seminars themselves, then during follow-up contacts. For more, see SEC.

And recently, the National Adult Protective Services Association (NAPSA) joined forces with California Advocates for Nursing Home Reform (CANHR) and the Women’s Institute for a Secure Retirement (WISER) to create a new coalition, CEASE, to address annuity fraud, trust mills, and other forms of financial abuse (CEASE is a rough acronym for Coalition to End Elder Financial Abuse). CANHR has been sponsoring groundbreaking consumer protection legislation for years, and WISER develops information on financial issues. In recent testimony before the Senate Special Committee on Aging, CANHR attorney Prescott Cole cited a 92-year-old client who was talked into purchasing a $650,000 annuity that doesn’t mature until the year 2063.

Beginning on November 1, the Experian credit bureau will join with Trans Union in offering free credit freezes to victims of identity theft. For other customers, it will cost $10 to implement the freezes and $10 to temporarily or permanently remove them, unless state law mandates otherwise. The service is available to consumers in all 50 states and the District of Columbia

Last month, CBC produced an excellent program on Canadian scams against elders:

In Canadian Senior Scams, reporter Armen Keteyian takes viewers inside a Montreal "boiler room" to show how con artists operate. He also interviews Yve LeBlanc of the Royal Canadian Mounted Police; Doug Shadel who runs a call center in Seattle that warns seniors they've been target, and Zack, a working con artist.

The follow-up segment, "On the Sucker List," focuses on how scammers get hold of elders' names in the first place. In it, Zack assures us that those who sell lists with names like "Elderly Opportunity Seekers" and "Suffering Seniors" know exactly what they're being used for (for more on "information trafficking," see Predators and Politics). Also featured is U.S. Postal Inspector Timothy Mahoney who tracks down suppliers of "leads."

And finally, last month I updated my Web site to include a fact sheet on "mass marketing fraud," a term used to describe the various techniques that perpetrators use to target and defraud people using the phone, Internet, and mail. See Mass Marketing Fraud.