Exposed to Scams: Scam Stories

Examples of Financial Fraud: Tax Scams

Tax scams usually begin with a phone call to the potential victim, claiming that back taxes are owed and must be paid within a certain time to avoid criminal arrest.

Jackie¹, a 19-year-old university student who had returned home for the summer, said a caller reached out to her and seemed credible, even though he initially asked to speak with "Shelby." Jackie told the caller he had the wrong name and gave her own name. He then reversed course, saying, "I'm actually calling for you, Jackie."

The caller told Jackie she owed back taxes and was subject to arrest. He provided her with addresses for drugstores near her home and told her to purchase gift cards cards in varying amounts and provide him with the card numbers. At no time was she to hang up or tell anyone what she was doing. Jackie stayed on the line and went to the nearest drugstore. At one point, the cashier asked Jackie if everything was all right because she sensed something was wrong. Convinced of the scammer's power and authority over her, Jackie told the cashier she was just chatting with a friend.

Jackie's beliefs that she might have done something wrong, that the IRS had the authority to arrest her and that it is embarrassing to reveal any ignorance of how the world works—combined with her apparent lack of experience working with the IRS—may have led her to overlook red flags.

 

Lauren told researchers that she frequently gets calls and messages from people claiming they are from the IRS, threatening to have her arrested if she does not pay back taxes that same day.

Lauren's combination of experience with government agencies, such as the IRS, and her relaxed attitude toward compliance differs from Jackie's. In her interview, Lauren plainly said, "First of all, the IRS does not call and say they are going to arrest you. Second, nothing has to be done TODAY. There's always a process. I just hang up on people [when they make these claims]."

Examples of Financial Fraud: Fake Check Scams

Fake check scams usually involve a scammer presenting a would-be victim with a check for an amount greater than what is owed.

Karl had experienced trouble finding work and was open to job opportunities that offered good pay. He accepted an offer that arrived in a legitimate-looking email message saying he could earn money by evaluating the customer service he received while shopping in certain retail stores.

The “company” sent Karl a check for $2,950 and instructed him to deposit the check, and then quickly go to a series of stores to send money orders totaling $2,600 to specific addresses provided by the company. After making the wire transfers, he was instructed to provide feedback on the store employees' demeanor, helpfulness and so on. Karl’s new employer stressed that he needed to fulfill the assignment as quickly as possible. He was told to keep the remaining $350 for completing the task. While Karl was ecstatic about the chance to make easy money, he wondered whether the offer might be too good to be true and called his bank to see if the check had cleared. When a bank representative told him it had, he immediately completed the wired payments, notified the company and emailed his report.

Karl soon discovered that his bank account had been debited for $2,950, the full amount of the check he had deposited and, he thought, had cleared. Bank representatives explained to him that the check was fraudulent. In effect, Karl had wired $2,600 of his own money— nearly all the money in his account. In recapping the experience, he laughed and faulted the bank.

Karl's story highlights several factors that contributed to his experience: his need for income, his wish for "easy money", his unfamiliarity with fake check scams, his response to the time pressures placed on him by the scammers, and his belief that the check was confirmed as valid when the bank makes the funds available.

 

Tyler, who works as a swimming coach at a small college, received an email from a man asking if he could coach the man’s high-school-aged son during the summer, since his son would be in the area visiting his aunt. While this was not an unusual request, Tyler frequently offered private coaching to various clients, the man’s desire to pay Tyler far more than his usual fee stood out. The man offered to pay by check and asked Tyler to wire transfer a portion of the funds to his travel agent to cover the cost of an airplane ticket his son would need later that summer.

Tyler received the check, but was initially suspicious because the request seemed odd. However, the man explained that this arrangement made things easier for him. Tyler’s girlfriend and other friends convinced him that since he had the check in hand, he had nothing to lose. These factors, as well as Tyler’s sympathy for the son’s need for a coach, contributed to Tyler’s decision to deposit the check and follow through with the assignment.

Like Karl, Tyler believed the check must be valid when the bank credited the money to his account. Because the man emphasized that his travel agent needed the funds immediately, Tyler attempted to wire the funds right away. Fortunately for Tyler, an employee at the wire transfer business flagged the transaction as suspected fraud. An investigation revealed the address of the "travel agent" was linked to to previous fraudulent activity.

Tyler, despite his suspicions and his attempt to validate his thinking by consulting his friends, came close to losing money. The opportunity to make additional money and his desire to support someone in need of help may have contributed to his willingness to engage with the scammer. He was fortunate that the fraud detection protocols of the wire transfer business identified the scam before he lost money. Encouraging findings from the survey portion of this study show that someone intervenes in about 20% of scam attempts. Study participants recounted receiving help from bank tellers, employees of wire transfer services and other financial services companies. For Tyler, and others like him, this can be a vital last-minute line of defense against loss.

Examples of Financial Fraud: Investment Scams

Investment scams come in many forms. Some involve direct solicitation for funding to support business ventures; others come in the form of fictitious investments being marketed by unregistered investment professionals.

Cynthia had held many different types of jobs, including one role with a financial investment company. She lost her job at one point and, having some inherited funds, considered making investments in a couple of different businesses.

Through a series of disappointments, Cynthia learned that she had invested in shell companies set up for the express purpose of defrauding investors. Her explanation of what happened reveals the convergence of the mental frames referenced above. When asked why she felt confident about a particular investment, Cynthia proclaimed, "I know a great deal about [the product] and the industry." For some individuals, not inherently knowing the answers is a perceived lack of intelligence, which causes shame and reduces an individual's status. Cynthia’s desire to ultimately prevail and belief in an inherent structure that rewards goodness may have also played a role. When researchers asked why she continued after having such bad experiences, she replied, "I suppose I want to come out a winner … I was too trusting of my fellow man."

 

Dani, who was expecting a child, believed that she could make money for herself and her baby by investing her tax refund wisely. She saw ads that convinced her that people were making good money with specific investments, which made her believe she could do the same. She also felt protected by a general code of civility.

Dani invested her money. When the scammers did not respond to her repeated calls, she disclosed that she was pregnant, believing that they would never take advantage of a mother-to-be. However, it was soon clear that she would never get her money back.