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When Scammers Come Calling, Learn How To Protect Yourself

Blake Ellis, Melanie Hicken, CNN, Scammers

With Blake Ellis & Melanie Hicken, Investigative Reporters, CNN 

Scams come knocking from all sides: They arrive in the mail; they show up in our inbox; they call us on the phone, and they particularly target the elderly.

Blake Ellis and Melanie Hicken of CNN Money recently broke a story about a global mail scheme that turned out to be one of the largest in the history of the Department of Justice.

Impaired cognition, desperation, or naivete’ often drive older people to fall prey to acts of fraud which can leave them financially devastated. The sophistication behind these come-ons is startling and quite frightening—they offer big prizes, answers to life’s questions from “beyond”, and they always require you to send money, sometimes even a small sum, to get to that pot of gold. Of course, that pot of gold never appears.

The Beginning

While investigating acts of consumer fraud, Blake and Melanie were scanning through a pile of junk mail and came upon a letter from a French psychic named Maria Duval, which led to their uncovering a massive scam. They initially discovered that over the course of almost 20 years, the Maria Duval scam had bilked more than two hundred million dollars from the unsuspecting in just the United States and Canada alone. Was there actually a Maria Duval? They had to go all the way to France to find out that she did, indeed, exist but was now too elderly and ill to even be interviewed. Information from her son revealed that, although she had gotten some money herself, she was just another victim of the scammers who used her name and picture to their advantage.

Whether it’s the Nigerian minister scam, the winning Sweepstakes in the mail, a financial windfall scam, or Maria Duval divining a prophecy, what all these schemes have in common is money being sent and checks being cashed. Following the money trail is what led to the stunning realization that one company in Canada called PacNet was responsible for processing payments for multiple fraudulent schemes. Maria Duval was only the tip of the iceberg.

Investigating Further

When contacted and questioned by Melanie and Blake, the officials at PacNet claimed to be innocent of any wrongdoing and that they too were victims of the scammers. Not only were they processing all these payments, they also obscured where the money was going and engaged in a whole host of shady and nefarious evasions. Even after receiving stern warnings from the government, PacNet denied culpability and continued to operate as usual.

But the government was just as persistent and the U.S. Treasury eventually took the unprecedented action of adding PacNet to a blacklist along with some of the most dangerous and deadly criminal cartels, drug dealers, and murderers. PacNet is the first of its kind to be on this list.

Now that it’s designated as a transnational criminal organization, U.S. companies and individuals are banned from doing business with PacNet, so it’s cut out of the U.S. financial system entirely.  It can no longer prey on victims here in the U.S. and will be unable to do business with many international banks as well.

It’s going to be very hard for PacNet to continue doing business anywhere, and that’s a very good thing. These scams are taking away the only money many of the elderly have. The sad part is that, like the Whack-A-Mole theory, you can punch one down, but another will pop up somewhere else. Thanks to the dedication and persistence of people like Melanie Hicken and Blake Ellis who go after these deplorable scammers, many of their plots will be foiled.  You and I can do our part by looking after our elderly parents and neighbors.

Disclosure: The opinions expressed are those of the interviewee and not necessarily of the radio show. Interviewee is not a representative of the radio show. Investing involves risk and investors should carefully consider their own investment objectives and never rely on any single chart, graph or marketing piece to make decisions. Content provided is intended for informational purposes only, is not a recommendation to buy or sell any securities, and should not be considered tax, legal, investment advice. Please contact your tax, legal, financial professional with questions about your specific needs and circumstances. The information contained herein was obtained from sources believed to be reliable, however their accuracy and completeness cannot be guaranteed. All data are driven from publicly available information and has not been independently verified by the radio show.

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Steve Pomeranz: How many times have any of us noticed mail coming into our homes announcing that we have won a sweepstakes or maybe a new car or, maybe in an envelope that looks like it’s from the IRS, that we’re the subject of an IRS audit?  The vast majority of us throw this stuff right in the garbage, but if we took the time to read the fine print that then asks us to send money in order to claim our prize, we see it for what it is, and we toss it in the garbage where it belongs.  For those of us who may not be so sophisticated or, perhaps, even in desperate financial condition or, in the case of many elderly, just not as sharp as they’ve been in the past, these letters look real enough to take some action.  When they do, thousands of dollars are lost and millions are made by the scammers who perpetrate these frauds.  Happily, something is being done to root out this evil.  CNN reporters Blake Ellis and Melanie Hicken broke the story about a particular global mail scheme that targeted the sick and elderly.  The scheme turned out to be one of the largest in the Department of Justice history.  I have Blake Ellis and Melanie Hicken on the line with me right now.  Hey guys.

Blake Ellis: Hi.

Melanie Hicken: Hi, thanks for having us.

Steve Pomeranz: Blake is in Denver and Melanie is in Los Angeles.  First tell us how you guys came upon this story and decided to choose this and how you worked together on this.

Melanie Hicken: We, actually, many months ago, were looking for the next story that we wanted to look into.  We’d always really been interested in consumer fraud and scams that were taking advantage of the elderly.  We’d actually been sent a pile of junk mail that we poured onto a conference room.  At the time, we were both working out of our New York office, and we started looking through some of these letters that seniors were receiving.  We were just horrified at how these letters were taking advantage of people.  We saw one that intrigued us, and it was a letter from a psychic.  That letter led us to this massive scam that you mentioned.  It was all centering around a French psychic named Maria Duval.  Over the course of more than ten years, almost twenty years, it has stolen more than two hundred million dollars in just the United States and Canada alone.  A number of months ago, we did a big investigation into that scam and who the people were behind it and whether there really even was a woman named Maria Duval.

Steve Pomeranz: Yeah, I was going to ask you that.  Was there a woman named Maria Duval?

Blake Ellis: We went all the way to France to try to find her.  We spent months reporting, and, at the beginning, we had no idea whether she was actually a real person.  Then we were convinced she was real, and she was living in France, but then the question became how involved she really was because her face and her name were on all the letters, but we didn’t know how involved she actually was.  We went to France, and unfortunately, she is now elderly and sick like a lot of her victims and was unable to even sit for an interview.  We did talk to her son who said that she was another victim in this whole scam, and her name has been taken advantage of.  She definitely got money from it, but it seems like there are business men who have gotten far more rich from the scheme than she has.

Steve Pomeranz: It’s hard to believe that someone would be fooled by a psychic scam, someone who doesn’t even know you or …  I don’t actually know the basis of the scam, but that really seems so far-fetched, but two hundred million dollars proves me absolutely wrong about that.  Obviously, a lot of people have this need, and the pitch is so strong to them that they really can’t help themselves.  What other kinds of scams did you see?

Melanie Hicken: There were a lot of these psychic scams, and, like you mentioned, it’s hard, I think, for a lot of us to understand why someone would send money to a letter that they got in the mail from a psychic.  Just like these sweepstakes scams you mentioned, these letters tend to be sent to elderly people all over the world who don’t have a lot of money and may be lonely.  Each kind of letter, whether it’s a sweepstakes or a psychic, takes advantage of the fact that they aren’t as sharp as they used to be, they may have dementia or Alzheimer’s, and then they get a letter in the mail that has all of their personal information.  Oftentimes, their information has been purchased from data brokers, so they may know their birthday, they may know the city that they were born in, they know information that makes people believe these letters.

Those were the two biggest scams we saw that were being sent out were psychics, with Maria Duval being one of the most successful scams in history of that nature, and then these prize, sweepstakes ones that you mentioned where they’re claiming that someone had a huge amount of money, and all they need to do is send in a small amount to claim it.

Steve Pomeranz: It’s an iteration of the Nigerian Minister scam that says, “There’s fifty million dollars sitting in an account, and he just needs your help,” whatever it is, for five hundred dollars or some number for you to help him get that money out of the country.

Blake Ellis: Yes, exactly.

Steve Pomeranz: Very similar to that.  The idea here is that some of these people get so caught up that they actually …  I know one woman you described paid about a thousand dollars just in international stamps in order to get all of this material back to these scammers because they’re not just in the United States, they’re all over the world.

Blake Ellis: They’re all over the world.  One of the saddest is things is that a lot of these people, a lot of the family members we talked to, said that one of the reasons that their loved ones were sending so much money to these scammers and, all of a sudden, hoping to win these huge prizes was so that they would have something to leave for their children.  In the end, it was the opposite of that, and they spent every penny that they had on these scams.  The stamps themselves were so expensive and added up to a lot of money, and they were just …  We talked to so many victims or victims’ family members who spent their entire life savings-

Steve Pomeranz: One woman, an eighty-seven year old woman, spent the entire balance of a hundred thousand dollar reverse mortgage on this.

Blake Ellis: Yes.  Exactly.  We talked to another person whose mother spent more than fifty thousand dollars on a scam, then started pawning her jewelry, selling everything she owned, just so she could keep making payments because a lot of these people think of them as their friend.

Melanie Hicken: One I actually sat with a family member, a man whose father is still alive who had given away tens of thousands of dollars.  He was sending, basically, the entire value of his pension check each month to these scams.  He had a phone call with his father while I sat there, and even today, even after all of this, his father still believes those letters and is mad at his son for having taken his mail away.  The one thing all these victims have in common—and that is what our latest investigation was about—was we found that while these scams were coming from all over the world and the checks were being sent to PO boxes all over the world, there was a little known Canadian company that was cashing a lot of these checks for all of these different scams.

Steve Pomeranz: Yes, I definitely want to get into that next.  My guests are Blake Ellis and Melanie Hicken from CNN Money, and we’re talking about an investigation that they looked into and they wrote about, which broke open a very large, as a matter of fact, one of the largest scams in history and is now being picked up by the government.  We’ll talk about that right now.  Before I get into the main thesis of what you discovered, I know the government is constantly trying to close down these outfits, and they’re going after …  When they find a company that’s doing this, they’ll try to close it down, but then that company just opens up at another address with all new information, a new business.  It’s very hard.  It’s this Whack-A-Mole theory: you hit them down one place, they pop up in another.  The question then becomes, and this is where you guys, I think, did a wonderful job, you asked the question or you figured out, who processes these checks?  If people are being scammed and the victims are sending checks, they’ve got to be cashed, they’ve got to go through a banking system in some way.  Take us there, guys.

Blake Ellis: Like you described, it’s all a big game of Whack-A-Mole, so for years, government officials have been trying to shut down each little scam.  The one thing that all these scams do have in common is they need money.  They can’t survive without a way to get their hands on money from victims.  Oftentimes, scammers can’t use the traditional banking system and want to reach victims all over the world, so not just in the US.  This little company that we looked at out of Vancouver named PacNet provides a way for all of these scammers to process payments and obscure where the money’s going, and they can get money from victims anywhere they want.  Basically, PacNet will set up accounts in its own name, and then when victims send in the money, it will go to PacNet. PacNet will process the money, and then wire the payment from victims straight to the scammers.  That way there’s this extra layer, so it makes it harder for victims to know where their money is going, and it makes it harder for authorities to figure where the money is coming from and going.

Steve Pomeranz: How did you find this PacNet?

Melanie Hicken: We learned while reporting on the Maria Duval scam, we learned that PacNet was the company that had processed those payments.  Since that scam had been going on for so long and, if you Google the scam, just for years there have been press releases and warnings from government agencies and complaint after complaint after complaint online from victims and their families.  With thought it was curious that a company had been working with this scam for so many years and claimed not to know that it had been a scam.  As we started digging into this farther, we found that Maria Duval was really just the tip of the iceberg, and we found case after case where PacNet had been the company that was processing payments for the fraudulent schemes. When we asked PacNet, they claimed that they had never knowingly processed payments, that if they had, that it was because they, too, had been duped by the scammer.  We found a pattern that just showed that they had processed payments for an alarming number of scams.

Steve Pomeranz: Go ahead.

Blake Ellis: Oh, sorry.  The government filings that came out after our investigation showed that not only was there this pattern of them processing payment after payment for scammers, but that they knowingly and actively obscured where the money was going.  There were some times where PacNet couldn’t get an account at a certain bank, and so they used another company with a completely different name in order to setup an account for that client just to evade detection by banking authorities.  They were knowingly in on this the whole time.

Steve Pomeranz: PacNet denies any wrongdoing here, I’m sure.  I did see in the article their attorneys had sent a letter and so on.  The very fact that they were unable to setup an account at a bank, and they had to use another corporate name should have, at the very least, been a red flag to anyone in compliance at that company.  You can’t say for sure until it’s been adjudicated, but it seems obvious with common sense that they knew what they were doing.

Melanie Hicken: The government brought up a lot of these examples where there were clear warnings.  There was one case where they apparently had been contacted by the North Dakota Attorney General in 2009 about the Maria Duval scam, and they agreed to refund a victim’s money, but then they continued to process for many years after that.  That’s far from the only example the government says where they were given clear warnings that the schemes they were process were fraudulent.

Steve Pomeranz: Go ahead.

Blake Ellis: They even charged that PacNet had a private plane that it would use to launder money from place to place, and it would go pick up huge batches of currencies and bring them back to its office.  There are all kinds of interesting tidbits in the government filing.

Steve Pomeranz: What actions has the Treasury taken regarding PacNet?

Blake Ellis: The Treasury took a pretty unprecedented action.  It actually put PacNet on a blacklist of stores along with the likes of Los Zetas and some of the most dangerous and deadly criminal cartels and drug dealers and murderers.  It’s the first of its kind to be on this list.  Basically, it’s designated as a transnational criminal organization, which means that US companies and individuals are banned from doing business with PacNet.  What this means is that it’s cut out of the US financial system entirely.  It can no longer prey on victims here, and not only in the US, but authorities have said that usually a company on this list will be unable to do business with many international banks as well.  It’s going to be very hard for PacNet to continue doing business.

Steve Pomeranz: It seems amazing that a company in this kind of a business would be on the same list as the Los Zetas drug cartel, as you said, or the Japanese crime syndicate known as the Yakuza.  These people haven’t murdered anybody and they’re not known for criminal activities of any violent nature, and yet is this a first for a company like this to be put on that type of list?

Melanie Hicken:    Yeah.  They are definitely the first non-true, deadly, dangerous criminal organization to end up on this list, but the executive order that created this designation says that a company on this list needs to be jeopardizing the United States in some way.  It does say that a threat to the US economy counts, and so I think this is the first of its kind to really go in on the economic issue.  If you look at the amount of money that Americans are losing to these scams, it’s a significant amount of money, and it’s jeopardizing some of our most vulnerable residents.

The sad part that Blake and I were talking about is we both used to cover personal finance.  I used to cover retirement.  We already have a huge retirement crisis in this country with people unable to save enough money for retirement.  These scams are taking the only money that people do have in their retirement years, so the idea that we already have people struggling to survive and then people who have saved money and have these benefits are sending them to scammers.  It’s heartbreaking, and so I think the US government is saying they’re not going to that anymore.

Steve Pomeranz: Also, I think it may take care of the Whack-A-Mole problem because if you’re cutting off the source of processing, then these scammers are going to have much more difficulty staying in business.

Blake Ellis: That is the hope, and that’s why they took this action, rather than going after all the different companies and even just issuing a civil action against PacNet.  They want to cut these scams off at the money, and PacNet is the way that these are able to get their money.

Steve Pomeranz: Well, guys, congratulations, and thank you so much for your good work here.  Blake Ellis and Melanie Hicken from CNN Money on this very important investigation that they’re really responsible, to a large part, of uncovering.  Thank you guys so much.

Melanie Hicken & Blake Ellis: Thank you.