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Consumer Reports

Latest Internet scam goes after the good-hearted | (KRT) An Internet scam that preys not on the greedy but on the good-hearted has started draining tens of thousands of dollars from bank accounts.

Many Internet scams rely on victims' avarice to draw them in. The new scam depends instead on people's ignorance of obscure banking rules and their desire to return money that is not theirs.

It recently cost a Shawnee, Mo., man $74,500.

The scheme is too new for law enforcement officials to have a handle on how many people it has snared. A handful of cases in the two states suggest a steady stream of victims.

In Overland Park, Kan., last month, a man who was selling a motorcycle lost $1,350. A victim in Topeka, Kan., lost $42,000. A third in Hannibal, Mo., lost $5,500.

But the hardest hit was the 38-year-old Shawnee man, stung after he posted a car for sale on the Internet for $17,500.

Someone agreed to buy the car and sent what appeared to be a $92,000 cashier's check to the man's credit union, according to a police report.

Then the con artist told the seller that his secretary had sent the wrong check and asked him to send the extra $74,500 back. The story sounded fishy to the Shawnee man, so he said he would wire the money back to the buyer's account in the United Kingdom, but only after the cashier's check had cleared.

The victim, who spoke on condition of anonymity, said CommunityAmerica Credit Union told him the check cleared by April 29, so he wired the money out of his account. On May 8 the credit union told the Shawnee man the cashier's check had turned out to be a worthless counterfeit.

He was on the hook for more than $74,000.

"They're claiming that if they can't get the funds recalled, I'm liable," the man said last week. "In light of the circumstances, I think I've got a good chance to fight it I went on the faith that they (the credit union) are doing their job."

A CommunityAmerica spokeswoman referred questions to police and, citing privacy concerns, declined to say whether the credit union would hold the man responsible for the loss. If it does, the man said, he might be forced into bankruptcy.

If the scam's short history is an indication, victims should not count on anyone to bail them out after a wire transfer.

"The key with the wire is, once it's gone, it's gone," said Vince Wagner, a risk management expert with credit union service provider CUNA Mutual Group. "If they (financial institutions) follow your instructions, they're no longer liable."

The scam, which officials first noticed last summer, takes advantage of a federal rule requiring financial institutions to make money available within days, even for transactions that have not officially cleared.

The Federal Deposit Insurance Corp. requires banks to make money from cashier's, certified or teller's checks available in one to five days. But a well-made counterfeit check can bounce around the financial system for two weeks before anyone realizes it is worthless.

That leaves plenty of time for a victim to wire thousands of dollars to a con artist who cashes out and vanishes.

Banking officials say people need to find out whether transactions actually cleared the issuing institution before they use the money.

The attorneys general of Missouri, Kansas and Iowa started warning people about the scam in February.

"Even the most skeptical consumer can be deceived," Iowa Attorney General Tom Miller said in a news release. "First, the checks are superb facsimiles - counterfeit, but so authentic that they often fool bank personnel who study them. Second, people think the cashier's check must be good when the bank gives them the money - especially if they insist they are skeptical, as many victims do."

Bill Hoyt, a public information officer for Kansas Attorney General Phill Kline, said he was impressed with one counterfeit cashier's check he saw this year.

It was printed on expensive paper and bore a security watermark. The job was so good, he said, he wondered whether it also was printed with the magnetic, machine-readable ink that banks use on real checks.

"These checks are first-class. They're really professionally done," Hoyt said. "Your own banks aren't going to know it's counterfeit."

Law enforcement and finance officials think that whether victims send wire transfers to Europe, Africa or elsewhere outside the United States, the money ends up with the same people, who run what authorities call the Nigerian scam.

If you have an e-mail box, chances are good you have heard recently from the widow or nephew of a fallen African potentate seeking your help in exchange for millions of dollars. People who fall for the scam can find their accounts wiped clean.

"It's the same huge gang of perpetrators, but they're using new tricks," Miller said.

Also known as advance fee fraud or 419 fraud, after a section of the Nigerian penal code, the pitch promises the recipient 30 percent or more of a multimillion-dollar sum.

The writer offers to transfer an "overinvoiced contract" or other money to the recipient's personal bank account.

In return, the recipient is asked to provide his or her bank account number and other personal information. Official-looking documents vouch for the proposal's authenticity.

Eventually the recipient is asked to provide advance fees for taxes, attorney's fees, transfer taxes, performance bonds and sometimes even bribes.

If the recipient takes the bait, "complications" will arise, necessitating additional payments. Eventually, the recipient's bank account is cleaned out.

Consider the case of Pueblo, Colo., lawyer Kirk P. Brown, who was contacted in November 1995 by a person claiming to be a Nigerian citizen representing a Nigerian construction firm.

As recounted in a decision last week by the 10th U.S. Circuit Court of Appeals, the person told Brown that the Nigerian government owed his firm $21 million as payment for building a major oil pipeline.

He further told Brown that the government was looking for an offshore account in which to deposit the money, as well as an escrow agent to settle claims.

Brown, through a company he operated, agreed to become the escrow agent. In return, he was to get part of the proceeds deposited in the escrow account.

But first he would have to pay a "stamp duty," a "bond fee," "exchange rate levies" and later a "handling fee."

Because he did not have enough money to pay all the costs himself, Brown recruited investors. All told, Brown coughed up $700,000 in fees, of which $500,000 came from the investors.

The proceeds from the construction project never found their way into the escrow account. The irate investors sued Brown, the government of Nigeria and the Central Bank of Nigeria under the Racketeer Influenced and Corrupt Organizations Act.

The Nigerian government claimed sovereign immunity. Although the victims contended that they could sue under a "commercial activity" exception to the doctrine, a lower court held otherwise, and the 10th Circuit agreed.

Like many of the victims of the Nigerian scam and its new variations, Brown, who did not return phone calls seeking comment, is out of luck.

So if you happen to get an e-mail from Joe-Daniels Koffi of Lome, Togo, in west Africa offering you a share of $35 million in overinvoiced proceeds, authorities recommend you do the sensible thing:

  • Delete it.

  • Be extremely skeptical if someone "overpays" you by a large amount.

  • If you receive a cashier's check, make sure it has cleared the issuing bank before you refund any money. If the check is a counterfeit, money from it might be available in your account for two weeks before the bank realizes the check is bogus.

  • If you are a scam victim, call the U.S. Secret Service at (202) 406-5572 or write to U.S. Secret Service, Financial Crimes Division, 950 H St. NW, Washington, DC 20223. Also, call your state attorney general's consumer protection division.

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© 2003, Distributed by Knight Ridder/Tribune Information Services