IRS impostors who have scammed Charlotte residents out of tens of thousands of dollars are operating out of a rogue call center in India, investigators say.
But stopping the scam – like most that originate in foreign countries – will be challenging and time-consuming.
And so, the calls continue.
“My name is Steve Martin, and I’m calling regarding an enforcement action executed by the U.S. Treasury. ... Ignoring this will be an intentional second attempt to avoid initial appearance before a magistrate judge, or a grand jury, or a federal criminal offense.”
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Mecklenburg County Commissioner Bill James recognized a scam when he got that message from a man with an Indian accent. “They do try and sound legitimate,” James said, “but if you listen to it, it is legal gobbledygook.”
Many people have been duped.
In North Carolina, the state’s Consumer Protection Division has received 795 complaints this year about the IRS scam, including 20 victims who lost a combined $75,627.40. That’s 20 times the number of complaints in 2013. Nationwide, there have been more than 200,000 complaints to the IRS this year, with 2,000 victims reporting a total of $11 million in losses – and more coming in every week.
Telephone fraud is more widespread than ever.
Callers use Internet software that allows them to operate from just about anywhere in the world but makes it look as if they’re calling from the IRS or another government agency.
They often know personal details about their victims that can be discovered online – such as the last four digits in a social security number.
And they demand payment by prepaid debit cards that make it easy to transfer money, but difficult to trace.
The con artists harass people by telephoning multiple times and threatening to send police to arrest them if they won’t pay. The calls are so intimidating, victims said they were afraid not to comply.
The Observer reported last month that the Rev. Al Cadenhead, senior pastor at Providence Baptist Church, spent nine hours on the phone with an IRS impersonator who claimed Cadenhead owed back taxes and would be charged with fraud if he didn’t pay immediately.
Like many victims, Cadenhead had no idea how the IRS operates. (The agency never calls demanding immediate payment.) He said the threat of jail clouded his judgment.
The caller persuaded Cadenhead to borrow $16,500 from his bank and drive to eight Rite Aid stores to purchase Green Dot MoneyPak prepaid debit cards. He then got Cadenhead to read the PINs on the cards, which enabled the impersonator to collect the money overseas.
Former Carolina Panther Frank Garcia got scammed out of $8,000 the same way.
Garcia said he had filed for an extension on his taxes and thought he might actually owe the money. But when the caller demanded more money after the first payment, Garcia realized he had been duped.
If you have been victimized, beware: Consumer advocates and federal investigators say your name may be sold or traded to other scam artists. The N.C. Attorney General’s office recommends that you check your credit report.
Tracing the perpetrators
Bikram Bandy, who coordinates the Federal Trade Commission’s Do Not Call Program, said considerable work is being done to stop the scheme. Bandy traveled to India in July and met with government officials.
“Part of it was educating our Indian government counterparts about the scope of the problem,” he said. “We are making progress on that front.”
But no charges yet.
India’s law enforcement is not centralized, Bandy said, so U.S. investigators must reach out to local police where call centers are located. “It’s a matter of working through bureaucracy,” he said.
A spokesman for the Internal Revenue Service, which is spearheading the investigation, declined to comment.
Margrita Harrison, telemarketing fraud investigator for the N.C. Consumer Protection Division, said she was told that putting the call center in India out of business will take time. With tax season approaching, she warned that IRS fraud likely will proliferate.
“The scammers are not going to stop because they’re successful,” Harrison said. “It seems like the more we warn consumers, the harder they come.”
A warning to others
Since going public with his story, Cadenhead said he has heard from people across the United States who were scammed, too. Some of the most heartwarming calls came from people who said they hung up on IRS impersonators because they heard what happened to him.
“One lady was ready to transfer several thousand dollars, but when they started talking about Green Dot prepaid cards, that rang a bell because of the Observer article,” Cadenhead said. “She hung up.”
Gerry Fadel of Charlotte also realized she was talking to an IRS impostor before it was too late. Fadel said she decided to play along and had several conversations before confronting the caller.
“I said, ‘I know this is a scam.’ And he said, ‘Don’t you call this number again.’ And I said, ‘You got that right!’ ”
Fighting technology
One of the biggest challenges to stopping a telephone scam is tracing the call. Often the number that appears on Caller ID is fake.
“Anyone with a modicum of technical ability can make any 10-digit number appear on Caller ID,” said Bandy of the FTC. “That’s called Caller ID spoofing. It’s so easy to do, the folks breaking the law use that rampantly to hide from law enforcement.”
The problem is exacerbated, he said, by Voice over Internet Protocol, which allows subscribers to place calls cheaply over the Internet.
“We are trying to leverage technology to fight back,” Bandy said. “It’s analogous to the email scam 15 years ago. A technological solution saved email – spam filters.”
He believes a technological solution will eventually eliminate many telephone scams, too.
In 2012, the FTC offered a $50,000 prize to the innovator who came up with a solution to block illegal robocalls. A Long Island software developer shared the award. His invention, called nomorobo.com, has blocked more than 10 million robocalls, according to the company.
Jury duty scam
Telephone scams are not limited to fake IRS calls. One popular scam involves “a grandchild” calling grandparents for money to post bail in a foreign country or repair a car. Another involves utility company impostors threatening to cut off electricity if a bill isn’t paid immediately. A scam making the rounds now is about jury duty.
Rachel Wingate of Charlotte got caught up in that one.
“I feel so stupid I want to bang my head on a concrete wall,” Wingate said. “The caller said he was with the sheriff’s department and he had a warrant on his desk, that I had been summoned to appear for jury duty and had not appeared. ... I panicked.”
Wingate said she did as the caller instructed: She drove to a Kangaroo Express and bought a $150 Green Dot debit card. The caller insisted she stay on the phone line with him the entire time so she tucked her cellphone in her pocket. After she bought the debit card, she read him the 10-digit numbers on the back.
“It was like an out of body experience,” she said. “You feel like you’re a robot. He had a good answer for everything.”
She had read about scams before and wondered how people get taken in. Now she knows.
Changes to Green Dot
Green Dot Corp. has warned consumers. The company says it spent millions of dollars reprinting its MoneyPak card with big red letters telling people not to give out their secret PINs, which allow transactions to occur online or by phone.
The warnings haven’t worked.
People ignore them, believing the fraudulent telemarketers are legitimate.
So Green Dot is changing the way money can be loaded onto its cards. By the end of the first quarter of 2015, the MoneyPak PIN will be phased out. Already that type of card is no longer sold at some stores, including Walmart. Green Dot is switching to a method that requires the cardholder to “swipe at the register.”
Before MoneyPak cards, scammers often collected through wire transfers. Under an agreement in 2008 with North Carolina, 43 other states and the District of Columbia, MoneyGram took steps to prevent the use of wire transfers by con artists.
The con artists turned to Green Dot cards.
Now, with changes to Green Dot cards, Bandy said con artists likely will figure another way to get money from gullible consumers.
“They are always innovating,” he said. “We have to keep pace with them.”
Criminal charges brought
The FTC says hundreds of fraudulent telemarketers have been charged in the United States.
Last month, a 71-year-old California man pleaded guilty to mail and wire fraud involving a debt collection scam. According to a government news release, Kirit Patel claimed to operate a debt collection company. Callers impersonating law enforcement officers placed more than 2 million phone calls and scammed consumers out of more than $5 million.
Although Patel lived in the United States, his call center was in India.
“We don’t have the authority to go into a country and shut down a call center,” Bandy said. “The Canadians have worked cooperatively to get centers shut down. … We’ve worked with Jamaican authorities against the scammers.”
Now they’re working with the Indian government.
Targeting the elderly
Though scammers approach all types of people, they frequently target the elderly.
As a person ages, the brain processes information more slowly, making older people more susceptible to errors in judgment, according to a 2007 study published in “Alzheimer’s Care Today.” Lapses in judgment are especially true when an immediate decision is demanded – as often happens in telemarketing schemes.
Vickie Matthews estimates her 85-year-old father has lost $60,000 to telephone con artists. Four years ago, they convinced him he won the lottery but said he needed to send them a fee in order to collect. Recently, he got a call from an IRS impersonator.
No matter how many times she has told him not to talk to the callers, he continues to do it.
“These people are ruthless,” she said. “I went to my local law enforcement, SBI and any agency that would listen to me. None offered any help. Local law enforcement told me since it was from people out of our area, there was nothing they could do. They say they get calls every week with the same thing. It is bad, but they just shake their heads.”
She eventually wrote Harrison at the state’s Consumer Protection Division, who notified wire services not to accept any payments from her father.
“It’s been a nightmare,” Matthews said. “We caught him selling off stuff and begging and borrowing small amounts of money. When he’s in the throes of it, it’s like a drug addict searching for drugs.”
What’s worse: After four years, the fraudsters continue to call.
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