Tag Archives: Fraud

Identity Thieves Now Targeting Social Security Benefits

I wanted to pass the following story along as a warning to people who are approaching Social Security age.

On Good Friday, as I was baking my Easter Bread, I received a frantic call from an old friend in Pittsburgh. Natalia (not her real name) received a letter in the mail from the Social Security Administration (SSA) thanking her for setting up her Social Security Account online. The problem was, she never did. Earlier in the week, when she and her husband attempted to file their income tax return electronically, the submission was denied by the IRS, as somebody had already filed an income tax return for 2017 using Natalia’s social security number. She was understandably desperate for advice on what to do next.

Equifax Data Breach & Its Implications

The Equifax breach, which occurred between May and July of 2017, may have been the source of Natalia’s problems. The breach impacted as many as 143 Million people in the US, plus others in Canada and the UK. Credit card numbers of over 200,000 Americans were breached, as well as “personal identifying information” of 143,000 Americans.
When this breach was announced, many were concerned about the “normal” identity fraud problems: fraudulent credit cards, auto loans, or even mortgages being opened up in their names. In addition, ID theft artists are getting better at filing fraudulent tax returns using stolen social security numbers to claim “refunds” of the withholding of their victims before the victims file their own tax returns. Many of Natalia’s co-workers have experienced this problem over the past 4 years.

The big surprise that has surfaced after the Equifax breach is that some of the devious con artists are now filing for social security benefits using the stolen numbers. This approach works best if the person whose identity was stolen was at least 62 years old (the earliest you can collect retirement benefits), still working, but not yet collecting. Those not yet collecting social security would not know if someone had tapped their account and was receiving their monthly benefit. Also, it would be very easy for these folks to discard a letter from the SSA (like the one Natalia received) thinking it was junk mail or one of those annual benefit estimate statements. On the contrary, if a retiree who was already collecting retirement benefits was a victim of this scam, they would likely notice a missing monthly payment immediately and would contact the SSA.

Therefore, a person who is at least age 62 but still working is the perfect target for this scam. I have read a number of reports over the past 3 months of this occurring. One Michigan resident received a double whammy. In 2017, somebody filed for and collected social security benefits using his number. In January of 2018, he received a SSA-1099 from the SSA for the amount the con artist collected, so now the IRS is looking for him to report the Social Security income and pay any tax due on his 1040!

Natalia’s Problem Resolution

Natalia spoke with the SSA, he shared with Natalia that this scam actually happened to him personally! He deleted Natalia’s online account, so going forward, Natalia will need to appear at her local Social Security office and take care of any business in person, and she will never have an online SSA account. She alerted her bank and credit card companies that her information had been breached, and pulled and reviewed her credit reports from all three credit bureaus. They were all clean, but she is monitoring her reports regularly and has signed up for a credit monitoring service. She also reported the identity theft to the Federal Trade Commission athttps://www.identitytheft.gov/ and was instructed to report the incident to the local police. Finally, Natalia and her husband are working directly with the IRS on the fraudulent filing and they will file a paper return.

Takeaways

Identify theft is never pleasant to deal with. Nobody likes even a “mild” breach involving a stolen credit card number. However, this new scheme of targeting Social Security benefits is especially disturbing, as it targets what a person has accrued throughout their entire work history. If you are of eligible Social Security age (62 or over) and you are still working, pay particular attention to any correspondence you receive from the SSA. You may want to proactively establish your online SSA account using their enhanced security to sign up. Better yet, you may want to emulate Natalia’s approach and set up your relationship with SSA the old-fashioned way…in their offices. It is not as convenient as setting it up online, but at least you can proactively protect yourself against this new threat.

Tagged , ,

Avoiding Bad Advisors

Some good advice from SeekingAlpha:

The elephant standing in the room in all discussions of financial advice is the unethical advisor who offers bad, or not good, advice. Many commentators prefer not to dignify such people with the term “advisor.” I completely agree that the gulf is wide between these folks and those who genuinely possess advisory credentials; the trouble is that they typically call themselves advisors and they often give advice – it’s just that such advice is conflicted!

At their most extreme, bad advisors are the sharks sitting down in a Long Island boiler room pushing some pump-and-dump microcrap to widows lacking a companion to speak with. They talk about how their stock (or any other money-making device) is poised to shoot for the moon, and try to make you feel stupid for not handing over everything you’ve got.

Most people can recognize such wolves in sheep’s clothing, but seniors are not infrequently taken in, not because of their age certainly, but because of the growing problem of cognitive impairment such as Alzheimer’s and the like. A major national survey conducted two years ago by Public Policy Polling on behalf of nonprofit Investor Protection Trust found that nearly one in five Americans aged 65 and older had been victims of a financial swindle.

It is relevant to point out that a good financial advisor is often the first line of defense against such predators, as are adult children with sufficient awareness of the issue and, increasingly, doctors now trained to check for signs of financial exploitation when treating patients experiencing cognitive decline. It is also critical to note that a big source of vulnerability is the lack of awareness (of seniors and their adult children) of such decline.

Beyond the outright looting of bank accounts and the like, there are advisors who, on their own initiative or as a result of pressure from their firms, operate like used-car dealers are reputed to do; that is, they try to “put you in” a product today. And the firms we’re talking about, it is important to note, are not just large full-service brokerage firms that have been embroiled in past scandals, but also the discount brokerage firms of saintly reputation that are associated in the public mind as pro-consumer. Here’s a quote from an article by Bloomberg’s Nir Kaiser, citing a recent Wall Street Journal report:

Fidelity representatives are paid 0.04% of the assets clients invest in most types of mutual funds and exchange-traded funds,” but they earn 0.1% on investments that “generate higher annual fees for Fidelity, such as managed accounts, annuities and referrals to independent financial advisors.”

I think the above quote gets to the nub of the problem of unethical advice. Anyone who has any interest other than the client’s best interest should be automatically disqualified from offering you advice. The reason is simply that the person cannot be trusted. Maybe he is generally an upstanding citizen but the day you need his advice, he’s got a big bill to pay at home and convinces himself, first, that the product that will put the biggest jingle in his pocket is just the thing you need. Or, maybe the advisor faces no personal financial pressure whatsoever, but faces pressure to “perform” at work, and wants to keep his job. A 2015 survey from whistleblower securities law firm Labaton Sucharow found that nearly one in five financial industry respondents felt that financial services professionals must at least sometimes engage in illegal or unethical practices.

Such pressures exist in every field, but perverse incentives increase where large sums of money are involved. Many honest advisors seeking to break away from what they see as a conflicted corporate environment have undertaken fiduciary responsibilities, banded with an organization that imposes ethical standards and very often set up their practices as registered independent advisors, or RIAs. These are all good ideas, and favor good advice, but it bears mentioning that there are honest advisors outside of this framework, and that this framework doesn’t guarantee honest advice. Ultimately, it is incumbent on every individual who could benefit from professional financial advice to hone his own ability to detect integrity or the lack thereof, and to find an honest and capable advisors whose advice will help them succeed beyond the cost they are paying for the service.

Getting financial guidance is more important than ever, but be careful who you take advice from.  If you have questions, feel free to ask us.

Tagged , ,

Harsh Lessons In Modern Con Art

There have been a lot of articles about the fact that Seniors are often the subject of financial fraud, and it’s true.  But you don’t have to be old to get scammed.  Most of Bernie Madoff’s victims were rich, successful and relatively sophisticated.

Here is the story of financial writer, public speaker and financial thought leader, Mitch Anthony, who was scammed out of $1 million and whose mother lost her life savings.  It’s an object lesson.

As I sit down to write this article, I know it will likely be the most difficult composition of my writing career—difficult because it dredges up a miasma of regret, embarrassment, sadness and anger like nothing else I’ve experienced in life. I was conned out of almost a million dollars.

I will survive. But my mother was also conned—out of every penny she had. Her journey would prove much more difficult. The recollection of what I’m about to detail makes me feel stupid and gullible, like a sucker who should have known better. Then there’s the exasperation and indignation of watching someone skirt justice for one simple reason: There wasn’t ample time to hold him accountable for the fortunes he destroyed and the lives he crushed.

The federal statute of limitations on financial crimes is five years. Once you discover you have been defrauded, very likely two to three years have passed. Legal proceedings will chew up a year or two. By the time prosecutors decide there is merit in proceeding, the time has almost run out, and they will cease their efforts knowing they are up against the statute. This was our exact experience. By the time I brought the fraud to the attention of the FBI, they informed me that the perpetrator was already “on their radar”—but at this point, there wasn’t enough time left to do anything, and they couldn’t afford the time and resources to waste their efforts.

The man’s name is Wendell Corey, and he touted himself as a “developer.” Continue reading

Tagged , , ,

Avoiding Tax Scams

Financial Advisor magazine ran an excellent article about a scam that is being run by people pretending to be IRS agents. One of these scams defrauded more than 5,000 people out of more than $25 million.  Here’s how one scam works:

Victims are told they owe money to the IRS and it must be paid promptly through a pre-loaded debit card or wire transfer. If the victim refuses to cooperate, they are then threatened with arrest, deportation or suspension of a business or driver’s license. In many cases, the caller becomes hostile and insulting.

Here’s what you must know: the IRS never solicits payments by phone or e-mail.  If they need information they will always write a letter first.  Do not respond to e-mails that appear to be from the IRS or an organization closely linked to the IRS, such as the Electronic Federal Tax Payment System.

There are a number of other frauds that involve taxes.  A thief may steal your identity and fraudulently file a tax return and claim a refund.  There are several ways to avoid this happening to you.  First, protect your identity by shredding all documents that contain personal information.  Second file early and electronically; electronic filing eliminates paper documents with sensitive information will not get stolen in the mail.

Beware of tax preparer fraud.  It is important to choose carefully when hiring an individual or firm to prepare your return. This year, the IRS wants to remind all taxpayers that they should use only preparers who sign the returns they prepare and enter their IRS Preparer Tax Identification Numbers (PTINs).

Beware of “Free Money” from the IRS or scams involving social security.

Flyers and advertisements for free money from the IRS, suggesting that the taxpayer can file a tax return with little or no documentation, have been appearing in community churches around the country. These schemes promise refunds to people who have little or no income and normally don’t have a tax filing requirement – and are also often spread by word of mouth as unsuspecting and well-intentioned people tell their friends and relatives.

 

We protect your identity and work hard to safeguard sensitive financial information.  It’s why we provide you with a password protected Lock Box when we send information such as performance reports to you electronically.

For more information, please contact us.

Tagged ,

Protecting yourself against financial fraud.

Bernie Madoff isn’t the only fraudster preying on the unwary. There are a number of scam artists in the financial services business.

There’s the case of Malcolm Segal. According to the SEC:

Segal allegedly promised his clients 12% returns on CDs bought through Aegis. But he’s alleged in some cases to have either bought the CDs but redeemed them early or not bought them at all. Citing the SEC, the Philadelphia Business Journal says he raised about $15.5 million from at least 50 investors in this fashion.

It puzzles me how people can actually fall for something like this. Perhaps I have been in the investment business so long that I have seen too many of the ways people are fleeced out of their money.

How do you protect yourself against financial fraud? The first thing to do is to be suspicious of offers that are too good to be true. No actual, legitimate bank is offering 12% CDs in a 1% interest rate environment.

Another thing to do is to make sure that your assets are held in custody be a third party; a custodian like Charles Schwab, Fidelity or a major bank trust department.  The reason that Madoff was able to fool his clients for so many years is that he printed his own statements. These statements “showed” that he was trading for them and that they were making money. In reality, he was not trading and their account statements were fabrications.

At Korving & Company we use Schwab as our custodian and our clients receive trade confirmations and statements from directly from Schwab. We encourage our clients to view their accounts on-line at Schwab.

We had an experience with a client who had an account with another advisor. He suddenly dropped his custodian and began producing his own account statements. That’s a wake-up call. They asked us to look at their statements and when we noticed that their end-of-year tax reports did not include taxable income from CDs that he claimed to have bought for them, we knew he was defrauding them.

If you have any concerns about your financial advisor, feel free to contact us for a second opinion.

 

Tagged , ,
%d bloggers like this: