[Senate Report 113-305]
[From the U.S. Government Publishing Office]
113th Congress } { Report
SENATE
2d Session } { 113-305
_______________________________________________________________________
FIGHTING FRAUD: LESSONS LEARNED FROM THE SENATE AGING COMMITTEE'S
CONSUMER HOTLINE
__________
R E P O R T
of the
SPECIAL COMMITTEE ON AGING
UNITED STATES SENATE
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
December 11, 2014.--Ordered to be printed
______
U.S. GOVERNMENT PRINTING OFFICE
49-010 WASHINGTON : 2014
SPECIAL COMMITTEE ON AGING
BILL NELSON, Florida, Chairman
BOB CASEY, Pennsylvania SUSAN COLLINS, Maine
CLAIRE McCASKILL, Missouri Ranking Member
SHELDON WHITEHOUSE, Rhode Island BOB CORKER, Tennessee
KIRSTEN GILLIBRAND, New York ORRIN HATCH, Utah
JOE MANCHIN, West Virginia MARK KIRK, Illinois
RICHARD BLUMENTHAL, Connecticut DEAN HELLER, Nevada
TAMMY BALDWIN, Wisconsin JEFF FLAKE, Arizona
JOE DONNELLY, Indiana KELLY AYOTTE, New Hampshire
ELIZABETH WARREN, Massachusetts TIM SCOTT, South Carolina
JOHN WALSH, Montana TED CRUZ, Texas
Kim Lipsky, Staff Director
Priscilla Hanley, Staff Director
LETTER OF TRANSMITTAL
----------
U.S. Senate,
Special Committee on Aging,
Washington, DC, December 11, 2014.
Hon. Joe Biden,
President, U.S. Senate,
Washington, DC.
Dear Mr. President: Under the authority of Senate
Resolution 253, agreed to on October 3, 2013, I am submitting
to you a report of the U.S. Senate Special Committee on Aging
entitled: Fighting Fraud: Lessons Learned from the Senate Aging
Committee's Consumer Hotline.
Senate Resolution 4, the Committee Systems Reorganization
Amendments of 1977, authorizes the Special Committee on Aging
``to conduct a continuing study of any and all matters
pertaining to problems and opportunities of older people,
including but not limited to, problems and opportunities of
maintaining health, of assuring adequate income, of finding
employment, of engaging in productive and rewarding activity,
of securing proper housing and, when necessary, of obtaining
care and assistance.'' Senate Resolution 4 also requires that
the result of these studies and recommendations be reported to
the Senate annually.
I am pleased to transmit this report to you.
Sincerely,
Bill Nelson, Chairman.
C O N T E N T S
----------
Page
Executive Summary................................................ 1
I. Introduction.....................................................1
II. Computer Scams...................................................4
III. Grandparent Scams................................................6
IV. Health-Related Scams.............................................8
V. Identity Theft..................................................10
VI. Lottery Scams...................................................12
a. Jamaican Lottery Scams................................ 13
VII. Social Security Fraud...........................................17
VIII.Timeshare Scams.................................................18
IX. Fraud Involving Guardianship....................................19
X. Conclusion......................................................20
113th Congress } { Report
SENATE
2d Session } { 113-305
======================================================================
FIGHTING FRAUD: LESSONS LEARNED FROM THE SENATE AGING COMMITTEE'S
CONSUMER HOTLINE
_______
December 11, 2014.--Ordered to be printed
_______
Mr. Nelson, from the Special Committee on Aging, submitted the
following
R E P O R T
----------
EXECUTIVE SUMMARY
Recognizing the epidemic of fraud perpetrated against
seniors in the United States, and the extent to which the
victims of fraud are often unsure of where they should turn for
help, the United States Senate Special Committee on Aging
launched a Fraud Hotline in November 2013. In the Hotline's
first year, Committee staff has responded to more than 1,900
reports of fraud impacting seniors. Categories of fraud
commonly reported to the Hotline included phone scams, such as
international lottery scams and impostor scams, identity theft,
Social Security fraud and tax-related fraud. Every day, the
Hotline not only shares valuable information with older
Americans and their loved ones who reach out for assistance,
but it also provides crucial information to the Committee by
offering a real-time glimpse into the nature and variety of
scams targeting seniors--information the Committee has used to
better focus its investigations, hearings and efforts to
educate and protect older consumers.
I. INTRODUCTION
In the 113th Congress, the U.S. Senate Special Committee on
Aging has pursued an aggressive agenda aimed at protecting
older Americans from fraudulent and deceptive practices. As
Chairman and Ranking Member of the Committee, Senators Bill
Nelson and Susan Collins have held hearings to examine a
variety of scams often targeted at seniors. At the beginning of
2013, the Committee focused its attention on the Jamaican
lottery scam, a widespread scheme in which fraudsters lead
victims to believe they have won a lottery but must pay upfront
fees or taxes before their winnings can be released.\1\ The
following month, the Committee held a hearing to explore ways
to combat tax-related identity theft,\2\ a crime that grew
rapidly from 2008 to 2012, according to the Internal Revenue
Service Taxpayer Advocate Service.\3\ The Committee then held a
hearing to spotlight the targeting of Social Security benefits
by identity thieves in which it examined steps the Social
Security Administration (SSA) and the Department of Treasury
were taking to combat this fraud.\4\
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\1\U.S. Senate Special Committee on Aging, 876-SCAM: Jamaican Phone
Fraud Targeting Seniors (March 13, 2013) (online at http://
www.aging.senate.gov/hearings/hearing-876-scam-jamaican-phone-fraud-
targeting-seniors)
\2\U.S. Senate Special Committee on Aging, Tax-Related Identity
Theft: An Epidemic Facing Seniors and Taxpayers (April 10, 2013)
(online at http://www.aging.senate.gov/hearings/tax-related-identity-
theft-an-epidemic-facing-seniors-and-taxpayers)
\3\Taxpayer Advocate Service, 2012 Annual Report to Congress (Dec.
31, 2012) (online at http://www.taxpayeradvocate.irs.gov/userfiles/
file/2012-Annual-Report-to-Congress-Executive-Summary.pdf)
\4\U.S. Senate Special Committee on Aging, Social Security Payments
go Paperless: Protecting Seniors from Fraud and Confusion (June 19,
2013) (online at http://www.aging.serate.gov/hearings/social-security-
payments-go-paperless-protecting-seniors-from-fraud-and-confusion)
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In March of 2014, the Committee examined fraud in the
Medicare program and ways in which fraud prevention measures
might be strengthened to protect seniors and taxpayers.\5\ The
following month, the Committee released the findings of a year-
long Committee staff investigation into unscrupulous precious
metals firms and held a hearing to explore its findings.\6\
Also in April of 2014, the Committee released an investigative
report that detailed potentially widespread deception in the
promotion of sweepstakes popular among seniors.\7\
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\5\U.S. Senate Special Committee on Aging, Preventing Medicare
Fraud: How Can We Best Protect Seniors and Taxpayers? (March 26, 2014)
(online at http://www.aging.senate.gov/hearings/preventing-medicare-
fraud-how-can-we-best-protect-seniors-and-taxpayers)
\6\U.S. Senate Special Committee on Aging, Exploring the Perils of
the Precious Metals Market (April 30, 2014) (online at http://
www.aging.senate.gov/hearings/exploring-the-perils-of-the-precious-
metals-market)
\7\U.S. Senate Special Committee on Aging, Pushing the Envelope:
Publishers Clearing House in the New Era of Direct Marketing, Senate
Report 113-153 (April 11, 2014) (online at: http://
www.aging.senate.gov/imo/media/doc/PCH_REPORT_4_20141.pdf)
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In July of this year, the Committee revisited the scourge
of phone scams, with particular emphasis on the grandparent
scam--in which a con artist impersonates a family member or
friend--and heard testimony from the Federal Bureau of
Investigations (FBI) and Federal Trade Commission (FTC) about
their efforts to track down the fraudsters.\8\ Most recently,
the Committee examined the role of the private sector in
stemming the tide of phone scams.\9\
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\8\U.S. Senate Special Committee on Aging, Hanging Up on Phone
Scams: Progress and Potential Solutions to this Scourge (July 16, 2014)
(online at http://www.aging.senate.gov/hearings/-hanging-up-on-phone-
scams-progress-and-potential-solutions-to-this-scourge)
\9\U.S. Senate Special Committee on Aging, Private Industry's Role
in Stemming the Tide of Phone Scams (Nov. 19, 2014) (online at http://
www.aging.senate.gov/hearings/private-industrys-role-in-stemming-the-
tide-of-phone-scams)
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As the Committee has examined this array of scams in its
investigations and hearings, two issues that have arisen
repeatedly include the frequency with which victims do not
report fraud and the difficulty they encounter in determining
where they should turn when they wish to report a scam to law
enforcement. These concerns are not new, but rather, they are
well documented. For example, an AARP study found that 75
percent of victims age 55 and over did not report the
fraud.\10\ A study by the National White Collar Crime Center
found that, even when victims did report a scam, only 12
percent reported to a criminal justice entity.\11\
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\10\AARP, AARP Foundation National Fraud Victim Study (March 2011)
(online at http://assets.aarp.org/rgcenter/econ/fraud-victims-11.pdf)
\11\National White Collar Crime Center, The 2010 National Public
Survey on White Collar Crime (Dec. 2010) (online at http://
www.nw3c.org/docs/publications/2010-national-public-survey-on-white-
collar-crime.pdf?sfvrsn=8)
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In the context of these concerns, the Committee launched
its Fraud Hotline, an innovative resource to which individuals
can report instances of fraud or scams affecting seniors. The
Hotline is consistently staffed during business hours with
investigators who have experience with investment scams,
identity theft, bogus sweepstakes and lottery schemes, Medicare
and Social Security fraud and a variety of other scams of which
seniors are often the victims.
The Hotline seeks to assist individual consumers by
providing callers with personalized advice regarding steps that
can be taken when a senior is the target of a scam, including
where to report the fraud and ways to reduce the likelihood
that the senior becomes a victim or repeat victim. Seniors are
typically referred by investigators to the local, state and/or
federal law enforcement entities with jurisdiction over the
particular scam. In addition to law enforcement, Committee
staff may also direct seniors to other resources, such as
consumer protection groups, legal aid clinics, Congressional
caseworkers or local nonprofits that provide aid to seniors.
When appropriate, seniors are also provided with steps they
can take to reduce the likelihood that they become victims or
repeat victims. For example, when a senior reports an instance
of identity theft, he may be advised to place a fraud alert on
his credit report with a major, national credit bureau; order
free credit reports to ensure that he is aware of all attempts
to fraudulently open accounts using his identity; contact his
bank, credit card company or any other financial institution;
and create an identity theft affidavit by reporting the theft
to the FTC and filing a police report.\12\ The victim should
also report it to the Internal Revenue Service (IRS), who will
flag his account and take precautions against someone
fraudulently filing a tax return.
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\12\Federal Trade Commission, Immediate Steps to Repair Identity
Theft (August 2012) (online at http://www.consumer.ftc.gov/articles/
0274-immediate-steps-repair-identity-theft)
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Meanwhile, the Hotline allows the Committee to keep a
detailed and current record of common fraud schemes impacting
seniors, which informs the efforts of the Committee, and
ultimately the work of the U.S. Congress. With the goal of
protecting the hard-earned life savings of older Americans, the
Committee has used information gained through the Hotline to
inform its investigations, hearings and efforts to educate
older consumers--and to bring greater awareness to the epidemic
of fraud perpetrated against our nation's seniors.
The resources offered by the Hotline were highlighted in
numerous news articles across the country, including the
January/February 2014 AARP Bulletin, which described the
Hotline as a new effort aimed at shrinking the estimated $2.9
billion that older Americans lose to fraud each year.\13\
Additionally, the New York Times featured the Hotline in a
November 2013 article that explained that the resource ``will
give harried seniors and family members another place to turn
besides local law enforcement, the Federal Trade Commission and
adult protective services agencies.''\14\ The Hotline was also
featured in various local publications.\15\ Since its November
2013 launch, the Hotline has already responded to more than
1,900 individuals over the phone or through its online form.
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\13\Steve Mencher, Taking a Bite Out of Fraud, AARP Bulletin (Jan.-
Feb. 2014), p. 6.
\14\Paula Span, A New Way to Report Fraud, New York Times (Nov. 26,
2013) (online at http://newoldage.blogs.nytimes.com/2013/11/26/a-new-
way-to-report-fraud/?_php=true&_type=blogs&_r=0)
\15\See, e.g., Sheryl Harris, Senate Aging Committee Creates Fraud
Hotline for Seniors: Plain Dealing, cleveland.com (Nov. 19, 2013)
(online at http://www.cleveland.com/consumeraffairs/index.ssf/2013/11/
senate_aging_committee_creates.html); Senate Aging Committee Launches
Anti-Fraud Hotline: 1-855-303-9470, St. John Valley Times (Nov. 13,
2013) (online at http://www.sjvalley-times.com/view/full_story/
24048871/article-Senate-Aging-Committee-launches-anti-fraud-hotline--1-
855-303-9470); and Alejandra Matos, Senate Launches Anti-Fraud Hotline
for Seniors, Star Tribune (Jan. 20, 2014) (online at http://
www.startribune.com/local/blogs/241188101.html)
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This report serves as an overview of scams reported to the
Hotline. The most common fraud schemes are highlighted, with a
description of the scam and real-life stories of victims from
across the country. Victims' names have been changed to protect
their confidentiality and prevent the possibility of
revictimization. It should be noted that some victims'
experiences overlap into multiple categories of scams. For
example, once an individual becomes the victim of identity
theft, his information may also be used to commit fraud by
redirecting his Social Security payment or by claiming his tax
refund.
The most common scams reported to the Hotline include:
Computer scams;
Grandparent scams;
Health-related scams, especially medical
alert device scams;
Identity theft, including reports of tax-
related identity theft;
Lottery scams, including reports of the
Jamaican lottery scam;
Social Security fraud;
Timeshare scams; and
In addition to these categories, the Hotline has received
more than 800 miscellaneous consumer complaints, which include
many reports of deceptive business practices. The Hotline has
also received a number of reports regarding guardianship
issues, which typically involve financial abuse of a senior.
II. COMPUTER SCAMS
Increasingly, fraudsters have utilized computers to acquire
personal information from victims. They often target seniors,
who may be less technologically savvy than younger consumers.
In a common variation of the scam, often referred to as a
``tech support'' scam, fraudsters gain the victim's trust by
pretending to be from a well-known technology company, such as
Microsoft, Dell or McAfee, claiming they can stop an impending
computer hack or virus. In a typical variation of the scam, the
fraudster will direct the senior to a screen on his computer
that displays an activity log of the system, which the scammer
will claim shows that the computer has been compromised. In
reality, what is displayed on this screen is normal and does
not indicate that there is any problem. Preying on the senior's
fear, the scammers will then insist upon gaining remote access
to a computer in order to fix the so-called emergency. Once
they have gained access to the device, hackers will change the
computer's settings to increase the computer's vulnerability,
enroll the victim in worthless computer warranty programs,
request credit card information to bill for supposed computer
protection services, install malware to steal sensitive data or
personal information and/or direct a victim to a fraudulent
website to purchase software with a credit card.\16\
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\16\FTC, Consumer Information: Tech Support Scams (Jan. 2014)
(online at http://www.consumer.ftc.gov/articles/0346-tech-support-
scams)
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In October 2012, the FTC announced an international
crackdown on tech support scammers, charging six operations,
mostly based in India, with contacting consumers over the phone
and pretending to be from legitimate computer companies.\17\
The scammers tricked consumers into believing their computers
were riddled with malware and then charged them to ``fix'' the
problems. According to the FTC, the companies utilized 80
different domain names and 130 different phone numbers. Earlier
this year, a U.S. District Court ordered the scam operators to
pay more than $5.1 million.\18\
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\17\FTC, FTC Halts Massive Tech Support Scams (Oct. 3, 2012)
(online at http://www.ftc.gov/news-events/press-releases/2012/10/ftc-
halts-massive-tech-support-scams)
\18\FTC, Federal Court Orders Tech Support Scammers to Pay More
Than $5.1 Million (July 24, 2014) (online at http://www.ftc.gov/news-
events/press-releases/2014/07/federal-court-orders-tech-support-
scammers-pay-more-51-million)
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Depending on the extent of a computer scam victim's
experience, investigators may direct the victim to several
resources, including:
The Internet Crime Complaint Center, also
known as IC3, which is a partnership between the FBI
and the National White Collar Crime Center.\19\ The IC3
receives Internet-related complaints and refers them to
federal, state, local or international law enforcement
and/or regulatory agencies for whatever investigation
they deem to be appropriate. The IC3 also provides
information on current Internet schemes. In its 2013
annual report, the IC3 noted that the total combined
losses for individuals over the age of 60 from reported
Internet-related scams in 2013 were $160,129,686;\20\
and
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\19\The Internet Crime Complaint Center, About IC3 (online at
http://www.ic3.gov/about/default.aspx)
\20\The Internet Crime Complaint Center, 2013 Internet Crime Report
(May 2014) (online at http://www.nw3c.org/docs/IC3-Annual-Reports/2013-
ic3-internet-crime-report.pdf?sfvrsn=4)
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The FTC, which is a beneficial resource for
victims who would like more information on current
Internet scams. The FTC also manages a scam email
account for those who would like to report phishing
emails.\21\
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\21\FTC, Consumer Information: Phishing (Sept. 2011) (online at
http://www.consumer.ftc.gov/articles/0003-phishing)
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The Hotline has received a number of reports of computer
scams, including the following stories:
Margaret, a Florida resident, called the Hotline
with concern about her husband, who was the victim of a
computer scam. A fraudster, who claimed he was calling on
behalf of Microsoft, contacted Margaret's husband and convinced
him to send $400 via Western Union money transfer to pay for
virus protections services. Margaret requested that an
investigator speak to her husband to give him information about
the prevalence of these scams and advice on how he might
protect himself in the future. Like many seniors who contact
the Hotline, Margaret's husband was very embarrassed about what
had occurred. An investigator spoke with Margaret's husband and
explained the prevalence of this scam and ways he might protect
himself in the future. She was also encouraged to report the
scams to the FTC.
Steven, from Boston, Massachusetts, received a
phone call from a scammer posing as a representative from
Microsoft. The scammer claimed Steven's computer needed
maintenance. The scammer was able to gain remote access to his
computer and showed Steven a list of files that supposedly
needed to be removed. Steven provided the scammer with his
debit card information to pay for $10 service fee. Later,
Steven realized that he had actually been charged $800. He
contacted his bank to report the scam, but he was informed that
the bank would be unable to recover his money. He is still
receiving phone calls from fraudulent computer companies
claiming he needs additional maintenance on his computer. An
investigator encouraged Steven to report the scam to the FTC.
The investigator also explained that Steven could contact his
phone service provider to inquire about blocking some of the
numbers from which he is still receiving the harassing calls.
Bill from New York was scammed out of $750 after
he received a phone call from someone claiming he had a virus
on his computer that needed to be removed. After gaining remote
access to his computer, the scammer convinced him to send a
check to an address in Arizona. Bill did not realize that he
was the victim of a scam until after the check had been cashed,
and he has been unable to recover any of the money. Bill had
already reported the scam to the New York Attorney General's
office, which was looking into the matter, but he wanted to
also make the Committee aware of this scam.
III. GRANDPARENT SCAMS
The Committee has received an alarming number of reports of
scammers posing as a family member in need of help. Scammers
claim they are with a family member, often a grandchild, who is
in urgent need of money to cover medical care or fix a legal
problem, such as money for bail or legal services after a
supposed arrest. Scammers may obtain personal family
information from social networking sites, which they use to
make their stories more convincing.\22\ In many cases, scammers
will ask a victim to send money via a wire transfer service or
purchase a prepaid debit product, such as the Green Dot
MoneyPak.\23\ The FTC categorizes grandparent scams as a subset
of scams known as impostor scams. Impostor scams were the
fourth most prevalent scam in 2013, with a total of 121,720
incidents reported to the FTC.\24\
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\22\Federal Bureau of Investigations, The Grandparent Scam: Don't
Let it Happen to You (April 2, 2012) (online at http://www.fbi.gov/
news/stories/2012/april/grandparent_040212)
\23\Green Dot, About MoneyPak (online at https://www.moneypak.com/
AboutMoneyPak.aspx)
\24\FTC, Consumer Sentinel Network Data Book for January-December
2013 (Feb. 2014) (online at http://www.ftc.gov/system/files/documents/
reports/consumer-sentinel-network-data-book-january-december-2013/
sentinel-cy2013.pdf)
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The Committee held a hearing on July 16, 2014, to examine
the role of the federal government, especially the FTC and FBI,
in combating phone scams, with particular attention paid to the
grandparent scam.\25\ An Ohio grandfather explained how he lost
$7,000 after he received a call from someone impersonating his
grandson and claiming he had been arrested and needed bail
money immediately.\26\ The victim transferred money to the
fraudsters using Green Dot MoneyPaks, which are PIN-based
reload cards that allow a scammer to remotely receive payment
from a victim in a manner that is very difficult to trace. Last
year, Americans reported losing $42.86 million to schemes
involving prepaid products.\27\ The MoneyPak is the prepaid
reload card of choice for many scammers and a product the
Committee has examined closely, along with two corresponding
products: InComm's Vanilla Reload\28\ and Blackhawk Network's
Reloadit Pack.\29\ During the hearing, Chairman Nelson
announced that Green Dot would be discontinuing their MoneyPak
product in the coming months.\30\ Additionally, InComm recently
announced that it would also be pulling its Vanilla Reload in
the first quarter of 2015, and Blackhawk shared with the
Committee its plans to introduce enhanced security
features.\31\
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\25\U.S. Senate Special Committee on Aging, Hanging Up on Phone
Scams: Progress and Potential Solutions to this Scourge (July 16, 2014)
(online at http://www.aging.senate.gov/hearings/-hanging-up-on-phone-
scams-progress-and-potential-solutions-to-this-scourge)
\26\Cincinnati.com, Local Testifies About `Grandparent Scam' Before
Senate (July 16, 2014) (online at http://www.cincinnati.com/story/news/
crime/2014/07/16/cincinnati-man-grandparent-scam-senate/12762055/)
\27\Matthew Goldstein, MoneyPak, a Popular Prepaid Money Card,
Opens Path to Fraud Schemes (July 31, 2014) (online at http://
dealbook.nytimes.com/2014/07/31/popular-prepaid-money-card-opens-path-
to-fraud-schemes/?_php=true&_type=blogs&_r=0)
\28\See Vanilla Reload, How Reload Works (online at https://
www.vanillareload.com/howitworks)
\29\See Reloadit, How it Works (online at https://www.reloadit.com/
HowItWorks)
\30\U.S. Senate Special Committee on Aging, Hanging Up on Phone
Scams: Progress and Potential Solutions to this Scourge, Opening
Statement of Chairman Nelson (July 16, 2014) (online at http://
www.aging.senate.gov/imo/media/doc/Nelson_7_16_14.pdf)
\31\U.S. Senate Special Committee on Aging, Private Industry's Role
in Stemming the Tide of Phone Scams, Testimony of Skeet Rolling and
William Y. Tauscher (Nov. 19, 2014) (online at http://
www.aging.senate.gov/hearings/private-industrys-role-in-stemming-the-
tide-of-phone-scams)
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Resources to which victims of grandparent scams are
referred include:
State Attorneys General;
State consumer protection agencies;
Local law enforcement authorities;
The Department of Homeland Security's
Immigration and Customs Enforcement (ICE) tip line; and
The FTC.
Committee staff continues to explore what can be done to
help seniors defend against fraudulent calls before they pick
up the phone.
Grandparent scam victims have reported the following
stories through the Hotline:
Mary, who lives in Illinois, received a phone call
from a scammer posing as her grandson. He claimed he was on
vacation in the Dominican Republic and was calling because he
had been arrested for drug possession. He pleaded that she keep
the arrest a secret from his parents until he was safe. The
scammer sounded just like her grandson and gave Mary specific
directives on what she should say at the bank in order to
withdraw a significant amount of money without raising
suspicions. The scam continued to evolve, and he later asked
for money for a lawyer. In the end, Mary lost over $25,000. She
had already reported the scam to local, state and federal law
enforcement, but she had been unable to recover any money. She
contacted the Hotline to share her story so that others could
be educated and avoid the difficulty she had experienced.
Emily in Louisiana received a phone call from a
scammer who she believed was her son. The scammer said he was
in jail in Mexico City and asked Emily to contact a bail
bondsman as soon as possible. Emily sent the scammers $20,000.
The next day, Emily received a phone call from her son, who was
at home in California. He informed her that he was never in
Mexico City. Emily contacted the Hotline in search of guidance
on what law enforcement entities might be able to investigate
this crime. An investigator provided Emily with the contact
information for the ICE tip line, the FTC and her state
Attorney General to report the scam for further investigation.
Mark's grandmother, a resident of California, was
contacted by an individual claiming to be from the United
States Embassy in Mexico. He alleged that Mark had been
arrested on drug charges. The scam went on for over a month and
Mark's grandmother sent the scammers more than $70,000, costing
her nearly all of her life savings. Mark contacted the Hotline
to share his grandmother's story, hoping it could be used to
educate other seniors and prevent future scams. The Committee
was ultimately able to connect Mark with a journalist who was
interested in writing about his grandmother's story to warn
unsuspecting seniors of this scam.
Robert, a California resident, received a call
from a scammer posing as his oldest grandson. He claimed he had
been in an accident and was in a hospital in Mexico. He asked
Robert for money to pay his hospital bill, which he said he had
to do before he would be allowed to leave the country. Robert
sent money, but he soon found out he was the victim of a scam.
He contacted the Hotline to inquire about whether he might have
any recourse. An investigator provided Robert with the contact
information for the FTC, the ICE tip line and his state's
Attorney General.
IV. HEALTH-RELATED SCAMS
The Committee has sought to address the significant
challenge of Medicare fraud with consistent oversight of the
Department of Health & Human Services' (HHS) fraud prevention
efforts targeted at Medicare payments.\32\ Although estimating
how much money is lost each year to Medicare fraud presents
various challenges, there is no doubt the number is staggering,
with one estimate of $60-$90 billion.\33\
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\32\Department of Health and Human Services, Center for Medicare &
Medicaid Services, Medicare Fraud & Abuse--Prevention, Detection, and
Reporting (Aug. 2014) (online at http://www.cms.gov/Outreach-and-
Education/Medicare-Learning-Network-MLN/MLNProducts/downloads/
Fraud_and_Abuse.pdf)
\33\Merrill Matthews, Medicare and Medicaid Fraud is Costing
Taxpayers Billions (May 2012) (online at http://www.forbes.com/sites/
merrillmatthews/2012/05/31/medicare-and-medicaid-fraud-is-costing-
taxpayers-billions/2/)
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In March 2014, the Committee held a hearing titled:
``Preventing Medicare Fraud: How Can We Best Protect Seniors
and Taxpayers?''\34\ The hearing highlighted expanded authority
granted by the Affordable Care Act to the Centers for Medicare
and Medicaid Services (CMS) to use in its fight against fraud.
The cost of Medicare fraud, however, is not limited to the
number of dollars lost, and the Hotline is a reminder of the
toll Medicare fraud can take on the life of a vulnerable
senior.
---------------------------------------------------------------------------
\34\U.S. Senate Special Committee on Aging, Preventing Medicare
Fraud: How Can We Best Protect Seniors and Taxpayers? (March 26, 2014)
(online at http://www.aging.senate.gov/hearings/preventing-medicare-
fraud-how-can-we-best-protect-seniors-and-taxpayers)
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The majority of health-related scams reported to the
Hotline involve seniors receiving fraudulent calls about
medical alert devices. A medical alert device is an electronic
device, typically worn on a bracelet or necklace, which is used
to alert responders of an emergency situation. Medical alert
device scammers attempt to collect personal information or
convince a senior to pay for a device or service he never
ordered.\35\ If collected, personal information will likely be
used in identity theft schemes, such as opening lines of credit
in a victim's name or redirecting a victim's Social Security
benefits.
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\35\Sid Kirchheimer, `Free' Medical Alert Device Offers Harm, Not
Help, AARP Bulletin (July 2013) (online at http://www.aarp.org/money/
scams-fraud/info-07-2013/free-medical-alert-device-offers-hurt-more-
than-help.html)
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A typical medical alert device scam begins with an
automated phone call informing the target that someone, usually
a family member or friend, has ordered a medical alert device
for the senior. The recording explains that the device has
already been paid for, and sometimes free groceries are offered
as an added incentive. A phone menu gives the target the option
of opting out--which likely only confirms that the phone number
is active--or speaking to a representative about confirming
delivery. If the target chooses the latter, the representative
will tell the victim that, although the device has already been
paid for, he must provide payment for monthly or annual
operating fees. This fee may be as much as $35 a month.\36\ The
scammer may also claim that personal information is needed to
confirm delivery.
---------------------------------------------------------------------------
\36\Gitte Laasby, Robocalls Targeted Elderly, Shut-Ins, Milwaukee
Journal Sentinel (Jan. 2014) (online at http://www.jsonline.com/
watchdog/pi/judge-halts-suspected-medical-alert-device-scam-
b99182956z1-239947171.html)
---------------------------------------------------------------------------
The medical alert device scammers should not be confused
with companies that legitimately provide real services. Unlike
scammers pretending to offer a service as a way to gain
personal information and payment, legitimate companies provide
real equipment and services, and they charge only for systems
customers have actually ordered. Legitimate companies are
usually registered with organizations like the Better Business
Bureau and do not solicit through an automated phone call.
Depending on the category of scam reported, investigators
may direct victims to a variety of resources; for example:
Callers wishing to report suspected cases of
Medicare fraud, waste or abuse may be referred to the HHS
Office of the Inspector General (OIG), which accepts tips and
complaints about potential fraud, waste, abuse and
mismanagement in the agency's programs.
If a caller has questions or concerns regarding
billing, and the investigator is unable to assist him, he may
be encouraged to contact CMS or the Medicare Rights Center.\37\
---------------------------------------------------------------------------
\37\The Medicare Rights Center is a national nonprofit consumer
organization that provides information on Medicare rights and benefits.
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Callers reporting medical alert device scams may
be referred to their state Attorneys General, the FTC and the
Federal Communications Commission (FCC).
Health-related scam victims include:
Edward, a resident of Massachusetts, received a
phone call from a health company claiming he was eligible for
two knee braces under Medicare. This company had information
about his Medicare, causing Edward to believe it was
legitimate. Once the two knee braces arrived, they were not
what Edward was told he was ordering and he is unable to use
them. Medicare was charged $1,700. Edward is in desperate need
of knee braces, but he will not be eligible to receive another
pair for five years. Edward was referred by an investigator to
the OIG and his State Health Insurance Assistance Program for
further assistance.
Tom received phone calls from a company that
claimed it was contacting him to arrange the delivery of the
medical alert system he had ordered, even though he never
ordered any such system. When this company called, his phone
displayed ``Alert'' in the Caller ID field, which piqued his
curiosity and led him to answer the phone. Fortunately, Tom was
aware that these calls were part of a scam. Committee staff
recommended that Tom register for the National Do-Not-Call
Registry and then file complaints about any unsolicited calls.
Tom was also advised to contact the FTC.
Sarah, a senior living in Colorado, received phone
calls claiming a family member purchased a medical alert device
for her. She received as many as 10 calls in a single day. It
is difficult for Sarah to get to the phone, and she does not
have Caller ID to screen these fraudulent calls. Sarah is in a
constant state of frustration because she cannot stop the
calls. An investigator encouraged Sarah to simply not answer
these calls--as answering the calls will often only lead to
more calls--and provided her with the contact information for
the FTC.
V. IDENTITY THEFT
Identity theft occurs when a fraudster uses someone's
personal information without permission. Thieves access
personal information through numerous means, including stealing
a wallet, purse, or mail; posing as a legitimate company and
requesting information in a phone or email scam; sifting
through the trash; accessing information provided to an
unsecured Internet site; and obtaining credit reports by posing
as a landlord or employer.\38\\39\ The FTC has reported
identity theft as the number one consumer complaint for 14
years in a row.\40\ Additionally, of the total number of
identity theft complaints in 2013, the FTC reported that 20
percent came from victims age 60 and older.\41\
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\38\IRS, Identity Protection Tips (October 2014) (online at http://
www.irs.gov/uac/Identity-Protection-Tips)
\39\U.S. Department of Education Office of Inspector General, How
Identity Theft Happens (July 2009) (online at http://www2.ed.gov/about/
offices/list/oig/misused/how.html)
\40\Ben Popken, ID Theft Tops FTC's Consumer Complaint List, Today
(Feb. 27, 2014) (online at http://www.nbcnews.com/business/consumer/id-
theft-tops-ftcs-consumer-complaint-list-n40356)
\41\FTC, Consumer Sentinel Network Data Book for January-December
2013 (Feb. 2014) (online at http://www.ftc.gov/system/files/documents/
reports/consumer-sentinel-network-data-book-january-december-2013/
sentinel-cy2013.pdf)
---------------------------------------------------------------------------
Medical identity theft can occur when scammers pose as
representatives of Medicare. If successful, the scammer will
obtain a person's Social Security number or Medicare number and
use it to receive medical care, purchase drugs or submit fake
billings to Medicare in the victim's name.\42\ Among other
tricks, scammers often ask the target to confirm certain
personal information in order to supposedly receive information
on Medicare services for which he is eligible. It is important
to note that representatives of Medicare will never come to an
individual's home uninvited to sell products. Also,
representatives of Medicare are not allowed to ask for a
person's Social Security number, bank account information or
Medicare number over the phone.\43\
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\42\Stopmedicarefraud.gov, Medical Identity Theft & Medicare Fraud,
U.S. Department of Health and Human Services, HHS Office of the
Inspector General, Center for Medicare and Medicaid Services, and U.S.
Department of Justice (online at http://www. stopmedicarefraud.gov/
toolkit/documents/fightback_brochure_rev.pdf)
\43\Center for Medicare & Medicaid Services, Protect Medicare and
You from Fraud (Aug. 2014) (online at http://www.medicare.gov/pubs/pdf/
10111.pdf)
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Tax-related identity theft is a growing variation of
identity theft. Based on complaints reported to the FTC's
Consumer Sentinel Network during 2013, around 30 percent of
identity theft complaints involved tax-related identity
theft.\44\ A September 2014 Government Accountability Office
(GAO) report found that in the 2013 filing season, the IRS paid
out $5.2 billion to fraudsters, an increase of $1.6 billion
from what the agency's inspector general identified in the 2012
tax-filing season.\45\
---------------------------------------------------------------------------
\44\FTC, FTC Announces Top National Consumer Complaints for 2013
(Feb. 2014) (online at http://www.ftc.gov/news-events/press-releases/
2014/02/ftc-announces-top-national-consumer-complaints-2013)
\45\Government Accountability Office, Identity Theft: Additional
Actions Could Help IRS Combat the Large, Evolving Threat of Refund
Fraud (Aug. 2014) (online at http://www.gao.gov/assets/670/665368.pdf)
---------------------------------------------------------------------------
The Committee held a hearing in April 2013 titled: ``Tax-
Related Identity Theft: An Epidemic Facing Seniors and
Taxpayers.''\46\ The hearing examined how fraudsters carry out
their tax-related identity theft schemes and what taxpayers can
do to protect their personal information. A victim of tax-
related identity theft, Marcy Hossli, shared her story with the
Committee. After receiving a letter from the IRS informing her
she was the victim of tax fraud, Ms. Hossli spent three years
trying to fix what had occurred. She reached out to several
federal agencies to assist her, but she received no significant
assistance. Chairman Nelson's office was the first resource she
contacted that actually helped to fix her problem.
---------------------------------------------------------------------------
\46\U.S. Senate Special Committee on Aging, Tax-Related Identity
Theft: An Epidemic Facing Seniors and Taxpayers (April 10, 2013)
(online at http://www.aging.senate.gov/hearings/tax-related-identity-
theft-an-epidemic-facing-seniors-and-taxpayers)
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Based on information provided by victims, investigators
may:
Encourage a victim to file a report with his
local police department, which can be used to prove
that he has been a victim of identity theft;
Advise a victim to establish a fraud alert
with the national credit bureaus;
Direct a victim to the FTC to file an
identity theft affidavit. The FTC will also provide the
victim with information to better understand the
process of repairing his identity and prevent against
further compromises;
If the victim is a target of tax fraud, he
will be encouraged to contact the IRS's Identity
Protection Specialized Unit or his local taxpayer
advocate; and
If a Social Security number was obtained by
a fraudster, the victim will be provided with the
contact information for the SSA to report the theft of
a Social Security number.
Of the many reports of identity theft received by the
Hotline, the following victims paid a significant price:
Martha's wallet was stolen and the perpetrator
began using her information to accumulate $13,000 of debt in
Martha's name. Although she has filed a report with her credit
card company and local police department, she has been
unsuccessful in her attempts to remove this debt from her
credit report. Martha contacted the Hotline for help in her
dealings with the credit bureaus and assistance with how she
might protect herself from a future compromise of her personal
information. An investigator provided Martha with basic steps
she could take to protect her personal information and directed
her to the FTC for additional information on identity theft.
The investigator also referred her to the Consumer Financial
Protection Bureau and explained how it might be able to help
her in her dispute with the credit bureaus.
Mindy's mother, who lives in Missouri, was visited
by a door-to-door salesman who claimed she could sign up for a
service that would bring a doctor to her home to explain what
Medicare services she was eligible to receive. Mindy's mother
signed the forms, which asked for her Social Security number
and Medicare number. Mindy contacted the Hotline to receive
assistance in preventing her mother from becoming the victim of
identity theft. Mindy was referred to the SSA to report the
theft of her mother's Social Security number and Medicare
number. An investigator further encouraged Mindy to contact the
national credit bureaus and the FTC to file an identity theft
affidavit.
Julie has been a victim of identity theft since
2007, when someone began using her name and Social Security
number to apply for credit cards and loans. In 2011, a
fraudulent IRS tax return was submitted using her name, home
address and Social Security number. Julie contacted the Hotline
looking for help with this matter with which she has struggled
for years. An investigator referred Julie to the FTC to report
the fraud and to file an identity theft affidavit. She was
further referred to the SSA to report the fraudulent use of her
Social Security number. She was also referred to the IRS's
Identity Protection Specialized Unit.
VI. LOTTERY SCAMS
An especially prevalent scam often targeted at unsuspecting
seniors involves telephone calls and direct mail, usually
originating overseas, that claim the targets have won a
lottery. Scammers explain that victims must make an advanced
payment to cover taxes or fees in order to claim their
winnings. Scammers typically request payment via wire transfer,
such as MoneyGram or Western Union, or ask the victim to
purchase a prepaid debit reload card, such as the Green Dot
MoneyPak.
Over time, the scammer's story evolves, with various
excuses as to why the winnings have not been delivered. All the
while, the fraudster continues to ask for additional payments.
The scammer may assert that another winner has not claimed the
jackpot, and, therefore, the victim is entitled to additional
payments as soon as the additional taxes and fees are paid.
According to data collected by the FTC's Consumer Sentinel,
there were nearly 90,000 consumer complaints regarding prizes,
sweepstakes and lottery scams in 2013.\47\ Individual victim
losses reported to the Hotline have ranged from a couple
hundred dollars to over $500,000.
---------------------------------------------------------------------------
\ 47\FTC, Consumer Sentinel Network Data Book for January-December
2013 (Feb. 2014) (online at http://www.ftc.gov/system/files/documents/
reports/consumer-sentinel-network-data-book-january-december-2013/
sentinel-cy2013.pdf)
---------------------------------------------------------------------------
Investigators may refer victims of lottery scams to:
The FTC;
The Department of Homeland Security's ICE
tip line. ICE investigates cross-border crimes and
leads the Jamaican Operations Linked to Telemarketing
(JOLT) task force, a multi-agency, international task
force established with the goal of eradicating lottery
scams;\48\
---------------------------------------------------------------------------
\ 48\U.S. Department of Homeland Security's Immigration and Customs
Enforcement, U.S. and Jamaica Launch International Task Force to Combat
Telemarketing Fraud (May 27, 2009) (online at http://www.ice.gov/news/
releases/0905/090527kingston.htm)
---------------------------------------------------------------------------
The U.S. Postal Inspection Service, which
investigates fraudulent use of the nation's mail system
and has a history of actively pursuing lottery
scammers;\49\ and
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\ 49\See, e.g., Department of Justice, Jamaican DJ Arrested in
Florida in Connection with North Dakota Telemarketing Lottery Scam; 26
Individuals Currently Indicted (May 27, 2014) (online at: http://
www.justice.gov/usao/nd/news/2014/05-27-14-Willcocks%20Arrested.html)
---------------------------------------------------------------------------
The AARP Fraud Fighter Call Center, which is
staffed with caseworkers who are well-versed in
speaking with victims and their families who are
dealing with the effects of lottery scams;\50\
---------------------------------------------------------------------------
\ 50\AARP, AARP Fraud Fighter Call Center Dials in on Scams (Feb.
2, 2014) (online at http://states.aarp.org/aarp-fraud-fighter-call-
center-dials-in-on-scams/)
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a. Jamaican Lottery Scams
A sophisticated and common variation of the lottery scam is
known as the Jamaican lottery scam. In 2012, it was estimated
that scammers in Jamaica placed 30,000 calls daily to older
Americans in an effort to swindle them out of their life
savings.\51\ Frequently, the phone numbers displayed on Caller
ID will begin with area code 876, which is Jamaica's country
code, but is also often confused with an American toll-free
phone number. More sophisticated scammers, however, are able to
``spoof'' Caller ID so that a U.S. number appears, even if the
scammer is calling from overseas.\52\ These scammers are often
relentless in their pursuit of money. The daughter of a victim
of the Jamaican lottery scam, who testified at the Committee's
March 2013 hearing on the topic, explained that her father
would sometimes receive 85 to 100 calls per day.\53\ At times,
scammers have also been known to threaten harm to a victim or
his or her family. They may use readily available technology,
such as Google Earth, to view images of a victim's home and
neighborhood. Using this information, they can reference the
appearance of the victim's home or a nearby landmark, making
the scammer's claims that he or she is nearby much more
believable.
---------------------------------------------------------------------------
\ 51\Caribbean Policy Research Institute, Background Brief:
Jamaican Lottery, p. 5 (Nov. 2012), (online at http://
www.capricaribbean.org/sites/default/files/text/
FINAL_Background%20Brief_Jamaican%20Lottery%20Scam_November%202012.pdf)
\ 52\Federal Communications Commission, Caller ID and Spoofing
(online at http://www.fcc.gov/guides/caller-id-and-spoofing)
\ 53\U.S. Senate Special Committee on Aging, 876-SCAM: Jamaican
Phone Fraud Targeting Seniors, Testimony of Kim Nichols (March 13,
2013) (online at http://www.aging.senate.gov/imo/media/doc/
01_Nichols_3_13_13.pdf)
---------------------------------------------------------------------------
According to the FTC, in 2007, there were 1,867 complaints
related to Jamaican lottery scams; by 2011, the figure had
ballooned to more than 30,000 complaints.\54\ Experts believe
that as many as 90 percent of the victims of this scam do not
report their experience to authorities, often due to
embarrassment and shame.\55\ As a result of the underreporting
of this scam, it is difficult to measure how much money has
been taken from victims. According to some estimates, victims
lost $300 million in 2011, up from $30 million in 2008, to
Jamaican lottery scams.\56\ An FTC official stated that prize
and lottery scams worldwide could be bilking Americans out of
as much as $1 billion a year.\57\
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\ 54\Caribbean Policy Research Institute, Background Brief:
Jamaican Lottery, p. 5 (Nov. 2012)
\ 55\Id. at p. 5-p. 6 (Nov. 2012)
\ 56\David McFadden, Jamaican Lottery Scams Spread Despite US
Crackdown, The Associated Press, (April 2012) (online at http://
www.businessweek.com/ap/2012-04/D9U6Q1O00.htm)
\ 57\Id.
---------------------------------------------------------------------------
In the Committee's hearing to examine the Jamaican Lottery
Scam, the stories of two victims of the scam were shared by
their families:
Kim Nichols told the heartbreaking story of her
father, a retired commercial airline pilot who flew for 36
years after proudly serving in the U.S. Armed Forces. Over the
course of approximately five months, the scammer defrauded Ms.
Nichols' father out of $85,000.\58\
---------------------------------------------------------------------------
\ 58\U.S. Senate Special Committee on Aging, 876-SCAM: Jamaican
Phone Fraud Targeting Seniors, Testimony of Kim Nichols (March 13,
2013) (online at http://www.aging.senate.gov/imo/media/doc/
01_Nichols_3_13_13.pdf)
---------------------------------------------------------------------------
After learning that her mother was sending money
to fraudsters located in Jamaica in hopes of claiming a $4.2
million lottery, Sonia Ellis had to file for legal guardianship
to protect her mother's remaining assets. From December 2008 to
July 2012, Sonia's mother sent approximately $64,500 to
scammers.\59\
---------------------------------------------------------------------------
\ 59\U.S. Senate Special Committee on Aging, 876-SCAM: Jamaican
Phone Fraud Targeting Seniors, Testimony of Sonia Ellis (March 13,
2013) (online at http://www.aging.senate.gov/download/2013/03/13/sonia-
ellis-testimony-031313)
---------------------------------------------------------------------------
A local sheriff, officials from ICE and the U.S. Postal
Inspection Service, and a representative of a wire transfer
service often used by victims to transmit money to scammers all
shared their efforts to bring an end to the scam. The hearing
also sought to press the Department of Justice (DOJ) to work
toward extraditing perpetrators of the crime to the United
States for trial. Chairman Nelson explained that such an action
would have a chilling effect on those who now commit the crime
with a sense of impunity.\60\ Following the hearing, on March
15, 2013, Chairman Nelson and Ranking Member Collins wrote a
letter to U.S. Attorney General Eric Holder in which they
expressed their concern over the ``lack of attention'' being
paid to the Jamaican lottery scams and urged the DOJ to work
toward extraditing lottery scammers from Jamaica.\61\
---------------------------------------------------------------------------
\ 60\Ledyard King, U.S. Authorities Tell Nelson Indicted Jamaican
Scammers will be Extradited, Florida Today (April 25, 2013) (online at
http://www.floridatoday.com/article/20130424/NEWS01/130424027/U-S-
authorities-tell-Nelson-indicted-Jamaican-scammers-will-extradited)
\ 61\U.S. Senate Special Committee on Aging, Lawmakers Press
Justice Department to Extradite Lottery Scammers (March 15, 2013)
(online at http://www.aging.senate.gov/press-releases/lawmakers-press-
justice-department-to-extradite-lottery-scammers)
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
According to the Jamaican government, as of February 2014,
more than 100 arrests had been made under the anti-lottery
scamming law, which was passed in 2013.\62\ To date, no lottery
scammers living in Jamaica have been extradited to the U.S. for
prosecution.
---------------------------------------------------------------------------
\ 62\Jamaica Information Service, More Than 100 Scammers Arrested
(Feb. 6, 2014) (online at http://jis.gov.jm/10009scammers-arrested/)
---------------------------------------------------------------------------
The following are lottery scam victims who contacted the
Hotline to report their experiences:
William called the Hotline with concern over his
father, who is continually bombarded via phone and mail by
fraudsters who claim he has won $2.5 million. Since 2012, he
has wired close to $200,000 to these scammers in an effort to
claim his supposed winnings. Despite William's efforts to
convince his father that it is all a scam, his father continues
to believe he is the winner of $2.5 million. An investigator
provided William with contact information for ICE, the U.S.
Postal Inspection Service, and the AARP Fraud Fighter Call
Center. The Committee also sent him a letter with information
about the scam so that William could share something concrete
with his father.
Ethan's father, a retired attorney, fell victim to
the Jamaican lottery scam. Although Ethan was granted temporary
conservatorship over his father's finances, his father
continues to send whatever money he can accumulate to the
scammers, who call him multiple times a day from Jamaican phone
numbers. According to Ethan's calculations, his father has lost
over $500,000 to this scam. An investigator referred Ethan to
the AARP Fraud Fighter Call Center and to the ICE tip line.
Ethan was also provided the link to the Committee's hearing for
more information on the Jamaican lottery scam.
After discovering her parents lost $180,000 to the
Jamaican lottery scam, Alice had to take over her parents'
finances and confiscate their phones. After sending most of the
money they had saved for retirement, Alice's parents eventually
sold their home to send the proceeds to the scammers. Alice's
father passed away soon after finding out it was a scam, and
her mother is still in denial. An investigator spoke with Alice
and provided her with the contact information for the ICE tip
line, the AARP Fraud Fighter Call Center and to Western Union's
Fraud Hotline since a majority of the money was sent using
Western Union's wire transfer service. Furthermore, the
investigator spoke with a sergeant at the county police
department to follow up with Alice and ensure all steps have
been taken to investigate the scam.
Elizabeth from Florida is receiving numerous calls
a day from Jamaican lottery scammers. She has not fallen victim
to this scam, but she is worried her neighbors have. Although
she knows this is a scam and has asked the scammers to stop
calling, they continue to call her daily. She has contacted her
local telephone company, and they have tried to stop the phone
calls; however, as soon as she blocks one phone number, the
scammers begin calling from a new number. Elizabeth was
provided with contact information for the ICE tip line and the
FTC. She was also sent the Committee's Jamaican lottery scam
letter for information on this scam to share with her
neighbors.
VII. SOCIAL SECURITY FRAUD
As Social Security payments have moved from mailed checks
to electronic payments via direct deposit or debit card, a new
type of fraud has emerged. Fraudsters use banks and debit cards
to set up accounts to which they can re-route Social Security
benefits from the rightful recipients to these fraudulently
created accounts. As of November 30, 2014, the SSA Office of
Inspector General (SSA OIG) reported it had received more than
42,000 allegations of questionable changes to a beneficiary's
account. Many seniors rely on Social Security benefits for a
large percentage of their income, resulting in drastic changes
in everyday life for a senior who is the victim of Social
Security fraud. Almost 90 percent of people age 65 and over
receive some of their family income from Social Security, and
without Social Security benefits, 44.4 percent of Americans 65
and over would have incomes below the poverty line.\63\ Without
their monthly benefits, these seniors would be unable to
purchase basic day-to-day necessities.
---------------------------------------------------------------------------
\63\Center on Budget and Policy Priorities, Social Security Keeps
22 Million Americans Out of Poverty: A State-By-State Analysis (Oct.
2013) (online at http://www.cbpp.org/cms/?fa=view&id=4037)
---------------------------------------------------------------------------
The SSA OIG found that fraudsters most commonly make
changes to the way in which Social Security benefits are to be
paid through financial institutions, often directing the
benefits to prepaid debit cards. Fraudsters also go online to
establish a My Social Security account, which is an online tool
that allows Social Security recipients to access information
about their benefits and change payment information. As of
January 2013, SSA reported that more than 22,000 potentially
fraudulent My Social Security accounts had been opened.\64\
---------------------------------------------------------------------------
\64\U.S. Senate Special Committee on Aging, Social Security
Payments Go Paperless: Protecting Seniors from Fraud and Confusion
(June 19, 2013) (online at http://www.aging.senate.gov/imo/media/doc/
05_SSA_IG_O'Carroll_6_19_13.pdf)
---------------------------------------------------------------------------
On June 19, 2013, the Committee held a hearing titled
``Social Security Payments Go Paperless: Protecting Seniors
from Fraud and Confusion.'' The hearing examined what actions
have been taken by SSA and the Treasury Department to prevent
Social Security benefit fraud during the transition to
electronic payments.\65\
---------------------------------------------------------------------------
\65\Almost all Social Security beneficiaries have been required to
receive their Social Security benefits electronically since March 1,
2013 (see explanation at http://www.ssa.gov/deposit/)
---------------------------------------------------------------------------
Callers reporting Social Security fraud may be handled in
the following ways:
In cases where their Social Security
benefits were fraudulently misappropriated, victims who
require their benefits to pay for basic necessities are
directed to their local SSA office to file for what is
known as a critical payment, which usually provides a
beneficiary with a paper check on the spot; and
Callers who suspect fraudulent use, waste or
abuse in Social Security programs and operations are
encouraged to contact the SSA OIG to file a report.
The Hotline reports of Social Security fraud include the
following:
A Florida senior named Julia discovered that her
daughter had been taking her Social Security disability
benefits for months, so she opened a new bank account and
requested that her benefits be deposited to that account. When
Julia's daughter learned that her mother had set up a separate
account, she contacted SSA to again redirect the benefits back
to the old account. Julia's relative contacted the Hotline in
search of information about how she could stop Julia's daughter
from continuing to steal her benefits. An investigator referred
Julia's relative to Julia's local SSA office and advised her to
request that a freeze be placed on Julia's Social Security
account, which will prevent any future changes to the account
information unless Julia physically visits her local SSA
office. Further, she was provided with the contact information
for the SSA OIG to report the fraudulent use of her Social
Security benefits.
Anna became worried that she was the victim of
Social Security fraud when her monthly benefit did now show up
in her bank account. Anna contacted SSA and found out that
someone had changed the address and direct deposit information
on her account. Anna is a senior living in Arizona who depends
on her monthly Social Security benefits to pay for rent and
groceries. Anna was referred by an investigator to her local
SSA field office, where she could place a freeze on her account
and file for a critical payment. She was also encouraged to
contact the SSA OIG to report the fraudulent use of her Social
Security benefits.
After receiving a letter thanking him for opening
an online account with Social Security, James, an Illinois
resident, realized he was a victim of Social Security fraud. A
scammer had created a My Social Security account in his name
and then used it to request that his Social Security check be
direct deposited into a bank account located in another state.
Because James was proactive and contacted the SSA immediately,
the fraud was discovered and his local Social Security office
was able to correct the information. James contacted the
Hotline to share his experience.
VIII. TIMESHARE SCAMS
Given the significant drop in the value of numerous
timeshares in recent years, many timeshare owners are desperate
sell their units, especially older Americans, who may no longer
be able to use a timeshare, but must continue to pay the
compulsory annual maintenance fees. Scammers contact timeshare
owners claiming to have found someone interested in buying the
timeshare. The owner is told he must simply pay transfer fees
and closing costs, which the scammer may claim will be refunded
upon completion of the sale. Victims pay anywhere from a few
hundred to many thousands of dollars in hopes of closing the
sale. According to Lois Greisman, the Associate Director of the
Division of Marketing Practices at the FTC, ``there are tens of
millions of dollars being bilked from people who are trying to
unload their properties because they need the money.''\66\
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\66\Herb Weisbaum, Timeshare Resale Scams Take In Millions, Today
Money (April 2012) (online at http://www.today.com/money/timeshare-
resale-scams-take-millions-667476)
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In 2013, the FTC Consumer Sentinel logged 30,094 complaints
related to travel, vacations and timeshare plans.\67\ In a two-
year period, U.S. and Florida officials filed nearly 200 civil
and criminal cases in the state of Florida.\68\ One case,
brought by the Southern District of Illinois U.S. Attorney's
Office, involved a massive timeshare fraud that bilked more
than 22,000 victims from 50 states out of over $30 million.\69\
The fraud ring grew from four employees to nearly 300, with
nine locations across Florida. Losses to timeshare scams
reported to the Hotline have ranged from $250 to over $19,000.
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\67\FTC, Consumer Sentinel Network Data Book for January-December
2013 (Feb. 2014) (online at http://www.ftc.gov/system/files/documents/
reports/consumer-sentinel-network-data-book-january-december-2013/
sentinel-cy2013.pdf)
\68\Susannah Nesmith, Florida, U.S. Crack Down on Timeshare Fraud,
Bloomberg (June 2013) (online at http://www.bloomberg.com/news/2013-06-
06/florida-prosecutors-say-191-timeshare-cases-filed-in-crackdown.html)
\69\Andrea Day and Valerie Patriarca, Dream Vacation Turned
Timeshare Nightmares, CNBC (March 20, 2014) (online at http://
www.cnbc.com/id/101488801)
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Victims of a timeshare scam are typically encouraged to
report the fraud to:
The office of their state Attorney General
and any relevant state consumer protection agency;
The FTC; an
The IC3, if the victim responded to an
Internet ad for timeshare resale services.
Complaints to the Hotline include:
Susan in Virginia reported receiving a call from
an individual claiming to be from the company ``Timeshares by
Owner,'' who said he had a buyer ready to purchase her
timeshare and needed a payment of $1,500 to cover closing
costs. She was even placed on the phone with an individual who
claimed he was the interested buyer, but, as soon as she sent a
payment, the scammer stopped answering her calls. An
investigator provided Susan with contact information for the
FTC and the Virginia Attorney General's office.
Marge in Florida was repeatedly victimized by
scammers claiming to have buyers lined up for her timeshare.
She explained to an investigator that her desperation to get
rid of the timeshare led her to believe the fraudsters as they
kept asking for additional payments to ensure the sale could be
finalized. She eventually lost approximately $10,000, and her
timeshare was never sold. Marge was advised to report this scam
to her Attorney General's office, the Florida Department of
Agriculture and Consumer Services and the FTC.
IX. FRAUD INVOLVING GUARDIANSHIP
The purpose of a court-appointed guardianship is to protect
and exercise the legal rights of an individual who has been
deemed to lack the capacity to handle his or her own affairs. A
guardian can be a family member or friend, a public guardian
appointed by the state, or a private guardian if the individual
is able to provide compensation. State courts are responsible
for overseeing guardians, and laws pertaining to guardianships
may vary greatly from one state to another.\70\ Individuals
have contacted the Hotline to share heartbreaking stories of
the abuses they have witnessed within the guardianship system,
typically involving financial abuse of an elderly individual.
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\70\See U.S. Social Security Administration, Digest of State
Guardianship Laws (Aug. 2012) (online at https://secure.ssa.gov/
poms.nsf/lnx/0200502300)
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Individuals who have contacted the Hotline for assistance
with guardianship issues are often referred to state
authorities. The Department of Justice's Elder Justice
Initiative is also a valuable resource, providing state-by-
state information for victims of financial exploitation and
their families, practitioners who serve them, and prosecutors
and law enforcement agencies.\71\
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\71\U.S. Department of Justice, Elder Justice Initiative (online at
http://www.justice.gov/elderjustice/)
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Individuals who have contacted the Hotline include:
Alexandra, a resident of Missouri, explained that
her father was placed under a temporary guardianship. While
under the care of the guardian, Alexandra's father's assets
were squandered and necessary medical care was not provided.
Alexandra has contacted law enforcement and shared the evidence
she has collected of the abuse inflicted by the guardian.
Elaine, a resident of North Carolina, said that
her sister's lies led to a court-appointed guardianship for her
father. Elaine claims the guardian drugged and abused her
father and sold his home for $1.5 million, taking all the money
for himself. While one state organization says it is
investigating what happened to Elaine's father, no action has
been taken by state or federal authorities.
Jim, an attorney in Florida, contacted the Hotline
because he believed the Social Security benefits of a client
were being misappropriated by a representative payee,\72\ the
client's brother. The brother is a convicted felon but
neglected to notify anyone of this fact when he sought to
become his brother's representative payee. Although the
beneficiary was deemed mentally impaired, a bank account was
set up in such a way as to ensure that, even after the
beneficiary passed away, the benefits would remain in his
possession instead of passing to the estate. A Committee
investigator put Jim in touch with one of Chairman Nelson's
caseworkers in Florida and also advised Jim to contact the SSA
OIG.
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\72\A representative payee is appointed by a Federal agency to
handle the benefits of an incapacitated individual
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X. CONCLUSION
It is clear that more needs to be done to help seniors
protect themselves from scams and the financial exploitation
that accompanies them. With the aging of the American
population, the problems highlighted in this report will only
continue to grow.\73\ Information gathered through the Hotline
and the resulting work of the Committee have already brought
about some important successes. For example, after sustained
Committee pressure, two of the three primary providers of
prepaid debit reload products, Green Dot and InComm, announced
their plans to distoninue the PIN method of reloading prepaid
cards by the end of the first quarter of 2015, citing concerns
over the extent to which scam artists were utilizing them in
their fraud schemes.\74\ The third provider, Blackhawk, also
recently unveiled enhanced security measures that it believes
will mitigate the risks posed by fraud.\75\ However, as
illustrated by the continued daily reports of fraud to the
Hotline, much more work remains to be done. The Hotline
provides a glimpse into the current state of scams against
older Americans--information that the Committee hopes will not
only raise awareness of the extent of this scourge, but also
inform the conversation as possible solutions are considered.
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\73\Allianz Life Insurance Company of North America, 2014
Safeguarding Our Seniors, New Allianz Life Study Confirms Elder
Financial Abuse Under-Reported and Misunderstood Problem Likely to Grow
(Oct. 15, 2014) (online at https://www.allianzlife.com/about/news-and-
events/news-releases/Press-Release-October-15-2014)
\74\U.S. Senate Special Committee on Aging, Private Industry's Role
in Stemming the Tide of Phone Scams, Testimony of Steven W. Streit and
Skeet Rolling (Nov. 19, 2014) (online at http://www.aging.senate.gov/
hearings/private-industrys-role-in-stemming-the-tide-of-phone-scams)
\75\U.S. Senate Special Committee on Aging, Private Industry's Role
in Stemming the Tide of Phone Scams, Testimony of William Y. Tauscher
(Nov. 19, 2014) (online at http://www.aging.senate.gov/imo/media/doc/
Tauscher_11_19_14.pdf)
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