Manti Te’o a victim of a romance scam?

By John Breyault, Vice President of Public Policy, Telecommunications and Fraud

The bizarre tale of Manti Te’o’s relationship with a fictitious person going by the name of “Lennay Kekua,” has captivated more than just the sports world over the past 24 hours.  While many of the details of the episode remain unclear, Te’o’s story bears many of the hallmarks of the romance/friendship scam complaints that NCL’s Fraud Center receives on a regular basis. This type of fraud is especially attractive to scammers for one simple reason: it pays. In 2011, victims of these scams reported losing an average of $5,500, making romance/friendship scams the single most costly type of scam reported to NCL. These types of scams were the 7^th most-reported scam to NCL in 2011.

Manti Te’o’s story bears many of the hallmarks of romance/friendship scams reported to NCL, including:

• The relationship is exclusively virtual – It has been reported that Te’o never met “Lennay Kekua” in person. Most of their interactions were apparently over the Internet or via telephone calls. Numerous in-person meetings were reportedly arranged, but “Kekua” never arrived.
• Use of others’ photos to gain trust – Reportedly, the perpetrator of the scam against Te’o used photos pulled from another person’s Facebook and Instagram accounts. This is a common tactic used by romance/friendship scammers to make their online persona more believable and thereby gain the victim’s trust.
• “Tragic” event – “Kekua” told Te’o that she had been in serious car accident and then discovered that she had contracted leukemia. In the complaints that NCL receives about romance/friendship scams, it is not unusual that a supposedly “tragic” event is reported as an excuse to ask for money from the victim (often for fictitious “hospital bills”).

The goal of most fraudsters in romance/friendship scams is to gain the trust of their mark and eventually persuade them to send money. It is unknown whether Te’o ever sent money to the fictitious “Lennay Kekua.” However, it seems plausible that a scammer who discovered that their mark was highly-touted NFL prospect would continue to string the victim along even if the scammer was not getting paid immediately.

Much of the sad story of Manti Te’o and “Lennay Kekua” remains to be told. More details are sure to emerge in the coming days and weeks.  What this episode does illustrate is that no one, not even star football players, is immune to being taken in by skilled scammers.

Hopefully, the publicity this story generates will give other victims of these types of scams the courage to report these scams. Unfortunately, fraud is notoriously underreported, and in the case of romance/friendship scams likely even more so. Victims are understandably embarrassed and often go to great lengths to avoid facing the reality of the crime. Only by reporting the fraud can the criminal perpetrating these be brought to justice. To report a romance/friendship scam or another other instance of fraud, use NCL’s secure online complaint form. Complaints received by NCL are shared with our network of more than 90 federal, state, local and international law enforcement and consumer protection partners.

 

Newtown charity scams show no event too tragic for fraudsters

By John Breyault, NCL Vice President of Public Policy, Telecommunications and Fraud

It seems almost unimaginable that someone would try to take advantage of the Newtown school shooting to defraud consumers. Unfortunately, in this tragedy as with others, scam artists are all too willing to stoop to a new low.  According to a report from Jeff Rossen and Avni Patel of NBC’s “Today” show, a scam artist in the Bronx posed as the aunt of Newtown victim Noah Pozner in a ploy to collect donations for a fictitious charity fund. While the scammer in this case was later arrested, the high-profile of the Sandy Hook Elementary tragedy is sure to generate other charity scams.

Unfortunately, such scams have become a predictable part of most major natural disasters or other tragedies. They cropped up in 2004 after the Indonesian tsunami, in 2005 after Hurricane Katrina, in 2010 after the Haiti earthquake, and earlier this year after the Aurora theater shooting, to name but a few. In each case, unscrupulous con artists took advantage of the natural inclination of good Samaritans to help others in times of need. Charity scammers are adept at setting up fake Web sites, sending out telephone solicitations, and using email and direct mail to try and create a sense of trust with their victims. Rarely does any money donated to these outfits make its way to the intended charitable causes.

Charity scams are doubly damaging, since they not only cost victims money, but they also deprive legitimate charities of badly needed contributions. Consumers who are approached to donate money to a charity should be sure to check out the charity ahead of time before giving. Web sites like Charity Navigator and the Better Business Bureau’s Wise Giving Alliance are good places to start when researching a charitable organization.

Unfortunately, these aren’t foolproof ways to protect oneself from charity scams. Scammers often pose as legitimate charities such as the Red Cross or UNICEF, even going so far as to set up Web sites or Facebook pages that look like the real organization’s sites. They may include the logos of respected organizations in emails or other solicitations to make themselves seem more legitimate. If you receive a solicitation to support a particular charitable organization, even one you may have heard of before, it’s usually a good idea to contact the charity directly (either via the Web or a listed telephone number for the group) and make your donation that way.

A good rule of thumb to remember is that major news events, especially ones with victims that tug at our heartstrings, are sure to bring out scammers. While it’s right to want to support others in their time of need, make sure and donate smartly to avoid becoming a victim of a charity scam. For more information on spotting and avoiding charity scams, click here.

Book review: Bair’s ‘Bull by the Horns’

By Sally Greenberg, NCL Executive Director

Several weeks ago I dropped by my local book store to hear former Federal Deposit Insurance Corporation (FDIC) Director Sheila Bair read from her new book, “Bull by the Horns.” The place was packed. I had no idea so many people would come out to hear her read and be so eager to talk about the FDIC’s role in the near-collapse of the economy and the sub-prime lending debacle.

The FDIC plays a critical role in protecting bank depositors and overseeing the bank to ensure they are making wise investments and their finances are sound. When they are not, the FDIC can also oversee the process of winding down a bank’s business. The agency was created after the Great Depression to prevent a repeat of the run on banks by depositors desperate to get their money out for fear of losing it all. Today the agency ensures most bank deposits up to $250,000.

I admit that when I bought the book for the NCL library I thought, “I’ll never get around to reading this; furthermore, it’s probably a snooze.” I opened up the first page, began to read, and was hooked. It reminded me why Sheila Bair was always held in such high esteem in the consumer community during her tenure at the FDIC. She was often a voice in the wilderness, standing by her beliefs that investors–and not taxpayers–be on the hook if a bank or investment firm failed. She was frequently fighting NY Fed and then Secretary of Treasury Timothy Geithner, Larry Summers, OCC’s John Dugan, and the Fed Chairman Ben Bernanke and was often the only woman. As such she was routinely excluded from meetings and decisions involving the other regulatory agencies.

Bair paints a picture of her counterparts at the Fed, the Office of the Comptroller of the Currency, the Office of Thrift Supervision, all financial heads of agencies – especially Geithner – as being more interested in protecting the big banks and Wall Street, rather than taxpayers, especially Citibank, where Geithner had close ties. Geithner, Bair says, was often eager to commit FDIC’s funds to help bail out firms that had engaged in high risk lending and slip shod investment practices. Bair resisted them at different times, and though she chose her battles carefully, they pilloried her for it. She also compromised more than she felt comfortable doing, if only to be a team player and put in place stronger standards in place for risk-taking among financial institutions. The expression that “Wall Street wants risk socialized and profits privatized” applies never seems more fitting than when reading Bair’s book.

I highly recommend it. It has some good Washington gossip and more than a few glimpses inside the world of the Washington financial regulators. Her meetings with President Obama are far more positive than her interactions with his appointees. It makes you wonder why the President put Wall Street types like Geithner and Summers in charge of agencies that needed an independent, fair-minded regulator.

If I ever run into that guy named Barack Obama, I’m going to recommend he read the book and think about Sheila Bair for Secretary of Treasury. That would be a great appointment.

NCL symposium examines consumer issues and the next Congress

By John Breyault, NCL Vice President of Public Policy, Telecommunications and Fraud

The freshman class of the 113^th Congress will feature 12 new Senators and 67 new Representatives. For consumer advocates, this is an opportunity to introduce ourselves to these new lawmakers and develop relationships that can help promote our economic and social justice mission on the Hill. Freshman like Senator-elect Elizabeth Warren have long been heroes to the consumer movement, but others such as Senator-elect Heidi Heitkamp and Members-elect Kevin Cramer, Joseph Kennedy III, and George Holding all have experience in regulatory agencies and in the legal system where consumer issues arise.

The incoming members of the 113^th Congress will have a full agenda when it comes to consumer issues. Even before the next Congress, the Lame Duck session of the current 112^th Congress is tackling the so-called “fiscal cliff” of tax increases and spending cuts mandated by the Budget Control Act of 2011.

It is in this context that NCL convened our inaugural Consumer Issues Symposium on Wednesday, November 14 to examine the future of three important consumer issues in the lame duck session and the coming 113^th Congress. We chose to focus the event on three issues near and dear to NCL’s heart – food safety, sequestration and privacy. The goal of the event was to examine not only the future prospects for consumer-focused legislation in Congress, but also to highlight the real-world impact of these policy areas on consumers.

For example, the sequestration cuts envisioned as part of the “fiscal cliff” will require numerous federal agencies to significantly scale back their activities. When the USDA’s Food Safety and Inspection Service is projected to take an $86 million haircut, what does that mean for the safety of America’s food supply? Likewise, in a scenario where the federal Low-Income Home Energy Assistance Program is on track to take a $285 million budget hit, how will consumers living through the cold winter months adjust?

The event, organized in partnership with the law firm of Kelley Drye, was a great success. (Historical note: One of Kelley Drye’s name partners was Nicholas Kelley, son of Florence Kelley, the first General Secretary of NCL). It featured more than a dozen expert speakers from Executive Branch, Congress and advocacy organizations, including FTC Commissioner Julie Brill, FDA Deputy Commissioner Michael Taylor and former Congresswoman and CPSC Commissioner Anne Northup. Photos from the event are currently viewable on NCL’s Facebook page.

 

Strengthening the American middle class

By Michael Finch, NCL Public Policy Intern

Earlier this month, three of the NCL interns (me, Alex and Ben) attended a hearing held by the Senate Health, Education, Labor and Pensions (HELP) Committee called “Building the Ladder of Opportunity: What’s Working to Make the American Dream a Reality for Middle Class Families.” For the first part of the hearing, Secretary of Labor Hilda Solis spoke about the Department of Labor’s efforts to rebuild a strong middle class.

Secretary Solis emphasized the importance of education and training in the effort to rebuild the middle class. A company represented in the second part of the hearing was a perfect example of this. IceStone, a recycled glass and concrete surface manufacturer, provides their workers with a living wage (starting at $10 an hour), and stresses the importance of professional development. All workers are given opportunities to improve their job skills (whether relevant to their current position or not) and therefore earn an even higher wage shortly after joining the company. The wage gap between their lowest-earning employee and their CEO is only ten times, an impressively small difference in an economy where the gap is usually closer to 300 times. Although IceStone only has a small number of employees, hopefully this model can be refined and used by more businesses in the future, both small and large.

One issue that Secretary Solis stressed that was of particular interest to us was the high youth unemployment rate. Young people are entering the workforce at much lower rates, and those who do manage to find employment encounter a high turn over rate. She pointed out that the lack of jobs for young workers is most likely caused by older workers having to wait longer to retire. This is just one entry in a long list of reasons young people should support bolstering our country’s safety nets for older Americans, but that’s an issue I could write a whole separate blog post about.

Back on the topic of young workers: Secretary Solis highlighted a heartening story about the company Jamba Juice, which agreed to provide 2,500 jobs to young workers as a part of the Department of Labor’s Summer Jobs USA challenge. When Secretary Solis visited Jamba Juice, they informed her that they have actually provided 2,700 jobs to young workers so far and would be willing to participate in similar programs in the future. As Secretary Solis put it, “I think once we begin a discussion with businesses about what we’re faced with, people will give it some thought and open up to those opportunities.” The Department of Labor had hoped to facilitate opening up 100,000 summer jobs for young people, and they’ve so far reached 80,000.

Another dismaying effect of the decline of the middle class mentioned by several hearing participants is the increasing wage gap between white workers and their minority counterparts. According to a new Pew Research Center study, white workers make around 20 times more than African-American workers, and 18 times more than Hispanic workers. This gap is the largest it has been since the government started collecting this data 25 years ago.

Secretary Solis suggested that increased training and professional development could also be a solution to this specific problem. She also emphasized the importance of helping workers to pinpoint and develop important skills and credentials that could make them more valuable to employers. This way, workers will be able to obtain, and retain, stable employment.

As Committee Chairman Tom Harkin pointed out, politicians on both sides of the aisle understand that the middle class is a vital part of keeping America great, and they acknowledge that a lack of opportunity for the middle class is bad for everyone. While the parties may vary on the specifics of cause and solution, they need to work together to figure out the best way to solve this pressing problem.

Luxury goods sales highlight rich-poor gap

By Sally Greenberg, NCL Executive Director

A front page New York Times story that ran yesterday, Aug. 4, begins like this:

“Nordstrom has a waiting list for a Chanel sequined tweed coat with a $9,010 price. Neiman Marcus has sold out in almost every size of Christian Louboutin ‘Bianca’ platform pumps, at $775 a pair. Mercedes-Benz said it sold more cars last month in the United States than it had in any July in five years.”

In the perverse world we live in, the 9+ percent unemployment rate for millions of Americans won’t budge, more than 50 million of us are without health insurance, and more than 5 million citizens are living solely on food stamps – that’s right, they have no other resources, so food stamps are their only safety net.

And the gap between rich and poor in America continues to grow. In 1915, an era in which the Rockefellers and Carnegies dominated American industry, the richest 1 percent of Americans earned roughly 18 percent of all income. Today, the top 1 percent account for 24 percent of all income. During the late 1980s and the late 1990s, the United States experienced two unprecedentedly long periods of sustained economic growth. Yet from 1980 to 2005, more than 80 percent of total increase in Americans’ income went to the top 1 percent. That’s because the increase in productivity wasn’t shared; it was commandeered by the rich and the very rich.

Today, sadly, the vast majority of Americans live a far more modest existence, and many are poor.

Meanwhile, the Times article quotes a designer brand that sells shoes that cost $2000 each. That’s hard to fathom – or to justify – in this economy.

Why raising the minimum wage is a good policy, even in times of economic downturn

By Benjamin Judge, NCL Public Policy Intern

Benjamin Judge, a public policy intern at NCL this summer, is a rising sophomore at the University of North Carolina- Asheville, where he is majoring in Political Science and minoring in Economics. At UNCA, Benjamin is a Student Senator and Academic Affairs Chair in Student Government, a Student Ambassador, and a member of the Sigma Nu Fraternity.

From California to Maine, legislation is being introduced to increase the minimum wage at that state level, while the federal minimum wage remains stagnant. New research shows that an increase in the federal minimum wage would not only improve the livelihood of the average worker, but would also stimulate the economy, increase productivity in an economic downturn, and draw massive public support.

The benefits

The federal minimum wage is currently $7.25 and, according to the Huffington Post, an increase of one dollar (to $8.25) would improve the lives of 10 million workers and “could ultimately pump as much as $9 billion into the economy.” This would greatly improve the economic situation of our country while also helping the workers who provide us with the goods and services we enjoy. It is very hard to make an argument against a measure that does so much good.

Why hasn’t it already been raised?

Many businesses are hesitant to raise wages during an economic downturn because they want to preserve their profits, however there is a productivity phenomenon that the Center for American Progress acknowledges. Whenever there is an economic downturn, the average worker becomes more productive to preserve their job, and this increase in productivity should be rewarded with a payment increase. Sadly, this increase in productivity goes unrewarded in most instances.

Public Support

The last major benefit to increasing the federal minimum wage, is that the general public is largely in support of raising the minimum wage. The Huffington Post article quotes Celinda Lake, president of polling firm Lake Research Partners, who says, “When we’ve done public polls anywhere from 86 to 67 percent say they will support an increase in the minimum wage.”  With all of the before mentioned benefits, combined with a new study that shows that an increase in the minimum wage does not decrease employment, the need to increase the federal minimum wage remains clear.

Tax breaks for big oil when gas is 4 bucks a gallon?

By Sally Greenberg, NCL Executive Director

Oil executives earlier this month testified before Congress that they don’t think they should have to lose their $2.1 billion in tax breaks just because they are making record profits. One exec even claimed ending oil company subsidies would be “discriminatory.” Testifying were execs at Exxon Mobil, Shell, Chevron, BP, and ConocoPhillips. Collectively these companies racked up $35 billion in first quarter profits and will set record profits for the year.

Excuse me, but gas is well over $4 a gallon for most working Americans. This prompts two questions. First, why must the oil companies charge us so much at the pump if they are making record profits? Secondly, why in the heck should the American taxpayer be subsiding oil company profits?

In mid-May the Senate blocked a Democratic bill to repeal $21 billion in tax breaks and apply the savings to deficit reduction. The 52-48 vote was eight shy of the 60 votes needed to advance a bill that would nix incentives for ExxonMobil, Shell, ConocoPhillips, Chevron, and BP, according to The Hill.

But good for New Jersey Senator Robert Menendez. He is a sponsor of the bill to end oil subsidies and at the hearing he took ConocoPhillips’ top dog to task for calling the bill “un-American.”  The exec refused to apologize and that is how things were left. But the fact remains that there is no justification at all for asking average Americans to pay twice for their gas – once at the pump and again by subsidizing the oil companies through tax breaks.

Are the IRS’s aggressive tactics hurting taxpayers? Internal report says yes

National Taxpayer Advocate Nina E. Olson released her annual report to Congress today, urging the Internal Revenue Service to reconsider its policy on penalizing struggling taxpayers with tax liens and identifying the need for tax reform as “the number one priority in tax administration.”

A tax lien is a claim the government files against a taxpayer’s property as collateral for money owed. A lien helps ensure that the government has priority over other creditors. Even if the taxpayer has no current assets, a lien still gives the government a claim on future assets.

According to the in-house report, the problem is that the IRS’s aggressive use of liens is hurting taxpayers by pushing them further into debt, damaging their credit, and harming their employment and property rental opportunities.

Olson takes issue with the fact that — despite the global economic recession, high unemployment and a real estate crisis — the IRS has not changed its policy on regularly imposing liens on delinquent taxpayers.

By making it harder for taxpayers to get back on their feet, the IRS might actually be shooting itself in the foot, ultimately reducing long-term tax collections, according to the new report.

The IRS filed 1.1 million tax liens in 2010 fiscal year, compared to the 522,887 it filed in 2005. Though lien filings have soared over the past 11 years, revenue brought in through the IRS collection program “has remained flat,” Olson wrote.

Gap between the richest and the rest a widening problem

By Sally Greenberg, NCL Executive Director

With the economy stagnant, unemployment continuing to hover near 10 percent, a depressing mid-term election a few weeks away, Americans are angry, frustrated, frightened about their economic future and looking for someone to blame.

In terms of cause and effect, I think it’s impossible for economists – and the rest of us – to ignore any longer the staggering gap between the richest Americans and the rest of us.

Columnist Robert Frank in the New York Times cites some sobering statistics. During the three decades after WWII, incomes rose in the United States at almost 3 percent a year for people at all income levels. America, Frank says, had an economically vibrant middle class. Roads and bridges were well maintained and people were optimistic. The contrast between today and 1976 is stark. The share of total income going to the top 1 percent of earners, which was 8.9 percent in 1976, rose to 23.5 percent by 2007, but during the same period, the average hourly wage declined by more than 7 percent.

Frank says economists are reluctant to confront rising income inequality and they by and large refuse to take a position on whether the growing income inequality is a good or bad trend.

Worker productivity has grown over the past two decades. Workers are now earning only 83 cents of every dollar they earned more than 35 years ago, while their productivity has increased a dramatic 80 percent. This is the central explanation for the explosion in corporate profits and the growing income gap in America.

But the gains from that increased productivity have not gone to workers; they have been scooped up by management — good manufacturing jobs, including union jobs with good benefits that provided a solid middle class income to working Americans, have disappeared. The percentage of private sector union jobs has shrunk to 7 percent.

But, for reasons I don’t understand, outsize pay packages – including probably the most outrageous case – $1 billion in total compensation claimed by the former head of United Health Care – (who felt he was entitled to take those kind of profits from the health care system when we have 50 million Americans with no health insurance) haven’t generated all that much anger and outrage.

The widening gap between the super rich in America and the amount of income they have taken out of the economy – at the expense of the vast majority of hard working Americans who struggle to make ends meet every day– may just be far more destructive than any of us understand.