Elderly an easy target for scammers

Kiwis are falling for fraudsters who offer riches, but deliver scams.

Just this week a Bay of Plenty couple spoke about losing their life savings in a fake investment scheme. Those behind the scam, Lee Papple and Tina West, are awaiting sentencing for luring 120 people into investing large sums of money that they subsequently lost.

Barely a week goes past without another scam hitting the headlines. The Serious Fraud Office (SFO) is investigating nearly 20 scams in which about $50 million has been lost and that, says director David Bradshaw, is just the "tip of the iceberg".

Meanwhile, two more Kiwi women face prosecution. Patricia Lenine Mabel Walsh, 65, is up for 89 charges of fraud, forgery and theft, and her aunt, Elva Mary Medhurst, 78, is accused of two charges of theft in relation to an alleged fraud. Walsh allegedly told investors in a failed apartment scheme that she needed their money to get an overseas charitable trust to recoup their losses. But the investors and Walsh lost their money to a smooth-talking conman.

It's not just Kiwi fraudsters you need to be wary of. In the age of the internet and cheap foreign travel, illegal investment scams know no borders and Kiwis' love of overseas experts means they're easy prey for fast-talking foreigners.

Unfortunately, no matter how many scams the SFO and other Government agencies close down, more pop up. The people behind these schemes tend to breed like rats, often using the internet like a sewer pipe to reach their victims.

Q: Where does a rip-off end and a scam begin?

A: There are plenty of rip-offs or poor-value investments on the market in which you could lose your money.

But for a rip-off to become a scam, "there has to be a dishonest intention to defraud someone", says Bradshaw.

Q: What are the typical investment scams?

A: The most common variety is the Ponzi Scam.

Named after American Charles Ponzi, these schemes offer to double your money in just a few months. New victims are continually recruited and their capital is siphoned off by the person at the top of the pyramid, with some of it used to pay "interest" to early investors. Eventually, the pyramid collapses because there is no real investment vehicle and the new capital dries up.

* Advance Fee Fraud or Nigerian Scam. Typically, con artists send emails to random addresses claiming to be officials, business people or relatives of Government honchos from an African country wanting help to get money out of the country. They usually claim to need a foreign bank account for the transfer millions of dollars and offer to do it to your account, providing you pay paperwork fees in advance.

You're offered a share of the money. If you fall for the patter, you'll lose the money you send. In many cases, such as the Walsh/Medhurst case, these fees can run into hundreds of thousands of dollars.

* Prime bank instrument fraud. Fraudsters using this method sell the idea of a secret investment market where foreign banks deal in instruments with names such as Prime Bank Guarantees and Prime Bank Notes.

You're offered huge profits to invest in such schemes, but your money simply vanishes. According to the SFO, some financial and investment advisers have been duped into investing their clients' money.

* Bogus share tips. In this scam, con artists buy large holdings on the cheap of little-known shares in obscure foreign companies. They then spam millions of internet users with a recommendation to buy the shares. Inevitably, thousands of the recipients do so - pushing the price sky high. The con artist sells out before the inevitable share price crash comes as the supply of new investors dries up.

* Foreign lotteries. Typically, victims of this fraud receive official-looking letters notifying them that they have won money in a foreign lottery. To claim the prize, they need to pay a sum, running into thousands of dollars, to cover taxes, bank costs, and processing fees.

* Housing and property frauds. These are numerous and include the Queensland-style frauds where property investors are flown to an exotic location, shown overpriced property and convinced to buy. Victims often feel an affinity with the fraudster who has paid for their holiday and shown them around. And if they waver when it comes time to sign, tame solicitors and accountants are trotted out to complete the duping.

Another style of housing fraud of concern to the SFO is one where a homeowner unwittingly signs the ownership of his or her home over to a fraudster in return for cash often used to pay off debts. The victim effectively becomes a tenant and, if they fall behind in rent, can be evicted. The Commerce Commission has new powers under the Credit Contracts and Consumer Finance Act of 2003 to deal with this style of oppressive contract and the instances of this scam have been reduced during the past year.

* Investment seminars. Many an investor has been set on the path to riches by attending property and other investment seminars. But not all these seminars are what they seem. If you attend a seminar and are asked to invest money in a property or investment while there, especially if there's little paperwork or a sense of urgency, think long and hard.

* Credit card and bank frauds. Criminals are becoming increasingly sophisticated at card and bank fraud. The BNZ's general manager of credit cards, Mark Wilkshire, says victims are usually targeted with one of four methods:

1. Credit card theft.

2. Skimming. Your card is removed from your sight, often in a foreign restaurant or shop, and a counterfeit made from the imprint.

3. PIN theft. A convincing fraudster calls you masquerading as a bank official or police officer and gets you to divulge your security information, giving them access to your account.

4. Phishing. You get an email that appears to come from your bank, asking you to click on a link and verify your security details. The link takes you to a website that is a copy of the real bank.

Q: Who is most at risk?

A: The biggest losers, and often the easiest to cheat, are those with more than a few grey hairs who may be worrying if they have sufficient capital to enjoy their retirement.

Victims are often sucked in slowly. In the case of Bay of Plenty couple Jessica and Alan, they were snared by a classic Ponzi scheme. When they started to receive huge "interest" payments on their initial $30,000 investment, they ploughed another $100,000 into the scheme and lost the lot.

Often people who have already been scammed are the easiest to suck into the web, says scambusting Australian Neil Jenman.

Once they've lost money, the victims are often willing to go in one step deeper to recover lost money.

Victims can't just be written off as stupid. One of the alleged victims of the Walsh and Medhurst case, who lost $400,000, was a former partner in an Auckland law firm.

Being financially naive or greedy isn't a crime. As Jenman points out: "Even if they were greedy, that doesn't excuse financial assault in the same way as lust doesn't excuse sexual assault."

Q: What are the telltale signs?

A: Scams are often so obvious it's hard to understand how people get sucked in hook, line and sinker. The telltale signs are: little or no paperwork, suggestions of fantastic returns, claims of "no-risk" or "guaranteed returns".

Q: Why do people fall for scams?

A: A typical fraudster offers to impart the "secrets of the rich" or offers investments usually only available to the rich or large corporations. Victims have heard of or know people who have made a killing in property or shares and want a slice of the action.

It's not uncommon for the fraudsters to have links with the church and churchgoers are often victims in "affinity frauds". In the case of Papple, her victims thought their money would be safe because she was a member of the Church of the Latter Day Saints (Mormons).

Q: How to protect yourself.

A: The golden rule of scam-proofing your finances is to get everything in writing and have it checked out by your lawyer or accountant, not theirs.

When it comes to investing in anything, you should never forget the old adage: "If it looks too good to be true, it is." If these investments were really so good, why would they be offered to strangers?

Finally, the Consumers' Institute wants New Zealand's Fair Trading Act given more teeth with greater penalties for scams, a cooling-off period and the outlawing of unfair or oppressive conduct.

If you think you've been approached by scammers or are the victim of a scam, you should contact the SFO on 0800 109-800 (ext 863) or send an e-mail to SFO.


* Diana Clement is an Auckland-based freelance writer