PYRAMID time

Be warned, the pyramids are coming. After years of people getting rich by flipping properties using cheap credit there's suddenly a gap in the market. Money might be tight but there's plenty of people out there with €5,000 burning a hole in their pockets. Ireland last saw a serious spate of pyramid schemes from 2001 until 2005. It's incredible how people can allow themselves be brain-washed by an investment scheme that is insolvent from the start. Also known as Ponzi schemes they use cash from new investors to pay off older investors - but eventually there's too few investors. There was Ignite Leisure in 2005, the Liberty scheme in 2005 and then Women Empowering Women in 2001 (later changed to the Eternal Gifting Circle after a high-profile armed robbery at one group meeting.)
Group 'affinity' is used and exploited by the scam artists. The Fraudsters details one case of a man who was approached because his connections through Alcoholics Anonymous. Often a scheme will centre on a single town or village, like it did in Bandon, County Cork in 2005. They'll be dressed up as something different and whoever is selling it, without being asked, will say: This is not a pyramid scheme.

NOT so dirty sexy money

It's a million miles away from Catch Me If You Can. There were a few cases in Dublin last week that highlighted the mundane, boring, dull reality of most frauds. They also showed that for most companies the biggest risk of fraud comes from within. Remanded for sentencing was pay roll manager Joseph Sullivan, who admitted transferring €36,000 to his own bank account. The dad-of-one, worked for an investment company. He was caught after he left a bank transfer order with authorising signatures taped to the bottom on the office photocopier. Sullivan took the money because he owed €50,000 as a result of his gambling addiction.
Then there was the mother of seven children, overwhelmed by debts who took €9,000 from her employer and blew €10,000 from an anonymous benefactor touched by her plight. Joan Sloan made a number of internet banking transactions when she was under serious financial pressure. She got a three-year suspended sentence and 150 hours of community service.
Another gambling addict Harry Henry pulled off the old rent deposit scam on five different people by pretending to be the landlord of his own apartment while sleeping rough. The former sports teacher, described as a chronic gambler, confessed on the day his victims were due to collect the keys. He got a three-year suspended sentence.

HOLY scammer talks!

The embezzling Irish priest Fr Francis Guinan has gone down fighting all the way. Unlike his partner Fr John Skehan, he fought the case and rejected a plea bargain deal. Now that he's serving a four year sentence for theft he gave an interview to US and Irish journalists from jail. Like all good fraudsters he blames everyone else for his problems although he does admit "a little too much emphasis on celebration" after being reunited with his old pal Fr Skehan in Saint Vincent's Parish, Delray Beach , Florida. He even did the tears and made sure his handcuffs got into the frame while wiping his eyes. He suggested he was too ill to have a sex-life (he was arrested with his girlfriend who was accused of obstructing officers) and that he never gambled with Parish money. Asked what he thought he did wrong, he said: "That's a good question." You can watch the self-serving interview on RTE TV.

SKIMMER caught in hospital

Another card skimmer was jailed today. Romanian Florian Lupu (21) was caught at Beaumont Hospital in Dublin in October, 2007. Security guards at the hospital, one of the biggest in Ireland, spotted the card reader attached to a machine and kept watch. Lupu was arrested when he and a co-accused came to retrieve their card reader and miniature camera. The other man fled the country after being released on bail. Lupu got a two year sentence.

SKIMMERS caught

Last week two Londoners were sentenced after being caught red-handed trying to fit a card reader to a cash register at a hardware shop in Galway city. Akeen Mohammed Aziz (22) and Ataaib Khan (22) both from Walthamstow, London were convicted of possessing an electronic PIN pad device with the intention of using it to commit a theft at B&Q, Rahoon on 28 January, 2009. The pair had tried to pose as technicians employed to service cash registers. They both got nine months in prison, which is lucky considering that most other organised card-skimmers who got caught have got four year sentences.

BOILER room scam

Boiler room scams didn't get to feature in The Fraudsters but they are lucrative frauds run by well-organised and sophisticated criminal gangs. Victims are cold-called by fake stockbrokers and persuaded to buy shares in worthless, non-existent, hi-jacked or near bankrupt companies. One major rip-off outfit recently swindled an Irish victim of €250,000 in a classic boiler-room scam that targeted UK and Irish people.

It was part of a boiler room operation allegedly run by Englishman Paul Robert Gunter. He is due to go on trial in Florida accused of stealing €53 million by selling worthless shares. Also facing charges is his 26-year-old daughter Zibiah who is said to have played a major role in the fraud which scammed an estimated 15,000 people. According to a criminal complaint filed by the US Secret Service, the Gunters hijacked the identities of at least 54 dormant publicly-traded companies registered in the United States. The agents said the Gunters used “high-pressure and misleading sales techniques” and used the money “for their own personal enrichment.” Customers were told the firms were on the verge of a breakthrough or the target of a takeover bid that would boost the share price.
This week three US based lawyers were also charged for their role in the huge scam. They are alleged to have help funnel funds to bank accounts around the globe. The ‘stockbrokers’ were in fact telesales workers recruited to work from an office in Barcelona - some of whom were not even aware they were taking part in a scam. The operation has been investigated by US federal authorities as well as the City Of London Police and the British Columbia Securities Commission in Canada.
Boiler room con-artists often get contact details for a ‘client’ from a share register so they know they are targeting people used to buying and selling shares. The boiler-room scamsters give themselves names that conjure up image of blue-blood Wall Street wealth such as Morgan Vanderbilt, Lincoln Ventures, Boulton Capital Resources. Boiler rooms might simply take the money and disappear or they might sell you shares, but at vastly inflated prices and with exorbitant dealing charges. The movie Boiler Room starring Vin Diesel and Ben Affleck depicts the high-pressure sales techniques using in typical scams. The salesmen are slick and they have all the answers, using carefully prepared scripts. They are also relentless, calling clients four or five times a day and piling on the pressure over several weeks.
The Irish Financial Regulator currently lists no less than 126 companies who have been touting for business in Ireland. It is a criminal offence to offer financial services in Ireland unless licensed by the regulator.

CARD skimmers

Irish people just love ATMs, using the cash machines twice as much as the EU average. Card skimming, however, has quietly gone off the radar in Ireland. While the level of skimming has dropped from a peak of €14 million in 2002, there are individuals and gangs still operating in the country. The value of card fraud is still about the same but has dropped significantly as a proportion of transactions, according to figures from the Irish Payment Services Organisation (IPSO). Many bank customers are aware of skimmers and look out for possible card-readers attached to ATMs. Bank security has improved as well to make life harder for the skimmers. Late last year there were organised attempts to skim card details from retail outlets in which fraudsters posed as technicians to tamper with or replace point-of-sale card readers. It's a more audacious way of harvesting Pins and customers but potentially very effective.
It's a sure sign that the improved security and awareness has forced skimmers to look for new ways in. Once one point of attack is closed off to the fraudsters they'll look for another weak spot
But the future doesn't hold out any good news unless the banks move early to ensure their systems are safe. An article in today's Wired magazine suggests that hackers have found a weak spot in the banking system to harvest unencrypted Pins. In the meantime keep an eye on your account...

BLACK Market

When money is tight people start looking around for bargains. That's good news for black marketeers and illicit traders. Europe's black market economy is expected to grow this year while the legitimate market stays mired in the recession. The highest growth is expected in Ireland, Britain and and Spain according to researchers from at the Johannes Kepler University in Linz, Austria. They predict a 0.8 to 0.9 per cent growth after 15 years of decline while the mainstream economy will decline by at least 2 per cent.
The Irish government realised the power of the black market with the relatively modest 25 cent increase on a packet of 20 cigarettes in the recent budget. Calls for a €2 rise were ignored because it would have been a licence for the smugglers to print money. Only Norway has higher tobacco prices than Ireland. In 2006 Irish customs seized 17.5 million worth of contraband cigarettes. That rose to 25.6 million in 2007 and then to 54.4 million in 2008. The tobacco industry claims 20 per cent of cigarettes smoked in Ireland are contraband, costing the State €500 million in lost revenue. Some consignments are brought duty-paid from other EU countries where prices are cheaper. Others, however, are sourced from counterfeit manufacturers in China, which obviously pose potentially serious health risks.

BAD medicine

Most people think of designer t-shirts when talking about counterfeit products. It is a huge industry, but it isn't just limited to clothes and jewellery. The most dangerous area is in the sale of fake and counterfeit drugs, usually sold over the internet. Viagra and Cialis are money-spinners for the the fraudsters. The World Health Organisation estimates the trade is worth $75 billion a year
Some samples have been detected with no active ingredients, others with dangerously high-levels and then some contaminated with bacteria. In Ireland fake tooth paste has been found as well as fake brand-name condoms. The tested counterfeit condoms didn't offer any protection against Aids, so the potential effects can be lethal. There were 40,000 boxes of fake condoms sold in 2005.
Another popular target for counterfeiters are the heavily marketed and branded cuddly toys for kids. Many of these won't even come near safety standards, posing choking hazards for kids and using untested filling.

MISSING trader fraud

Missing trader fraud (MTIC), also known as Carousel VAT fraud is still costing the European Union an estimated €80 billion a year. With companies going to the wall, there are no doubt a few unscrupulous directors toying with the idea of one final pay-off. Here's how it works; goods are sold from an EU supplier to another company in an EU state (the buffer company) and then through a chain of companies in that EU state (broker companies). Eventually they are sold to the final trader who re-exports the goods (the exporting broker). The original consignment is zero-rated for VAT. The importing buffer company runs up a large VAT debt and then disappears, becoming a missing trader. At the other end of the chain the exporting broker does not owe VAT but instead reclaims the tax on its purchases from the broker companies - which in some cases adds up to millions every month. The missing traders are not usually the organisers of the fraud , usually small-time criminals paid for their assistance. The organisers needs to generate large volumes of transaction and so use small items of high value such as central processing units, mobile phones, gold bullion. Re-circulating the consignment through the chain of companies boosts profits hence the name 'Carousel VAT fraud.' The transactions through the chain of brokers have no commercial reality, their only purpose to is to defraud the tax system by claiming back the VAT that would have been paid in legitimate trade.
Irish carousel fraudster Dylan Creaven's company was (on paper) exporting to UK brokers more micro-chips than Intel. Silicon Technologies,based in a small factory unit, 'supplied' st£1.5 billion worth of CPUs from 2001 until police raided his premises in 2002.

WELFARE Fraud

THE Irish government is getting tough about handing out welfare cash. A fraud investigation during March in which 2,700 claims were checked, resulted in 275 claims being suspended - saving up to €3 million. In 2008 the government saved €476 million on fraudulent claims below the projected €536 million. The shortfall was blamed on staff being re-directed to cope with the surge in claims as the recession hit home and people lost their jobs. Deemed 'high-risk' were claims made by foreign nationals living in Ireland. Photo ID is now necessary when collected welfare payments.

Most fraudulent claims turn out to be individuals continuing to collect cash to which they lost their entitlement. It would naive in the extreme, however, to think that organised crime gangs don't target welfare systems. One of the biggest dole-fraud operations was carried out in the UK by a family of Irish travellers. Based near Bristol, the Maughans and others, spent more than a year cashing forged welfare checks. It took a nine-month investigation to track them down by which time they had stolen st£500,000. Last year Patrick Maughan was ordered to pay back nearly st£300,000 after serving his four year jail sentence.

JAIL the bankers

The president of the Association of Garda Sergeants and Inspectors brought up the thorny subject of why no-one from the Irish banking sector is facing a criminal investigation. Speaking at the association's annual conference Paschal Feeney said that the government should consult with the Garda Fraud Bureau and the Criminal Assets Bureau to see if legislation needs to be toughened up to let the detectives do their job. Feeney rightly complained that with the current promotion and recruitment freeze along with other cutbacks, officers will have even less resources to carry out investigations. Compared the United States and the UK, Irish authorities have been very slow to go after those responsible in even the most obvious cases of wrong doing. The public will is there to track down fraudsters but the political will is still lacking.

PENCIL men

Someone is always trying to outfox the bookies. From Shoeless Joe Jackson, accused of fixing games in the 1919 World Series to the 1974 Gay Future affair you can be sure that someone, somewhere is trying to scam a bookie. Without getting into the stunts used to affect outcomes on on-line betting exchanges, there are still some people sticking to the old-fashioned tricks. This week Irish journalist Ann Healy wrote about about electrician Diarmuid O'Keeffe who placed bets on the Irish National Lottery numbers with Galway bookie Donie O'Meara. After the draws were made he would break-in and change his betting slips. He made €42,000 from three bets. O'Keeffe is due for sentence next July.
Believe it or not he's not the first punter to have the bright idea of breaking into the bookies to change betting slips. In December 1999, Frank Duffy from Cabra in Dublin placed a small bet at 111,000/1 on picking five numbers from the British Lottery, leaving one line blank on the betting slip. That night the bookie shop was burgled in which all the betting slips and a microfiche film of winning bets were stolen. The next month he tried to claim his €245,000 winnings through a solicitor. The suspicious bookies, Ladbrokes, called in the gardai. Duffy pleaded guilty and was given a five-year suspended sentence.
Another character is the so-called 'Pencil Man' - a British conman, John Bailey who targeted small independent bookies. With staff distracted he would swipe stamped betting slips and make the necessary alterations and then drop it back over the counter and later claim his 'winner'. In 2003 he was jailed for three and half years for the scam in which he is claimed to have stolen st£1 million. In 2008 three major UK bookmakers took a court action to have him banned from their outlets.

FRAUDSTER named

The man at the centre of the massive mortgage fraud in which Allied Irish Bank was targeted was named in today's Guardian as Stefan Kollakis. In 1995 he was convicted of selling bogus feudal titles to foreigners for as much as st£85,000. While working in a travel company he set up a fake 'heraldic institution'. He later re-invented himself as Achilleas Kallakis and was able to fake enough references to persuade lenders to to hand over millions of pounds to build up an impressive property portfolio between 2003 until 2007.