What is a Charity Scam?

Scammers are nothing if not enterprising and they will take advantage of the charitable impulses people may have following a natural disaster, such as the Tsunami in Japan or Hurricane Katrina to set up phony charities to separate you from your money.  Sometimes you may receive a telemarketer’s phone call soliciting for a charity.  It is important to remember that even if you wisely have put yourself on the federal Do Not Call List for telemarketers, the restrictions on calling do not apply to charities.  Regardless, you never know who really is calling you when you receive a telephone call purporting to be from a charity, so if you are charitably inclined toward that particular charity, all you have to do is just contact the charity directly at an Internet address or telephone number you know is accurate.  And never give out a credit card number to anyone on the phone whom you have not called and are sure as to who they are.

TIP

A good resource for not only determining if a charity is a scam or not, but also for learning how much of the charity’s funds are spent on administrative salaries and how much actually goes toward their charitable purposes is the free website www.charitynavigator.org.

What is Travel Fraud?

Have you ever won a contest you never even entered?  Think about it.  Yet, many people fall prey to emails or faxes telling them that they have won free trips.  Unfortunately, these free trips come with fine print hidden fees that turn your trip into a costly trip to the cleaners.

Even faxed or email travel offers with great prices are scams waiting to lure you in.  Again, between extra fees and costly upgrades to be able to travel during times when you would want to travel, the great deal turns out to be nothing but a scam.

TIP

Check out the company with your local attorney general, the FTC, the Better Business Bureau or even just Google their name next to the word “scam” and see what comes up.  But always remember, if it looks too good to be true, it generally is.

Nigerian Letter

Although it may seem as if this scam only began in earnest with the invention of email, in fact, the scam itself is just a variation of a scam that is more than four hundred years old when it was called the Spanish Prisoner Con.  At that time a letter was sent to the targeted victim purportedly from someone on behalf of a wealthy aristocrat who was imprisoned in Spain under a false name.  The identity of the nobleman was not revealed for security reasons, but the victim was asked to help raise money to obtain the release of the aristocrat, who, it was promised, would reward the money-contributing victim with great sums of money and, in some versions of the con, the Spanish prisoner’s beautiful daughter in marriage.

In the more recent incarnations of this scam, you receive an email in which you are promised great sums of money if you assist a Nigerian in his effort to transfer money out of his country.  Other variations include the movement of embezzled funds by corrupt officials, a dying gentleman who wants to make charitable gifts or a minor bank official who is trying to move the money of deceased foreigners out of his bank without the government taking it.  Similar scams have managed to keep up with the news by having the money to be moved tied to fallen dictators such as Sadaam Hussein or Moamar Khadaffi.

What all of these scams have in common is that soon after agreeing to help, you learn that money is needed to be sent by you for lawyer fees, bribes, insurance and other costs.  The reward is always just around the corner and the fees keep mounting.

TIP

There are a number of ways to confirm that the email you are receiving is a scam including a careful review of the email address, however, you do not need to even go that far in your considerations.  Although you may want to open the email (so long as you do not click on to any links) for sheer entertainment purposes, all of these scenarios are scams.  Just ask yourself, why are you being singled out for this email?  You are not.  The emails are sent out all over the Internet.  Don’t be a victim.  Do not respond to the email in any fashion.  If you do, you will be hounded.

What is a Pyramid Scheme?

This is another scam that has been around for many years, but keeps popping up and scamming unsuspecting victims taken in both by their lack of skepticism and the abundance of greed, which is a profitable combination for scam artists.

Pyramid schemes are disguised as purported businesses; however, if you carefully evaluate the business you will see that the primary source of profit for the business is in enrolling new members who pay fees to join the business.  The only profit for investors comes from brining more people into the scheme.  In other words, the only way you can make a profit is by becoming a scammer yourself.  Like the chain letter, pyramid schemes are doomed to failure because eventually you run out of people to sustain the growth of the pyramid.

As with many scams, it does have some resemblance to how multi-level marketing companies such as Mary Kay Cosmetics and Amway operate; however, a key difference is that these companies actually sell products.  Pyramid schemes do not.

TIP

A little common sense can go a long way in avoiding pyramid schemes.  The simple question to ask yourself is whether or not the company actually sells products and makes substantial profits through product sales or through the recruiting of new members.  If it is through recruitment, it is most likely a pyramid scheme.  And don’t trust any letters from the IRS or the FTC that appear to support the legitimacy of the company.  Neither the IRS nor FTC ever issues such rulings.   If the operator of the business provides such a letter to you, you can be sure that it is a scam.

What is a Chain Letter?

This is another scam that keeps on returning with slight changes to appear to be something new and even legal, but if it looks like a duck, walks like a duck and quacks like a duck, it is most likely a duck and a chain letter is easy to spot unless you are blinded by greed.

At its most basic a chain letter involve you receiving a letter that contains the names of a number of people, often five.  You are asked to send a sum of money to the first person on the list, take his or her name off of the list, add your name to the list as the last person and send it to five more people with the same instructions.

The problem is not only are chain letters illegal, they are also doomed to failure as they will rather rapidly run out of people to participate.

Chain letters are sometimes disguised to resemble legitimate business operations and you may even be sent some inexpensive item as part of the scam to make it appear to be a legitimate business proposal.  However, it is easy to see that it is the pyramid that drives the chain letter and nothing of value is done to put oneself in a position to receive compensation.  A scam by any other name is still a scam.

TIP

Never get involved with chain letters regardless of their format.

What is a Ponzi Scheme?

It worked for Charles Ponzi, it worked many years later for Bernie Madoff and it still works today.  This scam is as profitable as it is simple.  It is a classic pyramid scheme whereby you are promised returns that may appear too good to be true (and indeed that is the case), but you know of investors who have made incredible profits by investing with the scam artist.  The problem is that the money used to pay off early investors does not come from successful investing, but rather by paying the early investors with the money of later investors.  Usually there are no investments at all.

TIP

If you are retaining the services of an investment advisor, make sure he or she is not acting both as your broker investment advisor and also the broker dealer.  By giving this kind of control of your money to a single person, you enhance the possibility of fraud.  Also, never invest in anything you do not truly understand.  This rule was broken by many intelligent people who invested with Bernie Madoff although they did not understand how his investment strategy worked.  Anyone who actually carefully evaluated Madoff’s investment strategy and the returns it provided would be able to see that it was a scam.

What is the Hitman Scam?

This scam keeps reoccurring around the country and people still are falling victim to it.  It starts when you receive an email from a purported hit man who informs you that he has been hired by someone you know to kill you.  However, the hit man then tells you that he will refrain from killing you if you pay him a sum of money.  In the past the amount has ranged from $80,000 to $150,000.  Not only is this a scam, but the FBI has traced many of these emails to Eastern Europe, far from where you may live.

TIP

If you get one of these emails contact the FBI and the Internet Crime Complain Center at www.ic3.gov.

What is an Ebay scam?

The tremendous popularity of eBay, the Internet auction website has made it a frequent target of scammers.  One of the more common scams that keeps occurring involves the receipt by the victim of an email purporting to be from PayPal informing you that there has been a computer problem and that you need to log on to your account to confirm your personal information in order to keep your eBay account operational.  The link provided in the email to connect you to PayPal’s website is an excellent example of phishing because although the website to which you go to if you click on the link looks like eBay, it is a phony website that exists merely to harvest your personal information if you provide it to the scammer.

TIP

If you ever get such an email and you are tempted to respond, merely contact eBay independently rather than by clicking on the address provided in the email.

What is Malware?

Malware is the term for malicious software that you unwittingly download on your computer when you click on links in emails from scammers or fall prey to phishing and download the program from a phony website to which you were lured in the belief that it was a legitimate website.

One of the most common and dangerous types of malware is the keystroke logging program which is often referred to as a Trojan horse.  Once this malware is installed on your computer, the scammer is able to access all of the information on your computer and can provide the scammer with access to your bank accounts, credit cards, brokerage accounts or any other information that is contained on your computer.

TIP

Never click on links unless you are absolutely sure it is legitimate.  Also make sure you have an operating firewall on your computer and your computer security software is up to date.

What is Smishing?

Smishing is similar to phishing on your computer, but this time the scammers message comes as a text message on your cell phone.  Often it comes purportedly from your bank telling you that your account has been frozen and then asks you to provide personal information or your account will be frozen.  Smishing is also used by scammers, particularly during the holidays to appear to provide free coupons or free coupons.

TIP

Never respond to a smishing message.  By so doing you only succeed in telling the scammer that you are out there.  Never provide personal information in response to a text message from anyone.  If you believe the message may be legitimate, contact the entity at a telephone number or website that you know is accurate.  Don’t download coupons from emails or text messages.  Again, if you think it may be legitimate, go to the website of the company that you know is legitimate and download the coupons there.