Canadian fraud cases rose in 2010

Sometime in the days leading up to Halloween, the 8,120th Canadian contacted police about being ripped off in a mass marketing scam, surpassing the total number of such victims reported for all of 2009.

Shifting from identity theft to marketing scams

Sometime in the days leading up to Halloween, the 8,120th Canadian contacted police about being ripped off in a mass marketing scam, surpassing the total number of such victims reported for all of 2009.

Mass marketing fraud where scammers use the internet, radio and television ads, and infomercials is on the rise, while identity theft is dropping, according to the Canadian Anti-Fraud Centre. ((IStock))
Total losses — close to $30 million — also topped 2009 numbers. And that only includes Canadians who reported being victims of mass marketing fraud.

According to the Canadian Anti-Fraud Centre, 95 per cent of people who are scammed never report it.

Mass marketing scams are those that use media such as the telephone, internet, radio ads and television infomercials to trick consumers into paying for something they never receive or has little real value.

When identity theft and complaints by U.S. and other foreign citizens about getting ripped off by Canadians are added to the total number of frauds, the number grows even higher — amounting to 16,741 victims and over $53 million. And that's just in the first 10 months of 2010.

"Mass marketing fraud is a growing problem that affects Canadians," said Lisa Campbell, deputy commissioner of Canada's Competition Bureau, just one of the agencies investigating the dizzying array of scams and frauds that snare Canadians.

Disgraced Montreal financier Earl Jones made headlines for running a $50-million Ponzi scheme, but we seldom hear about crooks that use the phone, internet or advertising to take millions from unsuspecting consumers.

Nor do we often hear the stories about their victims, who may be too embarrassed to speak publicly about how they were cheated. That's the reason only five per cent of victims come forward. But when their stories are told, they're often chilling.

Elderly targeted

One woman, who does not want her name or the city she lives in revealed, wrote eloquently to the Canadian Anti-Fraud Centre about a fraud perpetrated on her 82-year-old father.

Elderly people are often targets of scams because they tend to be more trusting. ((iStock))
"My father is slowly losing both his hearing and his best friend, my mother, who is well into the second state of Alzheimer's," she writes. "Dad's isolation and lack of critical thinking have made him a prime candidate for mass marketing fraud."

She learned about the fraud after being contacted by her father's bank manager. Her parents' bank account was about to exceed its overdraft limit, and her father's MasterCard and line of credit were nearly maxed out.

In his loneliness, the man had been entering "sweepstake" contests he received in the mail. Soon he was receiving about 50 pieces of mail a day.

The scammers promised him winnings, but first he had to send a deposit or other such payment. He never received a cent.

"With what little pension money remains, he will now begin what maybe a lifelong task of repaying, with interest, the money swindled from him by these criminals," the daughter writes.

Sweepstakes prize scams are remarkably common and usually target older individuals who grew up in a perhaps more trusting time.

Looking legitimate

On Dec. 1, a judge in California issued a restraining order to stop several companies from operating bogus sweepstakes. According to the U.S. Federal Trade Commission, the personalized mailers sent to hundreds of thousands of consumers were made to look as if they came from legitimate government agencies.

The RCMP, which operates the Canadian Anti-Fraud Centre, works extensively with the Federal Tarde Commission in the U.S. on cross-border scams. ((Darryl Dyck/Canadian Press))
In response to the growing sophistication and cost of mass marketing fraud, the FTC launched dozens of investigations that led to hundreds of charges — shutting down scams that took U.S. and Canadian residents for billions of dollars.

The FTC describes its working relationship with Canadian police agencies as a model it would like to apply in other international investigations.

"We work on cases together, we share leads and investigative information and we have had fabulously profitable partnerships working with Canadian law enforcement on scams going both directions," Steve Baker, the director of the FTC's Chicago office said in an interview with CBC News.

"As economies have gone global so has fraud," he said.

In one recent case, the FTC successfully investigated and shut down an organization that claimed it could reduce a consumer's credit card rate.

"They were out of Florida but in the last year or two they were operating their victims were exclusively Canadians," he said. The FTC has also investigated and charged Canadians.

"There's a great deal of fraud that operates out of Canada, ripping off Americans."

Embarrassment factor

Often victims get blamed for allowing themselves to be taken. The adage, "A fool and his money are soon parted," seems to be an opinion many people still hold.

But the frauds of 2010 are far different from the snake-oil sales pitches that offered magic elixirs from the back of a wagon. Today, scammers have the resources to hire professional web designers and employ fancy packaging, elaborate marketing and overnight delivery.

The company that makes Activia yogurt was charged with misleading advertising for falsly claiming its products could promote regularity and strengthen the immune system. ((Federal Trade Commission))
Today's snake oil comes in the form of dietary supplements, according to the FTC. In testimony to a U.S. Senate committee in May, the agency estimated the supplement industry took in $25 billion US, often selling products based on phoney claims.

Over the past decade, the agency has taken more than 100 enforcement actions against supplement companies that claimed their products could cure cancer, AIDS and other serious medical conditions.

Many of the fraudulent products are sold in national-chain pharmacies and advertised on radio and television.

In mid-December, the company that makes Activia Yogurt and DanActive dairy drink was forced to pay $21 million over false claims it made in U.S. ads. The marketing campaign featured actress Jamie Lee Curtis and falsely claimed that its products helped build a healthy immune system and prevented irregularity.

"Mass marketing fraud affects a large number of Canadians and international businesses and consumers," said assistant commissioner Steven White of the RCMP.

"It undermines people's confidence and trust in the marketplace and robs people of their savings, security and dignity," he said.

Identity theft down

Cases of identity theft appear to be on a downward trend, according to figures for the first 10 months of 2010. There were 5,150 victims who filed complaints with police in Canada, reporting losses of $7.4 million.

There were just over 12,000 identity-theft victims and losses of $11 million in 2009.

One of those cases involved a woman who wrote about what happened. She asked that neither her name nor where she lives be published.

The fraud began in January 2010 when her husband learned that their bank accounts had been cleaned out. They soon learned that someone had applied for several credit cards in her husband's name and had racked up charges on his existing card.

His credit rating was destroyed.

It was later learned that a bank employee had been part of a fraud ring. While the family had been cleaned out to the tune of $60,000, the banks involved were no help, and the woman was told it would be too expensive to sue.

"We worked hard, we earned that money. All I can think is that someone is driving around in some fancy car that we paid for, while we're stuck paying the same bills twice," wrote the woman, who is now expecting her first child.

"Not only are we victimized by having our money stolen, we cannot move on with our financial lives like everyone else can. We can't borrow money.

"We can't buy a home. We can't get a car loan. It never stops."