Online fraud against senior citizens is on the rise. This article may help others keep our senior family members and friends' money and information out of the hands of Internet con artists.
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When 78-year-old Nancy Landers and her 83-year-old husband, Wes, borrowed approximately $15,000 against their credit cards to invest in a company called Cornerstone Prodigy Group, they thought they were providing for their golden years. Cornerstone, which described itself as a multi-level marketing company on its website, promised investors a 10 percent return on their total investment every month. And for a while, the company delivered on that promise.


"It was paying off real good," Nancy Landers told "CyberCrime." "We were getting, like, $1,500 a month, and that really helped."


But what the Landers thought was a great investment opportunity turned out instead to be an alleged Ponzi scheme, said Harold Degenhardt, district administrator with the Securities and Exchange Commission.


"The revenues were being generated by investor money," he said, "and it was investor money that was being used to pay earlier investors -- your classic Ponzi scheme, where you have the early investors being paid with later investors' money."


By the time Degenhardt and the SEC began investigating Cornerstone in 1999, nearly 600 investors -- many older Americans like the Landers -- had lost a large part of their savings. And while the Landers may have been surprised by the failure of their investment, Degenhardt was not.


"We have seen an increase in elder fraud," he said. "On the Internet, all you need is a computer. You don't even need a website. You can spam it out. Press of a button, you're out to millions of people. And we're finding a lot of these fraudsters are doing exactly that."


In fact, people over the age of 65 comprise approximately 30 percent of the country's fraud victims, according to the Congressional Subcommittee on Health and Long Term Care. The Better Business Bureau estimates that 45 percent of all older Americans have been solicited to invest with a person they did not know, and the American Association of Retired People (AARP) claims that 56 percent of those targeted by telemarketing scams are over the age of 50.


Con artists often target older Americans because they "were brought up at a different time, a time in which you trusted people," Degenhardt said. A 1999 study conducted by AARP bears him out, concluding that "older consumers are less wary about, and therefore more vulnerable to, deceptive business practices than younger consumers."


In addition, "older consumers have saved up money over their entire lives and have retirement savings," said Adrienne Oleck, a program consultant for AARP. "That is an enticement to the scamster they cannot resist."


So how can wired older Americans avoid being conned out of their hard-earned savings while surfing the Web? Here are some tips.


1.Check everything. Always research investments, sweepstakes, giveaways, product offers, and money-making opportunities fully, no matter how trustworthy the person bringing you the offer may appear to be.

2.Beware investments that are too good to be true. Never fall for investments that promise spectacularly high profits or guaranteed returns. Also, be wary of any investment that claims to be risk-free. No investment is risk-free.

3.Be skeptical of websites. Just because a website seems professional doesn't mean the company behind it is. AARP's Oleck warns consumers to be especially careful of websites that do not list an address, phone number, or other way to contact the company.

4.Be even more skeptical of spam. Oleck says that an investment or moneymaking opportunity advertised through an unsolicited email should send up a red flag. Legitimate companies advertise via email only to those customers who have signed up to be contacted.

5.Communicate with others. Scam artists often count on the isolation of older Americans to help keep word of their schemes from spreading to other potential victims. Talk to your friends about the opportunities advertised to see if they've been contacted, too. Be very wary if you are told to keep an investment opportunity to yourself.

6.Don't be rushed. Legitimate companies generally don't rush their customers into making decisions. Always take the time to investigate any opportunity before you invest or make a purchase. If an advertisement says you have to act now, don't.

7.Be careful of prizes. Never pay money to claim a prize. Never buy a product just because the purchase will enter you into a sweepstakes or contest. Be very cautious if you're offered a prize from a contest that you don't remember entering. If it's truly a prize, it should be yours free, with no strings attached.

8.Watch out for pyramid and Ponzi schemes. Two of the most common investment scams are these cons in which investors are paid with the money of other investors. If you're promised a larger return on your investment as more people "join the club," you're probably looking at one of these schemes, both of which are illegal.

9.Watch out for work-at-home opportunities. These are some of the oldest cons in the book. If the pay seems too high for simple work or for work that could be done more cheaply by a machine, it's probably a scam.

10.Never give out personal information. Never give out your Social Security, bank account, or credit card numbers unless you know the person you're giving them to, whether it is over the Internet, the telephone, or in person.

11.Pay by credit card. Using a credit card to make purchases online protects you by giving you the opportunity to dispute the charge later. Checks can't be stopped once they have been cashed. And don't ever give someone approval to transfer money out of your bank account.

12.Ask questions. The Better Business Bureau suggests consumers ask the following questions before committing to anything:

13.Where did you get my name?
Can you explain the risks involved in this investment?
Could you explain the proposal to my attorney or accountant?
What government agency supervises your business?
Can you send me written information to back up your claims?
How much money will go for fees and commissions?
Where will my money be held?
What is the phone number and address of your company?

14.Don't be ashamed. Many con artists count on the fact that their victims will be too embarrassed to report that they've been scammed. Don't be. A large number of people get conned everyday, including younger people. Be sure to report it when you get conned so the con artists can be caught and others won't be taken.

In the end, this is what happened to the founders of Cornerstone Prodigy Group. When SEC authorities were made aware of the alleged Ponzi scheme, they sued Cornerstone founders Gary and Sandra Reeder and got a court order to conduct a raid on the Cornerstone offices and the Reeders' home. The government eventually shut the operation down. In April 2000, the Reeders settled with the government without admitting or denying guilt.

But despite the settlement, most Cornerstone customers recovered only about 47 percent of their original investments. The rest of their money was lost forever.

"Let's just say that we have to pinch a few pennies now," Nancy Landers said about the aftermath of Cornerstone. "Our lifestyle has reverted back to even worse than it was before we invested."


This article is based on original reporting by "CyberCrime" co-host and senior segment producer Jennifer London.

Posted by Interceptor: Sep. 10 2001, 11:43 pm

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Online fraud against senior citizens is on the rise. This article may help others keep our senior family members, friends' money and information out of the hands of Internet con artists.
*********

When 78-year-old Nancy Landers and her 83-year-old husband, Wes, borrowed approximately $15,000 against their credit cards to invest in a company called Cornerstone Prodigy Group, they thought they were providing for their golden years. Cornerstone, which described itself as a multi-level marketing company on its website, promised investors a 10 percent return on their total investment every month. And for a while, the company delivered on that promise.


"It was paying off real good," Nancy Landers told "CyberCrime." "We were getting, like, $1,500 a month, and that really helped."


But what the Landers thought was a great investment opportunity turned out instead to be an alleged Ponzi scheme, said Harold Degenhardt, district administrator with the Securities and Exchange Commission.


"The revenues were being generated by investor money," he said, "and it was investor money that was being used to pay earlier investors -- your classic Ponzi scheme, where you have the early investors being paid with later investors' money."


By the time Degenhardt and the SEC began investigating Cornerstone in 1999, nearly 600 investors -- many older Americans like the Landers -- had lost a large part of their savings. And while the Landers may have been surprised by the failure of their investment, Degenhardt was not.


"We have seen an increase in elder fraud," he said. "On the Internet, all you need is a computer. You don't even need a website. You can spam it out. Press of a button, you're out to millions of people. And we're finding a lot of these fraudsters are doing exactly that."


In fact, people over the age of 65 comprise approximately 30 percent of the country's fraud victims, according to the Congressional Subcommittee on Health and Long Term Care. The Better Business Bureau estimates that 45 percent of all older Americans have been solicited to invest with a person they did not know, and the American Association of Retired People (AARP) claims that 56 percent of those targeted by telemarketing scams are over the age of 50.


Con artists often target older Americans because they "were brought up at a different time, a time in which you trusted people," Degenhardt said. A 1999 study conducted by AARP bears him out, concluding that "older consumers are less wary about, and therefore more vulnerable to, deceptive business practices than younger consumers."


In addition, "older consumers have saved up money over their entire lives and have retirement savings," said Adrienne Oleck, a program consultant for AARP. "That is an enticement to the scamster they cannot resist."


So how can wired older Americans avoid being conned out of their hard-earned savings while surfing the Web? Here are some tips.


1.Check everything. Always research investments, sweepstakes, giveaways, product offers, and money-making opportunities fully, no matter how trustworthy the person bringing you the offer may appear to be.

2.Beware investments that are too good to be true. Never fall for investments that promise spectacularly high profits or guaranteed returns. Also, be wary of any investment that claims to be risk-free. No investment is risk-free.

3.Be skeptical of websites. Just because a website seems professional doesn't mean the company behind it is. AARP's Oleck warns consumers to be especially careful of websites that do not list an address, phone number, or other way to contact the company.

4.Be even more skeptical of spam. Oleck says that an investment or moneymaking opportunity advertised through an unsolicited email should send up a red flag. Legitimate companies advertise via email only to those customers who have signed up to be contacted.

5.Communicate with others. Scam artists often count on the isolation of older Americans to help keep word of their schemes from spreading to other potential victims. Talk to your friends about the opportunities advertised to see if they've been contacted, too. Be very wary if you are told to keep an investment opportunity to yourself.

6.Don't be rushed. Legitimate companies generally don't rush their customers into making decisions. Always take the time to investigate any opportunity before you invest or make a purchase. If an advertisement says you have to act now, don't.

7.Be careful of prizes. Never pay money to claim a prize. Never buy a product just because the purchase will enter you into a sweepstakes or contest. Be very cautious if you're offered a prize from a contest that you don't remember entering. If it's truly a prize, it should be yours free, with no strings attached.

8.Watch out for pyramid and Ponzi schemes. Two of the most common investment scams are these cons in which investors are paid with the money of other investors. If you're promised a larger return on your investment as more people "join the club," you're probably looking at one of these schemes, both of which are illegal.

9.Watch out for work-at-home opportunities. These are some of the oldest cons in the book. If the pay seems too high for simple work or for work that could be done more cheaply by a machine, it's probably a scam.

10.Never give out personal information. Never give out your Social Security, bank account, or credit card numbers unless you know the person you're giving them to, whether it is over the Internet, the telephone, or in person.

11.Pay by credit card. Using a credit card to make purchases online protects you by giving you the opportunity to dispute the charge later. Checks can't be stopped once they have been cashed. And don't ever give someone approval to transfer money out of your bank account.

12.Ask questions. The Better Business Bureau suggests consumers ask the following questions before committing to anything:

13.Where did you get my name?
Can you explain the risks involved in this investment?
Could you explain the proposal to my attorney or accountant?
What government agency supervises your business?
Can you send me written information to back up your claims?
How much money will go for fees and commissions?
Where will my money be held?
What is the phone number and address of your company?

14.Don't be ashamed. Many con artists count on the fact that their victims will be too embarrassed to report that they've been scammed. Don't be. A large number of people get conned everyday, including younger people. Be sure to report it when you get conned so the con artists can be caught and others won't be taken.

In the end, this is what happened to the founders of Cornerstone Prodigy Group. When SEC authorities were made aware of the alleged Ponzi scheme, they sued Cornerstone founders Gary and Sandra Reeder and got a court order to conduct a raid on the Cornerstone offices and the Reeders' home. The government eventually shut the operation down. In April 2000, the Reeders settled with the government without admitting or denying guilt.

But despite the settlement, most Cornerstone customers recovered only about 47 percent of their original investments. The rest of their money was lost forever.

"Let's just say that we have to pinch a few pennies now," Nancy Landers said about the aftermath of Cornerstone. "Our lifestyle has reverted back to even worse than it was before we invested."


This article is based on original reporting by "CyberCrime" co-host and senior segment producer Jennifer London.