Fighting fraudsters who target homeless in scams

Con artists and fraudsters often are pathological and express little emotion or remorse about their crimes. University student Kevin Wendolowski discusses a growing trend of schemes designed to target a vulnerable and transient population: the homeless. He gives an overview of some schemes and shows how anti-fraud professionals can help prevent these crimes and educate service providers.

Hooking the homeless with a new scam

A growing number of loosely affiliated criminal groups across the U.S. are enticing homeless people to divulge personally identifiable information (PII) so the thieves can buy cellphones in their names and sell them across the country for handsome profits. The homeless victims get a few bucks but often end up in deep debt.

Here's how the scam works. A fraudster offers a homeless person a little cash if he or she will travel with the thief to a cellphone retail store to complete and sign a contract. The fraudster takes the phone, drops off the homeless person and sells the new phone on the street or online.

The victims probably don't understand what they just committed to — because of possible mental, physical and substance abuse issues — but they're now responsible for fees and charges on their accounts, which can accumulate to hundreds or thousands of dollars. They'll receive late charges, liens, judgments and fines. And, ultimately, what little credit they might have is destroyed.

Fraudsters derail woman's quest for a house

A 49-year-old Boise, Idaho, homeless woman succumbed to this nefarious scheme. According to the Feb. 26, article, New scam targets homeless by Blake Ellis in CNN Money, this woman and her friend were walking back to a shelter when two men in a car drove by and offered her a deal to make "quick money."

She initially was hesitant to provide them with her Social Security number and other PII, but she succumbed to the bait of $100 and signed eight phone contracts. Weeks later, when the woman began to apply for affordable housing, a credit check showed that she owed $5,000 to Sprint and Verizon, and her debt had been sent to collections. Her housing loan was now in jeopardy.

Boise police caught the scam's ringleader who said he and fellow thieves began in California and were stopping in every state to pick up cellphones. Unfortunately, the police couldn't charge him because the homeless people had willfully provided their PII. The CNN Money article also described a St. Louis case in which the scammers said they were part of a nationwide ring.

Scammers disguised as businessmen

In another case described in the Sept. 20, 2013, Huffington Post article, Homeless People Hired To Wait In Line For New iPhones At Pasadena Apple Store, Don't Get Paid For It, an elderly homeless man said that a businessman approached him and a dozen other homeless people to ask them to wait in line for the new iPhone 5s and 5c in exchange for $20 per phone. Unfortunately, the "businessman" didn't follow through with the cash after the homeless man gave him the iPhones.

The victim trusted the man because he appeared to be a professional, and the victim desperately needed money. Ultimately, the fraudster didn't pay all of the dozens of recruited homeless people.

According to a 2008 U.S. Conference of Mayors survey, which was reported by the National Coalition for the Homeless in 2009, "Substance abuse [for 25 cities] was the single largest cause of homelessness for single adults (reported by 68% of cities)." (See Substance Abuse and Homelessness, July 2009.)

In another study reported by the National Coalition for the Homeless, which the U.S. Conference of Mayors conducted in 2005, 50 percent of cities reported that homeless women and children were running away because of domestic violence. Other reasons include mental illness, job loss, underemployment and addiction disorders. (See Why Are People Homeless? published by the National Coalition for the Homeless, July 2009.)

Scammers don't care about their victims and their issues. They can be heartless, articulate and smooth, with just one goal: to steal as many identities as possible and increase their financial gains by any means, regardless of the effect it has on the elderly, disabled or homeless.

Lessons to be learned

New CFEs and young anti-fraud professionals can help educate service providers, caregivers and mental health professionals who assist homeless people. Something as simple as publishing and distributing pamphlets at shelters and nonprofits can help tremendously.

Fraud fighters can make presentations on:

• Fraud and identity theft red flags.
• Protecting PII, including Social Security numbers.
• Identifying behavioral red flags indicative of predatory and fraudulent behavior.
• Basic financial literacy and money skills. 

As anti-fraud professionals, we possess unique skills of detecting and preventing fraud. As Theodore Roosevelt once said, "Each one must do his part if we wish to show that the nation is worthy of its good fortune." We can assist in helping to protect the dignity and financial well-being of many, especially the most vulnerable populations.

Kevin Wendolowski, a Student Associate Member of the ACFE, is enrolled in the Economic Crimes and Fraud Management MBA Program at Utica College.

Colin May, CFE, is a forensic financial investigator with a government agency (the views in "Starting Out" are his own) in Baltimore, Maryland.