Fraud in the News

Not above the law

The perpetrator of one of the largest Social Security fraud scams to recently surface is more familiar with enforcing the law — not breaking it. According to the May 14 Washington Times article, Judge pleads guilty in massive Social Security fraud case, by Stephen Dinan, a Kentucky administrative law judge pleaded guilty to bribery for paying out fraudulent disability insurance claims.

According to the article, David B. Daugherty hand-picked cases filed by a lawyer named Eric C. Conn and colluded to win disability benefits for claimants. However, many of these benefits were bogus. More than half of the 3,149 disability cases approved by the judge were deemed fraudulent by investigators. Conn made more than $7 million from the fraudulent claims, and he paid Judge Daugherty just over $600,000. The cost to taxpayers? $550 million.

The judge flew under the radar by strategically collecting payments in sums that federal regulators wouldn’t catch. According to the Social Security Administration, about half of the approved disability claims were reversed. Daugherty’s sentencing is scheduled for this August.

New technology to fight credit card fraud

In a May 10 KTLA story by Rich Demuro, Banks Turn to Tech for Fraud Fighting Credit Cards, banking companies are learning how to outsmart thieves by experimenting with several innovative card features.

According to the article, one technology is a fingerprint scanner built into the card. Another is “motion code” — a digital card verification value (CVV) on the back of the card that constantly changes.

But if you want to be the first to sign up for this new technology, don’t throw out your old cards. According to the article, Mastercard is testing the fingerprint feature on cards in South African grocery stores. The motion-code technology requires a battery, so users can expect a limited lifespan. And, for now, the only bank to offer any kind of card with the motion-code feature is in France.

Junk mail

A May 11 press release from the Federal Trade Commission (FTC) reports that victims of a fraudulent unsolicited mail scam will be compensated for some of their losses.

According to the release, CPU Service Inc. tricked more than 150,000 small businesses by mailing them fake invoices for computer services never rendered. Unfortunately, many of these businesses fell into the trap. Tom Pahl, acting director of the FTC’s Bureau of Consumer Protection, reinforced the importance of protecting small businesses from scams. As a result, the FTC will send 1,187 checks to business owners affected by the scam, which  totaled more than $48,000. While these businesses will be compensated for their losses, not all promotional mail scams can be resolved.

The FTC ordered Robert Ray Law, the owner of CPU Service, Inc., to discontinue sending any promotional mailings to businesses unless they’ve requested them.