Saturday, December 1, 2012

A New Variation on Charity Scam: The Matching Funds Scam

English: basketball player
English: basketball player (Photo credit: Wikipedia)
Normally, charity scams involving cheating the charity itself so it can send money to a scammer. However, in 2011 a relative new variant of a charity scam was discovered: the Matching Fund Charity Scam. It works as follows:

  1. Scammer finds a company that has a program to match charity contributions, i.e. if you, employee of this company, donate $1000 to an approved charity, the company will match your donation, so the charity will actually get $2000.
  2. Scammer sets up a fake charity, complete with the IRS certification and all that. It will be very authentic, for a very good cause, and even has celebrity endorsements. 
  3. Scammer gets his fake charity approved as one of the allowed charities for the company.
  4. Scammer recruits one of the employees as a co-conspirator, with the following proposal: you put in the paperwork that says you donated $1000. I'll give you "receipt" that "proves" you did so. When the company matches your money, I'll split it with you. It's free money! As I do most of the work, you get small cut. However, if you can find me more people that'll do the same, I'll give you a bigger cut. It's free money! Do we have a deal?

So this is what happens...

  • Employee submits a fake donation record as certified by this fake charity that says he donated $1000. 
  • Company matches the supposed donation, and gives $1000 to the fake charity. 
  • The scammer then splits the $1000 with the employee. 

Yep, and this is highly illegal, as it's fraud on multiple levels.

And it's a real case that involved Federal Court, and a fake charity called Hoops4Africa.

Stephan Bekale of Gabon established Hoops4Africa back in 2002. There's a long sob story about how he made his way to the US, leaving his parents behind, homeless, but made his way to Brooklyn, working as a street vendor, until he somehow got into a prep academy as a basketball player, helped win state championship, got a full basketball scholarship at Penn State University (a big deal in the US), and after one of his parents died of AIDS he founded Hoops4Africa, raising money for Africa.

Great story, right? Too bad it's just a cover for his charity scam, and he scammed $276600 (yes, TWO HUNDRED SEVENTY SIX THOUSAND SIX HUNDRED DOLLARS) out of Bank of America by enlisting some shady employees.

You can read the Indictment below:

The scam has several interesting characteristics in its narrative:
  • It is fraudulent on several different levels. To the company, it's a fake charity. To the participants, it's a "free money" scheme
  • It appeals to the common workers, the "99%", that instead of money going to Africa it should be going to them. As they don't actually lose any money themselves, it's just corporate money, WHY NOT cheat the company? 
  • It keeps the participants silent as they *know* they are involved in fraud... AND they have something to gain, AND they lose nothing personally. In fact, they may even be able to claim fake deductions to IRS! 
Well, this is fraud, and people who run this are going to prison. 

Enhanced by Zemanta

No comments:

Post a Comment