A New Variation on Charity Scam: The Matching Funds Scam

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.

Grandparent Scam: What to look for

Do you have a child or a grandchild? Is he or she active on Facebook and such? With detailed profiles? This happens more with sons than daughters. If so, you may soon become a victim of grandparent scam.

The scam is quite simple: the scammers will call you from some foreign number, usually in Mexico. A scared voice, greet you by name, says he's in trouble, probably car accident while on a vacation south of the border, need money wired right away for some sort of emergency, like bail, hospital bill, attorney, etc. The "child" will only say a few sentences, then hand the phone to an associate, who'll be the real scammer, pretending to be hospital staff, police, attorney, etc. who wants to help the child, and they need the money now, so the grandparent needs to go to a Western Union like "now, now, now" and send like 2000 or so dollars to this unknown destination. In many cases, they convinced one, who has no money, who convinced someone else to send the money.

There are several variations. It could be your best friend and husband/wife traveling abroad and got robbed, and need money to take care of a hotel bill or they'll miss their plane back home, or something. It could arrive via email instead of voice call. But the voice call involving allegedly wild antics of a grandchild is far more likely.

It's gotten so prevalent, FBI now has a warning for this:

http://www.fbi.gov/news/stories/2012/april/grandparent_040212

and various newspapers have picked up on this as well:

http://www.washingtonpost.com/blogs/rosenwald-md/post/the-grandmagrandpa-scam-is-back-in-the-region/2012/11/26/854ae7ce-37db-11e2-8a97-363b0f9a0ab3_blog.html?tid=pm_local_pop

http://www.wjla.com/articles/2012/11/scam-tricks-grandparents-out-of-thousands-82455.html

How *does* this scam work, from a psychological point of view? Let us examine it from a different angle.

Bad Argument: Wishful Extrapolation, Testimonial, and Placebo Effect

English: A chocolate-flavored multi-protein nutritional supplement milkshake (right), consisting of circa 25g protein powder (center) and 300ml milk (left). (Photo credit: Wikipedia)

Sometimes, the product in MLM, esp. nutritional supplements, are marketed one way that in no way can be proven. One company is known to claim their supplement "assists your body's natural release of stem cells" (huh?). Clearly, if they wish to not enrage the Federal Drug Administration (FDA) they need to be very careful about what they claim their product can do. In other words, if it's known to have a direct effect on the body, it's a drug, and therefore ILLEGAL TO MARKET (unless registered and underwent safety trials).

Not too long ago, FDA took the cosmetic maker Estee Lauder to court over some of their anti-aging cream claims that it affects the cells. THAT would make it a drug, not cosmetic.

Nutritional supplement companies only test to prove safety (i.e. at the concentration it's being sold it's not toxic) for their products. Unlike drug companies, nutritional supplement companies are NOT required to prove that product actually has any effect, and in fact, would prefer NOT to have any direct effect else they'll run afoul of the FDA.

Which is why you see all these "weasel wording". That stem cell "support" company clearly wants to say that if you take their stuff, your general stem cell level in your blood will increase, and therefore you'll be healthier. However, they need to word their ad very carefully, and the result is one vague sentence that allows you to interpret it any way you like. It's "You know what I mean".

Problem happens when this "you know what I mean" turns out to be unproven narrative that is wildly extrapolated from minimal research.

Bad Argument: Association Propaganda

Almost all sorts of advertisement (a form of propaganda) use association.

Alcohol ads usually use beautiful women, dancing to music, flashy cars, and so on. There's also the "AXE" product's frequent association with sex, or Marlboro cigarette's association with cowboy, the West, and freedom.


But what exactly is association? An attempt to associate (relate) two separate things that normally have NO relations with each other, usually by evoking an emotional response such as lust, guilt, pity, and so on.

If you hang out with the rich and famous, you look good by association (unless of course, you're merely hired help).

MLM companies, most having almost no name recognition (i.e. reputation) to stand on (there are very few exceptions, such as Amway, and maybe Herbalife, and NuSkin) must rely on association to get their point across, and when such association are made through merely implication, or outright FRAUD, the result can be devastating to its affiliates.

False associations are easy to make, and can often be misinterpreted by affiliates, who has confirmation bias to interpret any information they receive as somehow confirming their choice.

FBI list of online scams: an epic list

Français : Logo de l'association (Photo credit: Wikipedia)

FBI, in May 2012, released an epic list of online scams, and some of them are rather interesting as they aren't covered much in the news. You usually heard of mortgage fraud, scareware, ransomware, grandpa scam, and so on. But have you heard of funeral fraud, smishing / vishing, and telephone Denial-of-Service? 

Funeral Fraud

A variant of the insurance fraud, employee in the mortuary bought insurance in the name of a person, reported that person's death, then arranged a fake burial for this fake person, and claimed the payout. They went as far as hiring actors to play the alleged deceased's family at the funeral and a burial plot (no headstone!)  

They were discovered by insurance investigator and FBI Fraud Unit, when they tried to cover up their crime by exhuming the buried casket and had it cremated instead. 

Smishing / Vishing

Both are variants of "Phishing" (SMS + Phishing and Voice + Phishing, respectively). Basically you receive a message (SMS or Voice) that directs you to a method of contact where you are gently prompted for personal information that may result in compromise of your account information. Phishing usually involves a link to a website, while Smishing and Vishing appear to be more secure as it's used less often. 

The phone number will be worthless, even if it has an area code in the US. The proliferation of VOIP services has made phone numbers available anywhere for pennies. People in India can be calling you with a US number that's nearly impossible to trace. 

Bad Argument: The Half-Lie

Many of the "Bag Arguments" we've covered before are outright lies, logical fallacies, or red herrings. However, there is another kind of lie: the half-lie.

A half-lie is basically something that is partially true, and partially false, but you don't know which part is real, and which part is not real, and when the whole thing was presented as real, you'd assume that it really is real... never suspecting that part of it is not.

Here's an example... Has everybody heard of Alcoholics Anonymous, or AA? Founded by William G "Bill" Wilson? Their main book is simply called "The Big Book", and inside are tons of advice not only for the alcoholic him- or herself, but also for all the people around him or her. Here are some quotes:

As wives of Alcoholics Anonymous, we would like you to feel that we understand as perhaps few can. We want to analyze mistakes we have made.A.A. Big Book, 3rd Edition, William G. Wilson, Chapter 8, To Wives, page 104.

Sometimes there were other women. How heartbreaking was this discovery; how cruel to be told that they understood our men as we did not!A.A. Big Book, 3rd Edition, William G. Wilson, Chapter 8, To Wives, page 106.

Okay, this is obviously written by the wife of Bill Wilson, Lois Wilson, right?

Wrong. Bill Wilson wrote it himself, from the POV of his wife. Later truth emerged that Lois did not write a single word, despite volunteering to do so. Apparently Bill didn't trust his own wife to write properly.

By omitting the truth (that this "wife to wife" advice was NOT written by a wife at all), the advice is now of dubious value.

And it wouldn't surprise you that a lot of Scam, MLM, and Ponzi propaganda work the same way through recruiters and shills.

Who really benefits?

Every sort of narrative has a purpose, and often, it's to benefit someone.

Most narratives are of benign nature, like one's life, latest vacation, best friend's wedding, and so on. It's often for "social prestige" or "social capital".

However, sometimes, narratives are for commercial, or financial gain. Advertisements are the most commonly seen narrative, where they want you to buy the product in question, or raise the prestige of the company in question.

If you are not sure about the narrative's purpose, ask this question: "WHO REALLY BENEFITS?"

The results may surprise you.

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One of the most often used fake arguments used by defenders of a suspect scheme against a critic of the scheme is to claim that the critic is just out to raise controversy to push for ad views to the blog or website.

Consider from two different perspectives: the defender of the scheme, vs. critic of the scheme.

When a critic criticizes the scheme, who benefits?

Does the critic achieve any financial gain? No. (Though defenders often make baseless accusations of this, such as "your'e just out to get ad views" or "you're just bashing us for our competitor". ).  They don't really gain either way by busting a scam. They are doing it because it's the right thing to do.

Does the defender achieve any financial gain? Yes! They continue to benefit from whatever they are participating in! They *have* to protect their own livelihood, even if it means making illogical attacks!

As a neutral observing the situation, think about it: who has the most to gain, or lose?