Saturday, February 9, 2013

EDITORIAL COMMENTARY: Fraud Prevention through Data Mining

Data mining is increasing part of our everyday life. There's just tons of data each of us generate every day, from credit card and debit card purchases to GPS coordinates, and all that data can be mined for crime prevention. Police already mine crime statistics to optimize law enforcement (find hotspots of crime and concentrate police on those hotspots). Medicare used computers to detect fraudulent claim patterns. Banks use them to detect strange spending patterns and halt credit card and debit card purchases.

Read more about how Medicare Anti-fraud program saved 100+ million dollars in first year. 

The next frontier is having law enforcement agencies mine their own complaint files for commonalities. And with cooperation of banks, mine their data for strange banking activities.

Friday, February 8, 2013

Who's Rick Ross and What Does He Have to Say About Herbalife?

The Rick Ross Institute is a cult-study organization that documents destructive cults... and they have a section for Herbalife (and many other MLMs).

We have discussed before how a MLM can cultivate multiple cults of personality through its structure of giving "sales leaders" a lot of power and recognition, mainly through his or her group of downlines. And once the cult started, it is self-reinforcing and self-perpetuating.

A cult will attempt to force its members to stay in the cult, by public shaming, guilt confessions (I'm not good enough, I strive to be better), "team spirit", and so on and so forth.

One Herbalife member stated that she, and her husband, were essentially mind-controlled into investing more money and more time, to make her upline rich, while recruiting more people to make herself rich.

Thursday, February 7, 2013

Breaking News: Gary Calhoun of MPB Today plead guilty in MPB Today MLM Swindle

As reported by, Gary Calhoun, who ran a MLM / Grocery opportunity called "MPB Today" in conjunction with a online grocery business called Southeast Delivery, plead guilty to racketeering charges.

MPB Today claims to be an online grocery delivering business where you can buy a card at a discount, and use that to have groceries delivered to your door. However, it also promised serious income if you can get other people to also pre-purchase their groceries.

Wednesday, February 6, 2013

Six Archetypes of Fraud Disguise

Financial fraud is up... way up.

In 2011, according to FTC report, Americans reported 1.5 MILLION cases of fraud. That is 62% increase in merely THREE YEARS.

And vast majority of the fraud was never reported, or never investigated, because the victims were intimidated or embarrassed into not complaining (and in some cases, offered a refund for their silence).  The news media, chasing the big stories (think Enron or Madoff), don't bother with the small stories.

The bad economy, the lack of enforcement, the Internet allowing easy reach to plenty of potential victims... all contribute to an explosion of financial fraud.

Scams don't change, but disguises do. However, disguises generally fall into six archetypes, according to Kimberly Blanton, a fraud specialist at Boston College.

Tuesday, February 5, 2013

Lawyers and their role to cover up fraud

Recently, it was revealed that a whistleblower site "Science Fraud" which was beset by various legal threats since it pointed out a LOT of suspicious research in published papers, has decided to cease operations.

Read more about Science Fraud's shutdown here

This is indeed a sad day for science, esp. when the editor of the blog pointed out suspicious data in over 300 papers, and many of which were subsequently retracted. However, one of those folks chose to fight back, not with facts, but with legal threats sent by a lawyer in the form of a "cease and desist" letter.

Vast majority of scientific research is legitimate, and a handful are corrected, and even a few will face retraction... i.e. "forget we ever published this", but that rate is rising. According to an article in Nature, while the number of papers published went up only 44%, the number of retractions have gone up from 30... to 400, an increase of well over 1000 percent. In a survey, 1-2% of all scientists admits to "fudging" (okay, falsifying) some research data.

When scientists, the people we trust, are fudging data, what do you think the scammers are doing?

Scammer's first reaction often is to hire "reputation managers", then if that doesn't work, send in the lawyers.

Monday, February 4, 2013

BREAKING NEWS: Is FTC contemplating legal action against Herbalife?

Reuters reported that Herbalife may be in bigger trouble than it realizes.

According to Reuters report, New York Post filed a "freedom of information" request on FTC regarding Herbalife, and got back a 700+ page report which contains mention of ongoing investigation AND pending legal action.

A lot of documentation have been redacted thus details are not available, but the news sent Herbalife share prices down.

UPDATE: FTC said there is no pending legal action. When NYP requested clarification on why some sections were redacted an FTC staff member gave the wrong disclaimer / explanation.

Sunday, February 3, 2013

How Your Overconfidence Hurts You

One of the ways scammers get you is to make you overconfident in your own ability to "pick the right thing". This works for virtually all financial frauds (or even all frauds), but seniors are especially vulnerable as they believe their experience left them better prepared to detect fraud, even as their cognitive functions and mental abilities declined.

Read more about Seniors and Overconfidence Leading to Victimization

Overconfidence is often a simple inability to recognize or admit that you don't know enough about a certain subject you need to make decision on. Instead of holding off the decision until you have consulted experts and/or make more detailed inquiries, you were rushed / induced / enticed / hurried into making a faulty decision, by exploiting time pressure, overconfidence, attribute substitution, and other cognitive biases.

And victims who can't recognize their own weakness are overconfident indeed, whether they were lead on / pushed over by a conman is almost besides the point. It takes two to tango, so to speak. One does the scamming, and the other needs to be scammed. If one refused to be scammed, then scammers have nothing to do except wasting time.

So how *do* you avoid being overconfident?