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<DIV class=timestamp>May 20, 2007</DIV>
<DIV class=kicker></DIV>
<H1><NYT_HEADLINE type=" " version="1.0">Bilking the Elderly, With a Corporate
Assist </NYT_HEADLINE></H1><NYT_BYLINE type=" " version="1.0"></NYT_BYLINE>
<DIV class=byline>By <A title="More Articles by Charles Duhigg"
href="http://topics.nytimes.com/top/reference/timestopics/people/d/charles_duhigg/index.html?inline=nyt-per">CHARLES
DUHIGG</A></DIV><NYT_TEXT></NYT_TEXT>
<DIV id=articleBody>
<P>The thieves operated from small offices in Toronto and hangar-size rooms in
India. Every night, working from lists of names and phone numbers, they called
World War II veterans, retired schoolteachers and thousands of other elderly
Americans and posed as government and insurance workers updating their files.
</P>
<P>Then, the criminals emptied their victims’ bank accounts.</P>
<P>Richard Guthrie, a 92-year-old Army veteran, was one of those victims. He
ended up on scam artists’ lists because his name, like millions of others, was
sold by large companies to telemarketing criminals, who then turned to major
banks to steal his life’s savings. </P>
<P>Mr. Guthrie, who lives in Iowa, had entered a few sweepstakes that caused his
name to appear in a database advertised by <A title=infoUSA
href="http://www.nytimes.com/mem/MWredirect.html?MW=http://custom.marketwatch.com/custom/nyt-com/html-companyprofile.asp&symb=IUSA">infoUSA</A>,
one of the largest compilers of consumer information. InfoUSA sold his name, and
data on scores of other elderly Americans, to known lawbreakers, regulators
say.</P>
<P>InfoUSA advertised lists of “Elderly Opportunity Seekers,” 3.3 million older
people “looking for ways to make money,” and “Suffering Seniors,” 4.7 million
people with cancer or Alzheimer’s disease. “Oldies but Goodies” contained
500,000 gamblers over 55 years old, for 8.5 cents apiece. One list said: “These
people are gullible. They want to believe that their luck can change.” </P>
<P>As Mr. Guthrie sat home alone — surrounded by his Purple Heart medal, photos
of eight children and mementos of a wife who was buried nine years earlier — the
telephone rang day and night. After criminals tricked him into revealing his
banking information, they went to <A
title="More information about Wachovia Corporation"
href="http://topics.nytimes.com/top/news/business/companies/wachovia_corporation/index.html?inline=nyt-org">Wachovia</A>,
the nation’s fourth-largest bank, and raided his account, according to banking
records.</P>
<P>“I loved getting those calls,” Mr. Guthrie said in an interview. “Since my
wife passed away, I don’t have many people to talk with. I didn’t even know they
were stealing from me until everything was gone.” </P>
<P>Telemarketing fraud, once limited to small-time thieves, has become a global
criminal enterprise preying upon millions of elderly and other Americans every
year, authorities say. Vast databases of names and personal information, sold to
thieves by large publicly traded companies, have put almost anyone within reach
of fraudulent telemarketers. And major banks have made it possible for criminals
to dip into victims’ accounts without their authorization, according to court
records.</P>
<P>The banks and companies that sell such services often confront evidence that
they are used for fraud, according to thousands of banking documents, court
filings and e-mail messages reviewed by The New York Times.</P>
<P>Although some companies, including Wachovia, have made refunds to victims who
have complained, neither that bank nor infoUSA stopped working with criminals
even after executives were warned that they were aiding continuing crimes,
according to government investigators. Instead, those companies collected
millions of dollars in fees from scam artists. (Neither company has been
formally accused of wrongdoing by the authorities.)</P>
<P>“Only one kind of customer wants to buy lists of seniors interested in
lotteries and sweepstakes: criminals,” said Sgt. Yves Leblanc of the Royal
Canadian Mounted Police. “If someone advertises a list by saying it contains
gullible or elderly people, it’s like putting out a sign saying ‘Thieves welcome
here.’ ”</P>
<P>In recent years, despite the creation of a national “do not call” registry,
the legitimate telemarketing industry has grown, according to the <A
title="More articles about Direct Marketing Association"
href="http://topics.nytimes.com/top/reference/timestopics/organizations/d/direct_marketing_assn/index.html?inline=nyt-org">Direct
Marketing Association</A>. Callers pitching insurance plans, subscriptions and
precooked meals collected more than $177 billion in 2006, an increase of $4.5
billion since the federal do-not-call restrictions were put in place three years
ago. </P>
<P>That growth can be partly attributed to the industry’s renewed focus on the
elderly. Older Americans are perfect telemarketing customers, analysts say,
because they are often at home, rely on delivery services, and are lonely for
the companionship that telephone callers provide. Some researchers estimate that
the elderly account for 30 percent of telemarketing sales — another example of
how companies and investors are profiting from the growing numbers of Americans
in their final years.</P>
<P>While many telemarketing pitches are for legitimate products, the number of
scams aimed at older Americans is on the rise, the authorities say. In 2003, the
Federal Trade Commission estimated that 11 percent of Americans over age 55 had
been victims of consumer fraud. The following year, the <A
title="More articles about the Federal Bureau of Investigation."
href="http://topics.nytimes.com/top/reference/timestopics/organizations/f/federal_bureau_of_investigation/index.html?inline=nyt-org">Federal
Bureau of Investigation</A> shut down one telemarketing ring that stole more
than $1 billion, spanned seven countries and resulted in 565 arrests. Since the
start of last year, federal agencies have filed lawsuits or injunctions against
at least 68 telemarketing companies and individuals accused of stealing more
than $622 million. </P>
<P>“Most people have no idea how widespread and sophisticated telemarketing
fraud has become,” said James Davis, a Federal Trade Commission lawyer. “It
shocks even us.” </P>
<P>Many of the victims are people like Mr. Guthrie, whose name was among the
millions that infoUSA sold to companies under investigation for fraud, according
to regulators. Scam artists stole more than $100,000 from Mr. Guthrie, his
family says. How they took much of it is unclear, because Mr. Guthrie’s memory
is faulty and many financial records are incomplete. </P>
<P>What is certain is that a large sum was withdrawn from his account by thieves
relying on Wachovia and other banks, according to banking and court records.
Though 20 percent of the total amount stolen was recovered, investigators say
the rest has gone to schemes too complicated to untangle.</P>
<P>Senior executives at infoUSA were contacted by telephone and e-mail messages
at least 30 times. They did not respond. </P>
<P>Wachovia, in a statement, said that it had honored all requests for refunds
and that it was cooperating with authorities.</P>
<P>Mr. Guthrie, however, says that thieves should have been prevented from
getting access to his funds in the first place.</P>
<P>“I can’t understand why they were allowed inside my account,” said Mr.
Guthrie, who lives near Des Moines. “I just chatted with this woman for a few
minutes, and the next thing I knew, they took everything I had.”</P>
<P><SPAN class=bold>Sweepstakes a Common Tactic</SPAN></P>
<P>Investigators suspect that Mr. Guthrie’s name first appeared on a list used
by scam artists around 2002, after he filled out a few contest entries that
asked about his buying habits and other personal information.</P>
<P>He had lived alone since his wife died. Five of his eight children had moved
away from the farm. Mr. Guthrie survived on roughly $800 that he received from
Social Security each month. Because painful arthritis kept him home, he spent
many mornings organizing the mail, filling out sweepstakes entries and listening
to big-band albums as he chatted with telemarketers.</P>
<P>“I really enjoyed those calls,” Mr. Guthrie said. “One gal in particular
loved to hear stories about when I was younger.” </P>
<P>Some of those entries and calls, however, were intended solely to create
databases of information on millions of elderly Americans. Many sweepstakes were
fakes, investigators say, and existed only to ask entrants about shopping
habits, religion or other personal details. Databases of such responses can be
profitably sold, often via electronic download, through list brokers like Walter
Karl Inc., a division of infoUSA. </P>
<P>The list brokering industry has existed for decades, primarily serving
legitimate customers like magazine and catalog companies. InfoUSA, one of the
nation’s largest list brokers and a publicly held company, matches buyers and
sellers of data. The company maintains records on 210 million Americans,
according to its Web site. In 2006, it collected more than $430 million from
clients like <A title="Reader’s Digest"
href="http://www.nytimes.com/mem/MWredirect.html?MW=http://custom.marketwatch.com/custom/nyt-com/html-companyprofile.asp&symb=RDA">Reader’s
Digest</A>, Publishers Clearinghouse and Condé Nast.</P>
<P>But infoUSA has also helped sell lists to companies that were under
investigation or had been prosecuted for fraud, according to records collected
by the Iowa attorney general. Those records stemmed from a now completed
investigation of a suspected telemarketing criminal.</P>
<P>By 2004, Mr. Guthrie’s name was part of a list titled “Astroluck,” which
included 19,000 other sweepstakes players, Iowa’s records show. InfoUSA sold the
Astroluck list dozens of times, to companies including HMS Direct, which
Canadian authorities had sued the previous year for deceptive mailings; Westport
Enterprises, the subject of consumer complaints in Kansas, Connecticut and
Missouri; and Arlimbow, a European company that Swiss authorities were
prosecuting at the time for a lottery scam.</P>
<P>(In 2005, HMS’s director was found not guilty on a technicality. Arlimbow was
shut down in 2004. Those companies did not return phone calls. Westport
Enterprises said it has resolved all complaints, complies with all laws and
engages only in direct-mail solicitations.)</P>
<P>Records also indicate that infoUSA sold thousands of other elderly Americans’
names to Windfall Investments after the F.B.I. had accused the company in 2002
of stealing $600,000 from a California woman. </P>
<P>Between 2001 and 2004, infoUSA also sold lists to World Marketing Service, a
company that a judge shut down in 2003 for running a lottery scam; to Atlas
Marketing, which a court closed in 2006 for selling $86 million of bogus
business opportunities; and to Emerald Marketing Enterprises, a Canadian firm
that was investigated multiple times but never charged with wrongdoing. </P>
<P>The investigation of Windfall Investments was closed after its owners could
not be located. Representatives of Windfall Investments, World Marketing
Services, Atlas Marketing and Emerald Marketing Enterprises could not be located
or did not return calls.</P>
<P>The Federal Trade Commission’s rules prohibit list brokers from selling to
companies engaged in obvious frauds. In 2004, the agency fined three brokers
accused of knowingly, or purposely ignoring, that clients were breaking the law.
The Direct Marketing Association, which infoUSA belongs to, requires brokers to
screen buyers for suspicious activity. </P>
<P>But internal infoUSA e-mail messages indicate that employees did not abide by
those standards. In 2003, two infoUSA employees traded e-mail messages
discussing the fact that Nevada authorities were seeking Richard Panas, a
frequent infoUSA client, in connection with a lottery scam.</P>
<P>“This kind of behavior does not surprise me, but it adds to my concerns about
doing business with these people,” an infoUSA executive wrote to colleagues.
Yet, over the next 10 months, infoUSA sold Mr. Panas an additional 155,000
names, even after he pleaded guilty to criminal charges in Nevada and was barred
from operating in Iowa. </P>
<P>Mr. Panas did not return calls. </P>
<P>“Red flags should have been waving,” said Steve St. Clair, an Iowa assistant
attorney general who oversaw the infoUSA investigation. “But the attitude of
these list brokers is that it’s not their responsibility if someone else breaks
the law.” </P>
<P><SPAN class=bold>Millions of Americans Are Called</SPAN></P>
<P>Within months of the sale of the Astroluck list, groups of scam artists in
Canada, the Caribbean and elsewhere had the names of Mr. Guthrie and millions of
other Americans, authorities say. Such countries are popular among con artists
because they are outside the jurisdiction of the United States.</P>
<P>The thieves would call and pose as government workers or pharmacy employees.
They would contend that the <A
title="More articles about Social Security Administration"
href="http://topics.nytimes.com/top/reference/timestopics/organizations/s/social_security_administration/index.html?inline=nyt-org">Social
Security Administration</A>’s computers had crashed, or prescription records
were incomplete. Payments and pills would be delayed, they warned, unless the
older Americans provided their banking information. </P>
<P>Many people hung up. But Mr. Guthrie and hundreds of others gave the callers
whatever they asked.</P>
<P>“I was afraid if I didn’t give her my bank information, I wouldn’t have money
for my heart medicine,” Mr. Guthrie said.</P>
<P>Criminals can use such banking data to create unsigned checks that withdraw
funds from victims’ accounts. Such checks, once widely used by gyms and other
businesses that collect monthly fees, are allowed under a provision of the
banking code. The difficult part is finding a bank willing to accept them.</P>
<P>In the case of Mr. Guthrie, criminals turned to Wachovia.</P>
<P>Between 2003 and 2005, scam artists submitted at least seven unsigned checks
to Wachovia that withdrew funds from Mr. Guthrie’s account, according to banking
records. Wachovia accepted those checks and forwarded them to Mr. Guthrie’s bank
in Iowa, which in turn sent back $1,603 for distribution to the checks’ creators
that submitted them. </P>
<P>Within days, however, Mr. Guthrie’s bank, a branch of Wells Fargo, became
concerned and told Wachovia that the checks had not been authorized. At Wells
Fargo’s request, Wachovia returned the funds. But it failed to investigate
whether Wachovia’s accounts were being used by criminals, according to
prosecutors who studied the transactions.</P>
<P>In all, Wachovia accepted $142 million of unsigned checks from companies that
made unauthorized withdrawals from thousands of accounts, federal prosecutors
say. Wachovia collected millions of dollars in fees from those companies, even
as it failed to act on warnings, according to records. </P>
<P>In 2006, after account holders at Citizens Bank were victimized by the same
thieves that singled out Mr. Guthrie, an executive wrote to Wachovia that “the
purpose of this message is to put your bank on notice of this situation and to
ask for your assistance in trying to shut down this scam.”</P>
<P>But Wachovia, which declined to comment on that communication, did not shut
down the accounts.</P>
<P>Banking rules required Wachovia to periodically screen companies submitting
unsigned checks. Yet there is little evidence Wachovia screened most of the
firms that profited from the withdrawals. </P>
<P>In a lawsuit filed last year, the United States attorney in Philadelphia said
Wachovia received thousands of warnings that it was processing fraudulent
checks, but ignored them. That suit, against the company that printed those
unsigned checks, Payment Processing Center, or P.P.C., did not name Wachovia as
a defendant, though at least one victim has filed a pending lawsuit against the
bank.</P>
<P>During 2005, according to the United States attorney’s lawsuit, 59 percent of
the unsigned checks that Wachovia accepted from P.P.C. and forwarded to other
banks were ultimately refused by other financial institutions. Wachovia was
informed each time a check was returned.</P>
<P>“When between 50 and 60 percent of transactions are returned, that tells you
at gut level that something’s not right,” said the United States attorney in
Philadelphia, Patrick L. Meehan. </P>
<P>Other banks, when confronted with similar evidence, have closed questionable
accounts. But Wachovia continued accepting unsigned checks printed by P.P.C.
until the government filed suit in 2006.</P>
<P>Wachovia declined to respond to the accusations in the lawsuit, citing the
continuing civil litigation.</P>
<P>Although Wachovia is the largest bank that processed transactions that stole
from Mr. Guthrie, at least five other banks accepted 31 unsigned checks that
withdrew $9,228 from his account. Nearly every time, Mr. Guthrie’s bank told
those financial institutions the checks were fraudulent, and his money was
refunded. But few investigated further.</P>
<P>The suit against P.P.C. ended in February. A court-appointed receiver will
liquidate the firm and make refunds to consumers. P.P.C.’s owners admitted no
wrongdoing. </P>
<P>Wachovia was asked in detail about its relationship with P.P.C., the
withdrawals from Mr. Guthrie’s account and the accusations in the United States
attorney’s lawsuit. The company declined to comment, except to say: “Wachovia
works diligently to detect and end fraudulent use of its accounts. During the
time P.P.C. was a customer, Wachovia honored all requests for returns related to
the P.P.C. accounts, which in turn protected consumers from loss.” </P>
<P>Prosecutors argue that many elderly accountholders never realized Wachovia
had processed checks that withdrew from their accounts, and so never requested
refunds. Wachovia declined to respond.</P>
<P>The bank’s statement continued: “Wachovia is cooperating fully with
authorities on this matter.” </P>
<P><SPAN class=bold>Some Afraid to Seek Help</SPAN></P>
<P>By 2005, Mr. Guthrie was in dire straits. When tellers at his bank noticed
suspicious transactions, they helped him request refunds. But dozens of
unauthorized withdrawals slipped through. Sometimes, he went to the grocery
store and discovered that he could not buy food because his account was empty.
He didn’t know why. And he was afraid to seek help.</P>
<P>“I didn’t want to say anything that would cause my kids to take over my
accounts,” he said. Such concerns play into thieves’ plans, investigators
say.</P>
<P>“Criminals focus on the elderly because they know authorities will blame the
victims or seniors will worry about their kids throwing them into nursing
homes,” said C. Steven Baker, a lawyer with the Federal Trade Commission.
“Frequently, the victims are too distracted from dementia or Alzheimer’s to
figure out something’s wrong.” </P>
<P>Within a few months, Mr. Guthrie’s children noticed that he was skipping
meals and was behind on bills. By then, all of his savings — including the
proceeds of selling his farm and money set aside to send great-grandchildren to
college — was gone. </P>
<P>State regulators have tried to protect victims like Mr. Guthrie. In 2005,
attorneys general of 35 states urged the Federal Reserve to end the unsigned
check system.</P>
<P>“Such drafts should be eliminated in favor of electronic funds transfers that
can serve the same payment function” but are less susceptible to manipulation,
they wrote. </P>
<P>But the Federal Reserve disagreed. It changed its rules to place greater
responsibility on banks that first accept unsigned checks, but has permitted
their continued use.</P>
<P>Today, just as he feared, Mr. Guthrie’s financial freedom is gone. He gets a
weekly $50 allowance to buy food and gasoline. His children now own his home,
and his grandson controls his bank account. He must ask permission for large or
unusual purchases. </P>
<P>And because he can’t buy anything, many telemarketers have stopped
calling.</P>
<P>“It’s lonelier now,” he said at his kitchen table, which is crowded with
mail. “I really enjoy when those salespeople call. But when I tell them I can’t
buy anything now, they hang up. I miss the good chats we used to
have.”</P></DIV></DIV></BODY></HTML>