Detecting and derailing postal racketeers

By Deborah L. Porter
Source: Interloc News, April 1997

Last March a 52-year-old woman from Snohomish,Wa., discovered that her coupon-clipping days were over.

For five years the woman had been manufacturing cash register receipts and sending them to major companies under various names and addresses to obtain manufacturer’s rebates. From Proctor and Gamble alone, it was determined she received at least 4,000 refunds totaling more than $8,000 in 1993 and 1994. After local postal inspectors completed their investigation, the woman pled guilty to opening mail not addressed to her, a federal charge that carries a maximum penalty of one year in prison and up to a $100,000 fine.

In the same city, three years earlier, a 37-year-old woman, using an alias and posing as a magazine editor, began contacting major corporations requesting computer- related equipment on loan for review in her publication. Upon receipt, the woman promptly took out a classified ad in her local newspaper and sold the items. During one year’s time, postal inspectors discovered the woman received equipment worth approximately $75,000 and attempted to attain additional items worth over $95,000. This woman was convicted of mail fraud, which carries a maximum penalty of five year’s imprisonment and/or a $250,000 fine.

So what’s happening in Snohomish, WA? Is this a town filled with scam artists and swindlers? Hardly. Mail fraud occurs everywhere, every day, in more ways than you can imagine—and its costing taxpayers and legitimate businesses millions of dollars annually.

Mail fraud defined

The Mail Fraud Statute (Title 18, United States code, Section 1341) is the nation’s oldest federal consumer protection statute. It defines fraud as “a scheme or artifice which uses the U.S. Mail to obtain money or property by means of false or fraudulent representations.”

Mail fraud, on the other hand, is defined as “a criminal scheme where the postal system is used to obtain money or anything of value from a victim by offering a product, service, or investment opportunity that does not live up to its claims.”

Common examples

Through the years there have been thousands of schemes, each categorized by the USPS as to whether it’s a fraud against a business or a fraud against consumers.

According to David Smith, Postal Inspector In Charge, Los Angeles Division, one very common and very lucrative scheme against businesses is the False Billing Fraud.

Here, the con artist distributes invoices for common expenses such as office products, on a massive scale to area businesses. “In many cases, the disorganized and/or overworked businessperson automatically pays the bill without bothering to cross-reference account records,” says Smith. “When you consider each bill is multiplied by the thousands, the magnitude of this type of fraud becomes apparent.”

Another common scheme, usually targeted to the independent business person, is the directory/yellow pages fraud. “In this case, the businessperson is contacted by the fraud operator either by mail or telephone and is told that a directory specific to or her industry is being published,” says Smith. A fee is solicited with the promise that a copy of the directory will be sent to the subscriber. But instead of an actual copy of the publication, the business person receives a copy of the advertisement. The business person accepts the ad as proof of publication, when in fact, no such publication exists.

While all scams are somewhat different, in order to obtain a mail fraud conviction, a prosecutor must prove that the facts were intentionally misrepresented, and that the US Mail was used to carry out the scheme.

This is where the US Postal Inspection Service comes in. For 200 years, this arm of the postal service has been investigating crimes involving the mail and postal customers.

There are currently 2,240 Postal Inspectors and 1,400 Postal Police Officers throughout the nation armed with the authority to serve federal warrants and subpoenas and make arrests for postal-related offenses.

According to the United States Postal Service, during FY 96, which ended Sept. 15, 1996, the USPS delivered 182.7 billion pieces of mail, employed over 729,000 career employees in more than 34,400 postal facilities and generated revenue of $56.4 billion. During that time, mail fraud investigations resulted in 1,547 arrests; investigations into mail bombs and explosive devices in mail resulted in 82 arrests; investigations into controlled substances in the mail resulted in 1,878 arrests, and investigations into obscenity and child pornography in the mail resulted in 187 arrests.

Getting a case to trial

But for all of these arrests, there are still literally thousands of thriving scam artists on the streets. And because of the huge case load, it’s getting tougher and tougher to get cases to trial, according to Seattle Postal Inspector Jim Bordenet.  “Unless there’s a certain threshold of loss or ‘blood’ on the street, there is less likelihood the US Attorney’s office is going to authorize prosecution of the mail fraud statute,” says Bordenet, “We simply cannot investigate every mailer that comes to our attention.

We take the cases that we believe meet the standards of the Department of Justice to our local district attorney. But realistically, a lot of our cases may not wind up in federal court. They may end up in state court, or they many not wind up in any court because they don’t meet the threshold for prosecutive consideration by either the local county prosecuting attorney or the US attorney.”

There are exceptions, however. “If the class of victims are vulnerable either because they’re immigrants, they’re elderly, they’re indigent, sick, or particularly targeted for a certain type of nasty scam, the Department Of Justice is more likely to authorize prosecution,” says Bordenet. “In cases like these, they may not need a $30,000 loss. But usually, in larger cities like the Seattle area, they’re looking for a loss of at least $100,000 before they’re going to be interested in a fraud case.”

An ounce of prevention

Although the Postal Service is putting more and more of these criminals behind bars, Bordenet does not believe jail time is the best solution. Instead, he says “the answer is more awareness on the part of the target so they don’t become victims.”

There are simple precautions every citizen and business owner can take that will keep them from becoming a victim of mail fraud. Smith offers the following suggestions:

  • If at all possible, try to conduct business with established, reliable distributors and dealers.
  • If you are thinking about ordering an item from an unknown company, ask for references, annual reports, copies of business licenses and names of regular customers. “One thing con artists cannot withstand is questions about their credentials and legitimacy,” says Smith. “Honest business people will respond to such inquiries. Crooks will put you off, respond with double-talk, or simply refuse to respond.”
  • Pay attention when paying the bills. Always cross- reference accounts and take notice of company names and addresses, no matter how legitimate the invoice looks.
  • If you are responding to a telephone inquiry or advertisement, make sure you verify receipt of payment prior to sending items of value.
  • Check unknown individuals and companies by contacting established and reliable industry organizations and experts such as the Better Business Bureau, the Antiquarian Booksellers Association, the American Bookseller’s Association, or other booksellers you trust.
  • If you’ve been victimized, spread the word! Protect your fellow booksellers by shutting out the scam artist before he/she can strike again. Post your experiences on book- related newsgroups on the Internet.
  • If you think someone is trying to defraud you, contact your local police department and local Postal Inspector. They can advise you of similar complaints or investigations currently being conducted.

And finally, trust your instincts. You probably already know on a gut level whether or not an offer is legitimate. Always keep in mind “if it’s too good to be true, it probably is.”