Fraud growing fast and costing Idaho millions

BOISE – Fraud is costing Idaho residents millions of dollars and could be one of the fastest-growing crimes statewide, state Department of Finance officials said Thursday.

Nearly $24 million has been lost or put at risk by investors because of fraud schemes, Department of Finance Securities Bureau Chief Marilyn Chastain said.

But slippery scam artists can be tough to catch, and money even tougher to recover, Chastain said.

“Our main focus has been to educate people and keep pounding away at the problem,” she said. “Our investigators and analysts go out to high schools every chance we get – high schoolers are kind of intrigued by scams, so they’re a good audience. They’re young and it’s too soon for them to have been victimized, and they can share the information with their parents.”

More than 2,100 fraud cases were reported to Idaho law enforcement agencies in 2003, according to Idaho State Police statistics, and only about 29 percent of those cases resulted in arrests. Nationally, the Federal Trade Commission estimates that one in 10 Americans fell victim to fraud in 2002, with victims most likely to be Native Americans or Alaska natives. Nearly 34 percent of the people surveyed in those ethnic groups reported they had experienced one or more frauds.

The statewide numbers do not include all the types of securities fraud handled by the Department of Finance, Chastain said.

“We just issued a cease-and-desist order in one bank-to-venture trading program yesterday,” she said. “The gist of it is that the sales person tells the investor that they have access to this secret market that the world’s largest banks trade in, and for some special reason they’re able to offer the investor the chance to trade in it, too.”

The market is phony, but the victim may be convinced to participate when the “sales person” tells him he must sign a confidentiality agreement before he can trade.

In the recent Nampa case, Chastain said, the sales person told a potential investor they were likely to make a 40 percent return on their money every month – with the sales person taking a 10 percent commission.

“But the market doesn’t exist. So, we’ve issued an order telling this person to cease offering this,” she said.

The potential victim did not invest, she said, and the department believes he may have been the only one approached in the scam. But in similar cases, she said, victims have been reluctant to report the scam because they fear they could get sued for breach of confidentiality, even though the confidentiality agreements are not valid if they are part of an illegal scheme.

Still, it can be tough for victims to recover money even if their case makes it to court.

“About $2.8 million has actually been ordered in refunds in court last year. But it’s like any other judgment. We can get a judgment for a certain amount, but whether you actually recover that money is another question,” she said.

The most common type of fraud, according to the Federal Trade Commission, is a scheme in which victims are charged an advance fee for a loan they never receive.

In Idaho, most fraud complaints sent to the FTC involve Internet auctions or sales and shop-at-home scams. State residents were also targeted with phony sweepstakes scams and advance-fee loan schemes.

For the 1,215 complaints in 2003 reported to the FTC, Idaho residents paid nearly $1.2 million, the agency reported.