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Nigerian Money Con Targets Small Firms

Businesses are sent bogus checks for far more than the items bought and told to 'refund' the remainder.

September 07, 2003|Kathy M. Kristof | Times Staff Writer

Small-business owners are being targeted in the latest twist of a notorious and pervasive international swindle.

Nigerian money cons, which in recent years have lured thousands of unsuspecting Americans into shady deals that cost victims thousands of dollars, have developed a new wrinkle, fraud experts say.

Whereas the old con, which is still going strong, requires the victim to participate in a moderately shady transaction, the new con targets honest businesspeople. Indeed, it banks on their honesty to "refund" supposed overpayments to the con artist. The victims get burned when they find out the original payment was bogus -- made with a counterfeit check.

Karin Graefe learned about the new scam firsthand. The Lancaster dog breeder was contacted by a Nigerian who identified himself as Micheal Joe. Joe said he wanted to buy one of Graefe's Pyrenean Mastiffs as a birthday gift for his son.

But the certified check he mailed to Graefe for $5,500 -- about $4,000 more than the price of the dog -- was bogus.

When Graefe refused to send the dog or refund the $4,000 "overpayment," the Nigerian threatened her via voicemail messages and e-mails, she said.

Still, she was lucky. She found out that the check was fake before she reimbursed the con artist or gave him one of her prizewinning dogs. Many consumers haven't be as fortunate, experts said.

"This is one of the most awful scams we've run across," said Susan Grant, director of the National Fraud Information Center/Internet Fraud Watch in Washington.

Here's how it works:

A con artist orders merchandise from a business, usually targeting small, independent retailers. He tells a story to cover why he'll be sending a check for more than the selling price. The tales vary in detail, but follow a general script, Grant said.

Sending money from a Third World country is difficult, the con man will say. But someone in the United States owes him money, so he'll have that person send the retailer a check to cover the cost of the purchase. That amount is always more than the actual cost of whatever product is being sold, so the con artist will ask the retailer to send a "refund" for the difference, Grant said.

The problem is that the original check sent to the victim is bogus, but it's often such an expert forgery that it can take weeks for the retailer's bank to discover the fraud. When the bank does discover the forgery, the victim's bank account is debited for the full amount of the fraudulent check.

'Cleared' Doesn't Mean OK

Even when victims think they're being cautious by not sending money to the con artist until their banks say the checks have "cleared," they're not safe, Grant said. That's because U.S. banking laws require financial institutions to provide access to deposits within a set time frame -- even if the bank has not collected the money from the deposited check. When that time is up, the bank will tell the consumer that the funds are available for use. However, if the check eventually bounces, the consumer's bank account is debited for the full amount of the bad check.

By then, the victim has sent the con artist his money. The victim is held liable for whatever amount was wired to the con artist, which usually amounts to thousands of dollars.

Moreover, because the seller is rarely rich enough to shoulder that type of loss, it can trigger a pile of overdraft fees as all the other checks the seller has written over the course of the last month bounce.

"The fact that the [buyer's] check is fake isn't obvious in any way," Grant said. "When the check is returned -- and that often takes weeks -- the victim is left holding the bag."

Graefe's case provided a typical study in how the con works. The supposed buyer said he would issue Graefe a cashier's check through a client of his who purportedly owed the con artist $5,500. Graefe was urged to take the check to a check-cashing outlet, deduct the $1,500 cost of the dog from the proceeds, and wire the rest to the thief.

That's the key to the con, said John Gill, a spokesman for the Secret Service in Washington. The con artist doesn't want whatever the victim is selling. They want the "refund," which turns a bad check into real money.

Variation of Longtime Scam

The Secret Service has had a long-running project to deal with so-called 419 scams, named after a Nigerian code section on financial frauds. The classic 419 scam asks the victim to help some hapless relative of a deposed despot get millions of dollars out of the con artist's country.

The con artist offers the victim a percentage of this illusive pot of gold, hoping to suck the victim into paying all sorts of fees to get trunks of money out of Nigeria, Sierra Leone, the Philippines or whatever exotic locale the con artist chooses. In the end, the money is never sent, but the victims are often out thousands of dollars.

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