US:Popular Prepaid Card Fraud Scheme

Popular Prepaid Card Fraud Scheme

 

July-2014

 

The lawyer, Emily J. Henn, said her name kept cropping up in a scheme that asked its victims to make cash payments using a prepaid debt card to pay taxes owed on a fictitious lottery prize. The perpetrators of the fraud sometimes had a woman answer a phone pretending to be Ms. Henn; other times they used the logo of her law firm, Covington & Burling, on communications with the victims to make the lottery scheme appear legitimate.

“I have no idea why they picked me,” said Ms. Henn, who works in the law firm’s office in Redwood Shores, Calif. “When I would get these calls from these victims, you could hear it in their voices that they were upset and felt they had been had.”

For Ms. Henn, 41, who typically finds herself defending corporations in shareholder lawsuits, the calls from the apparent victims thrust her into the unexpected role of part consumer advocate, part consoler.

She says she is aware of at least a half-dozen victims who paid money to the unknown perpetrators but never received any lottery prize money. She talked with the Federal Bureau of Investigation about the matter, but there is no indication the authorities are close to making any arrests.

The lottery ruse is one of a number of fraudulent schemes involving a MoneyPak, a product sold by the Green Dot Corporation. MoneyPaks, basically prepaid debit cards, are a convenient way for people without access to a traditional bank account to shop online. But the prepaid product has also been a magnet for fraud that has been used to dupe consumers out of tens of millions of dollars.

That’s because the transfers of money, using a unique 14-digit access code on the back of each card, are often hard to trace. The abuse of MoneyPak cards was the subject of a front-page article in The New York Times on Aug. 1.

Green Dot intends to phase out MoneyPak and replace it with a more secure product by early next year, in part because of misuse of the product, which is sold at 92,000 retail stores across the United States.

Still, schemes using the card continue. Law enforcement authorities in a number of states have issued recent warnings to consumers about an uptick in MoneyPak swindles. The New York City Police Department community affairs division, for instance, has been posting an informational alert to Twitter over recent weeks advising consumers not to fall prey to the “Green Dot Card Scam.”

Arrests in prepaid card schemes are rare because the sums of money taken in any single incident tend to be relatively small, meaning law enforcement has little incentive to devote significant resources to an investigation. Perpetrators relying on MoneyPaks to defraud consumers also frequently change the details of their schemes.

After contacting authorities nearly a year ago, Ms. Henn stopped hearing from victims. But this spring, she received a telephone call from J. Patrick Hornbeck II, the grandson of an 86-year-old woman living in Sun City, Ariz., who had been fleeced out of more than $38,000.

Mr. Hornbeck, chairman of the theology department at Fordham University in New York, said he contacted Ms. Henn after learning that his grandmother, Dorit Austin, had been duped into sending the money after being told she had to pay taxes before collecting a $2.7 million lottery prize. Mr. Hornbeck said one of the people who tricked his grandmother had claimed on the telephone to be Ms. Henn.

Mr. Hornbeck, 32, said an Internet search led him to the real Ms. Henn, who told him that his grandmother was not the first person to be duped. Since then, he has become a forceful advocate for his grandmother in dealing with Green Dot representatives, the F.B.I. and local police in Arizona

After many calls and letters by Mr. Hornbeck, Green Dot recently reimbursed his grandmother the $340 that remained on two of the more than 80 MoneyPaks she bought from local pharmacies, in addition to about $10 in transaction fees. But Green Dot told Mr. Hornbeck it could not trace the rest of the money because the perpetrators transferred the dollars stored on the MoneyPaks to prepaid debit cards offered by another company that uses Green Dot’s network.

Mr. Hornbeck said that he understood Green Dot’s limitations in tracking fraudulent schemes, but that the company could also have more responsive to his grandmother’s plight. He said he hoped his grandmother’s situation would serve as a cautionary tale to others.

“I was concerned and disturbed it took so many phone calls and emails to even get a hearing from the company in the first place,” Mr. Hornbeck said. “Companies like this should be advocating for the lives of the people who have been upended by the criminal use of their product.”