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President of Telemarketing Fraud Business Pleads Guilty

October 31, 2009 By Paul (Founder, WorkAtHomeTruth) Leave a Comment

10/30/2009 Department of Justice Press Release via the FBI Website:

PHILADELPHIA—Neal D. Saferstein, 36, of Mount Laurel, NJ, pleaded guilty today to four counts of an indictment stemming from a multi-million dollar telemarketing scam that defrauded as many as 400,000 small businesses out of as much as $75 million, announced U.S. Attorney Michael L. Levy. Saferstein was the President and Chief Executive Officer of  GoInternet.net, Inc. (“GoInternet”), which did business at 20 N. Third Street, and 6 Strawberry Street, in Philadelphia. GoInternet allegedly derived more than $75 million in gross revenues from a fraudulent telemarketing scheme that lasted from 2001 to 2004. Co-defendant Tyrone L. Barr, 35, of Philadelphia, was Vice President of Customer Service and Regulatory Affairs. Co-defendant Billy D. Light, 41, of Voorhees, NJ, was Chief Information Officer. Saferstein pleaded guilty today to one count of wire fraud, one count of mail fraud, and two counts of filing false tax returns. Sentencing is scheduled for February 2010.

According to the indictment, the entire GoInternet business model was designed to defraud customers and potential customers into making monthly $29.00 payments for Internet-related services without their knowledge or authorization. GoInternet’s telemarketers duped customers into receiving a welcome packet without disclosing that the mailing would trigger monthly bills unless the customer called to cancel. The packets were then designed to look like bulk business mail to prompt it to be disregarded or thrown away. GoInternet engaged in “cramming.” It would place monthly charges on its customers’ local telephone bills, without authorization, which customers routinely paid without noticing. By approximately 2003, GoInternet employed over 1,000 telemarketers and was signing on approximately 7,500 new customers every week. By the end of 2003, GoInternet’s customer base included more than 350,000 businesses.

Saferstein prevented customers from receiving notices disclosing the cost of services, and delayed and prevented refunds from going to customers that had been defrauded and were promised refunds. Barr created fake sales-verification tapes which were purported to contain the telemarketer’s call to the customer and the customer’s consent. Barr pleaded guilty to wire fraud and is awaiting sentencing.

In 2003, the Federal Trade Commission brought a civil proceeding regarding GoInternet’s practice of billing consumers for services without their authorization, which resulted in a $58 million judgment being imposed against Saferstein and GoInternet. Light admitted that Saferstein directed him to testify falsely before the federal district court in Philadelphia during the FTC proceedings. Light pleaded guilty to conspiracy to commit perjury and is awaiting sentencing.

Saferstein also used GoInternet corporate funds as if they were in his personal bank account, paying for significant personal expenses. He also failed to report income from the years 2000 to 2003 allegedly exceeding $1.7 million. In addition, the indictment charges defendant Saferstein with failing to pay over to the Internal Revenue Service more than $2.8 million in payroll taxes while he ran GoInternet.

Saferstein faces a maximum penalty of 46 years’ imprisonment with a maximum fine of  $1 million.

Barr faces a maximum penalty of 20 years’ imprisonment with a maximum fine of $250,000.

Light faces a maximum penalty five years’ imprisonment with a maximum fine of $250,000.

The case was investigated by the Federal Bureau of Investigation, the Federal Trade Commission, the Federal Bureau of Investigation, the Internal Revenue Service and the U.S. Postal Inspection Service. It is being prosecuted by Assistant United States Attorneys Jennifer Arbittier Williams and Jason P. Bologna, and by FTC Special Assistant United States Attorney Larissa L. Bungo.

Filed Under: FBI Releases Tagged With: , , , , , , , , , , , , , ,

Digging deeper into hidden negative option scams

September 20, 2009 By Paul (Founder, WorkAtHomeTruth) 3 Comments

Warning: this particular post contains EXTREMELY loosely connected thoughts and observations

Some of the things I’ve been thinking about and trying to connect:

  • Not Kevin’s informaton at StrangelyPerfect.tv  showing many negative option scams set up companies in the UK (details here)
  • The recent Trend Micro paper detailing a cybercrime hub operating out of Estonia which extends into Europe and the United States (pdf available here)
  • The potential significance of hidden negative option “bizop kit” victims alleging the presence of  trojan horses on the CDs they received in the mail
  • The economic relationship between Estonia and The Isle of Man

AGAIN – these are very loosely connected thoughts…or maybe not even connected at all…in fact I don’t even present any possible conclusions

Today I was asking Lynndel Edgington of Eagle Research Associates about a comment Not Kevin made over at StrangelyPerfect.tv:

“Setting up a UK Ltd company at Companies House is very easy and no they don’t ask for proof of id or anything. You only need to register for Vat if/when your turnover exceeds a certain amount, so that comes after registration (if at all).
There are however quite strict regulations about your obligations as a Director, filing accounts on time etc. See:
http://www.businesslink.gov.uk/bdotg/action/layer?topicId=1073870537

Not sure how these companies would get their stuff from Companies House if they are using false addresses, filing accounts for all those companies would be a nightmare too (if done properly) – which is another reason it’s odd that there are so many of them which just multiplies the work and could make it very confusing! Perhaps they are not planning to stick around long enough to bother with legalities like filing accounts!? (Allegedly) (You can be in business for around 18 months I think before your first years accounts are due).”

I suggest you read the full discussion here to get the full context.

As Lynndel pointed out, Not Kevin really answered his own question:

(Lynndel): “They don’t plan on being around long enough to worry about reports/accounts are due.  This is get in quick, get the cash and get out before the authorities come calling.  The only ones who get caught are those who get greedy and try to milk it longer than they should.  They forget they can wait a couple of months, and then do it all over with a new name and a slightly different look and do it all over again.”

Seemingly related to all of this is the fascinating research recently performed by Griffith University’s Professor Jason Sharman

Which appears to indicate that the U.S. and the U.K. themselves may be the “dirtiest tax havens” which is fascinating as Sharman concludes:

“”The United States, Great Britain and other OECD states have chosen not to comply with the international standards which they have been largely responsible for putting in place.”

According to Switzerland’s Le Temps Newspaper:

“With a small budget, and using classified ads that proliferate on the Internet or in the press, this professor of the Center for Governance and Public Policy at Griffith University (Australia) made bids to set up shell companies in 22 countries — some labeled as tax havens; others are very respectable members of the OECD.”

The following are excerpted from Jason Sharman’s presentation of his key findings of his recent study:

Summary of the research

“The research involved electronically soliciting offers of anonymous corporate vehicles from 45 different corporate service providers in 22 different countries, and collating the various responses. Anonymous shell companies in isolation can sometimes be useful in disguising financial crime, but generally depend on associated bank accounts. And so the next step was trying to set up bank accounts linked to these shell companies. To the extent that the shell companies are anonymous (that is, where the beneficial owner remains unknown), the bank account will also be de facto anonymous. Seventeen of the 45 attempts to solicit anonymous corporate vehicles met with success. Of these, 13 of 17 successful approaches were to service providers in OECD countries (seven in the UK, four in the United States, one in Spain, and one in Canada). This compared with only four service providers of 28 willing to provide anonymous shell companies in countries often identified as ‘tax havens’
(Hong Kong, Singapore, Belize and Uruguay).”

Interesting details from Jason Sharman’s research:

  • “In 2009, the author was able to create a Nevada company and then open an account at one of America’s most prominent banks with
    only a scanned copy of a driver’s licence.”
  • “the author purchased an anonymous England and Wales company for GBP515, incorporated within a day”
  • The Economist highlighted the following amazing finding from Sharman’s study:
    • “One example was Britain, where in 45 minutes on the internet he formed a company without providing identification, was issued with bearer shares (which have been almost universally outlawed because they confer completely anonymous ownership) as well as nominee directors and a secretary. All was achieved at a cost of £515.95 ($753).”

Constantly changing names as a keystone to a “business model”

This isn’t really anything new, but I really enjoyed the wording the authors of the Trend Micro Cybercrime Hub report used to describe it:”The criminal outfit uses a lot of daughter companies that operate in Europe and in the United States. These daughter companies’ names quickly get the heat when they become involved in Internet abuse and other cybercrimes. They disappear after getting bad publicity or when upstream providers terminate their contracts. This does not cause much harm to the operation as a whole, however, as the same cybercriminal just continues its business under a new name. In fact, constantly changing names is part of the company’s business model”

The potential significance of hidden negative option “bizop kit” victims alleging the presence of viruses and/or trojan horses on the CD-Roms they received in the mail

There were several comments made on various sites that the bizop kit CDs contained trojan horses, which can be used to steal data or as the Trend Micro paper reveals –  hijack Google queries and even seamlessly replace advertisements on legitimate sites.

Of course a trojan horse would always be a concern, but imagine if the cybercriminal organization behind the planting of trojan horses operated out of a country where credit card fraud and internet-based financial fraud were ongoing concerns.

I have no idea if any of the allegations about the trojans were true or how pervasive the allegations were.

According to the U.S. Department of State’s information on Estonia:

“Credit card fraud is an ongoing concern, as is Internet-based financial fraud and “Internet dating” fraud.  Travelers should take precautions to safeguard their credit cards and report any suspected unauthorized transaction to the credit card company immediately.  Racially motivated verbal harassment and, on occasion, physical assault of Americans and other nationals of non-Caucasian ethnicity has occurred.   If an incident occurs, it should be reported to the police and to the Embassy.”

The economic relationship between Estonia and The Isle of Man

This is significantly outside my scope of expertise so I could be completely grasping at straws here or someone may look at it and wonder why I’m stating the obvious:

  • Estonia is a country where credit card fraud and internet-based financial fraud are ongoing concerns
  • Isle of Man (IOM) is a self-governing British Crown Dependency where offshore banking is a key sector of the economy and according to the IOM government is developing a global reputation for a diverse array of niche, quality sectors including:
    • High-tech manufacturing
    • E-Business
    • E-Gaming
    • Ship and super yacht management
    • Aircraft registration
    • Agricultural and fisheries produce
    • Film and television production
    • Space commerce
    • Entrepreneur/trading gateway
  • In it’s most recently “report card” on the Isle of Man’s observance of AML/CFT (Anti-Money Laundering and Combating the Financing of Terrorism) the IMF expressed concerns about Customer Due Diligence (CDD) measures (see item 30 here), where one of the observations is:
    • “It was not evident to the assessors in all cases that the financial institutions were taking fully into account the increased risk of dealing on such a scale with nonresident non face-to-face business, and the assessors noted an uneven level of controls in practice in some institutions when relying on third parties to have properly conducted CDD measures.”
  • The recent agreement between the IOM government and the Estonian government:
    • “The agreement between the two governments is based on the model published by the Organisation for Economic Co-operation and Development (OECD). In addition to this agreement signalling that the Isle of Man and Estonia wish to develop their bilateral economic relations, the DTA will also act to prevent tax evasion, and delivers the OECD’s agreed international standard on tax transparency and exchange of information.”

At this point I still have no idea if there are any real connections between all of this data

Filed Under: Scams Tagged With: , , , , , , ,

Beware of IRS’ 2009 “Dirty Dozen” Tax Scams

April 22, 2009 By Paul (Founder, WorkAtHomeTruth) 1 Comment

IRS News Release:

IR-2009-41, April 13, 2009

Video: English American Sign Language Text

WASHINGTON — The Internal Revenue Service today issued its 2009 “dirty dozen” list of tax scams, including schemes involving phishing, hiding income offshore and false claims for refunds.

“Taxpayers should be wary of scams to avoid paying taxes that seem too good to be true, especially during these challenging economic times,” IRS Commissioner Doug Shulman said. “There is no secret trick that can eliminate a person’s tax obligations. People should be wary of anyone peddling any of these scams.”

Tax schemes are illegal and can lead to problems for both scam artists and taxpayers who risk significant penalties, interest and possible criminal prosecution.

The IRS urges taxpayers to avoid these common schemes:

Phishing

Phishing is a tactic used by Internet-based scam artists to trick unsuspecting victims into revealing personal or financial information. The criminals use the information to steal the victim’s identity, access bank accounts, run up credit card charges or apply for loans in the victim’s name.

Phishing scams often take the form of an e-mail that appears to come from a legitimate source, including the IRS. The IRS never initiates unsolicited e-mail contact with taxpayers about their tax issues. Taxpayers who receive unsolicited e-mails that claim to be from the IRS can forward the message to phishing@irs.gov. Further instructions are available at IRS.gov. To date, taxpayers have forwarded scam e-mails reflecting thousands of confirmed IRS phishing sites. If you believe you have been the target of an identity thief, information is available at IRS.gov.

Hiding Income Offshore

The IRS aggressively pursues taxpayers and promoters involved in abusive offshore transactions. Taxpayers have tried to avoid or evade U.S. income tax by hiding income in offshore banks, brokerage accounts or through other entities. Recently, the IRS provided guidance to auditors on how to deal with those hiding income offshore in undisclosed accounts. The IRS draws a clear line between taxpayers with offshore accounts who voluntarily come forward and those who fail to come forward.

Taxpayers also evade taxes by using offshore debit cards, credit cards, wire transfers, foreign trusts, employee-leasing schemes, private annuities or life insurance plans. The IRS has also identified abusive offshore schemes including those that involve use of electronic funds transfer and payment systems, offshore business merchant accounts and private banking relationships.

Filing False or Misleading Forms

The IRS is seeing scam artists file false or misleading returns to claim refunds that they are not entitled to. Frivolous information returns, such as Form 1099-Original Issue Discount (OID), claiming false withholding credits are used to legitimize erroneous refund claims. The new scam has evolved from an earlier phony argument that a “strawman” bank account has been created for each citizen. Under this scheme, taxpayers fabricate an information return, arguing they used their “strawman” account to pay for goods and services and falsely claim the corresponding amount as withholding as a way to seek a tax refund.

Abuse of Charitable Organizations and Deductions

The IRS continues to observe the misuse of tax-exempt organizations. Abuse includes arrangements to improperly shield income or assets from taxation and attempts by donors to maintain control over donated assets or income from donated property. The IRS also continues to investigate various schemes involving the donation of non-cash assets, including easements on property, closely-held corporate stock and real property. Often, the donations are highly overvalued or the organization receiving the donation promises that the donor can purchase the items back at a later date at a price the donor sets. The Pension Protection Act of 2006 imposed increased penalties for inaccurate appraisals and new definitions of qualified appraisals and qualified appraisers for taxpayers claiming charitable contributions.

Return Preparer Fraud

Dishonest return preparers can cause many headaches for taxpayers who fall victim to their ploys. Such preparers derive financial gain by skimming a portion of their clients’ refunds and charging inflated fees for return preparation services. They attract new clients by promising large refunds. Taxpayers should choose carefully when hiring a tax preparer. As the saying goes, if it sounds too good to be true, it probably is. No matter who prepares the return, the taxpayer is ultimately responsible for its accuracy. Since 2002, the courts have issued injunctions ordering dozens of individuals to cease preparing returns, and the Department of Justice has filed complaints against dozens of others, which are pending in court.

Frivolous Arguments

Promoters of frivolous schemes encourage people to make unreasonable and unfounded claims to avoid paying the taxes they owe. The IRS has a list of frivolous legal positions that taxpayers should stay away from. Taxpayers who file a tax return or make a submission based on one of the positions on the list are subject to a $5,000 penalty. More information is available on IRS.gov.

False Claims for Refund and Requests for Abatement

This scam involves a request for abatement of previously assessed tax using Form 843, Claim for Refund and Request for Abatement. Many individuals who try this have not previously filed tax returns. The tax they are trying to have abated has been assessed by the IRS through the Substitute for Return Program. The filer uses Form 843 to list reasons for the request. Often, one of the reasons given is “Failed to properly compute and/or calculate Section 83-Property Transferred in Connection with Performance of Service.”

Abusive Retirement Plans

The IRS continues to uncover abuses in retirement plan arrangements, including Roth Individual Retirement Arrangements (IRAs). The IRS is looking for transactions that taxpayers are using to avoid the limitations on contributions to IRAs as well as transactions that are not properly reported as early distributions. Taxpayers should be wary of advisers who encourage them to shift appreciated assets into IRAs or companies owned by their IRAs at less than fair market value to circumvent annual contribution limits. Other variations have included the use of limited liability companies to engage in activity which is considered prohibited.

Disguised Corporate Ownership

Some taxpayers form corporations and other entities in certain states for the primary purpose of disguising the ownership of a business or financial activity. Such entities can be used to facilitate underreporting of income, fictitious deductions, non-filing of tax returns, participating in listed transactions, money laundering, financial crimes, and even terrorist financing. The IRS is working with state authorities to identify these entities and to bring the owners of these entities into compliance.

Zero Wages

Filing a phony wage- or income-related information return to replace a legitimate information return has been used as an illegal method to lower the amount of taxes owed. Typically, a Form 4852 (Substitute Form W-2) or a “corrected” Form 1099 is used as a way to improperly reduce taxable income to zero. The taxpayer also may submit a statement rebutting wages and taxes reported by a payer to the IRS. Sometimes fraudsters even include an explanation on their Form 4852 that cites statutory language on the definition of wages or may include some reference to a paying company that refuses to issue a corrected Form W-2 for fear of IRS retaliation. Taxpayers should resist any temptation to participate in any of the variations of this scheme.

Misuse of Trusts

For years, unscrupulous promoters have urged taxpayers to transfer assets into trusts. While there are many legitimate, valid uses of trusts in tax and estate planning, some promoted transactions promise reduction of income subject to tax, deductions for personal expenses and reduced estate or gift taxes. Such trusts rarely deliver the promised tax benefits and are being used primarily as a means to avoid income tax liability and hide assets from creditors, including the IRS.

The IRS has recently seen an increase in the improper use of private annuity trusts and foreign trusts to divert income and deduct personal expenses. As with other arrangements, taxpayers should seek the advice of a trusted professional before entering into a trust arrangement.

Fuel Tax Credit Scams

The IRS is receiving claims for the fuel tax credit that are unreasonable. Some taxpayers, such as farmers who use fuel for off-highway business purposes, may be eligible for the fuel tax credit. But some individuals are claiming the tax credit for nontaxable uses of fuel when their occupation or income level makes the claim unreasonable. Fraud involving the fuel tax credit is considered a frivolous tax claim, potentially subjecting those who improperly claim the credit to a $5,000 penalty.

How to Report Suspected Tax Fraud Activity

Suspected tax fraud can be reported to the IRS using Form 3949-A, Information Referral. Form 3949-A is available for download from the IRS Web site at IRS.gov. The completed form or a letter detailing the alleged fraudulent activity should be addressed to the Internal Revenue Service, Fresno, CA 93888. The mailing should include specific information about who is being reported, the activity being reported, how the activity became known, when the alleged violation took place, the amount of money involved and any other information that might be helpful in an investigation. The person filing the report is not required to self-identify, although it is helpful to do so. The identity of the person filing the report can be kept confidential.

Whistleblowers also may provide allegations of fraud to the IRS and may be eligible for a reward by filing Form 211, Application for Award for Original Information, and following the procedures outlined in Notice 2008-4, Claims Submitted to the IRS Whistleblower Office under Section 7623.

Filed Under: IRS Releases Tagged With: , , , , , , , , ,
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