Wachovia is Among the Financial Institutions Accused of Assisting Scam Artists To Bilk Seniors

For decades, telemarkers in “boiler rooms” have bilked the elderly by convincing touting them to buy investments which supposedly pay high rates of return or have fabulous growth potential.

Now thieves operating in small offices in Canada and warehouses in India work day and night targeting elderly Americans. Working from lists of names and phone numbers, they call War veterans, retired schoolteachers and thousands of other elderly Americans and posed as government and insurance workers updating their files.

Then, the criminals empty their victims’ bank accounts!

These seniors are being targeted with the help of by large companies! For example the firm InfoUSA advertises lists of “Elderly Opportunity Seekers,” 3.3 million older people “looking for ways to make money,” and “Suffering Seniors,” 4.7 million people with cancer or Alzheimer’s disease. “Oldies but Goodies” contained 500,000 gamblers over 55 years old, for 8.5 cents apiece. One list said: “These people are gullible. They want to believe that their luck can change.”

“Only one kind of customer wants to buy lists of seniors interested in lotteries and sweepstakes: criminals,” said Sgt. Yves Leblanc of the Royal Canadian Mounted Police. “If someone advertises a list by saying it contains gullible or elderly people, it’s like putting out a sign saying ‘Thieves welcome here.’ ”

Some researchers estimate that the elderly account for 30 percent of telemarketing sales – another example of how companies and investors are profiting from the growing numbers of Americans in their final years. In 2003, the Federal Trade Commission estimated that 11 percent of Americans over age 55 had been victims of consumer fraud. “Most people have no idea how widespread and sophisticated telemarketing fraud has become,” said James Davis, a Federal Trade Commission lawyer. “It shocks even us.”

Telemarketing fraud has become a global criminal enterprise preying largely upon millions of elderly Americans every year, authorities say. Vast databases of names and personal information, sold to thieves by large publicly traded companies, have put our seniors within reach of fraudulent telemarketers. Major banks then make it possible for criminals to dip into victims’ accounts without authorization, according to court records.

One such victim is Iowa resident Richard Guthrie, a 92 year old World War II Veteran and Purple Heart recipient. Mr. Guthrie was contacted by phone and tricked into revealing his banking information. The crooks then contacted Wachovia, the nation’s fourth-largest bank, and raided his account, according to banking records. Between 2003 and 2005, scam artists submitted at least seven unsigned checks to Wachovia that withdrew funds from Mr. Guthrie’s account, according to banking records. Wachovia accepted those checks and forwarded them to Mr. Guthrie’s bank in Iowa, which in turn sent back $1,603 for distribution to the checks’ creators that submitted them.

Within days, however, Mr. Guthrie’s bank became concerned and told Wachovia the checks had not been authorized. Wachovia then returned the funds. But it failed to investigate whether Wachovia’s accounts were being used by criminals, according to prosecutors who studied the transactions.

According to the New York Times, some financial firms, including Wachovia, have made refunds to victims who complain, yet have not stopped selling lists used by criminals, even after executives were warned that they were aiding continuing crimes, according to government investigators.

In all, Wachovia accepted $142 million of unsigned checks from companies that made unauthorized withdrawals from thousands of accounts, federal prosecutors say. Wachovia collected millions of dollars in fees from those companies, even as it failed to act on warnings, according to records.

In 2006, after account holders at Citizens Bank were victimized by the same thieves that singled out Mr. Guthrie, an executive wrote to Wachovia that “the purpose of this message is to put your bank on notice of this situation and to ask for your assistance in trying to shut down this scam.” But Wachovia, which declined to comment on that communication, did not shut down the accounts.

Banking rules required Wachovia to periodically screen companies submitting unsigned checks. Yet there is little evidence Wachovia screened most of the firms that profited from the withdrawals.

In a lawsuit filed last year, the United States attorney in Philadelphia said Wachovia received thousands of warnings that it was processing fraudulent checks, but ignored them. That suit, against the company that printed those unsigned checks, Payment Processing Center, or P.P.C., did not name Wachovia as a defendant, though at least one victim has filed a pending lawsuit against the bank.

During 2005, according to the United States attorney’s lawsuit, 59 percent of the unsigned checks that Wachovia accepted from P.P.C. and forwarded to other banks were ultimately refused by other financial institutions. Wachovia was informed each time a check was returned.

“When between 50 and 60 percent of transactions are returned, that tells you at gut level that something’s not right,” said the United States attorney in Philadelphia, Patrick L. Meehan.

Other banks, when confronted with similar evidence, have closed questionable accounts. But Wachovia continued accepting unsigned checks printed by P.P.C. until the government filed suit in 2006.

Although Wachovia is the largest bank that processed transactions that stole from Mr. Guthrie, at least five other banks accepted 31 unsigned checks that withdrew $9,228 from his account. Nearly every time, Mr. Guthrie’s bank told those financial institutions the checks were fraudulent, and his money was refunded. But few investigated further.

Mr. Guthrie’s memory is faulty, but his family says he has lost a total of more than $100,000 to such practices.

Wachovia was asked in detail about its relationship with the firm that perpetrated the hoax against Mr. Guthrie and the accusations in the United States attorney’s lawsuit. The company declined to comment, except to say: “Wachovia works diligently to detect and end fraudulent use of its accounts.” During the time the bogus firm was a customer, Wachovia say it honored all requests for returns related the company’s accounts. The bank’s statement continued: “Wachovia is cooperating fully with authorities on this.”

Prosecutors argue that many elderly accountholders never realized Wachovia had processed checks that withdrew from their accounts, and so never requested refunds. Wachovia declined to respond.

We at Shepherd Smith and Edwards, have assisted investors to recover losses from financial institutions including Wachovia. We recommend you NEVER GIVE PERSONAL FINANCIAL INFORMATION TO ANYONE WHO CALLS YOU. We also recommend you NEVER INVEST THROUGH ANYONE YOU HAVE NOT MET IN PERSON, NO MATTER HOW CONVINCING THE SALESMAN OR SOUND THE FIRM MAY APPEAR. If you wish to discuss your situation in confidence with an experienced securities attorney, contact Shepherd Smith and Edwards today.

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