Wednesday, December 13, 2006

Top 10 Scams of 2006 - 2

6. Pump & Dump Scam
As the stock market finally rebounded in 2006 after years of near dormancy, scammers stepped up their stock-touting schemes. Sending out millions of spam emails, they would offer a "hot tip" about an obscure company whose stock was selling for a few cents a share. Before sending the email they would buy up millions of shares.

For example, Texhoma Energy was touted in an October spam email, resulting in a significant increase in the stock's value. According to the Chicago Tribune, 53,000 shares of Texhoma stock were traded on October 16. The next day the volume jumped to more than one million. Two days later it jumped to more than five million, as the spam emails began to hit inboxes and prompt victims to place orders.

The scammers, of course, sell at the stock's high point and other investors soon join them as the price begins to fall. Pretty soon the stock is back to selling at a nickel a share and those who jumped on the bandwagon have lost significant amounts of money.

At year's end the National Association of Securities Dealers issued an alert to investors to avoid taking any unsolicited investment advice. A survey of the huge increase in spam email revealed most of it to be touting these near-worthless stocks.

7. Bogus Fuel Saving Devices
When gasoline prices surged this year, scammers were quick to try and cash in. One company claimed its "special pellets," dropped into the fuel tank, would improve efficiency. The Federal Trade Commission went after one company that claimed its "magnetic device" would increase gas mileage.

"Consumers are looking for ways to increase fuel efficiency and save money at the pump," said Lydia Parnes, Director of the FTC's Bureau of Consumer Protection. "There are some practical ways to do that, like following the maintenance schedule in your owner's manual, combining errands, and avoiding jack-rabbit starts. The fact is that many products that claim to save fuel don't work, and worse yet, may damage your car and end up costing you more."

8. Grandparents Scam
This is a particularly vile scam aimed at senior citizens, perhaps the most vulnerable scam victims. An elderly person is targeted by the scammer who calls and says something like, "It's me, grandpa." The elderly person will respond, thinking it's one of their grandchildren.

The scammer then tells a tale of woe, saying they are in trouble and need some money, "and please don't tell mom." The grandparent obligingly sends a few hundred dollars, thinking they're helping a grandchild. Investigators say it works more than you might think.

9. Oprah Ticket Scam
This scam makes our list this year because of its potential to become much more widespread and to victimize vulnerable people. Illinois Attorney General Lisa Madigan recently warned consumers about this scam, alerting them to emails or letters that told them they had won tickets to a taping of the talk diva's show in Chicago, or had been offered a tour package that included a taping of the show. The communication asked for sensitive personal information, which, if provided, could allow their identities to be stolen.

In this case, e-mail recipients are asked to submit personal information and told they will receive tickets to The Oprah Winfrey Show after verification of certain financial information and/or the wiring of money to an unknown third party. However, according to Harpo Productions, Inc., The Oprah Winfrey Show does not sell tickets or ticket travel packages to fans.

10. Craigslist Scam
Though not terribly widespread at the end of 2006, the craigslist scam makes our top ten list because of its potential to wreak harm in the years ahead. Starting this year scammers began taking advantage of the growing popularity of craigslist to victimize people trying to rent their homes or apartments.

The scheme is basically the fake check scam, with a twist. Darryl, of San Diego, told that he received almost identical replies when he listed a room for rent on both craigslist and The replies claimed to be from "Marie," who called herself "a young humanitarian officer."

"Marie" said her employer would be sending Darryl her expense check, which would be for several thousand dollars. Darryl was to deposit it in his account, deduct the rent and deposit, and send the balance back to her.

Fortunately, Darryl saw through the scam. If he had cashed the phony check, it would not have been discovered for a few days. By then he would have sent the scammer a very real check for a $3,000 or more.

"Most people who use craigslist have great stories to tell about their experiences with buyers, sellers, tenants, landlords and such, but we also receive occasional reports of scams and fraud," craigslist warned on its Web site. "We've found that one of the best ways to avoid this problem is to keep all transactions local -- whenever possible, don't do business with anyone who is not in your local area."

If It Sounds Too Good ...

Scams continued to be big business for criminals in 2006 and relatively risk-free as law enforcement appeared unable to keep up. As a result, consumers increasingly were at the mercy of scammers who use cunning, audacity and emerging technology to stay one step ahead of both their victims and the law.

The solution? Keep your wits about you, be skeptical and remember -- trite though it may be -- if it sounds too good to be true, it probably is.

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