And don’t think these activities are limited to personal checks. A Fortune 500 company in Chicago got ripped off when somebody outside the organization ordered the company’s business checks through a catalogue—and all he gave them to put on the check was the company’s name and address. He didn’t know where the company banked. He didn’t have an account number. He didn’t know who signed the checks. The person ordered two hundred of the company’s checks and had them sent to him. Then he went to all the grocery stores he could get to and cashed them, because the company was a household word and employed thousands of people. Its checks were gold.
Not long ago, a company in Long Beach, Calif., got a disturbing invoice in the mail from its check printer. The company’s checks were being shipped to 110th Street in Los Angeles. The problem was, the company didn’t have an office there. Someone had reordered the company’s checks and changed the ship-to location to 110th Street. The printer had gotten the reorder with an address change and had simply processed it. One way things like this happen is that criminals recruit company employees to steal check reorder forms. Or they buy them. A stolen check reorder form is worth one hundred dollars on the street.
WHAT TO DO
The solution is to order checks through your bank, not a mail-order catalogue. A crook can’t waltz into Chase or Citibank and try to order your checks. And when you buy checks through a bank, they usually have more security features on them to prevent forgeries. Mail-order houses don’t bother with these things, and that’s why their prices are lower. [Although prices may soar if other states follow Illinois’s example: Illinois, to my knowledge, is the first state to pass a law actually making it a felony to order someone else’s checks. If you live in Illinois and a catalogue sells your checks to a crook you can sue the catalogue company.] Businesses also ought to order their checks through a bank, or else directly from one of the major business check-printing companies, which dispatch a salesman and follow strict ordering procedures to keep your checks from falling into the wrong hands.
HEARD OF THAT SPERM BANK?
A big reason for the proliferation of forged checks is that the tellers and clerks who cash them don’t pay close attention to the IDs they get handed. Even if they do, it’s so easy today for criminals to obtain bogus IDs that look genuine. Recently, a man showed up in Salt Lake City and went around to local banks claiming to be a Russian official doing preparatory work for the Russian Olympic team in advance of the 2002 Winter Games. He had a fake passport and other well-crafted fraudulent documents, and as an added precaution he brought along a young female accomplice who posed as his interpreter. In just three days, banks cashed $90,000 worth of worthless checks for him.
For the less creative forger, there are numerous check cashing stores that require no ID whatsoever, which is the reason they charge steep commissions. But the criminal doesn’t care; the fee’s not coming out of his account.
Too often, tellers and salespeople ignore an important precept, which is to be impressed with the check, not the person. Once, to demonstrate the point before a hidden television camera, I put on an expensive suit and drove up to a bank in a Rolls-Royce, where I managed to successfully cash a fifty-dollar check written on a cocktail napkin because the bank teller was more impressed by my appearance than by what I had handed her. Remember, the way someone looks, what he drives, or how friendly he is has no bearing on whether a check is good. It’s all part of the scam.
I went into a store recently, and if this hadn’t happened I wouldn’t have believed it. I bought a piece of luggage and wrote a check for it. Within a moment, the saleswoman handed me the luggage on the counter and gave me my check back. I looked puzzled, and she said, “Oh, we have a new program. It’s called e-check, from TeleCheck.” I asked her how it worked, and she said, “Well, you wrote me a check, and I put it through this machine that looks like a Scotch tape dispenser. It read your account number off the bottom of it. Then I keyed in the amount of the purchase and it sent all of that data electronically to TeleCheck’s file. Three days from now, the money is automatically deducted from your bank account and it shows up on your statement as an electronic deduction. In the meantime, your check is your receipt.”
I was flabbergasted. I couldn’t resist asking her, “What if I’m not Frank Abagnale? Since you didn’t ask me for any identification, what if I happened to have forged this check? Where’s your evidence?” This is a forger’s dream come true. I write you a check, you give me the merchandise, and you give me the check back. When the police show up and ask for the forged check, you have to say, “Oh, we gave it to the forger.” It’s absolutely amazing. I’d like to know where this was thirty-five years ago when I needed it.
The truth is, people who cash checks today are often so blasé about it, that a forger hardly has to even try. You wouldn’t believe some of the ludicrous checks I’ve run across that stores saw fit to cash. One check cashed in a grocery store in Houston, Texas, for fifty dollars, was literally signed, “I Screwed You.” The bank wrote back, “unauthorized signature.” I guess so. Another check was signed, “U. R. Stuck.” A clerk took that one, too. Another check listed an ordinary person’s name in the upper left-hand corner along with an address. The address read, “Your City, U.S.A.” The bank was listed as National State Bank, also located in Your City, U.S.A. Still another check for ten dollars was cashed at a liquor store in Denver that was drawn off “The Sperm Bank of America.” Must be a new financial institution. The television show, “Dateline,” for a report on check fraud, managed to get a bank to cash a one-thousand-dollar check that had “void” written all over it and the message, “Please Don’t Pay Me. I Am A Counterfeit Check!”
HOT CHECKS
The most common type of bad check is the proverbial “hot” check. A hot check is a check drawn from a legitimate checking account that lacks the funds to cover the amount, or has been written off of an account previously closed.
There are a number of ways to detect a hot check, but many people who cash checks fail to know the easiest one of all. Ninety percent of hot checks are numbered in check sequence between 101 and 200. A check numbered 118 would represent an account about three weeks old. A check number of 1315 suggests an account that’s about three years old. Hence, many retailers over the years have become very leery of cashing so-called new account checks with numbers less than 200.
To circumvent this, bad check passers, when they set up accounts, try to obtain the highest possible check number they can get. This is usually done by asking the new accounts department to start their checks with a sequence number like 800. In many cases, they are denied. Most banks use a standard starter number of 101 for new checking accounts. Unfortunately, in recent years many new accounts departments have become very lax and, to oblige customers, will let them start their account with any number they request. Or they don’t pay attention to unusual reorder activity, even though criminals reorder checks every twenty or thirty days so they can get a higher sequence number. If all else fails, a criminal can buy checks through the mail, requesting any sequence number he wants.
For this reason, you can’t depend on the check number alone, but it’s a good tip-off for when you should use discretion. If you get a low-numbered check, that would be the time to ask for additional identification, to call the bank if it’s a large purchase, or to use a check verification company to guarantee the check. Remember: 90 percent of worthless checks are numbered between 101 and 200.
WHAT CAN BE DONE?
Over twenty years ago, a technique was developed that is referred to in banking as “date coding.” A date code is a tiny three-digit or four-digit number that appears on the front of a check to indicate when the account was opened. For example, the number 879 would mean that this checking account was opened in August of 1979. This coding is done automatically by the check printer. No matter how many checks a customer orders or reorders, this number will always appear on the face of the check. The date code helps you determine the
stability and credibility of the person writing the check. Even checks ordered through the mail from a catalogue will have a date code on them if it’s required by the state where the person lives.
I recommend that all institutions date code checks. And I recommend that retailers teach employees how to read date codes on checks. The date code is sometimes found above the signature line or above the “pay to the order” provision, but most commonly next to the customer’s name. The older the date code, the more established the person who has written the checks.
THOSE HANDY DEPOSIT SLIPS
I was speaking one day with a new acquaintance, and I asked him for a business card so I could stay in touch. After fumbling around in his pockets, he could only come up with a deposit slip from his personal checking account. He handed it to me with a smile. I smiled back and told him, “I’m the last person you want to give this to.”
Deposit slips seem harmless enough. That’s why most people write grocery lists on them, hand them out as business cards, or simply discard them when they run out of checks. But a deposit slip is actually an exceedingly valuable slip of paper. To a forger, a deposit slip is worth ten times more than a blank check.
The slips are used in a common scam called “less cash deposit” or “split deposit.” After obtaining a blank deposit slip, the criminal will write a forged check to the person named on the deposit slip. He’ll then proceed to the bank listed on the front of the deposit slip, and deposit a check in the amount of, say, six hundred dollars. In the line “less cash received,” he’ll write three hundred dollars back. The teller, especially a busy one, will think, Why should I bother to ask for ID? The person is obviously a customer of our bank and has enough funds in the account to cover the check. Plus, he’s depositing more than he’s withdrawing. She hands over the cash and the check writer drives away three hundred dollars richer. The bank is stuck with a worthless check. Less cash deposit scams occur more than two thousand times a day at drive-up windows of banks, savings and loan institutions, and credit unions.
WHAT TO DO
I advise tellers to pay very close attention to less cash deposits. Anytime you return more than twenty-five dollars to anyone you don’t know, ask for identification. Deposit slips also have date codes on them. Look at them, because they can give you an idea of the stability and credibility of the account. And I tell everyone, don’t give out blank deposit slips at the bar instead of business cards, or leave them in the grocery store cart.
STOP PAYMENT START-UPS
Many companies and municipalities have been burned by stale-dated stop payment orders. In these cases, dishonest recipients receive a check, then tell the issuer that it never arrived. So the company will place a stop payment order on the check and issue a new one. The second check is immediately cashed. The original check is saved for a rainy day, which usually comes about six months later.
Shrewd con artists know that stop payments at most banks are good for only 180 days. After that, they expire. At that point, they have to be renewed for another 180 days. The trouble is, few companies bother to renew them. The con artist will patiently bide his time for 181 days before negotiating the second check, which will pay almost every time.
WHAT TO DO
A little extra investment on the part of the company can easily prevent this scam. Put an extended stop payment period on the check, like 999 days. The bank’s limit for a stop payment period needs to be a three-digit number, and 999 fits as easily as 180. Even the most patient con artist doesn’t have that much patience. At most banks, stop payments cost between a dollar and two dollars a month. Many companies have dozens or even hundreds of stop payment orders in effect at any one time. Although the cost can add up, the exposure for loss is far greater.
FORGERY: HOURS OF FUN
Now, let’s take a look at forgery. Forgery has increased considerably since 1975. The major reason for this is technology.
Twenty-five years ago, it used to take me twelve weeks to create a check. A truly sophisticated forger needed a four-color printing press that cost a quarter of a million dollars. Today, I can create a check with a laptop computer, a laser printer, and a scanner in my hotel room in twelve minutes. The New York Times once calculated that a forger can buy everything he needs for about five thousand dollars. Of course, it doesn’t cost him anything. He pays by check.
A number of years ago, a business writer submitted an article to Forbes magazine, and the editors printed it, paid him, and also sent him a check in the amount of $333.33 to cover his expenses. The writer lived in a one-bedroom apartment in Boston, and he owned an old Apple computer, a printer, and a scanner. As an experiment, and with the blessings of his editors, he decided to try to demonstrate how easily he could transform that meager check into some real money. So he laid the check on the scanner and brought it up on the screen. Once it was on the screen, he could do anything he wanted to it.
He zoomed in on the amount box, locked on it, and removed the dollar amount of the check with his mouse. Then he went to the written legal amount of the check and deleted it. Then he asked the computer to identify the fonts. Back then, a home computer could match 122 fonts. Today, computers can match thousands of fonts. In just a few seconds, he was able to pretty closely match the font at the printer at the accounts payable department at Forbes magazine. Using that font, he typed in a new amount number. He put the machine on pause and went out to a stationary store. He asked for green basketweave check paper, which anyone can buy at Office Depot, and bought enough to serve his needs. He also picked up a mechanical number stamp and some red ink.
He went home with his supplies, took the white paper out of the printer, inserted the green basketweave paper, and printed out the new check. He forged the two signatures it required using two different pens. He needed the number stamp so he could reconstruct the ink of the check number in red. Using an Exacto knife, he cut the check out of the 81⁄2 x 11 sheet so he could bring it down to the appropriate size. Once he was finished, he ended up with a check for $3O,333.33, which he felt much better reflected the value of his services.
He deposited the check by opening up an account at Bank Boston. They told him there was a five-day hold period, and he said that was no problem. He didn’t return for twelve days, at which time he withdrew all but a hundred dollars. Sixty-two days later, an auditor at Forbes caught the forged check, but by then it was a little late. The writer then crafted a story for Forbes about check fraud, in which he revealed the details of his own little charade. Forbes put a picture of the fraudulent check on its cover.
This little caper is called scanning, and it’s one of the most popular forms of forgery and certainly the simplest. Scanning started to emerge as a problem in the early 1990s, and it has really caught on significantly in recent years.
In Springfield, Mass., a man changed a $3.00 refund check from L.L. Bean into one for $30,000. Then he changed a $2.39 bakery refund check for stale cinnamon buns to one for $15,552.39. In North Carolina, a well-dressed young man convinced an automobile dealer to accept a cashier’s check for $50,000 from Wachovia Bank, in exchange for a new Mercedes 300SC. It happened to be six in the evening, when the bank was closed, but the dealer was not about to turn away a nice piece of business. Little did he know that the cashier’s check had originally been made out for $5.00 and altered to $50,000, and that before the bank opened the next day the car would be two states away, with fake license plates and a new paint job.
DO YOUR BANKING WITH THE IRS
And sometimes, you don’t even need all that technology. For example, people always seem to require extra cash around tax time, and criminals are no exception. So they get it from you. Say you’ve had your tax returns prepared and, like most of us, you owe the IRS some additional money. For argument’s sake, let’s say it’s $1,500. You sign your return, insert a check made out to the IRS for $1,500, and drop it in the mail. As far as you’re concerned, that ends the pain for another twelve months.
Not qu
ite. The pain actually just doubled. Your package was “lifted” while in transit to the IRS. Envelopes to the IRS are common targets because of where they’re going. The check was removed and the rest of the return trashed. With a few pen strokes, the thief easily altered the check so that it was made out to a Mrs. Smith, and deposited it into a fake account. All he did was change “IRS” to “MRS” and add “Smith” to the payee line. Not only did you lose the $1,500, but you still owe the IRS another $1,500, plus late charges. Talk about double taxation.
WHAT TO DO
The easy solution is to fill out the entire payee line. If you had written “Internal Revenue Service” instead of “IRS,” this scam would not have worked.
SURE, YOU CAN TRY THIS AT HOME
Today, forgers drive around in industrial parks where there are big office buildings, and look into those large mailboxes standing in the parking lot. They’ll tell you that five years ago, they used to have to fish into those mailboxes, sending a line down and yanking the mail out, but they don’t have to anymore. Today, they drive up at a little after five in the afternoon, and there’s so much mail stuffed inside that it’s literally flowing out of the box. They just reach out of the car window and scoop it up. Any reasonable quantity of mail will always contain at least one envelope with a window in it that says, “Pay to.” Inside is a check payable to a construction company or a public relations firm—it doesn’t really matter who it’s addressed to. It’s not going to them anymore.