"Ryan, you don't sound OK," said Griffiths, a Palo Alto real estate agent, noting that the voice of her supposed grandson didn't seem quite right.
"Well, I'm in Barcelona, Spain," the voice said, proceeding to tell her he and a friend were in jail after having met two young people from Canada on the beach. The young men, who were backpacking, got into the Canadians' car to do some sightseeing. Police pulled them over and found drugs in the car, the impersonator claimed.
Thus began a harrowing journey for Griffiths, who was taken in by a common scam that preys on grandparents' hearts. In the end, Griffiths, 77, lost $11,000, she said.
Every year thousands of seniors fall victim to the so-called "favorite grandson" scam alone. According to a Feb. 28 report by the Federal Trade Commission, impostor scams were one of the 10 top complaints of fraud in 2011. The commission received 73,281 complaints nationwide.
Financial crimes against individuals, including fraudulently used credit cards and other monetary thefts, are on the rise. The Federal Trade Commission received 1.8 million complaints in 2011, compared with 1.3 million in 2010.
That trend is likely to continue, with technology easing global access to personal information, local investigators and prosecutors said. With a few taps on a keyboard and the click of a mouse, information about someone can be turned into years of chaos.
"All it takes is your name," said Neal O'Farrell, an independent security expert and executive director of The Identity Theft Council in Hayward, Calif., a nonprofit organization that helps victims of identity theft stop the financial bleeding and get their lives back in order.
Palo Alto is a prime target for identity theft and other crimes, said Scott Tsui, head of economic crimes for the Santa Clara County District Attorney's Office.
"Silicon Valley doesn't have the highest murder rate in the state, but white-collar cases have a high prevalence in the area for various reasons. There are so many business and investment opportunities in the Bay Area; there is a lot of wealth here. We have to be prolific in our enforcement and prosecution of these cases," he said.
Three areas of financial crime are on the rise in Palo Alto, according to the Palo Alto Police Department (see sidebar). Comparing 2010 to 2011, embezzlement rose from 12 cases to 17; and identity theft from credit cards rose from 73 reported cases to 100. But the sharpest rise was in elder financial abuse, which more than doubled from 12 cases to 28 in 2011. That figure might even be higher, given that some financial crimes affect elders but have not been categorized as such, Lt. Zach Perron said.
Crimes that go unreported could mean the total number of crimes is much larger. A March 2011 AARP Foundation National Fraud Victim Study noted that some studies on victim self-reporting found that as few as 25 percent of fraud victims report the crimes.
In Palo Alto the dollar losses resulting from fraud of all types are in the millions, according to Palo Alto police Financial Crimes Detective Christine Jolin. On average, city police see two to three cases a week, some involving large sums. Fraud detectives receive 10 to 15 cases per year involving losses of more than $200,000.
Besides creating years of havoc for a person's identity and credit rating, financial crimes can wipe out life savings when the victim is elderly. Making matters worse, Tsui said, seniors don't have the ability to earn the money back. And they are particularly targeted in the Bay Area because their homes are worth so much more than in other parts of the country, he added.
Relatives are many times the perpetrators of elder fraud.
"It's heartbreaking. These are the folks that are close to you," Tsui said. But "that big equity in the house" may turn people against their elders.
Santa Clara County prosecutors have handled cases for seniors who lost sums in the six figures. Cindy Hendrickson, supervising deputy district attorney in Palo Alto, said she prosecuted a case involving a 96-year-old woman who was "sharp as a tack" and was betrayed by a trusted person. The woman was talked into a fraudulent real estate transaction while recovering from surgery. Hendrickson got back nearly all the woman had lost — $500,000 — through restitution, she said.
Some of the most egregious cases involve caregivers of elderly patients with dementia and other infirmities. Retirement statements that come in the mail with full Social Security numbers can be used to appropriate the person's identity. Whole bank accounts can be wiped out.
Perpetrators of elder fraud are in their own special class of "despicable," Hendrickson said.
"Someone that can manipulate someone they know — that's a different mindset. People who embezzle (from relatives) are not doing it to feed their families," she said.
The "favorite grandson" scam — while not perpetrated by actual family members — tugs at grandparents' sympathies.
As Ann Griffiths experienced, a young person calls a senior pretending to be a grandchild in trouble. He or she begs the grandparent not to tell anyone, especially his or her parents, because the young person is ashamed of the predicament. The grandparent is anxious to help the beloved grandchild and keep his or her trust. Then the fraudster has the senior wire money to an address.
The scam has even affected families within the Palo Alto Police Department. Jolin said her grandfather also was approached by a would-be con man.
"He got some call and thought it was my nephew," she said. Fortunately, she was able to warn him in time, and he did not lose any money.
Stanford University's Center on Longevity launched the Research Center on the Prevention of Financial Fraud last fall. Martha Deevy, senior research scholar at the Stanford Center on Longevity, said the financial-fraud center was founded because of the prevalence of defrauded seniors. The center is a resource center for law enforcement and government and research groups to study how people lose billions of dollars each year.
Deevy said while it is suspected that the elderly are targeted for fraud by criminals more frequently, researchers aren't yet sure if they are more susceptible than the general population.
"We suspect the older population is more highly targeted because that's where the money is," she said. "What is known is that when they are victimized, they can't recover."
Researchers are interested in what Deevy called the "susceptibility factor."
"We're interested in understanding that cycle of fraud. What is that cycle of intimacy?" she said.
Deevy noted that work by Laura Carstensen, the Center on Longevity's founding director, discovered that as people age it takes longer to be trustful of people.
"But once you do, you become very trustful," Deevy said.
If a person has dementia or Alzheimer's Disease and is targeted for fraud, "then all bets are off," she said.
The most common elder scams are perpetrated by telemarketers, Jolin said, giving a typical Palo Alto case as an example. The victim is contacted by a person claiming to be an employee of the victim's bank or credit-card issuer. The victim is told that fraud has been detected on the account and the bank needs to verify the victim's true personal information. In a variation of this scam, the scammer offers a better interest rate or mortgage refinancing. In either case, the victim is directed to "confirm" his or her account number, name, date of birth, Social Security number, mother's maiden name and other personal information typically utilized by financial institutions.
One surprising aspect of the Stanford research is there is no single profile of a victim, Deevy said. Victims, however, can be profiled according to the type of fraud.
"Generally, victims of investment fraud are educated white men in their early 50s," she said.
But elderly women are more typically the victims of scams such as the Nigerian email, in which the recipient is offered the "opportunity" to share in a percentage of millions of dollars that the scammer — a self-proclaimed government official — is trying to transfer out of Nigeria.
Deevy said the economic downturn has led to increased fraud and to more cases targeting the non-elderly.
"As we navigate our way out of our recession, many victims are pre-retirees who find themselves in an unfortunate financial situation. They are listening to things that they wouldn't have before," she said.
Tsui said many current frauds involve mortgage refinancing. California is among the top states with a significant mortgage-fraud problem, according to the Mortgage Asset Research Institute.
Foreclosure-rescue schemes were the sixth-highest reported scheme in the 2010 fiscal year, a 2010 FBI mortgage-fraud report stated.
The perpetrator tells homeowners that their homes can be saved from foreclosure through deed transfers and the payment of fees upfront. The perpetrator transfers the property to his name through a quit-claim deed and promises to make mortgage payments while allowing the former homeowner to remain in the home paying rent. The perpetrator remortgages the property or pockets fees paid by desperate homeowners. Often, the original mortgage is not paid off by the perpetrator, and foreclosure is only delayed.
Mortgage-fraud con artists who promise loan modifications use advance-fee schemes, in which victims pay fees for services that are never rendered, the FBI report stated.
Deevy said that after the federal government's bailouts of financial institutions, some scammers promised people they could receive a piece of the bailout money.
In 2009, the Better Business Bureau warned the public to be "extremely wary" of these offers. Websites claim that consumers can get federal stimulus grants to pay their bills or get out of debt. The bureau found that people who sought free advice were ultimately charged as much as $69.95 every month for information on how to get the money.
When complainants contacted the businesses about why they were being charged for a "free" item, they were told that they had actually signed up for a "free trial" — as explained in the terms and conditions on the website. Others were asked to pay a "processing fee" in order to receive stimulus funds.
There are also Medicare Part D scams, Deevy said. Scam artists reportedly contact seniors claiming to represent a Medicare Part D provider but harvest personal information, such as Social Security numbers or checking or credit-card account numbers, according to the Federal trade Commission.
"They have a remarkable ability to take current events and turn them into scam opportunities," Deevy said.
One of the main types of fraud stems from identity theft, and much of that is through stolen credit cards. Menlo Park and Mountain View grocery stores see numerous purse thefts from shopping carts, Jolin said.
Wallet thefts from downtown Palo Alto restaurants have increased significantly, she added. Often wallets are plucked from purses slung over the backs of diners' chairs.
Card skimmers — small electronic devices that allow a thief to swipe a credit card to obtain its information — are finding their way into a variety of places, from ATM machines to grocery stores and gas stations. For about $200 to $300, thieves can buy skimmers and a machine that recodes credit cards. A few cases have occurred at restaurants, where an employee might use a pocket skimmer to make a fake credit card, Jolin said.
Cards can be made from hotel pass keys and credit-card blanks. Printers can put account numbers and, in some cases, Visa and MasterCard symbols on the cards.
"You can even buy credit-card blanks at Fry's," she said.
People who use debit cards are most at risk because thieves get direct access to checking accounts. If a victim has overdraft protection on the account, once the checking account is depleted, the savings account is emptied too, Jolin said.
Tsui noted the credit-card skimming machines are a good example of how insidious technology-based fraud has become. It no longer just targets the moneyed demographic.
"Look at the Lucky's situation," he said, referring to the incident last November involving card readers that had been tampered with at 23 Bay Area stores. "Who doesn't buy groceries? It's a very dangerous situation. You don't have to be a wealthy person."
Tsui said doing business on the Internet is convenient, but it also opens the door for personal information to be compromised, and by criminals far away.
Jolin agreed: "It's incredibly difficult to catch (the identity thieves); there is no chance to catch anyone outside of the country. The world is pretty much endless, and they'll terrorize you for years."
Some identity thieves use sophisticated ruses to obtain Social Security numbers. They can call into banks and pretend to be the victim to access their accounts.
O'Farrell of the Identity Theft Council said he is currently working on a $750,000 case involving a 23-year-old man victimized by his father. The son applied for credit and found that someone was already using his Social Security number.
"He is in Social Security hell. The father has the same name. He locked the son out of his own credit reports, so he couldn't find out what he was doing," O'Farrell said.
The father purchased homes, vehicles and time-share property. He received just 30 days in jail for his crimes, O'Farrell said. But five years later the son is still trying to repair the damage. New creditors are still calling, and he cannot get any credit. O'Farrell is trying to help the son get a new Social Security number, but the Social Security Administration is balking.
"There are only two cases in which you can get a new Social Security number: if there is irreparable financial harm or if you are in a witness-protection program," he said.
O'Farrell's Identity Theft Council handles 50 to 100 cases monthly in the Bay Area, offering free services, he said. It was founded after Hayward police approached him to help counsel identity-theft victims pro bono. He has worked with dozens of district attorneys' offices and police departments.
Another case he's working on involves a victim who discovered that someone had been using her Social Security number for 15 years. The thief is in the country illegally and racked up multiple DUIs. When the thief's driver's license was revoked, the victim also couldn't get a driver's license for three years.
The thief used the woman's identity to purchase a home and open credit-card accounts. She was finally arrested in South Carolina, but California doesn't want to prosecute her since she will be deported, O'Farrell said.
"It took awhile trying to expunge her criminal record. Every day it's a constant fight for this victim," he said.
The good news is that the law is on the side of the victim when it comes to getting the illegal transactions reversed by credit-card companies.
"But you have to assert it. You have to get an identity-theft affidavit from the IRS or Federal Trade Commission and a police report," he said. "The big problem is what if someone has your Social Security number and is working under it."
O'Farrell had a client in San Francisco who had $10,000 in wages garnished by the IRS after someone in Sunnyvale had stolen her identity. IRS fraud can take up to a year to resolve, he said.
"Don't assume it can't happen to you. There are more victims of identity theft than burglaries, arson, attempted theft, attempted car theft, purse snatching, pick-pocketing and shoplifting combined," he said.
Stanford's Deevy said the problem of financial crime is "a mile wide and a mile deep." Fraud schemes of all types are proliferating.
Online sites such as Craigslist.com are being used to commit whole new types of fraud.
Jolin said she has worked on real-estate scam cases in which the scammer drives around the area and finds a home with a sign stating the property is open for rent or sale. Then he or she places an ad on Craigslist offering the property.
"They say they are out of the country and can't meet you. The victim provides a $1,500 security deposit, and they say they will mail the keys," she said. But of course the keys never come, and the victim is out $1,500.
In February Jolin received a report from someone who planned to vacation in Kauai. The person looked on the Web and saw beautiful pictures of a rental home. The victim contacted the owner by email and was told to wire a deposit to hold the rental, she said.
"If anyone asks you to wire money or send a cashier's check or money order, do more research. Put the website in Google, and see if other people have been defrauded by the same suspect. You can find complaints quickly," she said.
Future financial crime undoubtedly will evolve around technology, Tsui said.
"With every technological invention there is an opportunity for a by-product crime to happen. It's a big problem. We can talk about it for days. As we become more global, we have to find ways to work together.
"We're creating a world where everyone's connected, but not so with law enforcement. You don't have to be in the U.S. to commit fraud against someone here. The big question is how are we going to deal with this globalization of everything?
"We get calls all the time from other parts of the country. I worked on a case with a travel agent who called and said, 'There was a fraud in your county, and they took my money,'" he said.
"And where are you?"
The reply: "Maine."
The Santa Clara County District Attorney's financial-crimes unit handles some of the most complex cases. These can involve organized-crime operations, sales of fraudulent securities to investors, and international investment schemes. But as budgets have been cut, it is getting harder to keep up with the burgeoning fraud industry, Tsui said.
"One thing that is a challenge: In handling financial crimes, one of the most important things we need is to have professionals to do forensic accounting. It's almost as important as a gun-carrying detective in the DA's office in terms of investment in the next stage of fighting and prosecuting financial crimes," Tsui said.
Hendrickson said about 80 percent of arrests made for identity theft and credit-card fraud are made by police officers during vehicle stops. Officers checking identification find false licenses, or they legally search vehicles of parolees and people on probation.
"We have a lot of good police work in Palo Alto enforcing traffic violations. People have stolen mail and stolen credit cards in their cars. I can't think of another way they would catch these people," she said.
Tsui and Hendrickson both said laws aren't tough enough to deter financial crimes.
"One of the most frustrating things is that these charges are not (three) strike offenses. With the (prison) realignment, most will do only half their time or go to county jail. There is not enough punishment prescribed by statute. Going to county jail is the cost of doing business for many of them," said Hendrickson, who once successfully convinced a jury that a serial con man committed burglary when he defrauded a victim in her home. The con artist received a 15-year sentence.
Hendrickson said the goal in prosecuting financial crimes often isn't just to throw someone in prison but to get restitution for the victim. Compromises are made so that, as Tsui said, "The victim can be made whole again."
Unfortunately, he said, "A lot of crimes don't pay, but financial crimes are one of the few crimes you can use to make a living."
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