May 26, 2007
Saturday

My son is one lucky guy.

He recently won $58,000 in a sweepstakes he didn't even enter.

The letter announcing his good fortune set off so many alarm bells my ears were ringing: It allegedly came from a company in the Bahamas and listed the "sponsor" as "Lotto, Reader's Digest, Publisher's Clearing House, Sweepstakes." The envelope had no return address and a Canadian stamp.

The only thing that stopped us from chucking it in the shredder was a very authentic-looking check for $1,940 from a Vancouver company drawn on Wachovia Bank. The check was an "advance" to cover the "processing fee and taxes" required by "international law," the letter said.

The check looked so real we were tempted to deposit it and see what happened. Using my better judgment, I decided to research it for a column.

Turns out this is one of a growing number of counterfeit check scams made possible by banking regulations, copiers capable of faking checks that can fool tellers, plus a healthy dollop of greed and gullibility.

"This is huge," says Steve Baker, director of the Federal Trade Commission's Midwest region, which handles counterfeit check fraud because "a lot it comes out of Canada."

Scam artists send out fake checks hoping that as soon as they clear the victim's account, the victim will send back money, not realizing the check could still bounce. Tellers are trained to spot counterfeits, but copier technology has gotten so good that phony checks sometimes slip through.

On behalf of my son, I called Peter Hamilton, the "international claims agent" named in his letter, at an area code in Ontario.

Hamilton said my son should deposit the check in his bank account. After it "clears," he should call back. At that time, he will be given an address in New York to which he should wire $1,940 via Western Union or MoneyGram.

After New York receives the money, he will be instructed to go to the "the nearest Publishers Clearing House office in California" to collect his prize, Hamilton said. An IRS agent will be on hand to discuss how my son wants to pay his taxes. (No doubt a personal check will be encouraged.)

Hamilton said the sweepstakes was bankrolled by "Electra Financial Trust Services in connection with Publishers Clearing House."

When I told him the name of the company on the letterhead was Experta Financial Trust Services, he said that "Electra owns Expectra" and continued to refer to the company as Expectra.

Stifling laughter, I asked him why the check was from Chalk Inc. of Vancouver. He said that Chalk Inc. sponsors the program, the same way Budweiser sponsors a basketball game.

The facts: Chalk Media Corp. (which has the same logo and address as the company on the check) is an e-learning company listed on the Toronto Stock Exchange. Its spokeswoman, Brooke Van Hatten, says the sweepstakes check is not authentic. It has received calls from other people who received checks. "None of them have gone through," she says.

Publishers Clearing House says it never requires sweepstakes winners to pay anything and referred me to fake-check warnings on the "Consumer Alert" section of its Web site, www.pch.com.

Jesse Weller, a spokesman for the IRS, says its agents will never show up at a lottery, prize drawing or any other event where money is won, although it might require the prize giver to withhold taxes.

Experta Financial Trust Services could not be reached for comment, but appears to be a legitimate company whose name may have been misappropriated.

Fraudsters hope that when people get big checks, they will be so excited they won't stop to ask questions. They're also hoping that victims don't realize that just because a check clears their account doesn't mean the check is good.

When a customer deposits a check, U.S. banks have to make those funds available within two days (for local checks) or five days (for non-local checks), according to the Federal Reserve. Banks can clear them sooner and some do.

Sometimes it takes much longer than two or five days for the bank to discover that the check is fraudulent. When that happens, it will come back to the depositor for the money.

"It's the consumer's obligation," says Lisa Arquette, associate director of anti-money-laundering and financial crimes for the Federal Deposit Insurance Corp.

Most of these frauds originate offshore, where U.S. authorities have no jurisdiction.

The FTC's Baker warns consumers, "If you send money through Western Union or MoneyGram, you have no rights to recourse."

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Ketchikan, Alaska