Consumer Protection – Fraud Files Forensic Accounting Blog

COVID-19 Coronavirus Stimulus Check Scams

30 March 2020 by Tracy Coenen

Coronavirus stimulus check scams have already started. This is shameful, but not entirely unexpected.

U.S. taxpayers will be receiving payments of up to $1,200 per adult and $500 per child, with reductions for special circumstances. To receive a payment, you must have a social security number. Nonresident aliens, people without a social security number, and adult dependents (ex. your college student who is claimed as a dependent on your tax return) are not eligible.

To receive the full $1,200 you must have income less than $75,000 per year (single) or $150,000 (married). Those with income of $75,000 to $98,000 (single) or $150,000 to $198,000 (married) will receive a reduced amount. Those receiving social security retirement or disability payments WILL get a stimulus check, as well as veterans and those who are unemployed

The $500 per child is only available for a child under the age of 17 who is claimed as a dependent on your income tax return.

Shark Tank’s Barbara Corcoran $400k Fraud Victim

4 March 20204 March 2020 by Tracy Coenen

Barbara Corcoran lost $400,000 to a fraud scheme. Or did she?

The headlines were that the real estate mogul had nearly $400,000 stolen from her with an email phishing scam. It makes for good click-bait, but there was so much more to the story.

What really happened was that Barbara’s bookkeeper paid an invoice that she thought had been approved by Barbara’s assistant. The invoice appeared to be from a renovation company in German, and seemed legitimate because of all the real estate projects Barbara is involved in.

But… the email from the other employee was a fake. The email address was off by one letter, and the bookkeeper didn’t notice it. She wired $388,700 from a German bank to an account that was owned by the Chinese scammer. The bookkeeper then emailed Barbara’s assistant to let her know that the invoice was paid, and the scam was revealed. The assistant knew nothing of the transaction and saw that the original email was a fake.

Who Has FIVE Foreclosures?

26 January 2020 by Tracy Coenen

Jennifer McKinney, that’s who!

Years ago I delighted in writing about mommy bloggers who earned gobs of money at the expense of their readers (and the advertisers who wanted to get in front of them), but were dishonest in one way or another. I’ve written about the shenanigans of Dooce, but we spent a lot of time on Jennifer McKinney, known as MckMama. She frauded her way through bankruptcy court and went on to shill for MLM company Xyngular.

McKinney is currently one of the top producers for Xyngular, and has been recognized as a “million dollar earner.” She started with Xyngular in 2012, and by mid-2014 she made $500,000. (Made… means commissions paid to her plus the value of trips and prizes given to her.) In late 2015 she was up to $1 million cumulative. Then $2 million cumulative by the middle of 2017. It was $3 million cumulative by mid-2018. She has likely surpassed $4 million cumulative by now… which is an average of $500,000 per year for the last 8 years.

Dooce Will Sleep With Your Husband

11 January 202011 January 2020 by Tracy Coenen

From time-to-time, I used to talk about mommy bloggers here. Primarily the fraud that is Jennifer McKinney (MckMama), but occasionally I would mention others. One such person was Dooce (Heather B. Armstrong), the “original” mommy blogger.

Dooce made a mint off her blog when it was in its prime, which led to her buy a 9 bedroom, 9 bath house in Salt Lake City. But following her divorce, her income sources dried up and she was forced to sell. (That led to blog posts about living in a small house, waaaaahhhhh!) By all appearances, Heather had all sorts of opportunities for sponsorships, television shows, speaking engagements, and other lucrative gigs… but her bad attitude, inconsistency, and failure to follow through led to those revenue sources evaporating.

Windy City Rehab Fraud?

6 January 20207 January 2020 by Tracy Coenen

Windy City Rehab is an awesome reality show on HGTV. Alison Victoria (legal name Alison Gramenos) and Donovan Eckhardt are the faces of the show, and they find properties in Chicago to rehab and sell. But construction projects don’t always go as planned, and a lawsuit filed in Cook County on December 30 alleges that the Windy City Rehab team defrauded James and Anna Morrissey.

In March 2019, the Morrisseys bought a 4,000 square foot home at 2308 West Giddings Street in Lincoln Square for $1.36 million. The property was sold for $645,000 in October 2017 and then underwent renovations featured on an episode of Windy City Rehab. (You can even see this episode next week, 6pm central on January 14!)

The couple says that the house leaks… that the day after they closed the shower on the second floor leaked gallons of water into the kitchen. They say they paid for a new roof, but that the old roof was simply repaired and now it leaks. The windows allegedly were installed improperly throughout the house, with water coming in the windows in the master bathroom and the bedrooms. The Morriseys further say that the masonry and mortar are crumbling on the outside of the house, and the front door is crooked.

How Does MLM Affect People?

7 December 201921 November 2019 by Tracy Coenen

The late Jon Taylor, PhD wrote a thorough and excellent book about multi-level marketing (MLM): The Case (For and) Against Multi-Level Marketing: The Complete Guide to Understanding the Flaws – and Proving and Countering the Effects – of Endless Chain “Opportunity” Recruitment, or Product-Based Pyramid Schemes.

He put the book together in 2011 and 2012, but it is still relevant.

If you’re not familiar with MLM, you should acquaint yourself with the horrible statistics. Basically, the odds of a distributor losing money in multi-level marketing are greater than 99%. Despite the fact that participants are almost guaranteed to lose money in MLM, these scams are marketed as business opportunities with the potential for unlimited earnings.

MLM Income Disclosure Statements

4 March 202018 November 2019 by Tracy Coenen

A collection of annual income disclosure statements published by multi-level marketing companies, continuously updated. Last updates done 03/04/20.

Some MLMs release income disclosures or earnings disclosures. These numbers are not required to be disclosed in the United States, but some of the companies do it anyway to appear transparent. The disclosures theoretically provide insight into how much distributors earn in commissions or overrides, but they are generally worthless. They are worthless because of what they do not disclose.

Multilevel marketing companies purposely omit important information that would allow potential distributors or investors to have real insight into these plans. In general, earnings disclosure statements often fail to provide the following information that is critical to understanding the plans and the results:

Multi-Level Marketing is Not a Legitimate Business Model

2 December 20196 November 2019 by Tracy Coenen

One of the common defenses of multi-level marketing is that it is a legitimate business method that has been around for a long time.

I’ve also been told that if it was illegal, it would have been shut down. Some companies that were widely touted as “legal” or “legitimate” MLMs, such as Advocare, HAVE been shut down or prohibited from using the MLM model. Who knows the rhyme or reason to that.

But neither the length of existence nor the lack of law enforcement action means something is legitimate or not a fraud. Remember Enron? Remember Bernie Madoff? These and others have been in business for a long time, and turned out to be complete frauds.

FTC Sues Nerium: Illegal Pyramid Scheme

2 December 20194 November 2019 by Tracy Coenen

Last week the FTC announced a lawsuit against Neora (formerly known as Nerium), alleging that it is an illegal pyramid scheme. Couple this with the recent end to AdvoCare’s multi-level marketing method of business at the hands of the FTC, and people like me (who think MLMs are abusive pyramid schemes) have a bit of hope.

More specifically, the FTC suit goes after Nerium under the parts of the FTC Act that prohibit unfair or deceptive practices and false advertising. The company was known as Nerium from 2011 to 2019. In February 2019, the company changed the name to Neora. It is suspected that the name change was because the Nerium name was connected to so many complaints and lawsuits.

The current suit says that “unlike a legitimate multi-level marketing business,” Nerium’s compensation plan emphasizes recruiting new “brand partners” (BPs) over the sale of products to consumers outside of the company. (Note to FTC: This is what all MLMs do. They ALL focus on recruiting, and the actual retail sales are pathetic for several reasons.) The FTC says the business model makes it unlikely that distributors can make money selling products in response to legitimate demand from third parties.

AdvoCare Pyramid Scheme

6 October 20194 October 2019 by Tracy Coenen

On Wednesday it was announced that AdvoCare and the FTC entered into a settlement which bars it from participating in any multi-level marketing (MLM) activities. AdvoCare will also give $150 million in consumer refunds.

The settlement comes after the FTC said AdvoCare was running an illegal pyramid scheme. There were allegations that the company “deceived consumers into believing they could earn significant income as distributors of its health and wellness products.”

There is interesting stuff in the complaint filed by the FTC: