By Herb Weisbaum ConsumerMan
msnbc.com
updated 10/30/2008 7:49:37 AM ET 2008-10-30T11:49:37

Imagine getting a letter from Publishers Clearinghouse that says you’ve won a million dollars. You might be so excited you wouldn’t even question if it’s legitimate. Con artists are counting on that. They’re sending these official-looking but phony prize notices to people all across the country.

Lois Zupan of Morton, Wash., got one. “Congratulations!” it said. “The team at PCH is thrilled to officially announce your name as the third place winner of the 15 Million Dollars ($15,000,000) Grand Prize Draw sponsored by Martha Stewart Living Magazine.”

The envelope included a check for $5,889 to cover “any outstanding fees that had not been paid by PCH directly.” All Lois had to do was call a toll-free number and her representative would explain everything.

She called and spoke to Kevin. She remembers him as “very nice and very professional.” He told her to deposit the check and then call back. Lois went to the bank and waited a week before calling back. She wanted to make sure the money showed up in her account.

Kevin told her to wire the money to him in Canada. Just minutes after doing that, Lois got a call from her bank. The check she had deposited was bogus. By then, it was too late to stop the wire transaction. Lois knows she’ll never see her money again.

Scammers getting more devious
“We are angry that scam artists are using our good name and reputation to deceive consumers,” says Christopher Irving, assistant vice president for consumer affairs at the real Publishers Clearinghouse. “There’s a lot of money being lost and we are very concerned about it,” he says.

This is not the first time con artists have hidden behind the Publishers Clearinghouse name. But the bad guys are getting more devious. The current batch of bogus prize letters mentions either Martha Stewart Living or Orpah Winfrey’s O magazine. It’s another way to build credibility.

And there’s that toll-free number you’re told to call. The recorded message answers: “Thanks for calling the Publishers Clearinghouse, where dreams can come true.” But it’s just another ruse.

Why this scam works
The bad guys know a lot more about bank deposits and wiring money than most people. They use this to their advantage.

Let’s say you deposit one of those fake checks. You’re skeptical, so you wait a few days to see if the money shows up in your account.  It does, so you assume the check is good. That’s not necessarily the case.

“The only thing the check has really cleared is the bank’s hold period so those funds are now available for you to spend” explains James Perry with the National Consumers League. “It has nothing to do with the check being good or bad.”

If the check eventually bounces – which could take as long as eight weeks – you will be left holding the bag. You are responsible for any withdrawal you make from your account – not the bank.

Why they want you to wire money
A credit card charge can be disputed. A wire transfer is basically a cash transaction. That’s why so many scams today involve these bogus checks and wiring money.

“Once they pick up the money, it’s gone and it’s too late for the consumer,” Perry says.

Something else a lot of people don’t understand; these wire transactions make it easy for a thief to hide from the law. Even though you wire the money to a specific address, it can be picked up anywhere in that country.

The red flags are there
There are plenty of warning signs this prize notice is a scam. The most obvious one: You are required to send money. No legitimate contest ever requires you to buy something or pay any money.

Then there’s the check that comes with the award notice letter. It always has the name of some unrelated company on it – such as a funeral home in North Dakota or a collision shop in California – not Publishers Clearinghouse. Why? The bad guys steal the names and account numbers of real companies to put on their fake checks so they won’t bounce as soon as you deposit them.

And then there’s the strange instruction you get about wiring the money. You’re told not to mention that you’ve won the contest. You’re supposed to say you’re sending money to a friend or relative. That should make warning sirens go off.

Willard Hart, director or fraud at MoneyGram International says this is done to fake out their agents who will question the transaction if you say you’ve won a contest or lottery. “What the bad guys are trying to do is give their victims a set answer to keep the transaction going,” he explains.

Trying to attack the problem
Consumer groups, businesses and government regulators have formed a task force on fake checks. Susan Grant, director of consumer protection at the Consumer Federation of America chairs this task force.

I asked her if she believes the banking industry should do more to protect their customers from these fake check scams. Her response: “Banks clearly need to do more.”

Grant has high praise for West Suburban Bank in the Chicago area. It reduced this check fraud by 85 percent in one year by instituting a simple policy. Every customer who deposits a check for $1,000 or more or withdraws $1,000 or more gets a flyer about fake check scams. “It’s simple and effective,” Grant says.

The bottom line
With the real Publishers Clearinghouse sweepstakes you never have to call to claim your prize. The company notifies you. If you win $10,000 or more – the Prize Patrol makes a surprise visit. If the check is for less than $10,000, it will come via certified mail.

Be smart. Don’t get greedy. Never wire off money to claim a prize. If you do, you’re guaranteed to be a loser.

“Don’t fall for this scam,” warns Lois Zupan, who got burned for nearly $6,000. “Just don’t let them get away with it.”

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