Investigating Elder Fraud: Where to Begin

Investigating Elder Fraud: Where to Begin

While millennials are more likely to fall victim to fraud than seniors, the financial losses they suffer are less than half of those suffered by seniors — $400 versus $1,092, respectively — with an annual loss by seniors of approximately $3 billion. The reason for the loss discrepancy: the financial stability of many elderly citizens and the types of frauds perpetrated against them. 

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The Top 10 Scams Targeting Seniors

The Top 10 Scams Targeting Seniors

Angie Kennard felt that something was off with her 79-year-old father. When they talked on the phone he would tell her about a woman he met online and occasionally sent money to. Even though her father never met the woman in person, she professed her love for him through emails and asked him to send her money to feed her and her daughter. Angie told her father that he was being conned, but he would not listen and continued to send the woman money.

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Funeral Fraud: Scamming the Dearly Departed


Misty Carter, CFE, CIA
ACFE Research Specialist

Scamming the elderly or taking advantage of the mentally disabled are considered among the most repugnant of fraud schemes. But what about when fraudsters scam the deceased?

Believe it or not, many criminals take advantage of those who have died using funeral fraud schemes. These types of frauds come in many forms and mainly target and affect the families of the deceased. One of the most common funeral fraud schemes involves prepaid funeral expenses. According to the Federal Trade Commission, millions of Americans prearrange their funerals by entering into contracts and prepaying all or some of the related expenses. Some states have laws in place to regulate these contracts,. Other states, however, are more lenient, which leaves a window of opportunity for unscrupulous individuals.

Consider the case of James “Doug” Cassity, a disbarred attorney and resident of St. Louis, Missouri. His company, National Prearranged Services Inc. (NPS), engineered a fraud scheme that caused fraud losses of more than $600 million. Cassity devised a scheme to defraud purchasers of prearranged funeral contracts or insurance policies obtained through NPS.

How did the scam work? NPS promised customers that, for a fee, the company would cover all their funeral expenses when they died. Depending on the type of funeral arrangements requested, customer’s fees could run upwards of $10,000. After finding out what customers wanted, NPS determined an agreed-upon price and accepted payment. NPS then made arrangements with the funeral home designated by the customer. NPS supposedly placed the funds in a trust — to be used for safe investments or to purchase a life insurance policy — with a third party in the customer’s name.

What customers didn’t know was that NPS, instead of putting their funds in a trust or life insurance policy, often altered documents by changing deposit amounts and listing the company as a beneficiary. NPS then converted these policies and used the money for risky investments, to pay existing funeral claims, and to purchase personal items. According to court documents, Cassity sold approximately 100,000 prepaid funeral contracts. The scheme was discovered when several agencies reported suspicious practices by NPS to the FBI. Cassity was sentenced to nine years in prison.

There are many other funeral fraud schemes that individuals should also be on guard against. For example, some scammers might try to capitalize on a family member’s unfamiliarity with funeral services and add unnecessary charges to their bill. Some might even insist that a burial casket is necessary even though a body will be cremated and a less expensive cardboard casket could be used.

Some suggestions that can help you minimize the risk of becoming a victim of a funeral fraud scheme are:

  • Be informed. Shop around before making a purchase. Take a friend along who might be able to offer a different perspective before you make a final decision.
  • Educate yourself about the goods and services, such as caskets or cremations, provided by funeral homes.
  • Understand the difference between fees, such as funeral home basic fees and fees for any additional services.
  • Carefully read all contracts and any other paperwork before signing.
  • Before signing, make sure that you understand the contract language and that all your requirements have been included in the contract.
  • If you are considering prepaying, be sure to include specific details about what funeral arrangements have been made in the prepaid contract.

While funeral fraud might at first seem hard to believe, the reality is that wherever there is a cheap buck to be made, fraudsters will find an opportunity. By being informed and aware, people can help protect themselves – and their friends and family – from becoming victims of this insidious type of fraud.

Wine Fraud: The Grapes Do Fall Far From the Tree


Emily Primeaux, CFE
Associate Editor, Fraud Magazine

A friend of mine recently hosted a wine-tasting party at her home. The premise was simple: bring two bottles of a single varietal that our generous host would bag and number. She gave each of us a numbered sheet of paper and, thankfully, a list of the wines hidden in the bags (in no particular order) to help us during the guessing game. We blindly tasted each wine and then took a guess at the varietal.

Full disclosure: my team and I did terribly. While I’m certain my palate would appreciate a finer wine instead of “two buck chuck,” the evening was certainly a learning experience.

So when I heard only a couple of weeks later that the ACFE’s Austin Chapter would feature “Wine and Fraud” as the topic for their March event, I knew I wanted to learn more. Presented by Cecily Raiborn, CFE, CMA, professor at Texas State University, the session covered the many ways in which wine fraud can be committed.

“We like to think of wine as something pretty and sweet and outstanding,” said Raiborn. “But really, a vineyard is just a farm. A winery is a manufacturing plant and wine is the product.” And she explained that there are at least four ways in which wine fraud can occur.

  • Employee theft                                      

At the Kendall-Jackson Winery, a low value placed on accounting was most likely the contributing factor when a service rep stole thousands of bottles and resold them for sporting tickets. He was found out because the bottles he resold weren’t even on the market yet.

  • Upstream supply chain

In 1993, Bronco Wine Company and Fred Franzia, one of the owners, were indicted on federal charges of conspiracy to defraud by misrepresenting cheaper grapes as premium Zinfandel and Cabernet Sauvignon.

Franzia lied about where the oak barrels had come from. The problem is that an oak barrel from France will make the wine taste differently than an oak from the U.S. Raiborn explained that one new French oak barrel costs around $1,400, but the fraudster used a U.S. barrel that should’ve cost much less. Of course, he didn’t charge less.

How do you prevent this kind of fraud from happening? Know your suppliers.

  • Downstream supply chain

Mark Anderson made headlines in Sausalito when he set fire to a wine warehouse. The wine arsonist was facing embezzlement charges after stealing more than 5,700 bottles of his clients’ collections. He’d take a bottle here and there from the warehouse where he stored wine for wineries and collectors. To cover his tracks, Anderson burned down $6 million of wine.

Unfortunately, because of insurance quirks pertaining to the movement of wine, the affected wineries were unable to claim the loss. Raiborn’s advice in this scenario is to properly insure your property and know your customer.

  • Frauds by wineries

Two cases really stood out to me in this example. In one, an Austrian winery added antifreeze to its wine to make it sweeter for their German customers, who prefer a sweeter wine. And in 2008, 20 Italian companies added hydraulic acid, manure and fertilizer to their wines. These attempts to cut costs endangered lives.

According to Raiborn, it’s a little trickier to prevent this kind of tampering. Compositional analysis is an option, but it’s very expensive and most wouldn’t be able to afford the cost. The best control here is to, again, know your supplier.

“But it’s still wine!”

According to Raiborn, 20 percent of wines sold worldwide are counterfeit. Yet the first person ever prosecuted for counterfeiting wine was Rudy Kurniawan in 2013. Why?

Wine fraud goes unreported because the fear of what it will do to the industry is overwhelming. There’s a lack of prosecution because many hire friends and family and don’t want to seek retribution. And worst of all, it may not seem like a big deal. Raiborn said that many fraudsters would argue that at the end of the day, it’s still wine.

The best defense is to employ sound internal controls and to know that even in such a glamorous industry, there are many ways in which people can con others.

Read more about wine fraud in the Fraud Magazine article, “A bitter tasting: Serving up three cases of wine fraud,” by Donn LeVie Jr.