Sounds too good to be true? It probably is
Encino resident Beryl Arbit got a nice surprise in the mail the other day: A check for $3,875 as a down payment on $125,000 in international lottery winnings.
She examined the check closely, front and back. It was drawn on an account belonging to Eagle Tool & Machine Co. in Springfield, Ohio. But other than that oddity, it sure looked legit.
“I’ve read stories about people being scammed,” Arbit, 60, told me, “but this looked pretty real.”
Her excitement didn’t last long. Googling the lottery company named on an accompanying letter, Goldberg Securities Inc., she quickly saw warnings online that the check was bogus and the purported winnings a scam.
Lottery and sweepstakes scams aren’t new. But they’ve grown increasingly sophisticated in their trickery, meriting a reminder about the pitfalls to watch for.
The Federal Trade Commission says it received nearly 42,000 complaints last year relating to “prizes, sweepstakes and lotteries.” And this may be just the tip of the iceberg.
“Obviously there are other incidents that go unreported,” said John Krebs, an FTC spokesman. “These are just the complaints we’ve received or learned about.”
The check Arbit received highlights the lengths that lottery scammers — many of whom are based in Canada — will go to.
First off, the letter from Goldberg Securities claims Arbit was one of 32 lucky people sharing in a $4-million lottery prize. Winners, the letter said, “were selected through a random computer ballot system drawn from over 500,000 names.”
The $3,875 check, Arbit was informed, represents part of her winnings. But to expedite payment, she’ll need to wire back $2,875 via Western Union to cover taxes that can’t be deducted upfront “because of the insurance bond policy coverage.”
The beauty of the scam is that the victim still thinks she’s coming out ahead because she doesn’t have to wire back the entire amount of the check. There’s still an extra $1,000 in the bank.
But there’s not, although you might not know that right away. If you deposit the check in your account, chances are it would be accepted by the teller. It wouldn’t be revealed as a fake until days later, when the bank it was ostensibly drawn from refuses payment.
That means any money you wire to the lottery company during that interval will be coming from your own funds. That’s the scam.
I contacted Eagle Tool & Machine, which was purchased in April by Canada’s Heroux-Devtek Inc. A spokeswoman said the company had received “quite a few” complaints in recent weeks from recipients of bogus checks nationwide.
“Don’t cash it,” she said. “It’s a fraud.”
I also called the number in the letter for Goldberg Securities. A man answered, saying, “May I help you?” When I asked if this was Goldberg Securities, he said yes. But when I started asking questions about his location and the nature of the lottery, he hung up.
Arbit said she wasn’t surprised to learn the check was worthless.
“I certainly didn’t enter any sweepstakes or buy a lottery ticket,” she said.
On the other hand, she was the lucky winner about 25 years ago of a car from public-TV station KCET. The prize was a Mazda, which Arbit didn’t want. So she settled for about $10,000 in cash instead.
“I haven’t won anything since then,” Arbit said.
Not yet anyway.
Protecting debtors
Speaking of our friends at the FTC, the agency has unveiled new safeguards for people seeking help trying to crawl out from beneath a mountain of debt.
Beginning in October, companies that say they can help reduce people’s debt will be prohibited from charging upfront fees. Instead, they’ll be able to charge for their service only after successfully reducing or renegotiating at least a portion of a person’s debt.
As I wrote in a recent column, many debt-settlement companies charge an advance fee of up to 20% of a client’s debt load even if they don’t do a thing to him or her.
The Assn. of Settlement Cos., a trade group, says its members settled about $1.1 billion in clients’ debt last year for an average of 40 cents on the dollar. But such companies offer no guarantees. Their contracts clearly state that fees must be paid even if no debt is reduced.
That’s not good enough, the FTC has decided.
“This rule will stop companies who offer consumers false promises of reducing credit card debts by half or more in exchange for large, upfront fees,” said the agency’s chairman, Jon Leibowitz. “Too many of these companies pick the last dollar out of consumers’ pockets — and far from leaving them better off, push them deeper into debt, even bankruptcy.”
You’re likely to be better off seeking the assistance of a nonprofit credit counselor affiliated with the National Foundation for Credit Counseling or the Assn. of Independent Consumer Credit Counseling Agencies.
David Lazarus’ column runs Tuesdays and Fridays. He also can be seen daily on KTLA-TV Channel 5. Send your tips or feedback to david.lazarus@latimes.com.
