The $18 million settlement MoneyGram International has agreed to pay U.S. consumers who were tricked into transferring $84 million to the U.S. and Canada for fraudulent schemes is the tip of the iceberg. My video on this is here.

Worse, WatchdogNation believes, is the allegation leveled against MoneyGram by the Federal Trade Commission that 10 percent of MoneyGram’s Canadian agents (about 134 employees) were involved in the scams as willing partners.

But that’s not even the worst: MoneyGram executives were warned and did nothing. Company whistleblowers were disciplined or fired.

In damning language about the Minnesota-based company, the FTC states that MoneyGram “ignored warnings from law enforcement officials and even its own employees that widespread fraud was being conducted over its network, claiming that proposals to deal with the problem were too costly and were not the company’s responsibility.

“The company even discouraged its employees from enforcing its own fraud detection policies or taking action against suspicious or corrupt agents,” the FTC states. “Some employees who raised concerns were disciplined or fired.”

During one month alone, the FTC says 8 out of 10 wire transfers through MoneyGram of $1,000 or more were fraudulent. You can read all the FTC’s legal documents here.

As first reported in the Dave Lieber column in the Nov. 6, 2009 Fort Worth Star-Telegram, the scams involved fake lotteries and sweepstakes, con jobs working as mystery shoppers, Internet  purchases, scams involving loans, e-mail, romance, employment ads and, one of the worst, the infamous grandparents scam where grandparents falsely believe they are wiring money to stranded grandchildren in Canada.

FTC spokesman Mitchell Katz says those scams are among the most evil because they prey on the elderly, many of whom already face financial troubles in tough economic times.

“They play on their emotions and financial insecurity to trick them out of their money, and that’s just not right,” Katz says. “That’s why we thought this was such a great case.”

The allegations against Minnesota-based MoneyGram go far deeper into the corporate culture than crooked agents.

FTC spokesman Katz tells The Watchdog: “Businesses have to keep in mind that you can’t just look the other way and pretend it’s not happening. You need to have a compliance program in place to make sure that the people working for you and doing your business are complying with the law.”

MoneyGram spokeswoman Lynda Michielutti released a statement:

“We don’t agree with the allegations made by the FTC. But we believed that it was in the best interest of our company and our consumers to put this matter behind us and focus our resources on delivering our valued service to consumers rather than battling it out through a long and costly trial.”

Some of the witnesses at that trial, undoubtedly would include, some of the 65 Canadian and U.S. employees of MoneyGram who already have been charged with crimes by law enforcement agencies in Canada and the U.S.

Under the settlement, MoneyGram must pay $18 million to victims and make the following changes:

- conduct background checks on all employees

- educate its employees on consumer fraud

- monitor its agents

- discipline those who break rules

- provide a clear fraud warning on its money transfer forms

- maintain a system for receiving consumer complaints that federal agents can periodically review.

WatchdogNation.com TIP

If you were scammed in a MoneyGram wire transfer, here’s how to apply for your part of the $18 million settlement:

1. File a written written complaint with MoneyGram. Contact them at 1-800-666-3947 to get started.

2. File a complaint with the Federal Trade Commission by visiting Web site ftc.gov or by calling toll-free 1-877-382-4357.

3. File a complaint with your state’s Attorney General.

Source: FTC

Don’t fall for it

Don’t wire money to:

- someone you don’t know

- someone claiming to be a relative in the midst of a crisis who wants to keep the transfer a secret

- someone who says a money transfer is the only form of payment accepted

- someone who asks you to deposit a check and send some of the money back

Source: FTC

What MoneyGram now tells customers:

On MoneyGram’s Web site, clear warnings are now issued that many of the reasons Americans were using the company’s service were fraudulent. This is worth reprinting in full from MoneyGram’s Web site:

Don’t Send Money to Strangers

MoneyGram never recommends sending money to a stranger. Any monies received by a stranger cannot be recovered and unfortunately you will not get your money refunded back to you.

Lottery/Sweepstakes

Have you ever received a communication stating that you won something (money or a prize), but before you can collect you will need to send money to pay for taxes, customs, or any fees?  However, you didn’t actually buy a ticket or enter a sweepstakes. This is a SCAM.

Don’t send transfer money to the people who are stating you have “WON” something but need to send them funds before collecting your winnings. You will never have to pay money up front to receive any legitimate lottery or sweepstakes winnings

Internet Purchases

Have you found something online that interests you – a puppy, a car, an apartment for rent or any item for sale? Does the price for the item seem to be too good to be true and are you being asked to pay for the item through a MoneyGram money transfer?

Unfortunately, this is a SCAM.

Do not send money for the item to the seller. They may even send you a letter or e-mail of authentication telling you that you have purchased the item but need to wire funds first. Do not send the money. It is a SCAM. You will receive no merchandise. Once money is wired and received it cannot be recovered and unfortunately you will be at loss for any money transferred.

Loan Scams

Did you receive an e-mail or mailing about getting a loan? Were you asked to send money for loan fees, taxes, service fees, advance payments or any other reason? This is a SCAM.

Do not send money to a loan company to obtain a loan.  If the money is wired and received it can not be recovered. You will be at a loss for the money you have sent.

Checks/Money Orders in the Mail

Have you received a check or money order in the mail with instructions to first cash it at your bank and then send some of the funds to someone else through a MoneyGram money transfer? If so, the check/ money order is counterfeit and your bank will make you cover the loss.

Be aware that counterfeit checks are very hard to identify. You may have been promised a percentage of the check for employment or because of an over payment. This is a SCAM. Do not send the money and do not cash the check

E-mail Scams

Have you received a random e-mail from someone who needs help getting money back into the United States?  They may claim to be ill or inheriting a company and asking you to help them by wiring money – Do not send money to this person as this is a scam. Any money sent to the stranger will be lost and you will not get a refund.

Did you receive an e-mail from MoneyGram? The only time you will ever receive an e-mail from MoneyGram is if you sent money through www.emoneygram.com. If you receive an e-mail stating that a payment/or funds have been sent to you, and you didn’t use eMoney Transfer, the e-mail is fraudulent.

Romance Scams

Did you meet someone through a personal ad, e-mail, chat room or an instant message? Did they ask you to send them money for travel or to help them financially? Do not wire the money – This is a SCAM. Any money received by this person cannot be recovered and you will be at loss for any money sent.

Newspaper Ads

Have you found something for sale in the classifieds or any type of newspaper ad? Did they ask you to pay for the item through a MoneyGram money transfer? This is a SCAM.

Do not use a money transfer to purchase an item from a stranger. It is not safe to use a money transfer service when trying to purchase an item

Grandparent/Relative Scam

Did you receive a phone call from a grandchild or a family member? Are they in despair because they have been detained in Canada for not having a fishing license or for catching a protected species of fish? Have they been in a car accident? Are they asking for money to pay fines or for car repair? Did a relative call because they need money for a family member in medical need or for medicine? THIS IS A SCAM! Use precaution when sending money in this situation. These callers can request that you send money anywhere in the world. If you cannot verify with your family member that they are requesting the money and aren’t sure about the transaction, do not send the money. You will be at a loss for any money that is sent.

Finally, here is the latest FTC consumer alert on money transfer scams.

You can learn more about the latest scams and ways to protect yourself in the groundbreaking book by the author called Dave Lieber’s Watchdog Nation: Bite Back When Businesses and Scammers Do You Wrong, winner of two national book awards in 2009 for Social Change.

Who is this mysterious person that said the following awful things about Toyota?

Was it the company’s biggest stockholder? An outside critic who monitors the company? A disgruntled employee?

Here are the comments made by this mystery person:

- The company is grieving about a fatal crash that led to a recall of 3.8 million cars. The crash and recall calls into question the company’s long tradition of safe cars.

- The company regrets its expected second annual loss.

- The company is sorry about its decision to close the company’s first American factory in California.

- The company was terribly unprepared for the global economic crisis.

- Automakers such as Toyota “have abandoned our passion for cars.”

- The company is one little step away from “capitulation to irrelevance or death.”

- The company is “gasping for salvation.”

* * *

Do you know who made these comments recently to the Japan National Press Club?

The answer:

Akio Toyoda.

He is the president of the company.

* * *

When was the last time you heard an American CEO make these kinds of honest comments?

I suggest NEVER – unless the American CEO is standing before a judge making a plea of guilty to all charges.

* * *

To learn more about this amazing confessional, read the New York Times report.

Columnist: Hundreds of complaints about banks, none on credit unions FORT WORTH, Texas (9/3/09)–Dave Lieber, “Watchdog” columnist for the Fort Worth Star-Telegram, told Texas credit unions that he receives hundreds of requests for help with bank problems and none for credit unions. He recently gave a presentation titled “Why Americans Hate their Banks but Don’t Know Enough to Love their Credit Unions,” at the Fort Worth Chapter of Credit Unions‘ monthly meeting. Lieber’s column helps readers who have issues or problems with current situations affecting their communities (LoneStar Leaguer Aug. 28). He said that while he has had hundreds of requests from readers to address or correct complaints facing the banking industry, he had not received any asking for help in dealing with a credit union. With many “horror” stories relating to banking customers’ complaints, Lieber had his audience laughing when he said he now understood why it was called “BANKruptcy” and not “CREDITUNIONruptcy.” -30- Source: http://www.cuna.org/newsnow/archive/list.php?date=090209#42560

You’ve heard of Bernie Madoff and Madoff Securities. You’ve heard of R. Allen Stanford and his Stanford Financial Group. But here’s another Ponzi scheme that resulted in a major federal indictment the other day. Tens of thousands of people across the United states were deceived. Hundreds of millions of dollars are missing. And it hasn’t drawn a lot of public attention.

Does National Prearranged Services ring a bell?

That’s the company that sold more pre-need funeral contracts than anyone else. NPS officials turned out to be among the earliest examples last year of stereotypical U.S. executives’ greed. It’s the biggest scandal to hit the funeral industry in years.

Tens of thousands of people paid a lot of money to the Missouri-based company that sold funeral contracts through insurance policies written by its two subsidiary Texas insurance companies. You buy these contracts now, with the idea that when you die, that’s one less worry for your survivors: most funerals costs are already paid.

Last year, though, Texas regulators figured out the company was about to fail and placed it into receivership. The FBI launched a criminal investigation.

That’s how I came to know about this. With the help of Jim Bates of the Funeral Consumers Alliance of Texas, I was the first newspaper writer to expose this, which I did in my Fort Worth Star-Telegram column. (Credit, though, to the award-winning Funeral Service Insider newsletter that put the story into print first.) I’ve kept my eye on it ever since and wondered why more people haven’t done so.

But last week, two new developments show the immense reach of this scandal.

On Thursday, a federal lawsuit was filed that seeks to recover $600 million in lost funds from the companies. That same day, a federal grand jury indicted former NPS Chief Financial Officer Randall Sutton for mail fraud, wire fraud and money laundering. (Here’s my story about that in the Aug. 8, 2009 Star-Telegram.)

I called Sutton at home Friday and left a message that I wished to hear his side.

By going after the CFO, however, the feds may be targeting the actual founders of the company, the Cassity family, the politically well-connected funeral industry entrepreneurs that dominated their industry and made millions.

Where the money is today is anybody’s guess, but before this is through, we’ll surely have a greater understanding of what the St. Louis Post-Dispatch calls the “secretive Cassity family trust, RBT Trust II.”

“Some believe the missing funds could be hidden in that account,” reporter Todd C. Frankel writes.

Until now, we didn’t know what ultimately led to the demise of NPS and its two Texas subsidiaries – Lincoln Memorial Life Insurance and Memorial Service Life Insurance. But the federal indictment gives us the first behind-the-scenes look at the many ways you can steal from a corpse.

If you’re keeping track of big-time fraudsters who are ruining this great nation of ours by making suckers out of millions of us, well, please take notes. Watchdog Nation, the only way to stop these scams is to understand how they work. (NOTE: Details below are from the U.S. Attorney’s Office, and, of course, at this point, they are only allegations.)

* Promise your customers that the money they invest will be held in trust for when they die. Get the customers to pay in full when they sign the contract, but don’t tell them there is any risk. And don’t disclose to funeral homes and customers that these funds will be used for other purposes.

* Don’t tell customers that because their funds are used for other purposes, other contracts to new customers must be sold to cover the costs of funerals for the original customers.

* After you convince your customers to pay in full for a life insurance policy to cover funeral costs, go back and erase from their contracts any mention that complete payments were actually made. Alter documents so they show that customers made only partial payments. Then take the difference between the full payments and falsified partial payments from the customer’s insurance policy and use it for other purposes. Leave most of the customer’s payment in the account, but transfer the obligation of future payments to the insurance provider, who will be surprised when that bill comes due years later.

* While you’re altering the forms, make sure you white-out the names of the true beneficiaries and replace them with the name of National Prearranged Services. Once NPS is listed, the company can get more money. Here’s how: Pledge customers’ insurance policies as collateral for loans to NPS without the customers’ knowledge. Then use affiliated insurance companies to extract money from these loans under false pretenses. Use proceeds to pay outstanding premiums due from other customers. You can get another $65 million from your customers that way, the indictment states.

* Because NPS is now a listed beneficiary, NPS can then easily convert customers’ whole life insurance policies to monthly renewable term policies. By taking the difference from the insurance company, the difference from the cash surrender value of the whole life policy and the first monthly premium of the renewable term policy, you can get another $40 million from your unknowing customers, the indictment states.

* Don’t keep your promise to invest the money you receive from roll-over accounts. Instead, purchase large blocks of pre-need funeral contracts from funeral homes you’ve done business with. Promise to invest 80 percent of the underlying customers’ funds for 30 days, and then use the money to purchase life insurance. But don’t bother investing the money as promised. While you’re at it, create false monthly reports for the funeral homes showing their money is held in trust — when that’s not true.

* Promise to invest $1.7 million from a well-known Kansas City funeral home, but place the money in speculative futures contracts – and lose most of it. Then, rather than admit what happened, send monthly statements to the funeral home showing false balances.

* Give false information to regulators and funeral homes when they come by asking questions.

* Make sure your chief financial officer claims that he is licensed by the Missouri Department of Insurance. But get his secretary to study and take the qualifying exam online pretending to be him.

Who gets hurt in the end? Right now, most states have guaranty funds that pick up funeral costs in the event of a systemic failure such as this. But I fear that when those funds run out, funeral homes, already operating on tight budgets, will be forced to pay the losses out of pocket to assuage angry customers, well, actually their survivors.

Dave Lieber is the author of Dave Lieber’s Watchdog Nation: Bite Back When Businesses and Scammers Do You Wrong, the 2009 winner of the Next Generation Indie Book Award for Social Change. This post appears on http://www.WatchdogNation.com.

The trend that I hate the most, really hate, is that it takes most service personnel two times, at least, to get things right. We used to live in a nation where almost everybody got things right the first time.

Now you hire somebody to do something, most likely, they will have to come back because they didn’t get it right the first time.

Recently, for example, the security alarm guy from ADT visited Watchdog Nation HQ to help protect our top-secret investigative files.

He was back again the next day. He forgot to alarm the back door.

The new brakes that were put on Watchdog Nation’s Batmobile the other day? We had to return and get them replaced after 24 hours. Defective parts.

But the one that stands out in a week of second chances is the Mattress Giant.

Last week, we bought a new bed. Of course, when they delivered it, they forgot to bring the bed frame.

No problem. I went to the store and picked it up. Yeah, second chances. I half expect the incompetence.

By the second night, however, the box springs were so creaky we couldn’t stand it. Every move on that bed sounded like a stack of plates crashing to the floor. LOUD. CRASH. WAKEUP.

We returned to the store, and the woman at the counter apologized. She told us there might be a $59 exchange fee.

I started reading their statement of principles hanging on the wall to her. Standing behind their service. Quality. Blah blah blah.

She got the fee waived.

Then I asked her how come the box springs made so much noise?

She explained it was part of “a bad batch” that came from the bed factory in Cleburne, Texas.

I asked, “If you knew the batch was bad, why did you sell it to me?”

She replied, “Well, some of the bad ones got mixed in with the rest.”

EXCUSE ME?!

Have you ever heard of bar codes? Inventory control? Finding the bad ones in the lot AND PULLING THEM OFF THE SHELVES??

I believe Mattress Giant knowingly sold me a bad bed. How else to explain how they knew the batch was bad and still sold it anyway?

I called Graeme Gordon, the vice president of marketing and advertising for Mattress Giant (sted on the company Web site as the PR contact), to discuss this with him. If he calls back, I’ll update this post.

An employee at the International Bedding Corporation in Cleburne, Texas told me she wasn’t aware of any bad box springs, but if there was a bad lot, “We sell it to Mattress Giant, and if they have an issue, they’ll talk to our production manager. If you have a problem, talk to Mattress Giant.”

I’m talking here. Right now.

UPDATE: After this blog post appeared, within seconds, Mattress Giant sent me a message via Twitter. A few minutes later, Graeme Gordon, who didn’t call back yesterday, called today to respond to this post. The vice president for marketing and advertising apologized.

Here are excerpts of his remarks:

“We’re in the middle of a meeting and I wanted to step out to let you know that I know what was going on…

“This comes down to someone at the store level who unfortunately isn’t aware of what is going on.

“The reason we know something wasn’t right was because we saw returns jump from 1 to 5 percent… There was a flaw in the design.

“The manufacturer told us they were completely redesigning the box springs. So there’s no excuse for getting it mixed in…

“I’m not one to give excuses, and honestly, there’s no reason that should have happened….

“If anyone calls and says they’ve got the same problem, I’ll bring them one tomorrow. I’ll give them a pillow, whatever it takes to get the problem solved…

“I’m going to ask you: Can I send you a pillow to make up for this?”

I said, “Thank you for the gesture, but I’m not in this for the free gifts.“