Inside the IRS Phone Scam Bust

[00:00:00] Will Johnson: Coming up this week on AARP - The Perfect Scam.

[00:00:03] Doug Schadel: Now I've interviewed con men for a long time, convicted con men and they typically are hardened criminals. These are not hardened criminals. More and more with the globalization of the economy which are getting our young people to just want the money...

[00:00:18] Will Johnson: For AARP - The Perfect Scam Podcast, I'm Will Johnson. Welcome back to our show and I'm joined here once again by the AARP's Fraud Watch Network Ambassador, Frank Abagnale. Frank, good to see you once again.

[00:00:28] Frank Abagnale: Good to see you, Will.

[00:00:29] Will Johnson: Frank, this week we're going to tell our listeners about a scam that has cost Americans over $100 million. It has to do with the IRS and certainly this is a type of scam you've heard of. This is a, a really big one that actually got busted, uh the folks that were doing this when it was an Indian call center, but let's talk about call centers and IRS scams. First of all, if the IRS wants to get in touch with you, uh what can you expect? Will they call you?

[00:00:55] Frank Abagnale: They don't make phone calls. They'll write you a letter, and they'll have a reference number up in the righthand corner for you to refer to when you call them, and uh, that they're not going to telephone you and certainly the IRS is not going to call you and demand that you pay uh back taxes immediately.

[00:01:12] Will Johnson: Or you'll get arrested.

[00:01:13] Frank Abagnale: Or you'll get arrested and they're not going to tell you to pay the back taxes on Apple Pay or go down to Walmart and get a green dot card as many of those scams say.

[00:01:22] Will Johnson: Don't wire money to the IRS.

[00:01:24] Frank Abagnale: Exactly.

[00:01:26] Will Johnson: All right, Frank. I want to introduce our listeners to 20-year-old Jaesh Dubay. He's lived in Mumbai, India, all his life. In the summer of 2016, he and his best friend made a phone call that changed their lives and ultimately helped bring it in to a vast scam that cost Americans over hundreds of millions of dollars. Jaesh and his friend, Puan Pujari were working in what's called a boiler room scamming Americans over the phone by pretending to be from the IRS and demanding back taxes. Jaesh and hundreds of other scammers were using all the latest tools to swindle Americans, high tech calling systems, robo calls, predictive dialing, even getting into the building was a high tech matter.

[00:02:07] Jaesh: There was a thing, a big (inaudible) door. If you want to enter the room, uh you need to have your thumb. So after thumbing the door, the door will immediately open. That means no one else can enter, only the people who work there, work in there, can enter the room.

[00:02:25] Will Johnson: AARP Fraud expert Doug Schadel describes the scam as massive.

[00:02:29] Doug Schadel: And they said there were about a thousand people in the boiler room, multiple floors of the same building. Um, they were robo dialing 100,000 Americans a day. They were getting 10,000 to 15,000 callbacks, cause you know, they're robo-dialing 100,000 people saying I'm the IRS and you're about to go to jail if you don't call me back, so that tends to get people to call them back. And these two kids were actually in the, in the boiler room receiving those calls and um, trying to extract money. So it was definitely a huge operation.

[00:03:01] Will Johnson: I just want to sort of underscore, you mentioned that you know a thousand people in a boiler room. I've got to be honest. My image of boiler rooms in, in the course of doing this podcast has been on a much smaller scale, maybe a dozen, maybe you know, maybe 50 or so people, but that, you know two floors of a building, it's astonishing to think about.

[00:03:19] Doug Schadel: Yeah, it really is and um, I, as I've experienced, I kind of agree with you. It's a little bit unusual. In the modern age, a lot of these, this calling is done by individuals who are not organized into a group that size. They tend to operate with voice over the internet technology, they could be on a laptop anywhere in the world, and so it makes it very hard for law enforcement to catch them. So this was unusual because you had this aggregation of a giant number of people all in the same building.

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[00:03:49] Will Johnson: Doug spent time interviewing Jaesh and his friend after they came forward to blow the whistle on the scam. Doug got a sense of why Jaesh took the job in the first place.

[00:03:57] Doug Schadel: These two were talking about how they were being promised $1000 a month in a country where the average salary is $50 a month. That's like 20 times more than they could make anywhere else.

[00:04:09] Will Johnson: Jaesh worked the night shift, 6:30 to 4:30 in the morning. He would enter the boiler room and sit at one of hundreds of PCs and follow the script he was trained to use. At first, he was nervous, but over time he grew more comfortable talking to Americans.

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[00:04:25] Jaesh: So we worked (inaudible) together. Why is their tax not paid? Like that. You will get audited by the audit department of IRS, like so now you will like to listen more, like okay. Not every American is scared, some people, so we were like, so while auditing, we have found that you have not paid your taxes and if you do come up with this amount on today's date, then your bank account, assets and all will be, will be confiscated by the IRS all, we used to tell them. So now, they are like, okay I am going to pay but I have only $3,000, okay, I don't have money, I have to borrow it from my neighbor from $2,000, $1,000 whatever. So we used to tell them, okay, you just pay half of the amount so that this recorded call would be a proof in the courthouse that you are not running away from your case, and you are ready to pay.

[00:05:21] Will Johnson: Like most successful scams, Jaesh and his coworkers used a carefully worded script that relied on fear tactics to keep potential victims on the phone.

[00:05:29] Doug Schadel: It's a very effective pitch in the sense that it just scares people so much that um, that's why they pay. All of these scams have a couple things in common, one of them is that they try and get people into a heightened emotional state and you do that by either telling them they've won a prize so they're really excited, or fear is a good one too. You get them scared. Either way, the con men we've interviewed in the past and Jaesh was no exception say that once they're in that heightened emotional state it's much easier to manipulate them into not thinking clearly. Um, and so that's what they do. They call and they say you owe the IRS $7,912 from you know, the last four years, or you made some mistakes and if you don't pay us that immediately, we're going to send federal marshals out to your house and arrest you. And you know, if you're um, a person of any age, but especially some of our folks who are over the age of 55, 60, who might live alone, that's a very frightening prospect and you tend to disengage your logical reasoning, um, suspended as belief or whatever, just to get it taken care of and relieve the anxiety that it creates.

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[00:06:37] Will Johnson: In the short 1½ months that Jaesh worked at the call center, he quickly figured out how to identify callers who lived alone. They were always more likely not to hang up.

[00:06:47] Jaesh: Because then is everyone who is alone, you can tell every person who is alone. If I'm alone, I don't have anyone besides me, I'll definitely pay. People who are alone, we ask them, who is with you, they are likely to say just my friend, or my husband, my wife. They usually tell us, we used to understand, okay, now if it's your husband, then the chances are very low. If your friends, chances are very low, okay, you are alone, fine.

[00:07:14] Doug Schadel: Ninety percent of the people who actually fell for this lived by themselves, and they don't, cause they don't have somebody to run it by, you know, uh, "Do you think this is real? This IRS thing?" And if you had someone you could talk to your chance, they'd say, well come on, no, you know? So um, the nature of the victims here is a group that is particularly vulnerable and I think that's another reason why law enforcement makes it a priority.

[00:07:38] Will Johnson: One of the reasons why Jaesh was hired was his English language skills, but his accent is clearly strong. That's something that over time he learned to disguise more and more. And even so, a vulnerable American might be used to someone calling with an accent, even someone calling for the IRS. We're used to legitimate companies using foreign call centers, so why not the IRS?

[00:07:59] Doug Schadel: He had a pretty thick accent, and I remember asking him, how did you convince people you were the IRS because if you do this calling 8 hours a day, you, you adopt an American accent. You know it, I just haven't done it for a while, so I can't do it for you right now, but he goes, after a, you know, a couple weeks of doing this, I sounded like an American.

[00:08:21] Will Johnson: Once he had someone on the phone, Jaesh stuck to the script. If someone seemed willing to pay, he would use their zip code to find a local store with iTunes gift cards, and then he'd keep the caller on the phone.

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[00:08:33] Jaesh: Now I just tell you, just go to this store, right, that is a fairly (inaudible) store, you have to go inside the store and you don't have to tell anyone about this, right? If you tell anyone about this, then this case will be published with third parties, then I cannot help you. Now the one, one thing is left. What you have to buy is iTunes card, yeah, you have to buy iTunes card, right?

[00:08:57] Will Johnson: And his instructions went beyond just what to do and where to go. He gave victims tips on how to appear and how to act.

[00:09:04] Jaesh: Okay, now what you have to do is first thing, you have to keep a smile on your face. Very important thing, because the, there is a lot of awareness and they don't use to be like if you ask for $3,000 of iTunes card, to the shopkeeper, then he will not give you. He will actually ask you, why do you want $3,000 of iTunes card? So we used to tell them everything, that once, if anyone's asking you that why do you want $3,000 of card, what is the purpose of taking this card but you have to tell them that this is for gift of a family member, that's all, nothing else, this is what you have to tell them, right? And you have to keep a smile on your face. Now how to do the payment, right, and they used to do all of these things. Now one iTune card, one iTune card be loaded with $500. Now suppose if you have to pay me $4,000, okay, so you have to buy eight iTunes card, eight iTunes card okay divide by 4,000; $500 each. Now if you just tell them that you have to load $500 in each card, right, and you have to come back again to the parking lot, sit in the car and let me know that I have loaded $500 in each card, I have $4,000 and then I tell you what to do next. Now I will just take the 16-digits of (inaudible) of each card.

[00:10:25] Will Johnson: Jaesh would then pass along that 16-digit iTunes code to someone else in the boiler room, and they would go about accessing the money. His job was complete as soon as he had those numbers.

[00:10:36] Doug Schadel: Us standing on the outside of this transaction, you think it's pretty implausible that you, you'd respond to this, and then when they'd say the way to pay is to go down to, you know, Walmart or someplace and buy an iTunes gift card, you're thinking, what? But that's because, the reason they're doing it that way is because once they give that number, you know, you scratch that number off from the iTunes card, you load it with $500 or whatever the limit is, give it to them, it's completely untraceable. You can't find, you can never get it back, law enforcement can't find out who cashed it, and there's a huge underground market in the whole iTunes arena with gaming and so forth where it's much easier to fence things, buy Gameboys, run it through Xboxes, there's a whole world like that, um, cause I had that same question. iTune card? Really? Why don't you just have them wire money, um, which is what used to happen, but this is just a new world we live in.

[00:11:26] Will Johnson: And just as Jaesh would focus on getting those iTunes codes, they were scam employees, even victims in the United States playing other roles.

[00:11:34] Will Johnson: What can you tell us about the people in the United States who are part of the scam, the so-called runners?

[00:11:38] Doug Schadel: Um, well a lot of times scammers will either they're victims um, and they don't know that they're victims, they're also known as money mules where one victim is supposed to send money to another, uh and they'll, just because it's a local address as opposed to wiring it to India, and it's, it's all designed to further the conspiracy and conceal the fact that this is just a bunch of kids in India, you know, playing with your, with your money. And um, we've seen these money mules in a number of different scams, not just the IRS scam. One of the most common applications of it is the romance scam where you're sending money to um, very, you know, just laundering it through people. And there have been examples where those people unwittingly participate as money mules and then actually get charged by the US Attorney's Office, and you know have to defend themselves, and some even do time as a result of it.

[00:12:34] Will Johnson: Well, and as we have learned, recently in the news, uh almost a dozen members of this India based fraud were working in the United States and have been sentenced sometimes up to uh, up to 20 years, so uh the government is cracking down. Do you have any sense of how they were able to go about catching up with people here in the United States?

[00:12:54] Doug Schadel: I think it speaks to the level of cooperation between the US Attorney's Offices here and the government in India that they were able to cooperate and track those people down. There's a lot of law enforcement assigned to this, and I, I think the, the Indian government is, that's part of the reason for the crackdown is that that is a huge source of legitimate employment in that country and they do not want to be known as the place where all the scam boiler rooms operate

[00:13:20] Will Johnson: I mentioned that it was such a large scam that that might have been part of its downfall that eventually people are going to talk.

[00:13:27] Doug Schadel: Yeah, and you know, the strategy with the US Attorney's Office, always with these large scams is you arrest everybody, you charge as many people as possible, and then you offer people deals, and what is the price of the deal? You, you talk about what you saw and who were the leaders? Uh, and then you'll get a lighter sentence. We have interviewed dozens and dozens of con artists in the past, convicted felons who were just, hadn't been sentenced yet, and um, part of their motivation for talking to us is that they can go to the judge and say, uh well I did this bad thing, but I'm trying to make amends, and I am trying to help in these educational efforts, so cooperation to get a lighter sentence can take many forms. One is to testify against the other scammers, but another is to, is to show that you're willing to help educate the public about how to avoid it.

[00:14:18] Will Johnson: That motivation seems clear with Jaesh. He quit the job and blew the whistle on the scam before law enforcement moved in. He was eventually interviewed by the New York Times and featured along with a photo standing with his friend Puan in Mumbai.

[00:14:33] Will Johnson: You do get the sense that he was, he was willing to just come out and go ahead and talk about this stuff.

[00:14:36] Doug Schadel: They realized what they were doing, their conscience just couldn't let them do it anymore. I mean they had people crying on the phone. Jaesh felt really strongly that you know, um, he was willing to acknowledge that he did this, that it was wrong, and to go public and describe how to avoid it, so it was really admirable. He went through the full cycle of thinking, oh, I've got, this is my first job, and it's a good job, and I'm going to get paid twenty times more than anybody else to, wait a minute. Why are all these people crying on the phone, to this is a bad thing for me to be doing and now I'm going to warn America about it. So he's went full cycle.

[00:15:11] Jaesh: I left, because I didn't want such kind of money, I think such kind of money is risk. I cannot even tell anybody where do I work, where do I work.

[00:15:19] Will Johnson: When the call center where Jaesh worked was raided, hundreds of police officers stormed the building and found over 700 people inside according to the New York Times. All but 70 were released, the senior management if you will. Other call centers were raided. In the end, police learned that there were five call centers scamming thousands of people out of hundreds of millions of dollars. After the raid, the Better Business Bureau reports that scam IRS calls to Americans dropped a whopping 95%. Almost two dozen people working on the scam in the United States were sentenced this past summer, but call centers aren't going anywhere, and neither are the scams and the outrageous amount of money being stolen.

[00:15:57] Jaesh: Uh I think I cannot tell you, but it is still going on in a lot of places. Not in Mumbai, but in uh Ahmadabad, which is Pujurad, is what we have heard when I used to work there, that one has more uh centers, more rooms in Ahmadabad and he has four buildings in (inaudible) and (inaudible).

[00:16:17] Will Johnson: The scale and the scope of international scams like this one is sobering and frightening, but remember, you are in control when a scam call comes in. Hang up, stop, and verify.

[00:16:27] Doug Schadel: The Fraud Watch Network in AARP, our whole focus is getting to people before the bad guy does, helping them see the malicious attempt coming from a distance so they can defend against it, and the best way to do that is teach them what the approach is. The IRS is not going to call you out of the blue and tell you that you owe them $7912. It just won't happen. They may send you a letter, they may you know, but they're not going to call you on the phone, and if you get one of those calls, the simple thing to do is to not respond to it, and independently contact the IRS and ask them if they were contacting you, you know before you do anything else, so that's one of the, one of the big tips to avoid this.

[00:17:12] Will Johnson: AARP Fraud expert, Doug Schadel, thanks again for talking to us, really appreciate it.

[00:17:16] Doug Schadel: A pleasure, Will.

[00:17:18] Will Johnson: All right, Frank. Now IRS scams have been around a while, whether it's through phone calls or the mail, but like a lot of people, I trust the mail maybe more than a phone call.

[00:17:26] Frank Abagnale: Yeah, so what started to happen now recently is that people realize, con men realize that everyone's heard about the IRS scam. They've either read about it in the paper, they've heard it through AARP, they've heard it through a lot of other sources, so they've changed gears a little bit. They now send you out a letter, it comes in an IRS envelope, says "Internal Revenue-Washington DC" up in the left-hand corner. Over the righthand corner is it says, "Postage and Fees paid by United States government." It's a very official business. You open it up, there's a letterhead of the IRS. There is a reference number up in the righthand corner, it says, "Dear Mr. XYZ, that you owe back taxes on your taxes, you need to contact our local office immediately. Please refer to this phone number and contact Agent So and So with the IRS to discuss your case." So it looks very legitimate. People get that letter, they immediately call the number on the letter, it's a boiler room usually in Miami. Somebody answers and says, "Internal Revenue Service." Sounds very legitimate. I got this letter. I was asked to speak to Agent So and So. I'll connect you. Another person comes on and says they're that individual, and then the next thing you know, they're asking you the same thing they would have asked you on the phone, send the money, pay these back taxes immediately, etc. It's the same scam only the letter has some credibility and they've only heard about the phone call scams, they haven't heard about the letter scams, so it's a new, a new approach, a new way of getting the scam.

[00:18:51] Will Johnson: I've worked on this show long enough and had enough conversations with you that I know that I can get on the computer and look up the IRS phone number and call directly.

[00:19:00] Frank Abagnale: Exactly.

[00:19:00] Will Johnson: Stop and verify.

[00:19:01] Frank Abagnale: And that's what you need to do. Stop and verify, so if I got that letter, I'm not taking the phone number they gave me to call, I'm going to look up the IRS's phone number, and I'm going to call the IRS, say I got this letter, this is what it says, this is the reference number on the letter, and then IRS people will inform you that that is a fraudulent letter and not to, to ignore it.

[00:19:19] Will Johnson: And so this scam was based, the call center was based in India, and I want to talk a little bit about uh call centers, and you know, they hire a lot of young people.

[00:19:29] Frank Abagnale: Yes, especially like in, in call centers in general tend to hire young people. They're reading from a script which you can tell a lot of times when they call you that if you, they have waivered from the script they get lost, so they're only following what's written in front of the screen on them, so here you can imagine in India somewhere where you're offering someone a job in a call center, a young person, they don't even really know what it's all about, they're just reading from a script. They assume it's legitimate and they are making these calls and doing what they're told to do and getting paid a salary for it and they're, they're interested in the income they get from, from it. So I can see very easily someone falling victim to this, or truly not even understanding that it's part of a scam. They think they're doing something that's legitimate.

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[00:20:13] Will Johnson: All right, we now move on from international IRS call center scam rings to another scam that shows up as an ad on your laptop. We're joined by Jen Beam. She manages the Fraud Watch Network Facebook page. Jen, how are you?

[00:20:25] Jen Beam: Hi, Will, I'm great. How are you?

[00:20:26] Will Johnson: I'm good. Uh, it's always good to check in with you and see what's going on out there. You know, a lot of people like to do online shopping, right Jen?

[00:20:34] Jen Beam: As so I.

[00:20:35] Will Johnson: And it's a, it's a fun way to shop. You don't have to go anywhere, a box comes in the mail; however, there are scam and fraud concerns surrounding online shopping. Can you tell us about uh one that happened earlier this year, right?

[00:20:47] Jen Beam: Absolutely. Yeah, so I think most of us have heard of Amazon, it's probably one of the uh main places I go to.

[00:20:56] Will Johnson: A little outfit out of the Northwest.

[00:20:58] Jen Beam: Just a little outfit, yes. So obviously that's big money. That's a lot of shoppers so scammers are always looking for a way to, to get in there, and so what we're hearing, I first heard about this uh from our folks on the Facebook page messaging, and then I'm also hearing uh, our Fraud Watch Network Helpline, we were getting a lot of calls about this, too. So in this, there are fake phone numbers, uh posing as Amazon customer service, but they're actually using ads, the search engine ads to get you to call them, so uh, they're paying for their websites to show up high on search. So if you're searching in Google or Bing or what have you, Amazon customer service number, instead of calling the actual real customer service number, you're getting their dummy number.

[00:21:48] Will Johnson: So you call the fake number and then you start explaining your problem and what happens?

[00:21:52] Jen Beam: You know they, as you do when you call customer service, they verify your personal information, they make sure you've got the right credit card, and it's got all your stuff.

[00:22:01] Will Johnson: Alright, so the lesson here being, it should be a safe experience if you go to Amazon's website and look through and go to the right area of the website and get the right numbers or you're going to the right web address and chatting with them in that way.

[00:22:14] Jen Beam: Precisely. Always go to the main uh, website address. Make sure you type that correctly in the uh, the little box up there, and uh go through the customer service right there on their website. That's the safest way to go, and generally you don't need to call them, you just open a chat box.

[00:22:30] Will Johnson: Got it. Thanks again, Jen.

[00:22:32] Jen Beam: My pleasure. Thank you, Will.

[00:22:33] Will Johnson: Jen Beam is with the Fraud Watch Network Facebook page. For more information and resources on how to protect yourself or a loved one from becoming a victim of a scam, you can visit AARP's Fraud Watch Network website, AARP.org/fraudwatchnetwork, and as always, thanks to my team of scam busters here at AARP; Julie Getz, Brook Ellis, Julio Gonzales, and Steve Bartlett. For AARP - The Perfect Scam, I'm Will Johnson.

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