2/10/2012
By MICHAEL STRAND Salina Journal
Who would you rather have on your case, a cellmate or the IRS?

That's why Frank Abagnale advises the best way to punish an embezzler is to file an IRS Form 1099 rather than a police report.

The police and courts may well prosecute the crime, and the embezzler may be ordered to pay restitution -- but court-ordered restitution is rarely paid.

But because stolen money is taxable, Abagnale said, filing a 1099 provides several advantages; the business can write off the stolen amount, the IRS pays a finder's fee of up to one-third the amount of unpaid taxes, and the IRS is sicced on the embezzler.

"I've found that the threat of a 1099 gets people to pay up faster than the threat of jail," Abagnale told a crowd of about 400 Thursday afternoon during a seminar on business security at Kansas Wesleyan University.

Abagnale knows what he's talking about; before spending 36 years as a consultant to the FBI on white-collar crime, he spent several years on a multinational crime spree, writing some $2.5 million in bad checks and impersonating airline pilots, an attorney and a pediatrician, among others.

In addition to being the keynote speaker at Thursday night's annual meeting of the Salina Area Chamber of Commerce, he gave a two-hour talk Thursday afternoon on how businesses and individuals can protect themselves from identity theft, check forgery and a host of other crimes.

Unethical society

"We live in an extremely unethical society," and it's getting worse, Abagnale said.

As evidence, he cited several studies, including an annual survey of top high school students across the country; in 1980, just 5 percent admitted they'd cheated, lied or plagiarized during their high school years. By 2011, that number was 80 percent.

Another study found 56 percent of MBA students admitted to having cheated in school.

"You can have all kinds of sophisticated hardware and software, but if the human being operating it is defective in character, the system is doomed," Abagnale said.

Opening doors to criminals

The humans don't have to be criminally minded to help facilitate crime, Abagnale said.

"There's a misconception that all the data breeches we read about at major companies are performed by some criminal mastermind in Asia or Africa," Abagnale said. "In 99.9 percent of the cases, it's because somebody in the company did something they weren't supposed to do -- opened an email they weren't supposed to open, went to a website they weren't supposed to go to. It's really some criminal waiting for someone to open the door."

In other cases, it's just a matter of someone being helpful.

It's often possible, Abagnale said, to make two phone calls to a large company and get everything needed to empty its bank account.

"Call No. 1 is to accounts receivable, and you tell them you've gotten their invoice, and want to pay with a wire transfer, so you need their bank routing number and account number," Abagnale said. "The second is to corporate communications, and you ask for their annual report, which has the signatures of the CEO and CFO," everything needed to forge checks on the account.

ID theft made easy

In the old days, Abagnale said, "it took some legwork to steal someone's identity."

For example, a person could go to a courthouse, look up a 20-year-old bankruptcy filing on microfilm, and from that document get someone's signature, Social Security number and date of birth.

"Now, I can get all that from a laptop in Moscow," he said.

Even worse, he said, there are ways a person can casually take your photo with their cellphone, upload it to an online service that will scan photos on Facebook and find your page on the social network site.

And if you've put your date of birth and where you were born on Facebook, Abagnale can quickly determine seven digits in your Social Security Number.

Several years ago, after Abagnale claimed he could get vital data on anyone in under a minute, a USA Today reporter challenged him to prove it. The reporter asked him to pick from a list of names that included Gen. Colin Powell, John McCain and just-retired CIA director Porter Goss.

He picked Goss, and using the reporter's laptop, had his date of birth, Social Security number and other vital information in 17 seconds.

Bet you didn't know ...

Another great source of personal information is copy machines, Abagnale said.

For years, copiers have had internal hard drives, which store an image of every document put into them.

CBS News last year went to a used copy-machine dealer and picked out four machines at random; one was from the Buffalo, New York Police Department's sex crimes division, another from the Buffalo Police Department's narcotics unit, another from a New York construction company with payroll information still on it, and another was from an insurance company and contained reams of private medical records.

Abagnale's advice: When getting rid of a copier, erase the hard drive.

Other advice

Abagnale had more advice for people in general.

For starters, he said, "quit giving out your Social Security number to everybody, just because they ask." There's no need for a gym or rental storage business to have it.

He also recommends buying a shredder -- the right kind of shredder.

There are three basic kinds on the market, he said. The "straight" shredder, which creates long thin strips that can be reassembled in an hour; the "cross-cut" shredder, which creates a pile of paper that can be put back together in a matter of days, and the "confetti" shredder, often called a "security micro-cut" shredder, which is the kind used at FBI offices.

"They're all right there next to each other at Office Max, and they're all the same price," Abagnale said.

He also recommends signing on to a credit monitoring service -- one that monitors all three credit reporting agencies and will notify you of a suspicious purchase "in real-time, not by letter every 90 days. If someone is buying a big-screen TV in Chicago, your phone is going off."

He recommends against writing checks, and said he's never owned a debit card, preferring a credit card instead.

With a credit card, he explained, he's spending the card company's money, and any fraud comes out of the card company's account; if a debit card is compromised, it's your account and your money.

"If someone gets my credit card number, and charges $1 million dollars, under federal law, my liability is zero," he said.

It's also far easier to dispute a charge on a credit card, and refuse to pay, than it is to persuade a bank to put money back into a checking account if a criminal manages to make charges to it.

-- Reporter Mike Strand can be reached at 822-1418 or by email at mstrand@salina.com.

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