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- EP153: Detect And Combat Influencer Fraud With Yaro Pat | HypeAuditor
- EP 85: Dealing With Fraud As A Business Owner – Part 3
- EP 84: Dealing With Fraud As A Business Owner – Part 2
- EP 83: Dealing With Fraud As A Business Owner
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- Decoding The Illusion Of Bots In Influencer Marketing
- College Admissions Scandal And Celebrity Impact
- Law And Privacy Order With Richard Chapo
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Welcome to Marketing Mistakes (& How To Avoid Them). I’m Stacy Jones, the founder of influencer marketing and branded content agency, Hollywood Branded. This podcast provides brand marketers a learning platform for top experts to share their insights and knowledge on topics which make a direct impact on your business today. While it is impossible to be well versed on every topic and strategy that can improve bottom line results, my goal is to help you avoid making costly mistakes of time, energy, or money, whether you are doing a DIY approach or hiring an expert to help. Let’s begin today’s discussion.Intro (00:31):
Welcome to Marketing Mistakes (& How To Avoid Them). Here’s your host, Stacy Jones.Stacy Jones (00:36):
Welcome to Marketing Mistakes (& How To Avoid Them). I’m Stacy Jones, and I’m so happy to be here with you all today. And I want to give a very warm welcome to special agent, Brian Watson. Brian has been a special agent with IRS criminal investigation for 25 years, and currently serves as the public information officer for the IRS CI Phoenix field office, where his job is to publicize major financial crimes that they investigate and sentence. Subjects around tax evasion, corruption, the dark web, and scams are his specialty, and his job is to help people better understand the laws by showing by example where people have erred with their finances and taxes.
Some of those poor choices caught by the team at IRS were made by celebrities, including Richard Hatch of Survivor, actor Wesley Snipes, rapper, DMX, Jersey Shore’s The Situation, also known as Michael Sorrentino. And of course, the very recent Operation Varsity Blues college admission scandals of Lori Loughlin and Felicity Huffman. Today, we’re going to talk about how to avoid tax and financial scams as a business owner, and dive into some of the criminal cases I mentioned where people made the wrong choices along the way. We’ll learn what businesses need to be aware of from Special Agent Brian Watson’s perspective, what should be avoided and how some businesses can just miss the mark.
Brian, welcome. So happy to have you here today.Intro (01:51):
Great. Thanks for the opportunity, Stacy.
Stacy Jones (01:53):
I am very, very excited to have you here so that we can learn all things that are the forbidden subjects. Everyone worries about their taxes, about paying them, everyone complains about paying too much, but there are some people that take it a little bit too far. Can you start off by sharing, how did you get into this role and find yourself here today, where you are an investigator of tax fraud?
Brian Watson (02:21):
Well, I studied business and economics at UCLA, which is basically the de facto accounting major at UCLA. And I had planned to work for one of the big six accounting firms, Price Waterhouse, Coopers & Lybrand, etc, etc, except didn’t want me. My grades were just below the mark they were looking for. And I stumbled upon a Student Accounting Society meeting at UCLA, and there was a special agent talking about how his organization took down a major drug operation in Los Angeles County with the Sheriff’s department. And they were looking for accountants and I was like, “This is what I want to do. This is perfect.”
I’d never envisioned myself as a police officer because of my size, and kind of I’m a nice guy. I didn’t know if I had the toughness to be a street cop. And I applied, I got the job, and I’ve been with IRS criminal investigations for 25 years.
Stacy Jones (03:16):
That’s amazing. And yes, I could see how sexy it actually is. You’re sitting here, you’re a numbers cruncher, you’re in this room full of other number crunchers, and now you’re talking about saving the world.
Brian Watson (03:27):
Well, we try. We try one financial case at a time.
Stacy Jones (03:32):
Where are some of the things that pop up often? I know that you go out and you speak very much so on were major, major faces that were well known and recognized have made some errors along the way, made some poor decisions along the way, maybe not on purpose, but they stumbled upon and made decision after decision that led them to potential jail time. How does that involve your role? What are you involved with in all of those types of cases?
Brian Watson (04:00):
Well, we get leads from a variety of sources, sometimes it’ll be an audit that’s going on across the hallway and they keep finding more and more things, like peeling an onion, and they keep finding hidden bank accounts and things like that, and they’ll send it to us. We literally get people who walk in with a box of records or an anonymous letter. People provide information. Or, we work on certain projects, certain areas where we’re looking for compliance. It’s just amazing. The people that we try to investigate are not people who are just getting by and maybe fudged the little number here or there, we’re looking for the most egregious stuff.
And with our tax system, it’s a progressive tax rate system, so the more you make you’re actually paying up, not even more money, but you’re paying a higher percentage of your money. And most of the people we investigate are wealthy already. And then they start realizing they’re paying the highest tax bracket, and a lot of them don’t want to pay it. So they intentionally don’t provide their accountants with the true number, they’ll lower the number, they’ll only report certain bank accounts. Those are the types of cases that we’re looking for.
Stacy Jones (05:15):
That’s really hard to hide, I would assume, nowadays. We’ve all heard about offshore accounts and things along those lines of, also in spy movies, that’s where you funnel your money. But in today’s digital age, everything is so connected. I would assume that it’s getting harder with exceptions of maybe the world of cryptocurrency, what’s opening up there.
Brian Watson (05:35):
Right. Well, they always say we only get the dumb criminals because the really smart ones are so far ahead of us that we don’t even know they’re cheating at all. And some of the clues that we know someone is not reporting all their money is we look at the accumulation of assets and we can do a net worth analysis and realize how much someone’s made, because if they’re dealing in cash or they’re not depositing their money into a bank account, it’s hard to prove it from their bank deposits. So in my 25 years, I’ve seen the use of the internet start. When I first started, we didn’t have the internet, it was just a fledgling thing.
And then in the years in between, we saw the offshore bank accounts in the Caribbean and Panama, and then the South Pacific, and then in the last four or five years, a huge uptick in the use of cryptocurrency. So it is still easy to hide your money, but it takes time and it takes money and it takes someone who knows what they’re doing. It’s a constant cat and mouse game between us and the criminals that are committing either tax fraud or money laundering.
Stacy Jones (06:46):
Right. And then there’s the fine line of those people who are high net worth, who have just hired on financial experts who will help them find ways to silo their money and protect it and safeguard it, and that’s not who you’re really going after, it’s more so the ones who are truly corrupt.
Brian Watson (07:00):
Right. We’re not looking for people who are taking advantage of every deduction that’s possible or good tax planning, we’re looking for the people who are intentionally… Let’s say they’re operating a business and they decide they’re not going to report their cash. They’re only going to report their credit card receipts. That was done on purpose, and especially if you can show that they diverted that money into a hidden bank account under another person’s name, or they put assets under other people’s names, that’s the type of case we’re looking for. And then on the money laundering side, which is primarily narcotics cases, they’re constantly trying to hide their money because it’s dirty money. So we’re seeing money being put into other people’s names, nominees for properties and boats and cars and things like that. So it’s a constant battle to try to figure out who owns those assets
Stacy Jones (07:53):
A little less than those people who are listening going, “Oh gosh, I claimed a few more corporate dinner expenses than maybe I should have on my taxes.”
Brian Watson (08:03):
That would be an audit issue. You’re not going to go to jail for something like that, but you could be audited. And most of the tax evasion that happens in our country is handled at the audit level, the civil side of IRS. And if you’re caught, you’re going to pay interest and there’ll be some penalties. I tell people, you sleep better at night if you file an honest tax return. Because if be thinking about it, cheating on your taxes, this is the one crime that everyone has the ability to commit every single year, because really, anybody could do it by just budging a few numbers.
Because a crime like murder or bank robbery or terrorism, that doesn’t even come into most people’s minds, it would just never happen. But every year, 160 million tax returns are filed every year. The government asks you to provide your information to be honest. So it’s much easier if you just report everything, all your income and make sure your deductions are honest as well, you will sleep better at night.
Stacy Jones (09:09):
Agreed. 100% agreed on that. So what are some of the bigger cases? And I know what they are that you’re probably looking up, but what are some of the bigger ones in the last couple of years that we’ve really heard about, or the last months even?
Brian Watson (09:22):
Right. So you mentioned Operation Varsity Blues. That was the college admission scandal work between FBI and IRS, that made national news. And the only reason it got so much attention is because there’s celebrities involved. We work cases that get far more bigger prison sentences than some of those defendants in that case. We’ve worked these dark web cases, Silk Road a few years ago, which was sort of a clearing house for all the… We called that Craigslist for criminals. It’s where all the really bad stuff was going on. There was something called Welcome To Video that we were involved in, I believe in 2019 or 2020, where a South Korean young man basically operated, it was one of the biggest porn sites in the world.
And the scariest thing about it was, a huge percentage of the material on there was new materials, stuff that governments around the world had never seen before. So it was obviously creating a huge demand for child pornography. So IRS was involved in that. We’re very proud to be involved in that to help take that down. Unfortunately, then the next one’s just going to come up. But then also, some of the older cases you mentioned, Wesley Snipes. He went to prison for not filing tax returns.
Stacy Jones (10:53):
For a three years, right?
Brian Watson (10:53):
Stacy Jones (10:53):
It wasn’t just like, oh, we went for a few months, for three years, he was in prison.
Brian Watson (10:58):
Right. The people that helped him prepare those returns were based out of Florida, and they were very anti-tax, very anti-government people. I actually had a defendant who went to the same people. But no, he got three misdemeanors and the judge stacked them one year at a time to be served consecutively. Richard Hatch, the first winner of Survivor, got that million dollar from CBS, but didn’t report it, and that’s why he went to jail as well.
Stacy Jones (11:31):
That’s the most publicized moment, everyone was like… A duh moment, literally. You just won, on Survivor, a million dollars. Everyone knows. And you’re one of the first winners of Survivor and yet you managed to not file taxes on it.
Brian Watson (11:47):
Right. And it’s so easy. The common thread on all these cases, like 95% of our cases, is just greed. People don’t want to pay those high taxes, especially when you’re in those upper tax brackets, because you see what it would be if you report all your money and what the difference is, and you could save all those taxes, and people, they just don’t want to do it. Or on the expense side, I’ve personally worked a couple of cases where small business owners started running through personal expenses through their corporation, and my guess is they started small, figured, “It’s okay. No one will know.” And then it starts getting bigger and bigger to the point where you’re deducting trips and vehicles, plastic surgery, some stuff that’s not business related. And to the point where it could send hundreds of thousands of dollars, it’s no longer just that lunch here or there that maybe wasn’t business.
Stacy Jones (12:49):
Right. And then you mentioned something that I don’t think people really think of the IRS for, with the dark web and even Al Capone, these are things that people have done, but where they got in trouble, even though there were egregious, massive, massive things. We were talking child sex crimes, we’re talking murder and mayhem. It’s their finances that got them in trouble, and it was through the numbers that really actually got them to go to jail.
Brian Watson (13:19):
Right. I mean, Al Capone was public enemy number one, and tax evasion was not the worst thing he did, let’s be honest. His people were involved in murder and kidnapping and bootlegging, all kinds of bad things, but he was able to insulate himself with his underlings and he was never convicted of those charges. He was convicted of tax evasion. What’s interesting is, I can go speak to any Rotary Club, retirement group, I can go speak to eighth graders at a middle school career fair, and I’ll ask them what Al Capone went to jail for, and people know that it’s tax evasion, because the numbers don’t lie.
And this was a long time ago, he was convicted back in 1931, and he literally is our poster boy, we have posters of Al Capone saying, “Only an accountant could catch Al Capone,” because it’s very true. And it’s a great example, and we’ve been working in cases like that ever since then.
Stacy Jones (14:18):
Yeah. And so with Operation Varsity Blues as an example, how did you guys get involved with that? Because it is finances, it’s dollars, but really, it’s bribery. So is that IRS’s involvement where if there’s bribery charges that are coming in, or what is the fit there?
Brian Watson (14:39):
I don’t know exactly how we were invited into that case. A case like that is run through the US Attorney’s Office. And in that particular case, it was run through the US Attorney’s Office in Boston, in Massachusetts. It was definitely an FBI and IRS case. We are asked many times, we’re brought in because of our financial expertise. The US Attorney’s Office will say, “We’re working this type of case. We’d like one of your agents to come help us,” because the same financial skills that we use to take down someone on a tax evasion case translates to a bribery case, corruption, narcotics, dark web, whatever it is, it’s a financial case and we’re following the money.
Our bread and butter is taxes. We’re the only federal agency that can prosecute federal tax evasion. But we also devote a certain amount of time to other illegal source crime. A lot of that, they’re not are narcotics cases that we work.
Stacy Jones (15:44):
And I’m assuming over the next month ahead, we will be hearing a lot more about the Southern District and our former president a as they dive into things along those lines, still with accounting,
Brian Watson (15:55):
We will see. You never know. Because like when that Operation Varsity Blues thing came out, I remember watching the news at work and the special agent in charge for IRS in the Boston field office was on TV, and I said, “Well, I met her when I was in DC,” but I had no idea this case was going on because as an agent out in Arizona, I would have no need to know about that case unless we had a subject out in Arizona, but the subjects, the people involved in the case were all over the country. Obviously, a lot of them were in California, but they were scattered throughout the country.
Stacy Jones (16:37):
Yeah. And so many of them actually did bigger crimes. And I think Lori Loughlin and Felicity Huffman did, but because you all had the best faces possible to put on a case, they went down for their notoriety a little bit more, they got punished for being… Not punished, they did wrong, but they got more brought into the limelight just because of that celebrity aspect.
Brian Watson (16:59):
Right. I’ve seen that. We worked the case in Phoenix and this lady owned some either strip club or adult bookstore, and she was complaining that the only reason her case made the news as opposed to someone else’s because the industry she was in. And she probably has a good point there because newspapers are always looking for an angle, what’s the hook? Why should people care? And if someone is famous or owns a certain type of business, they’re going to-
Stacy Jones (17:31):
Or it’s a woman who owns a certain type of business.
Brian Watson (17:33):
Exactly. It’s different. But if we’re working on a drug case, a narcotics case, it’s 12 people charged with selling meth and none of them are famous, they’re just ordinary Joes, it’s sometimes hard to publicize a case like that in Arizona, because it’s run of the mill.
Stacy Jones (17:53):
Right. It’s, who cares? There’s no star power factor to it.
Brian Watson (17:55):
Right. We publicize our cases. We want people to know that crime does not pay. We are in the business of deterrence, deterring the bad guys. And then we’re also encouraging people who do follow the rules, the people that do pay all their taxes, the people that do run an honest business and pay their employees, all their benefits and payroll taxes and things like that.
Stacy Jones (18:21):
Right. So y’all are really just like my agency does, pop culture partnerships where you put brands into movies and partnerships with celebrities. You’re probably doing that in reverse, but the same where you’re leveraging pop culture to bring more PR and brand awareness to the IRS?
Brian Watson (18:36):
Well, we are. The Public Information Officer program, the PIO program that we have, it’s a force multiplier because, I tell people what good does it do if someone is convicted of filing a false tax return or tax evasion, and the only people that know about it are the people in court that day, which might be 10 people, because it’s not a famous person and their family and friends and coworkers might know? But if we can get that story in the Arizona Republic or the LA Times, or The Washington Post, thousands of people are going to read that story and ultimately, maybe millions of people. And then it’s like, instead of having our 2,500 special agents, it’s like having 250,000 special agents because we can really multiply our efforts by doing that.
Stacy Jones (19:30):
And when we were talking before, you said that people will bring in boxes of information or just do little drop-ins of bits of gossip and information that helps you with leads when they’re publicized.
Brian Watson (19:43):
It’s true. I’ve worked a couple of cases that were just from a former employee. A person came in and said, “My former employer is cheating on his taxes. He’s running all these personal expenses through the business.” And this person came in through her attorney. And the attorney knew me from a prior case and said, “Would you be interested?” And I said, “Yes.” And I said, “How soon can we meet?” And we met the following day and we started a criminal case. It took many years to get through, but we eventually got a conviction. If that person did not come forward, it’s unlikely that we would have had that criminal case.
Stacy Jones (20:20):
All right. It sounds like the Amber alerts that are out there, you just get more eyes on it from the public.
Brian Watson (20:25):
True. I wish we had billboards out there that said, “Do you know someone who’s committing tax evasion? If so, call this number.” That would probably get us some very interesting people calling in, a lot of false allegations, which we don’t want, because that would just be a waste of time because it takes a lot of effort to work a financial case. It’s not just like interview a couple of people and you have a video evidence or something. We’re talking, some of these people have 20, 30 or 40 bank accounts. It takes a long time to figure out if there really is a crime or not. So we don’t want false information.
Stacy Jones (21:01):
Yeah. And for all of our listeners, if you’re not an owner or someone who actually goes through your QuickBooks and your accounting and you understand your numbers, you can make one little tiny error and it can take hours to try to figure out that error. So the forensic accounting that Brian and his teams are doing, it is unbelievably mind boggling numbers and trying to see relationships and where one little thing might fall out in order to crumble the castle.
Brian Watson (21:31):
Oh, yeah. And you mentioned small business owners and QuickBooks. One of the big things that we see constantly nationwide is these embezzlement cases, and the common theme in all of them is poor internal controls. Now, I don’t want to get too much into accounting jargon, but internal controls is just a fancy way of saying, how many people are involved in the process and who’s oversight. And so many times with these small businesses, there’s just one person who does the money and the owner is not involved.
The owner needs to look at the QuickBooks entries, the owner needs to look at checks, go online and look at the canceled checks because it’s unbelievable how many of these embezzlement cases we work. And if you don’t have internal controls or you don’t even know what that term is and you’re a small business owner, you need to talk to your CPA and say, “I want to spend a little time, I want you to review my internal controls to see if I could be the victim of an embezzlement scheme.”
Stacy Jones (22:33):
Yeah. I think it’s so important for any small business, medium-sized business owner to actually have the basics of accounting. I think it’s something that so many people offload to a third party source. You have your bookkeeper and maybe you have an accountant and you’re like, “I’m great.” But if you don’t actually get in there, and there’s just so many things, even where you’re not expecting it, where you’re getting double billed for subscriptions, and you know your business, and your accountant and your bookkeeper don’t know your business, and so you’re missing things.
And then when you get in and you start seeing the things, you’re like, “Oh, this is miscategorized.” Or, “I could actually be getting better tax savings if I re-categorize these, because this was an employee meal, it wasn’t a client meal, I can get my larger percentages.” There’s just so much like little over to massive and big things or something being duplicated on a PO and you’re invoicing and it’s recording it twice. And all of a sudden it says that you made $170,000 more this year and you actually didn’t, or it says the opposite. And owners really need to get involved in their business finances.
Brian Watson (23:41):
Oh, yeah. It’s right, because tax returns, a CPA or a good enrolled agent, not only prepares the return, but they do tax planning and they can do some other things and that small amount of money will pay dividends because the tax system is complicated. Right now, it’s almost 60% of people have their return prepared by a paid preparer, even with all the software that’s out there. And it’s gotten a lot easier than it used to be; almost 60% have someone else do their taxes. So have them look at your just the basics of your businesses, it’ll be worth every penny.
Stacy Jones (24:19):
Yeah. And even the PPP loans that are out there and grants this year, last year, are messing it all up for people too to really actually have, I think, some more insights and intel versus just doing the books buying level.
Brian Watson (24:32):
Stacy Jones (24:32):
If someone wants to get involved and do what you do, you happen to stumble upon a meeting, you had another special agent who is chatting for rooftops, the coolness, the spies, the agent, the entry of how the IRS can work versus just being perceived as number-crunching, how can people learn more and actually apply and get involved?
Brian Watson (24:54):
All right. Well, I want to start with the requirements, the basic requirements to do what I do, you need to be a US citizen under the age of 37 to start, and you need a degree with 15 semester units of accounting. The reason why we recruit heavily at accounting departments across the country is accountants are basically automatically, they have all their units, they’re good to go. But we also recruit criminal justice majors or sociology majors. It can be anybody. And we take a lot of people from within an IRS, a lot of people who are revenue agents, auditors, or revenue officers, those are the people that do collection.
And then everything’s online through USAJobs, which is the national federal job website. And you can go on there and do research on any federal job. But for us, we basically just tell people about the job, we send them to our website. You can just Google, IRS Criminal Investigation, you can find us there, you can find us on irs.gov, can find us on USAJobs. And then we have contact, we have recruiters in every major city, and we have phone numbers where people can call and talk to them. I do recruiting all the time at our local universities in Arizona. And it’s just a matter of telling people and seeing if this is the right job for them. It’s not for everybody.
For some people, there’s way too much drama, way too much conflict, we carry a gun and we have bulletproof vests and we execute search warrants. For some people, that’s just way too much conflict and stress and high blood pressure. But then also there’s some people who want to be police officers and they want to kick in doors every day and chase criminal. If they did our job, they’d be bored out of their mind because it’s very paper intensive, very document intensive, and I can spend days just going through Excel spreadsheets and analyzing tax returns. So we’re looking for a cross between an accountant and a police officer to do this particular job.
Stacy Jones (27:07):
And on that note, did you watch the Ben Affleck movie, The Accountant?
Brian Watson (27:11):
I sure did. I thought it was a great movie.
Stacy Jones (27:15):
It’s a really good script also actually.
Brian Watson (27:16):
Right. I wish I was that smart, I could probably work even bigger cases than I do now, but I thought that was an excellent movie.
Stacy Jones (27:25):
Yeah, that was really cool. Moving on to cyber scams and financial thoughts because that’s something that I know our listeners are concerned about, everyone out there listening has gotten spam emails asking for gift cards to be purchased or for a statement to be paid, or an invoice to be paid, or all sorts of different hats that are trying to infiltrate your business and your email system and your personal computers. How does the IRS get involved with that?
Brian Watson (27:56):
We do a lot of public relations in terms of warning people about these phishing schemes, and that’s phishing with the PH. Every year we do an IRS dirty dozen, the 12 biggest tax and financial related scams that we’re seeing across the country. Last four years, phishing has been number one, whether it’s by email or text message, that’s where we’re seeing most of the problems. And it’s a crime that’s 100% preventable because they can only get you if you click on that link and start providing your information. So I would tell everybody, don’t click on any link unless you know for certain that it’s your bank or it’s your friend or something like that.
Well, first of all, anything from the IRS, a text or an email is not from the IRS because we don’t do that, IRS will send you a letter in the mail. I get these phishing emails all the time. My PayPal account was supposedly closed because of fraud or my Chase account was closed because of fraud. But I always hover the mouse over that link, and you can see it’s some crazy long email address or website that is not legit. So think about it this way, these criminals only have to be lucky once or twice a day to make it worth their time, and they’re sending out thousands of these emails.
So that’s the problem with this, having all the information at our fingertips right now, it’s great for us to get information instantaneously, but the criminals are using it to steal from us all the time.
Stacy Jones (29:33):
Yeah. Our agency’s experienced a lot of cybercrime and fraud. I would say on a daily basis at this point, we get people who are using web scrapers and necking into LinkedIn and finding even our interns’ emails to ask them to do gift cards. They will get emails from me saying, “You’ve done such a fantastic job, and I’m so busy right now. And I can really use your help, I want to do a surprise for the whole company. And can you run over to Target and buy seamless gift cards and I’ll pay you back.” And even though we talk to our team members about this, we talk to them, talk to them, we’ve had a few fall for it regardless of that.
And we even had someone who fell for it, where when they got to Target, and it was an obscene amount of money. They had asked them to pay $5,000 worth of gift cards, and they got them down like under 2,000, because that’s what he had available to his credit card. We’re talking insurance in college. And the Target, the person at the cashier said, “I think this is fraud, I think this is fraud. Are you sure your boss really asked you to do this? This has all the signs of fraud,” because retailers are trying to help, they know what’s out there, plus they don’t want to receive the angry call from the owner of the business later on, and still texting away back to the person who was doing the crime and engaging with this person, that person reassured my insurance, “No, this is not fraud. This is legitimate.”
Brian Watson (31:03):
What else are they going to say, “Oh, you caught me”?
Stacy Jones (31:07):
This is happening all the time, every day, all over the place.
Brian Watson (31:11):
The one we started seeing a couple of years ago was something we call the CEO scam. So Chief Executive Officer, and they try to target people inside the company. What they’ll do is they’ll email, they’ll spook the name to make it look like the head of the company, and they’ll say, “Hey, I need everyone’s W2’s from this department right now.” So if you think about it, IRS form, W2, has someone’s name, social security number and their wages. They get those things real quick because the people want to please the CEO, they don’t want to make that person wait. Then all of a sudden, now the criminals have 50 or 100 W2’s and they can use those to file fake tax returns. It’s unbelievable.
And then our phone scam is one of the things that we’ve been dealing with for seven years. It’s the IRS impersonation scam, criminals are calling everybody. They even call my government-issued cell phone, it’s funny as that is, but it’s still, when you think about it, it’s sad, because they’re just calling everybody and they’re demanding immediate payment over the phone. They tell you to go down to a store and buy a gift card. And they even at one point were telling people to send iTunes gift cards, as silly as that sounds to pay your taxes, but they keep you on the cell phone while you drive down there and they try to take your money, it’s terrible.
We know $75 million documented, but that number could be 10 times higher, we’ll never know.
Stacy Jones (32:42):
I think it has to be higher than that. In every case, fraud is always alerted to the FBI on it, no matter how small, no matter how big, but there has to be so many people who are just like, “Oh, this is stupid.” “Oh, I’m embarrassed.” “Oh, we got taken.” We don’t say a word,
Brian Watson (32:59):
Right. They’re either embarrassed or they don’t know they’ve been taken or they figure what’s the point. And then the most insidious thing about these phone scams and phishing scams is if they’re successful, they don’t stop and move on to the next person, they keep going after that person with a different scam or a variation of it to the point where that person might lose their house because they take out home equity loans. I’ve heard some horrible stories of people think, “Oh, this is just a financial scam,” but there are people that literally become homeless. There are people that commit suicide because they’ve been taken in a scam.
I’ve seen some just horrible things. So that’s why it’s very important, it’s to educate ourselves, but also if we have elderly parents or relatives, neighbors, to reach out to them, but then also, sometimes the younger generation, like you mentioned, might be a little gullible, those interns, because they grew up on technology and they trust technology so much. I’ve seen it where very young people, college age kids fall for these scams as well.
Stacy Jones (34:06):
And they’re so eager to please. That’s what I’d do too. It’s human nature, you want to please the people you’re working with, you want to make a good impression. You’re like, “I can come up with a solution. I can do this.” And then hell breaks loose.
Brian Watson (34:18):
Yeah. It’s terrible. During tax season, we spent a lot of time educating the public in all walks of life, sometimes it’s a TV interview, radio, podcasts, and every opportunity. And then I always challenge people, who do you know in your circle of friends and family that could fall for a high pressure phone call or for a phishing email and educate them, sit down and have a talk with them. My mom knows, and my dad know about the phone scam, trust me, to the point where my mom will actually mess with them a little bit and play along, knowing that it’s a scam because she knows how to recognize it.
Stacy Jones (34:58):
Yeah. Our agency, I talked about gift cards, and Brian, I mentioned this to you before, but years ago, my bookkeeper of five years at the time wanted to do good, got that spooky email, thought that we needed to send a massive media buy, massive out to pay like hundreds, massive, massive, out of someone, fell for the scam, ended up wiring her money to Hong Kong, then went directly to Nigeria all within 30 minutes. And she didn’t even have rights at our bank to do wires and managed to talk them because she was able to sign checks into allowing her to open up international wires.
And this again was an employee who was loyal to the company, she’s not an idiot by any means, was trying to do good. Didn’t want to bother me by calling me, it was just following the emails and it wasn’t until I’d gotten a confirmation from the bank that the funds had been released, all within 30 minutes of her starting and ending this. She got in her car, she goes to the bank, she had to go to the office to get her key fobs proof, all the stuff. And it happens to us. And so I know, and I spent so much time talking to other agency owners, this stuff happens, it can kill you, it can ruin your business, it will certainly send you into depression and sadness and trying to figure out how to recover.
But if you don’t have tools in place where people understand their sign-offs or you really limit who can send money out from your company, you’re just set up for failure right now, there’s too many scams out there.
Brian Watson (36:33):
Most banks are trained to recognize these things and they will stop you. And what I’ve noticed too is, I’ve gone to Home Depot or Walmart, and they have big signs in the areas where you can make the financial transactions and they ask, are you wiring money for your taxes? Are you doing this or that? And they’re just trying to stop people at that last minute from falling for a scam.
Stacy Jones (36:57):
Yeah. And they’re just scams is so right there, and it’s so sad because businesses try so hard to earn money and keep their employees paid and pay their taxes, they could soon be wiped out. We have literally every piece of savings and operations taken from us, every dime, you’ve heard me. You can recover from that, but it’s something that’s legit and real. And why I’m still talking about it and I’m very open about it is because I’m embarrassed that we were able [crosstalk 00:37:25] happened to us, but at the same time, who knew, but you just have to put safeguards out there.
Brian Watson (37:32):
Well, thanks for sharing your story, because if it stops one person, it’s worth the time to do it.
Stacy Jones (37:38):
It is. I would never want that to happen to anyone else. And like what you said, they got the money and then they came back the next day for more, we had sting operation in place, but because of the international territories, it just all fell apart. But literally, they come back, they’re like, “Ooh, I got it. I’m greedy.” Just like you’re saying the tax evaders are, they’re greedy, they’re like, “I got someone, I’m going to get more.”
Brian Watson (38:03):
Right. They’re like, “Oh, we hurt them, let’s be fair, and we’ll move on to someone else.” No, they hit the jackpot, they want more. And in that case, they’re using multiple countries, especially if they’re using a country that’s not friendly to IRS or to another federal agency,
Stacy Jones (38:25):
China, Nigeria. Those ones are not-
Brian Watson (38:27):
They can work with certain countries, but the phone scam, a lot of that is going back to India. And there’s a feeling in some of these countries that, “Well, oh, poor Americans, you rich Americans, lost a little bit of money. It’s like our people are just trying to eat.” So there’s not a lot of sympathy for us, rich Americans in some of these other parts of the world.
Stacy Jones (38:49):
Like your mom, I will engage with the scammers, I have written scripts. I have actually a witches purse, who knows what I was thinking, Brian. I’m not a witch, I’m not a wicked, I’m not anything, but I have this, put a nasty voice behind it, like, “Grooming, grooming, you’re going to go to hell and rot and I will unleash this.” And it’s interesting having people come back and engage, at least makes me feel better, by the way, that’s all the reason I do it. But they’ll come back and engage and tell me that I’m a bad person, they deserve this money.
The rationale you’re saying about what India is saying, that is literally a legitimate response where people feel entitled that they’re not actually committing a crime and it’s not doing anyone harm because they’re just taking some money. So it’s not a good thing.
Brian Watson (39:37):
Right. National Geographic Channel has a new show with Mariana van Zeller, and it’s called Trafficked. And they did a whole show on scammers. The first half of the show was in Jamaica, and a lot of the people she interviewed basically were able to justify why they did it. They said, “I’m not a bad person.” But in their mind, they could justify it, stealing from people in the United States.
Stacy Jones (40:06):
Well, I think that’s an excellent point for us to start wrapping up on because that’s the same point of view that your large tax evaders are doing as well. They’re not seeing as they’re stealing from the government or other people, or they’re not paying their taxes, they’re not thinking that they’re bad people, so it’s really all the same mindset.
Brian Watson (40:24):
Right. Some of those tax evaders that we prosecute pay a lot of taxes. Some of them pay as much taxes in one year that I might pay in 10 or 20 years. So in their minds, they’re like, “Look, I’ve paid more than my fair share.” And that’s how they can sleep at night, and then ultimately, our job is to catch those people.
Stacy Jones (40:47):
Well, Brian, you already shared where people can go to look for jobs, and if people want more information on cyber scams, financial fraud, how to make sure that they don’t freeze the system, where should they go?
Brian Watson (40:59):
I love our website, irs.gov. You can go to the Newsroom, there’s all kinds of press releases there. If you go to irs.gov and then in the search box type in criminal investigation, it has everything for my agency because IRS Criminal Investigation is part of the IRS, we’re about 3% of the IRS, but we’re the ones who do these criminal cases. But we list all of our press releases there, we have our history, we have some cool documents on Al Capone from way back in the ’30s, the 1930s. And so I send people there all the time. And then if someone wants to get ahold of me, the email address that will come to me is [email protected] I’ll say that one more time. [email protected]
Stacy Jones (41:58):
Well, Brian, thank you. You were full of insights and very cool stories, and I really appreciate your time.
Brian Watson (42:05):
Cool. Thanks, Stacy. I had a great time. I appreciate the opportunity.
Stacy Jones (42:08):
Of course. And I’m hoping that, you even had said, if one of our listeners can help protect themselves a little bit better from either overstepping where maybe they shouldn’t on their own taxes or by avoiding cyber scams and frauds, I think that this was well worth the time. So thank you.
Brian Watson (42:26):
Stacy Jones (42:27):
And to all of our listeners, thank you for tuning in to another episode of Marketing Mistakes (And How To Avoid Them). I look forward to chatting with you this next week.
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