Several Arkansas Banks Caught in Cashier?s Check Scams

Once considered the next-best thing to cold, hard cash, the cashier’s check is now the con artist’s favorite tool.
The ready availability of check paper stock and slick check-writing computer software has encouraged the criminal-minded to create high-tech variations on the old con games as well as some all-new scams that have snared untold thousands of Americans.
And they have created a lot of work for people like Mike Shepard, security officer for Metropolitan National Bank of Little Rock, and Nancy Kocourek, chief financial officer of First Security Bank of Conway. Both banks have a significant presence in Northwest Arkansas.
On June 30, Shepard received the first call concerning a suspicious cashier’s check bearing Metropolitan’s name, familiar eagle logo and correct bank routing number. It had been presented for deposit at a bank in San Diego.
In the weeks since, more than 200 identical checks — Shepard says he stopped counting — have been presented at banks in more than 20 states. All of them were dated June 16, all were supposedly issued on behalf of “Vivian Speck,” and all of them were made out for either $2,300 or $3,300 — the amount needed to cover the “tax and clearance fee” on a prize award of $65,000.
Each arrived in the bearer’s mailbox accompanied by a cover letter informing the recipient that he or she was a winner in the British International Lotto — a lottery that the winner had never entered because it doesn’t exist. And the victim who deposits the checks and wires out money as instructed ends up in the red — and personally liable — when the cashier’s check fails to clear.
First Security’s problem started in March, Kocourek said, and has continued since.
“I’m like Metropolitan: I quit counting. I’m sure there have been upwards of 250 to 300,” she said, and they have surfaced in almost every state except Alaska and Hawaii. “It looks like every two to three weeks there will be a new mailing that comes out.”
The counterfeit First Security cashier’s checks have been associated with a different type of con game known as an overpayment scam.
Metropolitan and First Security are among hundreds of banks whose checking instruments have been faked for various types of scams. The number of “special alerts” concerning fake checks issued by the Federal Deposit Insurance Corp. has more than quintupled in the past three years. As of mid-September, the 2006 count was already north of 230 — almost one a day, including weekends and holidays — and those include three Arkansas banks in addition to Metropolitan and First Security.
Recently, the FDIC issued an alert on behalf of ANB Financial N.A. of Bentonville, whose former name, Arkansas National Bank, and routing number had been used on counterfeit cashier’s checks that accompany a lottery winning announcement from “Crown Locators Inc.” with an address in Kitchener, Ontario.
The first report of the counterfeit Arkansas National Bank checks was received from the East Coast in mid-August, said Cynthia White, ANB’s vice president for compliance, and was followed by a small number of similar reports of checks for amounts ranging from $3,500 to $4,200 from “both ends of the nation.”
While the Metropolitan name is more generic and the phony Metropolitan checks don’t indicate where the bank is located, the fake Arkansas National Bank checks raise a particularly interesting question: Why would any consumer believe that a Canadian lottery would be using a bank in Arkansas?
“That’s part of the flow of information with our customers,” said Nat Bothwell, executive vice president of marketing for ANB. “If it sounds too good to be true, it is. It’s a cliché, but that’s how it is.”
The Bank of Eureka Springs’ name appeared on counterfeit cashier’s checks early this year, and a bank official said they had popped up again this summer but seem to have died off.
Arkansas Bankers Bank of Little Rock reported that a fraudulent check bearing its name and routing number was received in July, but it was different from these other cases. ABB’s chairman emeritus, Bill May, said a single forgery designed to look like a personal-account check — not a cashier’s check — had been reported. Arkansas Bankers Bank is a correspondent bank and does not offer personal checking accounts.
(The FDIC defines a counterfeit as a fake that mimics an actual bank instrument. A check described as fraudulent is slightly different in that no such instrument actually exists, as in the case of a personal-account check at Arkansas Bankers Bank.)
While a bank whose checks are counterfeited is never liable, it does have to devote staff time to the calls and e-mails received from recipients and banks across the country trying to determine whether the checks are good. And the rash of counterfeit checks and other instruments has required banks to do more training of tellers and other staff members.
Metropolitan, for instance, is now treating virtually every cashier’s check presented for deposit or payment as suspect.
“You bet. Unless it’s the bank across the street that we know what (their checks) look like,” Shepard said. “Our tellers are probably stopping, I’d say, five to 10 a week that we know are scams.”
ANB officials said they had not seen nearly that kind of epidemic of bad checks in Northwest Arkansas, and Kocourek said First Security of Conway had not noticed any fake checks being deposited by customers.

The Scams
Like grifters throughout history, most of the cashier’s check scammers take advantage of greed and the allure of easy money.
“Everybody wants to have a Santa Claus,” Shepard said.
And cashier’s checks lend a veneer of authenticity that can overcome natural suspicion.
“All of these [checks] are coming from the scams, either the lottery scams or the old Nigerian scam, and they know that people put more stock in cashier’s checks,” he said.
While there are untold variations, the scams currently making use of counterfeit cashier’s checks fall into four basic categories, according to the National Consumers League, which operates the National Fraud Information Center/Internet Fraud Watch (www.fraud.org).
The most familiar is probably the Nigerian letter scam, which predates the Internet but has found a new life in cyberspace. Victims respond to a written or e-mailed offer of big bucks in exchange for helping transfer money on behalf of a supposedly wealthy or well-connected person displaced by ubiquitous political upheaval in Africa or elsewhere. As the scam progresses, the victim will be asked to wire money to someone else’s account and, in newer versions, the victim may receive a counterfeit cashier’s check to deposit and then transfer funds.
A work-at-home scam preys on users of job-search sites on the Internet. Victims are promised handsome commissions for depositing cashier’s checks, or other official-looking checks, and then dispersing most of the proceeds to various other accounts. The checks, of course, are fakes.
On Aug. 24, Attorney General Mike Beebe announced that counterfeit checks that appeared to be written by the state of Arkansas were being used in a work-at-home scam. They had turned up in seven states at that point. The same thing happened a year ago, when more than 20 states reported that counterfeit Arkansas checks had surfaced.
Subtlest of all is the overpayment scam, which has flourished in the age of eBay and online used-car markets. Sellers listing cars or other big-ticket items are offered their full asking price and then receive a cashier’s check for an amount that is even greater. The buyer then asks the seller to wire the overage back to him or to a shipping agent or some other party. Days or weeks later, the seller learns that the check was a fake and that he owes the bank for the amount that has been withdrawn.
“Usually the crooks aren’t really after the car because that’s too much trouble, to actually get a car and resell it,” said Michael Benardo, chief of cyber fraud and financial crimes at the FDIC.
This is the scam that has made use of First Security’s checks, according to Kocourek.
“The majority of ours are people who have had a product or service advertised on the Internet,” she said, including “a horse, a snake, a motorcycle. We have had people from bed-and-breakfasts, from resorts… We have even had the Plaza [Hotel] in New York.”
Because the overpayment scam takes advantage of the fact that the check recipient is expecting to receive money and believes he has a business relationship with the sender, these checks are more likely than the lottery checks to actually be deposited.
“Oh yes, some of them were deposited,” Kocourek said.
The flurry of bad checks has led First Security to accelerate the processing of cashier’s checks received from other banks through the Federal Reserve System, she said.
“As soon as they make it to our processing center — they check it daily — and if there are any of those checks … then we immediately return them as counterfeit,” Kocourek said.
They are also reported to the Secret Service and the Department of Homeland Security, she said.
Liability
Shepard is a former North Little Rock police detective who joined Metropolitan four years ago.
He said no bank that had reported receiving a counterfeit Metropolitan National Bank cashier’s check had reported an actual loss associated with it.
That may mean all of the checks were intercepted by bank employees before being deposited in the recipient’s account. Or it may mean any loss experienced was by the recipient of the check rather than the bank.
“In most cases, it’s the customer that’s out the money, not the bank,” the FDIC’s Benardo said. “Some banks, we find, are absorbing the loss depending on the nature and importance of the business relationship with the client.”
One would think a client important enough to make a bank take a loss would be too savvy to fall for a lottery or Nigerian scam. But that’s a mighty big assumption, Benardo said.
“The Washington Post did a story on who falls for this sort of thing,” he said, referring to a package of articles that appeared in June. “And it usually is educated people. It’s across all income brackets, all education levels.”
A high-profile example is the case of Mary Winkler of Selmer, Tenn., a college-educated wife and mother charged with shooting her preacher-husband, Matthew Winkler, to death in March.
According to press reports, a state investigator testified at Mary Winkler’s bail hearing in July that she had been depositing large checks — presumably bogus — from Nigeria and Canada for several months and had opened four accounts that she was kiting money between.
The deposits totaled $17,500 in December alone, according to the testimony.