Some residents lose life savings to sophisticated lottery scams

Victims often too embarrassed to report they've been duped, or are convinced they're really winners

By Patty Hastings, Columbian breaking news reporter

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The Psychology of Consumer Fraud

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A Consumer's Guide to Sweepstakes and Lotteries

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Consumer Fraud by Phone or Mail

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Tips on preventing phone scams

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Jerry Pugh keeps all of his wire transfer and money gram receipts rubber-banded together in a cardboard box labeled "stupid."

The 74-year-old Woodland resident has lost more than $50,000 over the last year sending off money to the Great American Giveaway — a fraudulent Canadian sweepstakes that drained his savings and 401(k).

Legitimate sweepstakes won't require any purchase or fee to win — it's the law.

Pugh was unaware of this red flag.

His wife, Vallie, got a call that she won 100,000 pounds (the equivalent of about $160,000), but the couple was asked to send in money to transport the prize, which was supposedly being held at Lloyd's Bank of London before transport to Canada and then the U.S.

"It all sounded like that's what you've got to do," Jerry Pugh said.

The people involved in the scam cited official organizations, such as the Gaming Commission and the Postal Inspection Service, making the scheme sound more legitimate.

Did you know?

• There are smartphone apps that allow people to “spoof” numbers; a foreign number could show up on caller ID with a 360 area code. Overseas scammers use these apps to make people think they’re a legitimate, local organization.

• According to the 2012 Internet Crime Report, published by a branch of the FBI, Washington is among the top 10 states that filed complaints about online crimes. An estimated $11.5 million in Washington was lost last year through these types of scams. Victims age 50 and older account for a majority of the losses.

Seduced by the prospects of a hefty prize, the Pughs were willing to do just about anything to get it. Their focus on securing the "winnings" is a phenomenon psychologists call phantom fixation — fixating on something that isn't there. "The goal is to focus someone on a particular prize or desire so that they will fail to carefully evaluate the rest of the offer," according to a 2007 study from The Taos Institute called "The Psychology of Consumer Fraud."

When the Pughs heard they won additional sums that were collecting interest, the total translated to more than $500,000. There was always a reason the prize was just out of reach. Holding fees, courier charges, import taxes, insurance, taxes on the interest the money was collecting — the list of excuses went on for about a year.

Jerry Pugh first sent $240. It wasn't a huge sum, but making that kind of commitment can get someone to keep with a scam and make larger investments. Though the small payments add up over time, they pale in comparison to the huge sum a victim believes he or she will win, said the consumer fraud study; this is called the comparison tactic.

Local resources for seniors:

• Seniors and Law Enforcement Together, or SALT, is a collaboration among the Clark County Sheriff’s Office, Camas Police Department and senior citizens that works to decrease crime and raise livability for seniors. The program also publishes a monthly newsletter on senior issues; 360-397-2104 for west Clark County, 360-834-4151 for east county.

• The Elder Justice Center responds to reports of abuse of vulnerable adults in Clark County; call 1-877-734-6277 to report abuse.

• Friends of the Elder Justice Center, an ancillary organization of the justice center; 360-566-7690.

• Southwest Washington Area Agency on Aging and Disabilities; 201 N.E. 73rd St., Suite 201; 360-735-5720 or toll-free 1-888-637-6060.

The Pughs wired money from Western Union, and when they were barred from sending more money, they switched over to Ria. After they reached the cap on how much they could send at Ria, they used Moneygram at Walmart.

Detectives involved

A few months ago, Jerry Pugh went to the Clark County Sheriff's Office, where Detective Kevin Harper photocopied every receipt and confirmed that he had been a victim of a scam.

Harper, who investigates these cases, said it's rare that the victim will report the crime. Typically, banks get involved or family members notify police after they find out how much money their relative has lost.

Some victims intentionally keep the scam a secret, either because the scammers told them not to tell anyone about their "winnings," or because they're embarrassed. By accepting the facts, they're recognizing that they've been tricked. The consumer fraud study reports that when asked if they ever lost more than $1,000 in a consumer fraud swindle, half of victims actually admitted to it.

Compared with the general population, lottery victims are more likely to ...

• Be older.

• Believe their income will go up or down significantly over the next few years.

• Be in debt, and be less financially literate.

• Report foreclosure of their mortgage or loan.

• Be concerned about having enough money for emergencies.

• Experience legal problems.

• Have problems with the upkeep of their home.

• Experience serious illness, injury or death of a loved one.

• Have experienced a negative life event.

• Be lonely.

• Have been hospitalized or seriously ill in the last few years.

• Have a condition that limits their physical abilities.

SOURCE: The Psychology of Consumer Fraud

"You're attacking their solid ground. They truly believe it," Harper said.

The elderly may fear losing their independence if relatives find out they've given away money to collect a prize that doesn't exist.

"These people are so good at what they do, it's hard not to believe them," Jerry Pugh said. "We feel so stupid about it."

Harper told the Pughs they weren't dumb, they were just duped by a sophisticated scam. Multiple characters were involved in the fabrication; they went by names such as Regina Davis, Christopher Mead and Preston Powell. In fabricated plot twists, some of these characters were "fired" or "died."

Just when the Pughs were ready to give up, they would get another phone call that re-ignited their hope and excitement. According to the consumer fraud study, once people make a commitment, they are less likely to change their minds. "This commitment may persist, even when the person knows the decision they made is not optimal," the study says.

"In his notes sometimes he writes 'I was scammed,' but he keeps doing it," Harper said. "All the dreams he had of making his life better with the lottery money are gone."

Still dreaming?

With the winnings the Pughs planned to buy a new car with a crane that could lift Vallie's electric scooter. Jerry gets her in and out of the scooter, which strains his back and shoulders. They also dreamed of getting a home with plenty of space for Vallie to get around in her wheelchair without bumping into things. She often hits the hallway walls of their mobile home. The rest would go into savings and be divvied up among their children after they died.

Although Jerry Pugh periodically asked for paperwork to be mailed to him, confirming that he won the money, the paperwork never came.

After a while, contact with the people involved was spotty. "We gave up. No one is answering our calls," Jerry Pugh said.

They plan not to send anymore money, but the allure is strong. With every call, Jerry Pugh said, they get excited and feel there's still hope that it's real.

"I hope we get it, but I can't count on it," Vallie said.

At the end of October, the couple got a voice mail saying the money would arrive the next day. In the voice mail, a man who called himself Preston Powell said: "It's all good news. I think we've got this down to a close."

But the money hasn't shown up. Jerry Pugh set up a money market savings account at Bank of America, where the winnings could be wired, just in case.

"We're not totally convinced it's fake," Jerry acknowledged.

If any major expenses came up, the Pughs would be in trouble. "We have to start from scratch and build up our checking accounts," he said.

The Pughs, who have been together for 37 years, fit the profile of typical lottery/sweepstakes scam victims. Jerry is retired from Columbia Machine and the caretaker for Vallie, who has diabetes and gets around in her scooter.

The consumer fraud study says that victims are more likely to be older, retired and at the lower or higher end of the income bracket, not somewhere in the middle.

Wealthy scammed, too

Detective Jane Easter has spent the last two years of her 25-year career as a Vancouver police officer investigating these crimes through the Elder Justice Center. She was introduced to consumer scams in the early '90s, when her grandfather — not a poor man — fell victim to a sweepstakes scam. His fireplace mantel, she said, was lined with magazine subscriptions that he believed would give him a greater chance at winning a large sum of money.

She asked him why, when he was living comfortably, he would waste money on some scheme. His answer? He wanted to give the money to her father, who also did not need it.

Easter has dealt with victims who weren't in financial straits before they got wrapped up in a scam — in fact, they were well-off — but after losing money, they become indebted to family and friends. They send off checks for $43,000 or $50,000 or even $62,000.

One woman, whose name was not released, gave away more than $150,000 to a lottery scam, believing she would get two Mercedes autos and a "ridiculously ginormous" amount of money. With the money she spent, Easter pointed out, she could have bought a Mercedes.

The woman drained her bank accounts, which were closed by bankers who caught onto the suspicious transactions. When one account closed, she would just open a new one, following the instructions of scammers who told her how to do it. The transactions were done without her relatives knowing, what Easter described as "sneaky" behavior.

Despite the money she's lost and Easter's involvement in her case, the woman still believes she's a winner.

"I can't figure out what to do to convince her otherwise. I don't think I can," Easter said.

Tough to prosecute

The justice system has trouble prosecuting scammers because they typically live overseas, and have fake names and addresses. There's no way to retrieve the money once it's given away and the courts won't proceed with these cases, Harper said.

People, he said, have a right to blow through their money. What detectives like Easter and Harper try to do is prevent people from losing more money. This can involve alerting financial institutions, establishing guardianship and changing phone numbers.

But, someone who is convinced they're a winner may give their new number to the scammers.

Victims can get a hundred calls each day from scammers trying to wear them out. Even if a police officer picks up the phone, the scammer just goes along with it and yells at the officer. If the victim doesn't have money, they demand the victim sell their car or valuables. The demands can escalate to threats, as scammers tell their victims there's a warrant out for their arrest.

Dianna Kretzschmar, liaison at the Fort Vancouver Convalescence Center and president of the Friends of the Elder Justice Center, said that the elderly are part of a generation that secured business deals with a handshake and believes, in general, people are honest. This makes them more susceptible to schemes. If they realize they're being duped, they might not tell anyone because they fear they'll lose some of their independence and be moved to an assisted living facility. Often these environments, where there's more activity, entertainment and social events, can be what the person needs to fill the loneliness that might have led them to fall for the scam in the first place.

Harper worries about the next generation of victims. The more time people spend online, the less time there is available for building in-person relationships with people; friends are often the first line of defense in preventing someone from falling for a scam.

"The less socialized our kids are, our people are, the more vulnerable we are to scamming," he said.