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Quatloos! > Report From Quatloosia > March 2005

Report From Quatloosia

By Tony-the-Wonder-Llama
(March 2005)

People are stupid. Well, not all people are stupid, but quite a few of them are! They must be when I see people fall for the same well-known scams over and over.

You don’t think that anybody ever responds to those Nigerian scam letters? A typical letter reads, “Dear Sir, I need your assistance to consummate a glorious transaction to move $30 million out of Nigeria, for which I will assure your participation of 30%.”

In fact, people do reply to these letters. Every couple of weeks, someone sends us an e-mail asking, “They keep asking for money, but every time that I send them money, another problem arises. What do I do?”

Quit sending them money, for starters.

* * *

The latest Nigerian scam is the so-called “Overpayment Scam,” which is directed to those who try to sell stuff over the internet, such as on E-Bay, or electronic classified ads. Here’s how it works:

Let’s say that you finally want to sell your 1991 Toyota or your late uncle’s gun cabinet, and you believe that you can get $1,000 for it. So, you advertise it somewhere over the internet for $1,000.

Eventually, you are contacted by a Nigerian who says that he has been looking for a red 1991 Toyota Corolla, and that he will imme-diately pay you $1,000. You say, “Great! Send me a check.”

In a few days, a cashier’s check for $3,000 arrives in the mail. The next day, the Nigerian calls you and says, “There has been a mis-take. I misunderstood the currency conversion. However, let’s just split the difference.” The caller tells you to keep an extra $1,000 and wire-transfer the other $1,000 back to Nigeria.

You transfer $1,000 to Nigeria. The buyer never sent instructions as to where you should send the Toyota. However, 30 days later your bank sends you a notice that the cashier’s check has bounced. You go down to your bank, and demand that the bank reverse the wire-transfer. Unfortunately, your bank says that your wire-transfer and the bad cashier’s check have nothing to do with each other. You have just been scammed for $1,000.

You contact your local police station or the FBI. While they are sympathetic to your situation, they also make it clear that they have no jurisdiction over Nigerian residents and no power to reverse the bank transaction.

This scam happens EVERY DAY. We’ve seen people lose as much as $20,000 to such schemes. Recently, here in the United States, notes with Nigerian contact numbers have been found on cars that state, “I’ve been looking for a car just like your car. Will you sell it to me?”

* * *

When common sense is handed out, some people appear to prefer to wait in the “easy money” line instead. They’re still in that line – now waiting for easy money to replace the hard-earned money stolen from them by scammers who told them the easy money was a mere investment decision away, in a High Yield Investment Program (HYIP).

Asset protection planners most often run across victims of HYIP scams before the victims knows they are victims. Often these victims shop around for asset protection planning information for assets they are “receiving soon.” The typical victim says he is about to re-ceive a large amount of money from Europe or the Far East and needs an offshore corporation to protect the forthcoming multi-million dollar windfall from tax liability.

When asked about the source of the money, he starts hem-hawing around that his friend got him involved in a trading program in Europe, and he was lucky enough to get one of the only six top HYIP traders who is able to complete the transaction successfully.

In a nutshell, the victim states that he is able to deposit money in his own bank risk-free and leverage it a thousand times to make a princely profit and donate portions of the money to charity, too. In fact, the scam artist substitutes his cash for a worthless Korean bank bond or persuades the victim to pledge the cash against a letter of credit that the scam artist exercises immediately.

Many who fall for HYIP scams simply cannot be convinced that they have been scammed. Therefore, they often spend the next dec-ade trying to figure out why the U.S. government is trying to keep them and their humanitarian programs from their assets.

* * *

Two of the most high-profile offshore planners are in jail, and a third one has entered into a plea bargain.

After being prosecuted for computer fraud in the early 1970s, Jerome Schneider launched himself as a top offshore planner and spent years setting up worthless shell banks in various island nations in the Pacific. For years, Schneider held expensive seminars and brought in a number of tax attorneys and other professionals to give a sheen of credibility to his strategies. Schneider charged exorbi-tant sums to put together various offshore tax evasion schemes.

Though having pleaded guilty to conspiracy to defraud the IRS, Schneider will spend only six months in prison, because he is actively cooperating with the U.S. Department of Justice in prosecuting his former clients. That is the problem with undisclosed offshore plan-ning: someone always knows. Despite the promises of offshore promoters that you can live a secret life abroad, your planner, offshore banker, or offshore trust company knows what you are doing and a slight twist of the screw may be all it takes to put the authorities hot on your trail.

Marc Harris is another offshore trust guru, whose Harris Organization in Panama at one time boasted over two hundred employees. Harris provided “affordable” offshore planning, offering lower prices than other offshore promoters. Although he claimed that he was able to offer rock-bottom prices because of cheap labor costs in Panama, Harris was actually embezzling his clients’ funds.

Harris also told his clients that there was “no way” that anyone could identify them. Unfortunately, when Harris ran into financial trouble and terminated his staff without pay, one of his computer programmers downloaded Harris’ entire client list and e-mailed it to a reporter in Miami.

Agents of the U.S. Department of Justice snatched Harris from Nicaragua in the middle of the night and put him on a Learjet to Mi-ami. In Miami, Harris was tried, convicted, and sentenced to a 17-year vacation at Club Fed. Harris’ appeal is pending, and he has refused to testify against his clients. However, most inside observers believe that a deal is right around the corner. If so, Harris’ un-happy clients will join Schneider’s former clients in raking the leaves from the prison yard.

The third offshore promoter who was nabbed is Terry Neal, author of “The Offshore Advantage” and “The Nevada Advantage”. Neal also preached the virtues of secrecy and privacy and assisted his clients in tax evasive schemes. Unfortunately for his clients, Neal entered into a deal with prosecutors in which he agreed to testify against his former clients in exchange for a reduced sentence. While awaiting sentencing, a dispute arose between Neal and prosecutors as to whether he told the entire truth. The latest news is that Neal was trying to take back his plea bargain and get a jury trial.

For those of you seeking asset protection services, beware that the professionals you use are often as good as the service providers that they use. If the planner – even innocently - picks a bad egg such as Neal, you may get hassled, regardless of your intentions.

Offshore tax evasion does not work. Someone knows about your offshore trust or bank account, and that somebody is likely to sell you to the authorities in exchange for a reduced sentence.

Tony-the-Wonder-Llama’s Report from Quatloosia appears monthly as part of the Developments newsletter published by Riser Adkisson LLP. Free subscription available at

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