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Consumer Reports

Legendary swindler Frank Abagnale teaches business owners to avoid getting ripped off | (KRT) Thirty-five years after he pulled his last con, Frank Abagnale still makes a living off his deceptive mind. These days, though, he's on the straight side of the law.

The man who cashed $2.5 million in phony checks in every state and 26 countries and inspired a movie based on his 1980 autobiography "Catch Me If You Can" now advises businesses, big banks and law enforcement on how white-collar criminals think.

"People hire me to think out of the box for them. They hire me to solve a problem," Abagnale, 56, recently told a group of Orange County, Calif., business owners.

At the talk, one of several seminars sponsored by Union Bank of California for its business clients, nearly 200 people who, decades ago, would have crossed the street to avoid him, eagerly listened as he counseled them on preventing corporate fraud.

"As business people, we don't think like crooks," said Jerry Kerby, owner of California Replacement Windows in Anaheim. "He makes you (realize) not everybody is honest and maybe you should take a second look at your internal controls."

After prison, Abagnale started Abagnale & Associates, based in Washington, D.C., though he lives in Tulsa, Okla., with his wife of 27 years and their three sons. For three hours, he drilled home the same point he imparts to Fortune 500 executives and FBI agents: Every system has its loophole and every criminal worth his salt is looking for it.

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Q: How has fraud changed since you committed your crimes?

A: Identity theft has become popular because it's just become so simple to do. There's so much information already available. Anybody can find out anything about anybody and consequently take on that person's identity. In an interview a couple years ago, I mentioned that corporate identity theft would be next. People said, "What do you mean?" Well, eventually someone's going to steal corporate images from businesses and use that to gain information from people. That's what's happened with phishing. That's sending out thousands of e-mails that say "Your credit card is about to be deactivated unless we hear from you to update your files." I think only one person has been prosecuted for phishing. The hard thing is catching people. A lot of phishing comes from gangs in Russia, out of China, North Korea, Africa, so we don't have jurisdiction to go after them anyway. All banks can do is shut down the site.

Q: Are online banking and payment systems such as PayPal safe?

A: People ask me how safe online banking is and I say just as safe as writing a check. It's not a safer system. There's ways to beat that just as there is writing a check. Last year, 2 million Americans had their accounts raided from online banking with an average loss of $1,600. With phishing I'm in your online bank account. I can transfer money. I can look at all the images of checks you've written. I see who you've written checks to. I see what your account number is. I see the information on the check. I can order checks, and I know what your signature looks like because I have an image of it.

Q: What should small- and medium-size businesses that don't have the same resources as big corporations do to guard themselves against fraud?

A: Check forgery is a big problem for companies now. In the old days, check forgery was just me making up a check that said, for example, Used Tools Company and running around grocery stores cashing it. At the bank, they'd say, "We don't have an account for Used Tool Company." So the grocery store was out the money, not the bank, not Used Tool Company. Now criminals say, "Why do I want to go around to grocery stores and get $400 or $500 when I can make up a real Used Tool Company check for a quarter of a million dollars off the real account with the right signature, deposit it and walk away with a quarter of a million dollars?" People just assume the bank is responsible, but that's not the case all the time. There's a lot more liability for companies now. Used Tool Company would write that off as a loss. They probably have insurance and wouldn't think anything of it. But if you or I have a small company and somebody rips us off for $250,000 and the bank won't pay, we're through.

Q: What effect do large corporations' write-offs have on consumers?

A: One of the biggest problems you have now in America today is this way of thinking of "the cost of doing business." There's this attitude in companies that "The government lets me write off most of that on my taxes, so it really didn't cost me. It cost the taxpayers." There's $600 billion a year in white-collar crime that's written off but not collected in taxes. All of us pay for this. It comes out of our pockets because companies say, "Well I'm going to have to increase my prices because I've had this many millions in losses." We also pay in interest rates, in fees and service charges. The major point that I make to businesses is that if you're not doing anything about crime, you're encouraging crime.

Q: What difference would it make if we could cut that $600 billion figure in half?

A: Prices would go down. It would be great for the economy. The government would collect that in taxes. ... Every company in America should be asking themselves, "What can I do about these crimes?"

Q: Who is most likely to defraud a company? Employees? Customers? Strangers?

A: All important documents should be locked up. The first thing a bank will ask is if those things were locked up. You have to follow regular due diligence so employees or the janitor doesn't have access to those. I always tell people, "You have a moral obligation to keep your employees honest. So you have rules and procedures to keep them honest. All of us, in our lives, have a time when we're desperate. Maybe my kid's sick. Maybe my husband got laid off of work. If I put things in front of them that say, "You could steal this 10 grand and nobody would ever know," you're enticing them to do something they normally wouldn't do. By having good controls in place you keep your employees honest because the employees, even if they wanted to do that, would know it's impossible.

Q: Are you ever nervous that crooks will learn some new tricks from your talks?

A: I don't do programs that are open to the public. I only do these through the sponsorship of banks. The reason is to limit the possibility of someone coming to learn how to do it. However, I am a strong believer that in order to educate the masses, you have to take the risk sometimes that you might educate somebody else.

— — —

Frank Abagnale's tips for protecting yourself and your business from fraud:

— Use gel, not ink pens when signing checks to prevent a forger from washing your check and cashing it for a larger amount.

— Crooks can use Scotch tape to remove information from toner-printed checks. Use non-toner based printers or large fonts to discourage the trick.

— Never use your Social Security number for an identification number with insurance companies, hotels and airlines.

— Monitor your credit. Sign up for a credit-monitoring service that alerts you by pager or text message within hours of someone running your credit.

— For business checks, use controlled stock, and always lock up blank checks.

— Ask your bank about positive pay, a system in which the bank pays only the checks you approve.

— Shred important documents with a crisscross shredder before disposing of them.

— Never be careless with deposit slips, which carry your bank routing and checking account numbers. Always shred them before throwing them out.

— Remove executives' signatures from annual reports and other electronic documents. Forgers can use those to make phony checks

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© 2004, The Orange County Register Distributed by Knight Ridder/Tribune Information Services