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The Honolulu Advertiser
Posted on: Wednesday, December 24, 2003

Officials warn of online fraud

By Peter Boylan
Advertiser Staff Writer

Police, prosecutors and consumer protection officials are bracing for a spike in Internet fraud complaints as the holiday shopping season winds up.

Safer online shopping

The Better Business Bureau of Hawai'i suggests ways to protect yourself when shopping online:

• Try to stick with large, well-known companies such as Amazon.com. You can check out lesser-known retailers on the Better Business Bureau reliability report at http://search.bbb.org/search.html

• Pay by credit card. It gives you the right to dispute a bill, limits your liability for fraudulent charges to $50 under the Fair Credit Billing Act and may give you additional warranty rights. Paying with cash, debit cards or electronic transfers offers less protection.

• Look for the prefix https:// in the Web address (URL) box. The "s" indicates that information sent to the site is encrypted.

"They (online criminals) are in high gear because they are going to disappear after the holidays," said Anne Deschene, president of the Better Business Bureau of Hawai'i. "People are doing more business (online). It's easy, and it's fast. Where the money is, there go the crooks."

Internet commerce fraud falls into two main categories: Failure to deliver goods that have been purchased online, and using someone else's credit card number.

The Federal Trade Commission has issued an alert about "phishing," a relatively new way for crooks to obtain credit card accounts, Social Security numbers and other personal information.

A scammer sends an e-mail posing as a legitimate business and provides a link where people can "update" their information. The link directs consumers to a phony, look-alike site, which asks them to "update" or "validate" their billing information.

Honolulu police detective Chris Duque, a computer expert with HPD's white-collar crime unit, said he sees a spike in cases around February, when the holiday credit card bills arrive.

"You are never going to prevent people from getting ripped off," Duque said. "You're just doing damage control."

In the 3 1/2 years since HPD has been keeping track of online fraud complaints, 46 percent — 443 out of 968 complaints — were made this year.

Nationally, the number of complaints about online fraud have risen by 40 percent this year compared with 2002, to more than 106,000, according to the Internet Fraud Complaint Center, a joint venture of the FBI and the National White Collar Crime Center, based in Fairmont, W. Va.

Lt. Sharon Dolan, head of HPD's white-collar crime unit, said the largest such case HPD has handled since she took over in January involved the attempted online purchase of a Honda. A buyer paid $61,000 for a car that was never delivered.

Lt. Sherman Chan, head of criminal investigation at HPD's Kalihi substation, said detectives recently dealt with a case of online fraud that involved a Kalihi vendor purporting to sell clothing online.

The vendor accepted money from three buyers on the Mainland but did not deliver the goods.

Police tracked down the vendor and recovered more than $5,000. The vendor was not arrested, an occurrence that police and those in the consumer protection community call typical.

"A lot of people just want their money back," said Dolan.

If no formal charges are made, and the victims refuse further cooperation, it is difficult for the police to continue an investigation or to make an arrest.

In addition, police and consumer protection experts say, the victim often is shamed by the fact that he or she was deceived, therefore nullifying any motivation to press the case.

Police can investigate and arrest people for Internet fraud, but jurisdiction over state consumer protection laws falls to the state Department of Commerce and Consumer Affairs.

Stephen Levins, acting executive director of the state Office of Consumer Protection, said that if someone reports that they got ripped off online, his department investigates it as a possible violation of civil consumer-protection laws.

Levins said DCCA has no criminal authority but can exercise civil enforcement authority to seek injunctions, penalties and restitution.

He said cases that involve fraudulent Internet auctions or non-delivery of goods can result in fines ranging from $500 to $10,000 per violation.

Levins said his office has received about 100 complaints this year.

The city prosecutor's office has prosecuted 90 cases of identity theft since 2002, said spokesman Jim Fulton.

Identity theft involves the taking of personal information such as Social Security, bank account or credit card numbers for use by someone other than the person to whom they belong.

According to the Federal Trade Commission, identity theft cost people $48 billion nationwide in 2002.

Advertiser staff writer Deborah Adamson contributed to this report. Reach Peter Boylan at 535-8110 or pboylan@honoluluadvertiser.com.