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THE PERILS OF CONSUMER FRAUD IN THE SUNSHINE STATE
The Perils of Consumer Fraud in the Sunshine State
David Ward
Seminar in Social Science ISS 4935, University of South Florida
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In today’s society, the delicate socio-economic balance sways frequently but is
often returned to balance due to our agreed upon social contract. English philosopher
Thomas Hobbes describes this mutual understanding to be a manifestation of “men
surrendering their natural liberties in order to enjoy the order and safety of the organized
state” (Dagger, 2007, para. 12). This established Social Contract shapes the very fibers
which society functions upon and allows citizens to interact in a society free from
excessive levels of skepticism. Actions against this delicate balance have historically
been dealt with harshly and swiftly by additions to public policy and response by local
law enforcement. Unfortunately, in a dynamic, multifaceted society such as Florida,
malevolent activities are easier to hide and much more elaborate than ever before.
Perhaps one of the most prevalent manifestations of these malicious practices against
society can be categorized as Consumer Fraud. With Florida’s economy in turmoil,
advancements in technology have contributed to consumer fraud’s intensification and
severity regardless of increased social awareness.
The delicate balance established between deviance and conceived social norms
is always under siege by would be opportunists. These opportunists participate in
various levels of nefarious activities. Such activities target Florida’s populace due to the
state’s unique characteristics. Attributes such as Florida having a large population of
older citizens, a floundering housing market and its tendency for attracting natural
disasters on an annual basis causes its populace to be targeted by certain types of
Consumer Fraud. This type of fraud is defined as “a form of economic crime that
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involves the intentional deception or attempted deception of a victim with the promise of
goods, services, or other benefits that are nonexistent, unnecessary, were never
intended to be provided, or were grossly misrepresented” (Reisig, 2007, p. 113).
Elements such as Florida possessing a large population of older citizens and having the
potential of being categorized as a disaster area on an annual basis lends itself as an
attractive target for would be fraudsters. To illustrate the gravity of this situation, Reisig
asserts that in Florida, “an estimated 537,224 adult consumers were fraud victims in
2004” (Reisig, 2007, p. 115). This already excessive number is thought to increase
annually as the result of an exceedingly unpredictable economy. With technology
advancing at a blistering rate, fraudsters are able to modify their tactics and continue to
find new methodologies to circumvent State and Federal countermeasures.
To illustrate this, and as indicated by the Internet Crime Complaint Center, a joint
venture comprised of fraud analysts and the FBI, “Per 100,000 people 116.25 are
complainants identified as residing in Florida….this total accounts for 7.5% of all
complainants in the United States” (ic3.gov, 2009, p. 2). However, of the total fraudulent
events transpiring in Florida, a paltry “28.1%” (ic3.gov, 2009, p. 3) are actually reported.
Such malicious activities can be categorized as either opportunistic fraud or fraud for
profit (Annual Statewide Prosecution Report). Deciphering between which of these is
considered a greater detriment to society is unclear, however, in 2009, “26%” (Florida
Attorney General, 2009) of consumer fraud crimes were actively investigated and
prosecuted. To support this notion, Reisig states that “One of the greatest obstacles to
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combating fraud victimization is the low rate at which these victimizations are brought to
the attention of legal authorities” (Reisig, 2007). To further support this statement, Croall
states that Consumer Crimes receive less notoriety and are scantily investigated due to
them “receiving less public or academic attention than other areas….such as corporate
financial or securities frauds” (Croall, 2009, p. 127). With the probable feelings of
shock, shame and embarrassment, it’s of little surprise that a vast majority of Consumer
Fraud victims choose to suffer their financial losses in private.
Furthermore, not all forms of Consumer Fraud are deemed equally malicious.
Throughout the last decade, methodical patterns behind the various types of consumer
fraud have augmented themselves according to society’s level of awareness. For
several years “soft fraud otherwise known as opportunistic fraud” (Sliter, 2007, p. 12),
has been a seemingly benign variation of fraudulent behavior which was often
perpetuated on a relatively small scale. The average consumer can usually circumvent
would be assailants by simply reading the fine print or seeking third-party advice.
However, this incidental small scale behavior becomes extraordinarily problematic when
exposed in a much more nefarious state. Such practices are otherwise known as
reprehensible and particularity unscrupulous, Floridians know such methodologies as
price gouging. The Internet Crime Complaint Center indicates that this form of fraud
makes up for “7.6%” (ic3.gov, 2009, p. 2) of all fraudulent claims which transpired in
Florida in 2009. Due to Florida’s reliance upon fossil fuels, corporations and individuals
alike unjustly manipulating their leverage over consumer pricing symbolizes a
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perversion of capitalism at its finest if not an overt breech in humanities agreed upon
social contract.
Much debate has arisen in appropriately punishing this type of opportunistic
fraud. Simpson (2003) discusses this issue by stating how malicious activities by
corporations with the sole intent to defraud the populace are nothing short of sinister.
She asserts her skepticism of current punishment statutes by indicating “corporate
punishments are ineffective, offenses should be met by tougher criminal sanctions”
(Simpson, 2003, p, 43). Simpson understands the notion that current penalties are
nothing short of ineffective and companies should be reprimanded at a micro level. This
assertion gives a brief insight as to how the price gouging variation of consumer fraud
should be penalized, but to what extent is unclear. This lack of a definitive punishment
has much to do with the ambiguous nature of price gouging. With state and federal
statutes on this type of Consumer Fraud relying heavily upon whistle blower campaigns,
the only real method to maintain business compliance is the fear of being stigmatized in
the eyes of the public. Murphy understands this stigmatic response to coincide with her
Shaming Theory. Murphy asserts that “forms of shaming result in less reoffending”
(Murphy, 2007, p. 900). Unfortunately in certain instances consumers are forced to
purchase goods and services from institutions known to act unscrupulously. Businesses
such as insurance companies and gasoline stations are necessary to Floridians
regardless of any previous questionable actions. When public policy fails to adequately
protect the populace, negative public sentiment serves as an effective means of ceasing
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malicious activity. Interestingly such business tactics often deemed consumer fraud
have a valid financial basis. On one hand such tactics can be viewed as felonious
abuse of the delicate balance between supply and demand. On the other, nothing more
than the very definition of capitalism manifested.
Of the multitude of issues affecting Florida’s populace, few are as concerning as
the progressively increasing unpredictable nature of technology. For decades
technological advancements have served the purpose of improving the lifestyles of
individuals and society as a whole. Where the majority of financial transactions were
once done in person, the average consumer can realistically purchase everything online
that was once required a trip to the local shopping center. This vast augmentation of the
modern consumer dynamic has not only benefited the savvy shopper, but expanded the
tools available to business for advertising. Unfortunately, with any type of helpful
advancement, therein lies its potential misuse by unscrupulous persons. Reiseg
understands that “in Florida, the most frequent method of [fraudulent] targeting is the
internet (Reisig, 2007, p. 114). As e-mail becomes the dominate method of business,
personal and advertisement communications, its ambiguous nature sets itself as a
prime tool for Consumer Fraud. SPAM is the most common term used to describe
unsolicited and often deceptive e-mails. Such communications deemed as malicious
SPAM are characterized as unwelcome and littered with false promises of risk free
financial gain or unbelievable bargains originating from questionable sources.
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With electronic mediums becoming the de-facto method of interpersonal
communication, unsolicited emails have become the junk mail of the new millennium.
Linden states “SPAMsters [attempt] to customize each email sent, and many other
tricks to evade detection” (Linden, 2010, p. 9). To compound the issue, statistical data
has shown that older citizens are more apt to fall prey to an acute version of fraudulent
SPAM known as Phishing (ic3.gov, 2009, p. 2). This type of malevolent communication
is encapsulated within a SPAM email. This email contains a small amount of
personalization such as the recipient’s name or county they reside in. This
personalization creates a sliver of trust under the guise of validity. Once this trust is
attained, the included spoofed hyperlink and short message requesting personal
information seal the proverbial deal for the unfortunate recipient. Whether the bait
message appears to be from a respected financial institution or a notification that the
recipient has won an imaginary raffle promising thousands, each variation requests the
same, your personal information.Once this personal information is attained, the negative
financial ramifications can ripple for years. Bergholz affirms this idea by stating
“phishing has increased enormously over the last years and is a serious threat to global
security and economy” (Bergholz, 2010, p. 7). Furthermore, Bergholz asserts,
“Criminals are trying to convince unsuspecting online users to reveal sensitive
information, e.g., passwords, account numbers, social security numbers or other
personal information” (Bergholz, 2010, p. 9). Bergholz’s message reinforces the notion
that although Florida is protected by State and Federal statutes much like the rest of the
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nation, our above average populace of older citizens makes phishing an even greater
economic concern.
This targeting of older citizens can be attributed to their lack of computer savvy or
their propensity to function online without a proper level of suspicion. Another possibility
could be that older citizens tend to be less mobile and require care that does not allow
them to leave their residence without assistance. In instances such as this, online
shopping and email communication becomes of pinnacle importance to purchase
medication or home wares and communicating with loved ones. In either case, this
issue has become so severe that it has drawn the attention of Florida’s Attorney
General and caused him to officially categorize various types of SPAM as a form of
Consumer Fraud (Attorney General of Florida, 2009, p. 12). Interestingly, not all SPAM
is considered malicious. The CANN SPAM conformity guidelines list a series of
instructions to assure business compliance during their digital marketing campaigns.
The CANN SPAM guidelines were created to effectively differentiate legal SPAM
from illegal SPAM. During its inception, the guidelines seem to have been effective at
limiting blatant and outright unrequested electronic communications. Unfortunately, the
respective governing bodies have failed to truly quantify and differentiate between valid
marketing, and malicious SPAM. This disparity is apparent in the multitude of SPAM
messages still in circulation that are allowed to circumvent any meaningful prosecution.
Many recognized SPAMsters are allowed to act with impunity due to the bureaucracy’s
inability to evolve with the various forms of SPAM. Although the CANN SPAM
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guidelines offer an additional measure to bolstering consumer protection, the issue
remains that with stricter security come an increase of false positives. Linden asserts,
“unless a senders email has been pre-authorized by the recipient, email client safe
guards or firewalls may block the email if it is sent from a habitually spamming domain
(Linden, 2010, p. 9). Although the benefits email provides are far greater than the
annoyance derived from SPAM, if appropriate legislature and the constant evolution of
Federal policy is not maintained, electronic transmittal could become about as secure
as passing a note in a classroom.
In conclusion, due to Florida’s significant economic volatility, Consumer Fraud
has benefited through the misuse of technological advancements and has been allowed
to operate throughout the state with impunity regardless of increased social awareness
and improved electronic countermeasures. With the Attorney General’s office dedicating
an entire website to warn and inform Florida’s populace, fraudsters continue to prey on
Floridians under the guise of feign foreclosure assistance and get rich quick schemes.
of potential electronic threats, the ever changing Fraud’s pervasiveness is not at all a
new occurrence; its roots can be traced back to the industrialization of the modern
market place. However, where new processes and communication mediums were
created to improve established methods of commerce, the very same can be
manipulated to contribute to defraud millions of uninformed individuals out of millions of
dollars. The key to stymie this type of behavior relies upon increased awareness and
increased oversight for insurance companies, gasoline stations during a hurricane and
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perhaps more importantly, phony hurricane repair accessories guaranteed to protect
your home in the event of a disaster. In the end, when consumer fraud counter
measures fail, the final level of personal defense involves the utilization of an
individual’s common sense.
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References
Bergholz, A. et al. (2010). New filtering approaches for phishing email. [Editorial].
Journal of Computer Security, 7, 9-27.
Croall, H.. (2009). White collar crime, consumers and victimization. Crime, Law and
Social Change, 51(1), 127-146.
Dagger , R. (2007). Stanford Encyclopedia of Philosophy. Retrieved October 31, 2010
from http://plato.stanford.edu: http://plato.stanford.edu/entries/politicalobligation/#soccon.
Florida Attorney General. (2009). Annual Statewide Prosecution Report. Tallahassee,
Florida 32399-1050: Office of the Attorney General.
Internet Crime Complaint Center. (2009). Retrieved October 06, 2010 from Federal
Bureau of Investigation, http://www.ic3.gov: http://www.ic3.gov/media/
annualreport/2009/florida%202009%20report.pdf.
Linden, G. (2010, October 9). The War Against Spam;. [Editorial]. Communications of
the ACM , Volume 53, 9-10.
Michael D. Reisig, & Kristy Holtfreter. (2007). Fraud victimization and confidence in
Florida's legal authorities. Journal of Financial Crime, 14(2), 113.
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Murphy, K., & Harris, N.. (2007). SHAMING, SHAME AND RECIDIVISM :A Test of
Reintegrative Shaming Theory in the White-Collar Crime Context. The British
Journal of Criminology, 47(6), 900-917.
Protecting Yourself from Consumer Fraud. (2008). Retrieved October 07, 2010 from
Attorney General of Florida, http://www.myfloridalegal.com:
http://myfloridalegal.com/pages.nsf/main/81bf89afaf04dbeb85256cc6006ff6bf.
Simpson, Sally. (2003). Corporate Crime, Law and Social Control. (Cambridge:
Cambridge University Press, 2002, 180 pp. L14.95). The British Journal of
Criminology, 43(3), 643.
Sliter, J (2007). The price of corporate crime: the risks to business. Journal of Financial
Crime, 14(1), 12-16.