Casey Research

What We Now Know, week of January 24, 2005

WAVE RATS

by Doug Casey

Those donating money to tsunami relief efforts should be wary of "wave rats" who are posing as victims of the tragedy or even masquerading as charity organizations.

With billions of dollars in donations en route to Asian countries hard-hit by the tsunami, the FBI and consumer watchdogs are now warning humanitarians to be vigilant. 'Phishing' is the most popular type of scam, whereby an unsolicited e-mail directs potential philanthropists to a bogus charity website. Nameprotect Inc., a service that monitors the Internet for trademark abuse by phishers, told MSNBC that there are currently over 170 suspicious websites preying on benefactors; many using variations on the names Red Cross and Mercy Corp. Nameprotect's CEO Mark McClean said, "They register a site that looks like the Red Cross, but with an extra 'd' or something like that." These mock-charity sites then request banking information from donors. In some cases, these details are later also used to commit identity theft.

Another con the FBI is cautioning the public about involves the hiring of "private investigators." Targeting grieving families, ghoulish scammers offer their services as an investigator who would scour the country for a nominal fee, searching for missing loved ones. However, the FBI notes that it is unlikely those involved are anywhere near the disaster area.

Annie McGuire, director of the California-based online victim advocacy website Fraud-aid.com, told AFP that the sheer scope of the catastrophe in Asia "is bringing fraudsters out in droves." Earlier this month, Canadian college student Josh Kaplan duped a Connecticut woman into "donating" the domain name tsunamirelief.com to a non-existent non-profit called 'Tsunami Relief International.' When it turned out that Kaplan had cashed in on the disaster by auctioning the URL on eBay for $10,000, the New York Post exposed him as a "wave rat", whereupon Kaplan had little choice but to pass on his profits to a genuine tsunami charity.

The first U.S. arrest by the FBI for tsunami charity scam was Matthew Schmieder, an unemployed painter from Pittsburgh. Schmieder had sent out 800,000 e-mails under the guise of the Mercy Corps, claiming he was raising money for tsunami aid. After banking only $150, Schmieder was shut down and now faces a maximum 20-year sentence for fraud. Nevertheless, the recent arrest does little to placate those who have lost money-and their confidence in giving to charity-because of the scams. Mercy Corps' CEO Matthew DeGalan said in a NBC interview, "The thought that somebody was trying to take advantage of this for their own gain made us all mad."

Meanwhile, the American Institute of Philanthropy, a charity watchdog service, has created a list on their website (charitywatch.org) of the names of trustworthy tsunami charities with links to their official sites. However, for comprehensive evaluative reports on charities, including a complete breakdown of their spending, donators should visit the BBB Wise Giving Alliance's website, Give.org. For instance, in 2003, Mercy Corps used 91% of their funds on program activities; only 3% was spent on fundraising and 6% on administrative costs; whereas, also in 2003, Oxfam America used 76% of their funds on programs, 18% on fundraising, 5% on administration, then the remaining 1% was allocated to 'Other Expenses.' Both of these charities met the BBB Wise Giving Alliance Standards for Charity Accountability, which requires-among other things-that at least 65% of a charity's total expenses are spent on program activities.

Of course, by staying informed, philanthropists can give with good conscience, knowing that their money is going where it is really needed, instead of lining the pockets of fraudsters and dubious charities.

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