Cornerstone Credit Services no longer operating in Delaware

Attorney General Matt Denn announced that 35 Delawareans victimized by a national debt services provider recently received refunds for fees and costs paid for unlawful debt management services rendered by Cornerstone Credit Services, a Wisconsin company. In December 2017, the Wilmington law firm of Cross & Simon and the Consumer Protection Unit (CPU) of the DOJ’s Fraud and Consumer Protection Division reached a settlement with Cornerstone, under which Cornerstone ceased doing business in Delaware and refunded fees and costs totaling more than $115,000 to Delaware consumers.

Delaware law requires that debt management services providers doing business in the state register with the Attorney General, obtain a license, and fulfill a number of other requirements. The relevant statute exempts law firms providing legal services, and evidence produced during the litigation showed that Cornerstone had hired a law firm as its purported local representative in Delaware in an attempt to evade the statutory requirements. In 2015, the Cross & Simon law firm filed an action in the Court of Chancery alleging that Cornerstone’s business model was a sham and that the company had been charging fees to Delaware customers while not substantially lowering their debts. In 2017, the CPU moved to intervene in the litigation on the side of the plaintiffs, in order to ensure that any resolution of the case would include relief for all affected customers. In December 2017, the case settled.

Over the past two weeks, CPU representatives have been distributing checks, in some cases totaling several thousand dollars, to each of the consumers affected. “This is another example of how our CPU protects Delaware consumers,” Attorney General Denn said. “I want to thank Rick Cross and Cross & Simon, and Deputy Attorney General Michael Clarke and Chief Special Investigator Alan Rachko and their team, for their diligence in pursuing this case for the benefit of the Delaware customers, some of whom were facing significant financial difficulties.”

With IRS W-2 forms already issued by some employers, the 2018 tax season has arrived, and the Department of Justice Consumer Protection Unit is again warning Delaware consumers and employers to be on guard for fake IRS phone call scams and IRS Form W-2 email phishing scams that are targeting employers, including retail businesses, school districts, nonprofit organizations, and law firms.

IRS Phone Call Scam

In a typical IRS phone scam, a caller pretends to work for the Internal Revenue Service (or sometimes the U.S. Treasury Department), and tells the intended victim that the IRS will imminently be filing suit against the victim, or threatens the intended victim with arrest or some other kind of punishment, and the only way to avoid the lawsuit or arrest is to immediately pay a sum of money, usually via a pre-paid debit card or a money order, or even Amazon or iTunes gift cards.

“These scammers use scare tactics, threats, and aggressive language to put the person answering the phone into a precarious position,” said Attorney General Matt Denn. “They hope their prospective victims will quickly make payment in order to avoid the possibility of penalties like losing their jobs, or going to prison.”

The Internal Revenue Service says that these scammers often spoof the telephone number to disguise where they are calling from, and they sometimes manipulate the caller ID information so it seems like the call is coming from the IRS. They may even give out a fake IRS badge number, and may even know the last four digits of a victim’s Social Security number and try to use that information to gain a victim’s trust.

As a reminder, the IRS will never reach out to a taxpayer with an initial contact by telephone, email, text message, or social media. The IRS also will never demand credit or debit card payment over the telephone, nor will the IRS demand that you pay a tax bill in a specific manner.

DOJ’s Consumer Protection Unit urges consumers to ignore these calls and not return voicemail messages. Consumers should instead do the following:

• If you are worried that the call might be real, because you owe federal taxes, or think you might owe federal taxes, hang up and call the IRS directly at 1-800-829-1040. IRS workers there will be able to help you with any payment questions.
• Report the scam to federal authorities: fill out the “IRS Impersonation scam” form on TIGTA’s website, or call TIGTA at 800-366-4484, and also consider filing a complaint with the Federal Trade Commission at www.ftc.gov (add “IRS Telephone Scam” to the comments in your complaint).

IRS Form W-2 Phishing Scam

Delawareans should also be aware of a dangerous email scam that has been circulating nationwide and is targeting a wide variety of public and private-sector employers, including retail businesses, universities, secondary school districts, nonprofit organizations, hospitals, and law firms. The scam first appeared in 2016, but saw a significant increase in 2017, with an estimated 200 employers across the United States being victimized last year.

Typically, the scammer sends a “spoofing” email posing as an internal executive or official within the organization, requesting employee payroll data, including IRS W-2 forms that contain Social Security numbers and other personally identifiable information. If these cybercriminals are successful in tricking payroll and human resource officials into disclosing that data, they can use the data to file fraudulent tax returns for refunds and commit other forms of identity theft.

According to the IRS, these are examples of the details that may be contained in some of these emails:

• “Kindly send me the individual [2017] W-2 (PDF) and earnings summary of all W-2 of our company staff for a quick review.”
•  “Can you send me the updated list of employees with full details (Name, Social Security Number, Date of Birth, Home Address, Salary).”
• “I want you to send me the list of W-2 copy of employee wage and tax statement for [2017], I need them in PDF file type, you can send it as an attachment. Kindly prepare the lists and email them to me asap.”

The IRS has also established a process that will allow employers and payroll service providers to quickly report any data losses related to this W-2 scam: https://www.irs.gov/individuals/form-w2-ssn-data-theft-information-for-businesses-and-payroll-service-providers. The IRS has established a dedicated email address for employers to report W-2 scams and data thefts: dataloss@irs.gov. According to the IRS, if notified in time the IRS can take steps to prevent employees from being victimized by identity thieves filing fraudulent returns in their names. There is also information about how to report receiving the scam email even if an employer did not fall victim to the scam.

DOJ also reminds employers that if they are victimized by this scam, they have suffered a data breach and may need to give notice to affected individuals under Delaware’s data breach notification law (Title 6, Chapter 12B of the Delaware Code), and may also need to give notice under other applicable state or federal law. Employers who suffer a data breach should consult with legal counsel to ensure compliance with all applicable data breach notification laws.

Attorney General Matt Denn’s office warns Delawareans to be wary of online lead generators or list services that claim to provide potential client leads to certain professionals, particularly real estate agents.

The Consumer Protection Unit of the Delaware Department of Justice has investigated complaints about lead generators or list services that claim to provide advanced or superior advertising services for local professionals to drive more potential clients to those professionals. In exchange, they often require large up-front payments and include contracts that protect the lead generator more than the professional.

Lead generators may have complete control over when, where, and how they advertise the professional’s services. Often these leads provide little if any return, and may advertise the professional in areas or locations where the professional does not or cannot provide service. Unless the lead generator regularly operates in a particular geographic area of Delaware, or is affiliated with a known professional organization, professionals are strongly cautioned against paying for unknown or unverified lead generating services.

The DOJ Consumer Protection Unit cautions all consumers to be diligent before paying anyone for lead generating or listing services by:

▪ Doing initial research into the company online;
▪ Checking for any complaints with the Better Business Bureau;
▪ Searching for the company’s registration or licensure in the jurisdiction it claims to be operating from (i.e. Division of Corporations or Secretary of State offices)
▪ Thoroughly reading any contracts or agreements that the consumer is expected to sign before remitting any payment for services; and
▪ Checking for a local company or advertising forum, networking group, or professional association who could provide the same or similar services in the consumer’s own community.

DOJ encourages consumers who believe they may have been scammed to call the Attorney General’s toll-free Consumer Hotline at 1-800-220-5424 or email the Attorney General’s Consumer Protection Unit at consumer.protection@delaware.gov. If the company is located outside Delaware, consumers should also consider filing a complaint with the Attorney General’s office in that state.

Attorney General Matt Denn along with the attorneys general of 48 states and the District of Columbia Tuesday announced a settlement with Colorado-based The Western Union Company (“Western Union”) to resolve a multistate investigation focused on complaints of consumers who used Western Union’s wire transfer service to send money to third parties involved in schemes to defraud consumers.

The settlement requires Western Union to develop and put into action a comprehensive anti-fraud program designed to help detect and prevent incidents where consumers who have been the victims of fraud use Western Union to wire money to scam artists.

Criminal scams that involve wiring money include: lottery and contest scams in which consumers are told they have won a large sum of money but must first wire money to pay required taxes or fees before receiving their winnings; “grandparent scams” in which a consumer believes his or her loved one is in immediate danger and needs money right away; and romance scams in which someone poses as a love interest and then soon begins asking consumers to send money for various reasons, such as medical emergencies, car accidents, muggings, and emergency travel.

“Consumers who receive solicitations from strangers promising big winnings should toss those letters in the trash, delete the e-mail or hang up the phone,” Attorney General Denn said. “And consumers who meet someone online should be cautious about wiring money, particularly if meeting in person has never taken place. Unfortunately, some victims send money multiple times to the scam artist before realizing they have been duped.”

That anti-fraud program, which Western Union has agreed to evaluate and update as warranted, includes the following elements:

• Anti-fraud warnings on send forms that consumers use to wire money;
• Mandatory and appropriate training and education for Western Union’s agents about fraud-induced wire transfers;
• Heightened anti-fraud procedures when warranted by circumstances such as increased fraud complaints;
• Due diligence checks on Western Union agents who process money transfers;
• Monitoring of Western Union agent activity related to prevention of fraud-induced money transfers; and
• Prompt and appropriate disciplinary action against Western Union agents who fail to follow required protocols concerning anti-fraud measures.

Victims of fraud induced wire transfers nationwide, including Delaware victims, will receive refunds as part of a settlement between Western Union and the Federal Trade Commission and U.S. Department of Justice that was announced on January 19, 2017. In that settlement, Western Union will pay $586 million to a fund that the U.S. Department of Justice will administer to provide refunds to consumers. In the settlement with the states announced Tuesday, Western Union will pay a total of $5 million to be split among the states for the states’ costs and fees associated with the investigations that led to the settlements, with Delaware receiving $43,630 for the state Consumer Protection Fund.

Delaware Department of Justice Consumer Protection Director and Deputy Attorney General Christian Wright worked on the investigation for Delaware.

Information about the federal settlement is available at here, and information about the victim compensation process will be made available here.

Delaware residents who purchased electronic books – known as E-books – from a number of sources between April 1, 2010 and May 21, 2012, should begin receiving account credits or checks this week, as a result of the successful prosecution of a price-fixing case against Apple, Inc.

Delaware consumers are estimated to receive over $1,300,000 from this distribution of the Apple settlement, in addition to over $500,000 already paid to Delawareans from a settlement with E-book publishers. The amounts received by each customer will be based on the number of E-books purchased. Customers will receive $6.93 for each E-book purchased during the period that was a New York Times bestseller, and $1.57 each for all other E-books.

Customers who purchased E-books through Sony or Google will receive checks in the mail. Customers who purchased E-books through Amazon, Apple, Barnes & Noble, or Kobo will automatically receive credits in their accounts, unless they previously requested to receive checks.

Delaware joined with 33 other states in investigating and prosecuting Apple for its participation in the conspiracy to artificially inflate E-book prices. In July 2013, the United States District Court for the Southern District of New York ruled that Apple did conspire with five major U.S. Publishers – Penguin Group (USA), Inc. (now Penguin Random House); Holtzbrinck Publishers LLC d/b/a Macmillan; Hachette Book Group Inc.; HarperCollins Publishers LLC; and Simon & Schuster Inc.

Apple paid $400 million in nationwide consumer compensation after the United States Supreme Court denied Apple’s request to review the decision of a lower court that found Apple violated antitrust laws.
All five of the conspiring publishers settled prior to trial, paying a total of approximately $166 million in nationwide consumer compensation. Most of that money was distributed to consumers in March 2014. This new distribution consists of the $400 million Apple payment and additional funds remaining from the publisher settlements.

Anyone with questions about the settlement and distribution can visit www.ebooklawsuits.com or call (866) 686-9333 for more information.