Scam:   Telephone solicitors call out of the blue looking to hook you up with thousands of dollars worth of government grants (aka free money) they say you're eligible for.

Status:   Real fraud which costs its victim around $250.

Example:   [Collected on the Internet, 2004]

There is a telephone scam that is targeting people across the nation. The caller identifies himself as a representative of the Government Grant Association. The caller then leads the person to believe they have qualified for a government grant and in order to pay out the grant they need the persons bank account number or they have the account number and need the person to verify the account number.

Origins:   A new form of the "prepayment" con has been blanketing the US throughout 2004. Through it, the unsuspecting are lured by the promise of government grants into agreeing to have an "up-front fee" (usually $249) siphoned from their bank accounts. Though the fee is taken immediately, the grants never materialize, leaving those who have been led to believe they were about to be enriched to the tune of thousands of dollars sadly disappointed and a few hundred dollars poorer.

"Prepayment" frauds are far from brand-spanking new — many successful flim-flams hold out the carrot of big money (which never materializes no matter how hard it is chased after) to seduce the gullible into parting with some of their hard-earned funds. Those so gulled have acted on the belief they were arranging hard-to-secure loans at very favorable rates, often with distant countries said to be rabid with desire to lend to Americans. Or they were promised access to little-known and almost-forgotten college grants. Or they received the news they'd won foreign fabulous wealth in lotteries they had no recollection of entering. Even the venerable Nigerian scam is a prepayment con: though its victims initially believe that for helping distressed foreigners move large sums of cash from their country they will receive millions of dollars, very early into the process they discover they will have to dole out innumerable sums to various folks to bring this about.

Folks conned via prepayment schemes mistakenly believe they stand to gain vast amounts of something for practically nothing. Acting on that faith, they willingly part with funds they would ordinarily be loathe to spend yet which by comparison to the prizes about to be gained momentarily appear to be relatively small sums.

The 2004 'government grant' fraud operates on that principle. Those contacted by such cheats are told they are entitled to lay claim to government grants worth anywhere from $8,000 to $25,000. In return for their banking information and what now seems an insignificant processing fee of $249, said grants will be directly deposited into their accounts. Those who suspect something might be wrong with the notion of the government handing them money for no discernable reason are told they are eligible for this form of largesse as a reward for their having paid their taxes promptly for the past few years or because they're senior citizens. Folks who further quibble with the process are issued all manner of guarantees, including the provision of 800 numbers to call if at any time they wish to bow out and have their up-front fees refunded. "Supervisors" may join phone conversations between scam artists and their potential pigeons to assure those evincing doubts about the government wanting to give them money that everything is meticulously legitimate. The doubters may also be given the addresses of web sites to examine which, they are told, will explain in far greater detail how these grants operate.

These promises and seeming proofs serve only one purpose, and it is not the protection of the consumer — they work to lend an air of legitimacy to the pitch so as to soothe the suspicions of those about to be taken. Very few will think to call those numbers; they will instead trust that what they have been told are guarantees are in fact valid ones. Those inquisitive enough to dial those 800 numbers find they either go unanswered or have been disconnected.

Those operating versions of this scam have in the past identified themselves as representatives of granting agencies with the names of the Government Grant Center, Consumer Grants USA, Ultimate Funding Inc., Government Grant USA, Federal Government Information Center, Federal Government Grant Information Center, National Grant Center, Federal Research Funding, Customer Care Plus, and Department of Revenue. However, that a purported grant facilitation entity is not listed above in no way proves it is on the up-and-up, so no comfort should be taken from its absence. Swindlers routinely invent impressive-sounding names and titles for themselves and the entities they supposedly represent. "That's what scam artists do," said Pat Coakley of the Better Business Bureau, "they operate under a variety of names and phone numbers, then leave town and start all over again under other assumed names."

As to how the con is run, one of our readers who was contacted by someone intent upon victimizing him with the 'government grant' scheme reported this exchange:

[Bryan]     Good morning, this is Bryan.

[Swindler]   My name is Alec Watson. (Female with a Indian or Pakistan accent.)

[Bryan]   This is Bryan.

[Swindler]   Can I speak with Bryan P. please?

[Bryan]   Speaking. (I never answer in an affirmative manner anymore. I once had my long distance carrier changed because I said yes when they asked me if I was Bryan. Once they recorded my yes they had me saying yes to anything.)

[Swindler]   Again, my name is Alec Watson from the Las Vegas Government Grant Processing Center. And you have been approved to receive an eight thousand dollar grant. We would like to verify your information. Do you live at _____? Do you still work for _____?

[Bryan]   Correct. Why would I get a grant for $8,000?

[Swindler]   We have noticed that you have paid your taxes on time for the last 20 years. Can you please verify your bank?

[Bryan]   North Island Financial Credit Union.

[Swindler]   Can you tell me what your bank routing number is?

[Bryan]   No, I cannot.

[Swindler]   Bryan, we can process you for $8,000 for a full free grant. We can automaticly withdraw the processing amount from your back account. Do you think that a cost of $257 is worth receiving $8,000?

[Bryan]   Well, if you're charging me $257 then it isn't free, now is it?

[Swindler]   I can give you a few minutes to get your checkbook.

[Bryan]   I am at work. I do not have a checkbook with me. (Not kidding — my wife knows better then to send me to work with a checkbook during the holidays.)

[Swindler]   A deposit slip?

[Bryan]   No.

[Swindler]   Sir, we cannot finish without your banking routing number; can you call someone at home and receive it?

[Bryan]   Why can't you subtract the money from the grant?

[Swindler]   Because we are not allowed to touch the grant money. Did you get your checking information yet?

[Bryan]   Please remove me from your calling list.

[Swindler]   Bryan, you don't want the $8,000? We are not authorized to remove you.

[Bryan]   Ok, I found you on the web and it says you are a rip off. Please let me talk to a supervisor.

[Swindler]   CLICK

As Bryan experienced, the quite-reasonable question of "Why can't you deduct the fee from the funds you'll be sending me?" is always countered by the claim that it is impossible to do so. Others who have been party to such come-ons report being told laws precluded the use of the grant (or loan or scholarship or lottery prize) for anything other that its designated purpose, which included barring use of even a small part of those funds for payment of processing fees.

Bryan's example also shows how much he was pressured to provide his banking information. Someone less aware of the possibility of being conned might well have given up that number under such a barrage.

The scam succeeds as well as it does thanks in part to the many television commercials touting free government money. (Such advertisers are vending books containing the contact information for a variety of government grants, loans, and subsidies.) Though there are genuine government grants to be had, they are not available to just anyone for no purpose. Forget about the ads on TV — there are not untold troves of government funds available just for the asking. Grants are awarded on the basis of specific criteria having been met for specific programs. Such grants are very strictly administered, require the completion of a great deal of paperwork, and are overseen at every step. These are not "Fill out a simple form, then cash a huge check" types of propositions; these are "Prove to us that you qualify under this program then, provided you are engaged in the activity we are interested in fostering, we might subsidize some of your costs" sorts of deals. The hoops to be jumped through are many and varied, and there is precious little by way of a freebie to it.

Regarding the government grant scam, keep these three points in mind:

• The U.S. Government does not telephone people to offer them grants.
• Grants are never guaranteed, nor are they issued for no apparent purpose, so folks should be downright suspicious of any talk of grants where the words "free" or "guarantee" are bandied about.
• Real government grants require extensive documentation with great attention to detail. There is nothing simple or painless about securing a government grant.

Barbara "borne in the USA" Mikkelson

How To Avoid Falling Victim To Prepayment Scams:

• Above all else, have nothing to do with 'deal of a lifetime' offers that require payment in advance of fees. Do not fall in with schemes whereby you are required to prepay taxes on lottery winnings, or pay to have a prize shipped to you, or are to be charged a loan application fee. Do not pay someone for the privilege of working for them.
• With regard to 'free government grants' come-ons, disabuse yourself of the notion that the U.S. government is in the business of providing grants (aka free money) to whichever of its citizens have made it their habit to pay their taxes on time. (Rather, the U.S. government offers a disincentive to those who are tardy with their payments — it assesses penalties for deadlines missed and charges interest on the amounts overdue.)
• Stop believing in the chimera of "something for nothing."

Last updated:   11 December 2004

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  Sources:

    Levine, Steve.   "Government Grant Scam."

    WROC-TV [Rochester].   21 July 2004   (6 p.m. broadcast).

    Mulkins, Phil.   "Tell Us Your Bank Account Number, Etc., Etc."

    Tulsa World.   16 August 2004   (p. A2).

    Roesler, Richard.   "Agencies Warn of Grant Scheme."

    [Spokane] Spokesman Review.   23 July 2004   (p. B1).

    Sabatini, Patricia.   "Never Give Unknown Callers Bank Account Number."

    Pittsburgh Post-Gazette.   22 October 2004   (p. B16).

    Williams, Fred.   "Scam Uses Phone to Get 'Up-Front Fees.'"

    Buffalo News.   20 October 2004   (p. B7).

    Wyoming Tribune-Eagle   "BBB Warns Local Consumers About Government Grant Scam."

    2 December 2004   (p. A2).