MN Advisory Comm Exhibits 1-18 - Minnesota Judicial Branch

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EVERY RESIDENT of Hennepin
County was a direct or indirect victim
of these and similar types of white collar
crimes. Losses suffered by businesses
and government were passed on to
consumers and taxpayers in the form of
higher prices, higher taxes and reduced
services.
The dollar loss to the public from
whit,p collar crimes may far exceed that
of slrect crime. and there are indicaticJIlS
tllat SeVcl’Fil typos of’ bvtlito coll;ir
c&rimes arc on the r’isc.
A study of’ 1 I(tnnepin Coullty District
Court records of criminal (IHSC’S arraigned
in 1973 discsloscd only twothirds
as many white collar crimes as
street crimes. But the dollar cost of the
white collar crimes was nearly twoand-a-half
times greater. And the cost
was borne by individuals, groups, business
and government - all vulnerable
to the white collar criminal.
White collar crimes exploit the trust
of an unsuspecting and cooperative victim
through the use of guile or deceit.
Frauds, embezzlements, forgeries and
price-fixing are all types of white collar
crimes.
Individuals trying to save money are
particularly susceptible to frauds,
especially home improvement and auto
repair schemes. As in the case of the
homeowner with a leaking roof, a “good
deal“ often turns out to be fraudulent
and even more costly for the consumer
than an expensive but competent job.
The more elaborate buyers club
10
scheme exploited over 7.000 Midwes-
terners trying to save money through
cooperative buying. Each club member
paid $395 for a lo-year membership in
Mid-America Savers, Inc., of Edina,
and was guaranteed wholesale buying
rights. But the club’s announced 6 per-
cent handling fee was soon increased by
an illegal and hidden 8 percent markup
in the wholesale prices listed in the club
catalog. The club also began charging
down payments, another violation of
the original membership agreement.
By the time the state became aware
of the fraud in October. 1973. the club
owed members $48,000 in down pay-
rncnts and $200.000 in refunds on the
remaining years of memberships.
Another $48,000 was owed to companies
which had delivered merchandise but
had not been paid by the club.
Even through the club officers were
convicted in federal court last summel
and company assets were placed in re-
ceivership, defrauded members and
companies will never receive refunds
or payments.
Mel Vander Meer, a St. Paul postal
inspector who worked on the case, exp-
lained that “all the company money
went into operating and personal ex-
penses, and that’s why you never find a
bundle at the end of these schemes,
even though people think you do.
Ninety-five percent of the time, nothing
is recovered.”
While the need to economize makes
the individual vulnerable to white collar
frauds, the hope of easy gains is equally
dangerous.
Ads for work-at-home schemes, for
example. promise great earnings with
“no experience necessary.” Clipping
newspapers, addresssing envelopes,
assembling items, making clothing and
raising animals are among the jobs of-
fcred. The initial investment by the in-
dividual often exceeds the profits possi-
blc. Although each person loses only a
few dollars. the U.S. Chamber of Con-
mcrcc estimates that, nationally. $500
million is milked from the public each
year through these schemes.
Mail order investment frauds also
victimize people seeking financial gains
for no work. Recently a Twin Cities
man advertised silver dollars in the
newspaper, priced at less than market
value. He collected $1,900 by mail in
three weeks, sent no silver dollars and
left town.
On a more devastating scale, 14 Twin
Cities residents lost a total of $31,000
during the first six months of 1973 to a
man who promised investment gains on
the commodities market. False charts
and a fluid sales technique won the trust
of the victims, but their money was sto-
len, not invested. The loss represented
the life savings of several of the vic-
tims.
And occasionally an individual who is
neither trying to save nor earn money is
victimized through no fault or action 01
his own. Last year, some Minnesota re-
sidents discovered that they had been
bilked by car dealers turning back
odometers and artificially increasing
the value of used cars. No one knows yet
-- and some victims may never knoL$
they were “taken” -- how many p~~ol)lc~
were defrauded or what the dollar loss
has been.
On a more personal level. mtsmbcr!:
of a Minneapolis church bowling Irnguc
paid $1.800 in dues to the leaguc~ trras-
urcr to pay for the annual banquc~t.
After the members I’inishcd their ban-
quet dinner and received their trophies.
the treasurer slowly rose and haltingly
announced that there was no mono’)’ to
pay for the banquet. He had spent the
dues on himself,
While customers, clients and club
members are prey to many schemes.
businesses also suffer from frauds at
the hands of their own customers and
employees.
Jerry &huller. part owner of Tower
Grocery and Ralph and Jerry’s in Min-
neapolis, estimated his losses at both
stores from bad and forged checks at
over $1,000 per year. Schuller’s Tower
Grocery has been held up three times in
the last year, but his losses to the armecl
criminals were considerably less than
losses to the bad check artists.
William Rose of Kick’s Liquors in
Minneapolis said that he loses a ,‘sub-
stantial amount” of money each year to
bad checks and forgeries.
“It’s equivalent to stealing,” Rose
said. “The only difference is that the)
don’t use a gun.” Rose estirnates that
several thousand dollars of “pure los-
ses” are absorbed by Kick’s each year,
Brooks Superettes in the Twin Cities
loss nearly 2.5 percent of its annual
gross earnings to “internal and exter-
nal frauds,” estimates Keith Carlson.
president. Losses of the 20 Brooks
stores probably exceed $100,000 annu-
ally from bad checks. forgeries. shop-
lifting and employee theft, Carlson
said. All Brooks employees --- man-
“It’s equivalent
to stealing.
The difference
is . . . they
don’t use
a gun.”
Greater Minneapolis