A man emerges from the bathroom of a bar with a gold necklace in his hand, and says he found it on the bathroom floor. “Geez, looks nice – wonder who lost it?” he says. Just then, the bar phone rings and a man asks in a panic if anyone found a gold necklace he bought for his wife. He offers a $200 reward for it. You tell the bartender that a guy just found it, and the necklace owner says he will be there in 30 minutes. The man who found the necklace tells you he is running late and can’t wait 30 minutes for the other man to arrive. He offers to split the reward – give him $100, he will turn over the necklace. You agree, but the man who “lost” the necklace never shows up.
You’ve been conned, the victim of a con known as the ”pigeon drop.”
Scams in one form or another have probably been occurring since the dawn of language. An early one is the pig in a poke, in which a suckling pig offered for sale in a bag turned out to be a cat (a trick uncovered when the “cat was let out of the bag”).
Chances are that you’ve never fallen for a scam in a bar or tried to buy a pig in a bag, but every day thousands of people are victimized by variations of the “advance fee” fraud. The pigeon drop is a simple version of the advance fee fraud because it requires an “advance fee” of $100 to collect a larger amount of money ($200) in the future. Another version is the ubiquitous “419 scam” (named after the section in the Nigerian penal code addressing fraud), where the scammer asks the victim to wire a small amount of money to some offshore account in order to (a) bribe a prison guard to get a rich person out of jail; (b) pay the shipping costs for a big box of money; or (c) some other thing that will result in a soon-to-come large reward.
Generally speaking, advance fee frauds offer the victim something that is too good to be true. Bernie Madoff got investors to give him billions of dollars by offering them consistent 12% returns every single year. In other words, for the price of your original investment, your money would double every six years.
Another type of scam is the pure “confidence” fraud. The term “confidence man” or con man probably first appeared in an 1849 New York Herald article about the arrest of a man known as William Thompson. Thompson, a “graduate of the college at Sing Sing” who was known as the “Confidence Man,” would approach an upper-class mark, pretend they knew each other, and then pose his signature question: “Have you confidence in me to trust me with your watch until tomorrow?” After taking the watch, Thompson would stroll away laughing, and his dupes, “supposing it to be a joke,” would let him go, “thus placing ‘confidence’ in the honesty of the stranger.”
Website redirection scams (such as the one targeted at Gmail users announced by Google earlier this year) are really just the first part of modern “confidence” schemes. Scammers want your passwords so they can steal your identity. Once they have access to your emails and other passwords, they can convince your bank and your friends that they are you, thus giving the banks and your friends the “confidence” to send money to a verified customer or loved one.
Why do cons work? Despite the spectacular diversity of types of cons, experts say that almost all cons rely upon a small handful of psychological devices. In order to convince victims that the scam is legitimate, fraudsters may use the “deference to authority principle” or human beings’ tendency to behave like people who are nearby, which is called the “herd principle.” Con artists may also use time-pressure or scarcity to convince targets to act before self-control and rationale thought can kick in. Distraction is another time-tested technique.
Whichever psychological tools are employed, cons ultimately work because people want to believe them. How does the law deal with victims who wanted to believe? Cons run afoul of federal criminal wire and mail fraud laws even if a reasonable person would have seen right through the scheme. This is because these statutes punish not just fraud but an attempt to defraud. As Judge Posner has explained, any other rule “would invite con men to prey on people of below-average judgment or intelligence, who are anyway the biggest targets of such criminals and hence the people most needful of the law’s protection…. The fact that a reasonable person would not have been deceived would be no more relevant than the fact that a murder victim would have survived had he been wearing a bulletproof vest.”
If a victim does not receive restitution as part of a criminal case, he can bring a civil case against the con artist, typically for fraud. The civil standard for fraud in New York, however, is very different from the federal criminal standard. In order to recover, the victim must show that he relied on the con artist’s lie and that the reliance was “reasonable” or “justifiable,” two terms which have the same meaning in this context. New York courts consider all relevant facts in determining whether the reliance was reasonable, including the sophistication of the victim, the victim’s efforts to investigate the misrepresentation upon which he says he relied, and whether the truth was in the sole possession of the con artist. For instance, courts would almost certainly reject a fraud claim brought by a supposed purchaser of the Brooklyn Bridge because the ownership of real estate can be easily verified by checking public records.
The bottom line is that very few fraud victims ever get their money back. Thus, it’s important to remain vigilant. To paraphrase the famous saying, “If it sounds too good to be true, it’s probably a fraud.” And the advice in Richard Hilles’s Common-Place Book is as wise today as it was when it was written in 1530: ”When ye proffer the pigge, open the poke.”