Alert: Tools to Protect Against Fraud

A recent audit of the Hampden County Regional Contributory Retirement System (Hampden County Retirement Board) by the Pension Employee Retirement Administration Commission (PERAC), once again revealed that government entities can also fall victim to scam collection calls.

The news is filled with stories about individuals who have received a frightening call from someone claiming they will be sued – or even thrown in jail – if they do not pay a debt to a company. We have all read about people who have paid hundreds or thousands of dollars in response to these calls only to realize later that they have been scammed. This fraud alert provides tools to help protect you and your jurisdiction from falling victim to such scams.

Audit Information

PERAC’s audit found that over five years the Hampden County Retirement Board paid more than $235,000 to more than 50 different entities claiming to provide website-related services such as “search engine optimization” or “online directory listings.” The audit identified 119 bogus invoices, many of which claimed to be from a collection agency or legal department and demanded “immediate action.”

The Office of the Inspector general (OIG) learned that shortly before sending each invoice, the supposed service provider would first call the Hampden County Retirement Board’s executive director.  The callers would tell the executive director that the retirement board had entered a contract with them, that they had provided services and that they would send the sheriff to arrest her if she did not pay the bill. The executive director would respond that she could not pay them anything without an invoice. At that point, the companies would fax a fake invoice that she would present for payment at the next board meeting.

In a similar vein, the OIG in 2020 investigated allegations that Pioneer Products Inc. (Pioneer) and Noble Industrial Supply Corp. (Noble), used high-pressure techniques and misleading statements to induce municipalities to spend large amounts on supplies that they did not order. Pioneer and Noble did business across the state; they sold cleaning supplies, specialty products for fire departments and other chemical products to local governments.

The OIG found that Pioneer and Noble employed a common scheme for over 10 years, targeting scores of municipalities.  After a customer’s initial order, a salesperson would call back and say that they were sending the next order, even though the municipality had not agreed to additional purchases. If the municipality disputed the order, the Pioneer and Noble employee engaged in misleading and intimidating sales methods to compel the municipality to accept additional shipments. Through these misleading calls, the companies caused municipalities to pay for merchandise that they had not ordered. 

Precautions and Tools

To avoid paying bogus invoices, public entities should take the following simple precautions:

1. Make sure everyone in your organization is aware of these scams and knows that high-pressure tactics and threats are red flags for fraud.
2. Employees should report harassing phone calls to their supervisor. Supervisors should report the calls to the entity’s legal counsel, the local police and the Federal Trade Commission at ftc.gov/complaint.
3. Research any company that sends an unexpected invoice. Often a quick web search will reveal that the company name, website or phone number is fake.
4. Keep updated and organized records of all current contracts and do not pay any invoices without a valid contract. Even if the vendor’s name is familiar, check it against your contract to make sure the account number on the invoice matches the account number on your contract.
5. Never make a payment without first confirming with the right person in your organization that the services, materials or supplies had been ordered and received.
6. If you receive invoices for products or services you did not purchase, contact the Office of the Inspector General’s confidential fraud hotline at [phone] or [e-mail]. All telephone calls and emails are treated confidentially, and individuals may choose to remain anonymous.