Money For Nothing: Detecting Rebate Scams
March 2013
IN THIS ISSUE
— Like “Argo”, Minus the Hostage Rescue: Phony Film Crews and Other Scams
— Avoiding Guilt by Association With Rebate Scams
GREETINGS!
Welcome to the March edition of our newsletter! In this issue, we’ll examine various government rebate scams and discuss ways you can protect your clients from being tainted by association.
LIKE “ARGO”, MINUS THE HOSTAGE RESCUE: PHONY FILM CREWS AND OTHER SCAMS
As cash-strapped city governments have looked to leverage their locations for more revenue, allowing film crews to use famous locations within city limits has become a popular way of boosting both revenues and the local economy — even if, as this observer has noted, it meant a film crew using a snow machine in the midst of a cold and snowy Chicago winter. To attract television and film business, whose productions tend to be both capital and labor intensive, city governments often offer tax rebates that are typically dependent on the size of the production. But they don’t always check to make sure that $300 million blockbuster isn’t starring a B-list actor in a giant rat costume.
That type of scam, where phony (or nominally talented) film personnel concoct a story that professes to have a big budget behind it, take a tax rebate, then film a low-budget picture to “justify” the rebate check, may seem far-fetched, but it happens more than you might think. Five United Kingdom citizens were recently convicted on charges that they submitted GBP 2.78 million in valued-added tax rebates, successfully obtaining nearly GBP 600,000 for a film, “A Landscape of Lives,” that contained seven minutes of film, in the court’s words, of “unusable quality.”
AVOIDING GUILT BY ASSOCIATION WITH REBATE SCAMS
Film crews may be the more colorful type of rebate scam, but they’re hardly alone — any aspect of the economy where a government entity plays a role can be preyed upon. Landlords who provide affordable housing and receive rent subsidies, for example, or construction companies working on infrastructure projects, can each game the system to siphon off government funds for illegitimate purposes — and damage the reputations of the banks that lend them private funding, or the suppliers and vendors who believed a legitimate transaction was taking place.
If your client is working with a company that is receiving some form of government aid and suspect something is amiss, there are several steps an investigator can take. Open records requests for any permits or applications would provide information about the portrait the contractor provided to the government, which can be compared with the actual results of the project once undertaken. Most often, interviews of officials and reviews of court records (in the event that a discovered scam was not the subject’s first) will help assemble a pattern and practice that can help your client recover funds and maintain their credibility in the business community.