Dec 3, 2007: State Treasurer James B. Lewis Alerts New Mexicans, to Latest Check Scam

By Judy Espinosa, State Treasurer’s Office Audit/Compliance Officer

New Mexico State Treasurer James B. Lewis is proactively addressing a check fraud scam that is plaguing businesses and citizens in New Mexico and in other states. The scam involves official-looking checks (warrants) that appear to be issued by the state of New Mexico. Fraudulent checks could also be printed using a fictitious business name in the upper left corner and state bank account at the bottom of the check. The checks are made out to individuals and businesses for cash or for the purchase of merchandise. Although the state is protected from losing money through a fraud prevention safeguard known as Positive Pay, individuals or businesses that accept or cash these fraudulent checks are not protected.

Treasurer Lewis recently convened a meeting of law enforcement agencies within Albuquerque and surrounding areas to advise them of the fraudulent check scam. The Treasurer’s Office is working diligently with the Department of Public Safety and the Attorney General’s Office to address the problem. The Treasurer also met with the Greater Albuquerque Chamber of Commerce so that it could alert the business community and explore possible solutions. Treasurer Lewis also suggested that the Chamber advise its membership to take preventive measurers in accepting and cashing checks. Subsequently, a Check Fraud Task Force was created that will be managed by the Commerce. “The perpetrators are looking for vulnerable individuals and businesses,” Treasurer Lewis said. “Do not let yourselves be the victims.”

Treasurer Lewis went on to say that if a check appears to be issued by the state and is presented for a personal purchase, beware. The state does not do business in this manner. As part of the scam, individuals, businesses and organizations selling items locally or via the Internet receive an official-looking state check as payment for a purchase. The seller is then asked to cash the check, encouraged to keep a portion of the amount, and told to wire the remainder elsewhere – usually to a bank account in another state or country. Any individual or business who receives a suspicious state check should contact the State Treasurer’s Office at (505) 955-1131 or (505) 955-1148.

When a fraudulent check is presented for payment to the state fiscal agent bank, the bank’s Positive Pay system detects the fraudulent check and returns it unpaid to the bank of original deposit. The bank of original deposit that cashed the check or the business that accepted the check experiences the loss. During fiscal year 2007, fraudulent checks detected by the Positive Pay system totaled $67,000. In comparison, the number of fraudulent checks in fiscal year 2008 has increased. The aggregate amount of fraudulent checks detected in the first five months of fiscal year 2008 is approximately $500,000. The check fraud problem continues to escalate and the state must be vigilant in developing new detection and prevention initiatives, such as paying vendors electronically instead of processing and printing state checks (warrants) to pay vendors.

THE BOTTOM LINE: Anything that sounds too good to be true probably is. If you receive a check that appears to be issued by the state of New Mexico – especially a check you were not expecting – this should create doubt in your mind about the check’s authenticity. Do not cash the check. Contact the State Treasurer’s Office to protect yourself and New Mexico businesses.