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Lottery and Contest Scams

Everyone loves to win a prize. As a result, phony prize scams are rampant. Steve Weisman shows you some of the common ones and how to avoid them.
This chapter is from the book

This chapter is from the book

Conmen know that everyone loves to win a prize. As a result, phony prize scams are rampant. It is hard enough to win a prize when you have entered a legitimate sweepstakes, but when you are notified that you have won a contest that you never even entered, you should be hearing “Danger Will Robinson” ringing in your head even if you never watched the old television show Lost in Space.

One form of a contest prize scam requires you to buy something to qualify for the prize that you have “won.” Generally, the things you are required to buy are particularly overpriced when compared to the prize that you have supposedly won.

Another common lottery scam involves up-front fees that you are required to pay to claim your terrific prize. Knowing that some people might be initially skeptical of being told that they have won a prize in an international lottery that they did not enter, one particular scam came in the form of an email purportedly from the FBI. The message line in your email read “FBI Internet Fraud Watch/Alert,” and the return email address gained people’s confidence by appearing as FBIfraudalert@hotmail.co.uk or FBIfraudwatch@hotmail.co.uk. The truth is, it was a scam. The email told you that you had won a big prize in a lottery sponsored by a large, familiar company such as Microsoft or MasterCard, and the lottery had been examined by both the FBI and Scotland Yard and determined to be legitimate. You were also told that the lottery funds were insured. So who wouldn’t send in a processing fee when both the FBI and Scotland Yard have assured you that the lottery is legitimate? Someone thinking clearly. Don’t let your greed overrule your brain. Never trust an email to be from whom it says it is from. The FBI does not work with or endorse particular lotteries.

Many people who received a check from Clorox, the bleach company, indicating that it was part of the “American Lottery Sweepstakes” may have merely thought that this was a legitimate advertising promotion. Along with the check and a congratulatory letter, the victims received instructions to wire money (always a danger signal in scams) to a Canadian clearinghouse to cover the fees for processing the prize money. The truth is, this, too, is a scam. You don’t win contests that you have not entered. You don’t have to pay fees to receive winnings in legitimate sweepstakes. And you should never consider any check as real money, regardless of how legitimate it looks, until the funds have not only been deposited in your account, but also the check has actually cleared. As for money that you wire to the scammer while his check is in the process of bouncing; that money is gone forever.

Another form of prize scam involves the income taxes due on prize winnings. As with many scams, there is just enough of a kernel of truth in this assertion to make an unsuspecting victim susceptible to the scam. Lottery and contest winnings are generally subject to income taxes; however, the operators of scam lotteries tell you that you must pay them the income tax due on your prize. The truth is, you pay the tax on your prize winnings either directly to the IRS through an estimated tax payment, or the taxes are deducted from the prize before you receive it, in which case you would receive a Form 1099 from the sponsor of the sweepstakes informing you of the amount already deducted for your income taxes. Never pay income taxes to the sponsor of a lottery or other contest.

In another variation of the lottery scam, you may be sent a check for a portion of your winnings along with directions to send back money for processing fees. Unfortunately, the check from the phony lottery bounces, but your check back to the scammer does not. Adding insult to injury, some people who have fallen for this scam not only lost the money they sent to the scammer for processing fees but also were charged overdraft fees by their own bank when they bounced checks assuming that they had the prize money in their bank account.

Another lottery scam occurs when the scammer buys a lottery ticket choosing the winning numbers from the previous day’s or week’s lottery drawing. He then alters the date on the ticket to make it appear to be a winning ticket. Next, he approaches you with a sob story explaining why he cannot collect the money. Perhaps he is going through a divorce. Perhaps he is ineligible to claim the prize; this scam works particularly well with scammers who may appear to be teenagers. Whatever the reason, the result is the same: They offer to sell you the ticket so that you can collect the prize, and they get a significantly reduced amount of money from you. It’s a win-win solution, if you ever saw one. The truth is, buying a lottery ticket from anyone who is not in the business is a sucker’s bet. You can’t win.

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