The hidden or not-so-hidden fraudster in each of us and a few confessions from selling cars

While many are shocked at the extent uncovered so far and at least some are expecting more to come, anyone who spent their formative years in the car business in the early 1990s like me is probably not surprised in the least. 

Though the mainstream media has done their level best to pretend it’s an isolated issue, government fraud certainly appears to be a widespread problem, affecting almost every state across an ever growing list of programs.  Earlier this week, NewsNation reported on yet another scam in Arizona that relied on Medicaid funds for Native Americans allocated to treat drug and alcohol addiction.  As they described it, “In a new three-part exclusive report presented on NewsNation, senior national correspondent Brian Entin investigates sober living facilities in Arizona, where thousands of Native Americans seeking treatment for addiction using their American Indian health care plans became victims of alleged Medicaid fraud. Scammers discovered a loophole in the American Indian Health Program (AHIP), which is part of the Medicaid system, and learned that registered providers can bill Medicaid directly for services, such as therapy sessions, addiction services, or behavioral health treatment. Once a scam provider was able to get an eligible patient into their fraudulent sober living homes, they’d start billing Medicaid for treatments the person would never receive. As they brought in more people, they were able to make more money. Some facilities were charging upwards of $8,000 a day. As part of the scheme, scammers were allegedly recruiting, and in some cases kidnapping, vulnerable people with promises of free addiction treatment. According to advocates, Native American elders who had no prior drug or alcohol addictions were also brought into these homes.”  This news followed rapidly on reports of widespread fraud in the Southeast, targeting taxpayer, medical, and assistance funds across several including COVID relief programs, food stamps, and low-income housing, New York City where senior daycare centers were targeted, California, where it was senior living facilities, and Minnesota, where it was autism childcare centers, food subsidies, and other programs, to cite a few of the more high profile examples.

While many appear to be shocked at the extent uncovered so far and at least some are expecting more to come, anyone who spent their formative years in the car business in the early 1990s like I did is probably not surprised in the least.  We might like to pretend otherwise, but almost everyone has an inner fraudster and for some, fraud is simply a way of life and like all ways of life, some are simply better at it than others. If you think you don’t, how would you fare if the IRS audited you tomorrow and how accurate was your net worth on your most recent mortgage application? When I began my career in the car business at the tender age of fourteen, the day after I graduated middle school, car salesmen – particularly used cars, and particularly men because women were not prominent in the business in those days – were already well known to me as liars and cheats, more than willing to mislead their customers – up to and including their own mothers – to put more money in their pockets.  There was, however, another level to this that I’d scarce imagined.  Many customers, particularly low income individuals or those with less than stellar credit, weren’t able to finance a car or at least weren’t able to do so without a little help.  Whether it was not making enough money, not enough time on the job, or no legitimate job at all, working off the books, there was a segment of willing customers who simply wouldn’t be approved for a loan on the car they wanted.  In those cases, the customer desired what we had to sell, had the money for the down payment, and the amount of the loan checked out compared to the overall value of the car, but the customer didn’t meet the bank’s criteria.  If everything was on the up and up as they say, they wouldn’t have been able to purchase the car and the dealer would lose the sale unless an enterprising sales person found a means to fake the necessary paperwork, as in forge it, allowing everyone to win, except for maybe the bank should the car get repossessed at some point.

In 1990 itself, the old-timers who started their career in the 70s and 80s would do it the old fashioned way with razor blades, scotch tape, and sometimes a little glue.  During the frequent down times in an industry where you regularly worked 12 hours a day, when no customers were on the lot and there was nothing productive to other than smoke cigarettes, they’d be at their desk, heads down with an Exacto knife in their hands rather than a pen, concentrating fiercely on cutting numbers from one pay stub and taping them to another.  If you’ve never tried to do such a thing, it’s not an easy task.  The numbers on a pay stub, back when they had paper pay stubs anyway, were small and the changes needed to line up with everything existing in terms of the font and the spacing, requiring a ruler, a lot of patience, and no small amount of rework.  The numbers, even if they were perfectly faked on the page, also needed to line up with each other in terms of income tax and other deductions.  If you made the topline too high and miscalculated the payroll tax, for example, the finished product could look perfect yet still fail to withstand any scrutiny.  While it helped that documents were copied and faxed to the bank in those days, resulting in the loan officer receiving a pretty low fidelity version, there were a lot of ways what we might call the old-fashioned way could go wrong in addition to the amount of time and the necessary skill it would take in the first place.  If you were a young salesperson who didn’t have either, you were essentially shit out luck along with the dealer and your customer, suggesting there simply had to be a better way, some innovation that would make it both easier to produce the paystub – and any other necessary documents for that matter – and enable more salespeople to take advantage of it.

As was so frequently the case back then, computers were the answer to this pressing fraud problem.  Photoshop and similar programs had been around for a few years at that point, but to my knowledge, no one had ever applied them to this particular challenge in the car business until me and another person (who must go unnamed to protect the innocent) came along, realizing we could create a reusable template that was far superior with far fewer imperfections than one assembled using an Exacto.  Perhaps even better, we could essentially crank them out on demand, reducing hours of work into barely fifteen minutes in most cases and producing a better final product in the process.  As an added bonus, the computer could perform the calculations to ensure the deductions were accurate and the technology was generally new to most people in those days before the internet as we knew it existed, making the fake documents incredibly hard to spot, especially when faxed because people weren’t even aware it could be done in this way to begin with.  The combination was enough that within a year, no one except for a few stalwarts were doing it the old-fashioned way anymore, and those that did would be known to eye us jealously even if they refused to ask for help.  Instead, most were happy to pay us for the service, and what we colloquially referred to as “Fraud, Inc” was born. For a time, everyone was winning.  Salespeople were selling cars they wouldn’t have been able to, sometimes at higher prices, the dealer was increasing their profits and their units, the customer was getting the car they wanted, and we were making a little – at times a lot of – extra cash on the side to help put us through college.  The only possible loser in the innovation was the bank:  They were making loans they otherwise wouldn’t have, but I say possible on purpose, because it’s unclear what percentage of these fraudulent deals actually resulted in default.  In principle, they were making enough money off the interest of the “extra loans” that might well have offset any defaults.  Personally, I have no idea and had no real way to know in the first place.  If I had to guess, I’d say they likely made a little, but that leads nicely to the next point.

No one who was in on the scam could get hurt.  Once the bank approved the loan and wrote the dealer a check, the owner, the management, and the salesperson were paid in full.  It didn’t matter to us what might happen afterwards, whether or not the customer ultimately paid back the loan, traded in the car early, defaulted, or even if the car got repossessed.  Not only wasn’t this our problem because we were already paid, we had no way to know for sure what happened even if we wanted to because bank doesn’t keep the dealer appraised of a customer’s payments or the status of their car after it is delivered.  Once the loan is issued, we have no further role to play and the car might as well cease to exist, out of sight out of mind, not our problem, as they say.  In other words, everyone we worked with benefited while no one suffered, which perhaps not surprisingly, only served to incentivize more fraud.  Instead of merely increasing a customer’s income, entire jobs and careers were created out of whole cloth to the point where it became an ongoing joke how many customers worked at either Newark Airport, FedEx, or UPS, all chosen because it was next to impossible to call someone who actually did work there.  Back then, they were essentially black holes of phone numbers with no way to reach anyone and no way to verify anything. Frequently, the customers themselves knew what was happening, even if they didn’t know the precise means, but because they wanted the car and were helping them to acquire it, they were more than happy to play along with their less than real careers.

As you might imagine, what started as a relatively small scale operation, a few here and there around the edges, became something bigger and as it did so, began to be used in ways that were far riskier than the earlier incarnations.  Once people realized there was money to be made, chasing more was incentivized.  In some cases, we weren’t even aware what the documents were being used for, as they started to go beyond the original purpose in the car business, delivered to people we used to work who were doing something else we didn’t really know about at the time.  The combination led to two things that ultimately brought Fraud, Inc crashing down a few years later.  First, the banks started getting wiser about how easy it was to manipulate a pay stub or almost any other document required for a loan.  While I have no way to know for sure, we can only assume that we weren’t the only ones who began using computers and the problem was probably more widespread than we were aware of at the time.  Whatever the case, the banks realized the document alone couldn’t be trusted and started requiring third party verification.  Instead of trusting the document, they called the employer directly and wouldn’t approve the loan otherwise.  In principle, this might not have been much of an impediment to the broader scheme.  The finance manager knew the rules of each bank and we would simply not fake any numbers or anything else if we were submitting the loan to one that demanded verification, but humans aren’t always that logical in practice, especially when greed is involved.  Believing there was money to be made and likely thinking they could slip a few through, salespeople kept using the fake documents even when they were going to be flagged and at some point, a representative from the bank called the owner of the dealership.

Though Fraud, Inc was an open secret for years at that point and I’m pretty sure he knew all about it, he called me into his office and demanded an explanation, then fired me on the spot, but tellingly, he didn’t say what I was doing was wrong in principle and I should never have even attempted such a thing, far from it.  On the contrary, he was upset not because we were scamming the bank, that wasn’t an issue for him at all, but that I was making money on the side, money he felt might have gone into his own pocket.  Incredibly or perhaps not so incredibly, he insisted that if I had been doing it for free for some reason, it would have been different somehow.  He he was fine with the fraud, so long as he was the only one that profited from it.  Needless to say, I had a few choice words I could’ve said at the time, namely that our efforts made him hundreds of thousands of dollars over the years and his position was ironic to say the least because car dealers were notorious for ripping off their own salespeople, charging us for anything and everything to the point where I walked out of a couple of lots because I’d gotten robbed, but even at barely 22 years old, I simply held my tongue and walked out of that one.  A few minutes later, I realized this was the wisest move I could’ve made.  While I was in his office, everyone else involved – essentially the entire dealership – was freaking out about whether I would tell him the extent of the shenanigans, knowing I could’ve ratted on everyone.  After not saying a word, everyone breathed a sigh of relief they weren’t next in line to be canned and treated me like a hero for a short while, including setting me up with another job practically the next day, meaning my talent for faking pay stubs and my willingness to remain silent were seen as referenceable skills, not the opposite as they should have been.

Almost thirty years later, I’m not going to say I was proud of any of this, but I was broke beyond words at this point, commuting back and forth to college with a train ticket in my pocket and a dollar for the path. If I’d lost either, I would’ve been begging to find a way home. There were also certain lessons to be learned even beyond teaching myself to use these programs well enough that I was able to get my first job out of college as a graphic designer, though obviously I couldn’t tell them where I’d learned this stuff.  When I confessed last week to cheating in high school after news broke about a professor’s clever technique to catch students using AI in a similar fashion, then building that into a larger operation as well, a friend of mine from back then remarked how he’d never really thought of the connection between that and the car business, how the one informed the other.  In some ways, they were separate, done for entirely different purposes using largely different means, but once it became clear to me even before I was in high school that people cheat all the time, individually and collectively, the morality quickly became blurred at such a young age and one skill easily ported to another.  Ultimately, the need to breeze through high school with the best possible grades at the lowest possible effort and the need to pay for college made it all too easy to do both without even thinking much about it at the time, as usual, barely considering the implications that I might either lose control of my own creations or simply get caught for whatever reason.

Today, I see something similar at work in these fraud cases, only on a much larger and more corrosive scale.  Structurally, there are similarities.  The scammers are billing a remote third party, in this case the government rather than the bank, and there’s no cost to them to do so unless they get caught.  Whether the customers were in on it or not, getting a piece of the action or having no idea their information was being used in this fashion, all they needed to get paid was necessary paperwork which was easily produced because there was no verification process and the government was essentially relying on the honor system.  The scam also probably started out small, a fake patient or child here, a fake billing record there, but once they realized money could be made and no one was minding the store as the old saying goes, it started to spiral and greed took over.  Suddenly, there were opportunities to bill hundreds if not thousands of fake people and since no one stopped them on the ramp up, why would they believe they’d ever be stopped?  The real question in my mind isn’t why the people ran the scam – to be honest, my own efforts were in barely $100 increments, though who knows what I might have done if we had the opportunity to go bigger – but how the government managed to turn a blind eye to it for years, unlike the banks, who once they realized what was happening implemented the necessary controls.  To me, that’s the scandal and though sadly, I find myself unsurprised about either the scammers or the laxity of the government.  Whatever the case, I also find myself frequently reminded of something my father used to say in those days, who was in the business and generally speaking a chief advocate of faking it in all things:  Rather than a draft, everyone should serve two years in the car business.  That’ll teach them about life more than anything else.