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Fraud can happen to anyone, even wealthy entrepreneurs. Steve, who asked his last name not be used so he could tell this story, was shocked to discover that someone had stolen one of his checks that was supposed to go to the IRS. Months later, Steve, whose firm helps lawyers serve legal documents, was still on the hook for a $310,000 federal tax payment.
In early January 2024, Steve’s wife wrote a check, from their personal Wells Fargo bank account, and addressed it to the IRS for $310,000. This check was Steve’s estimated payment for his first-quarter federal taxes that year. She took the check to a secure mailbox inside a Seattle area post office and the check cleared on Jan. 31, according to a Wells Fargo bank statement.
It wasn’t until the following November, when his accountant contacted him, that Steve realized the IRS never got the check. Then, on Dec. 18, the IRS asked Steve to provide a front and back copy of the $310,000 check. After his wife retrieved a copy from a local Wells Fargo branch, Steve discovered that someone had stolen the $310,000 check, chemically washed it, and replaced "IRS" on the payee line with a random name “Ezavier Josiah Staples.”
Staples—or whoever pulled off the scam—had signed the back of the check and deposited it into a JPMorgan Chase checking account.
When asked why he didn’t realize any sooner that someone had stolen the check, Steve said he makes “more than a hundred” payments each quarter because he operates multiple businesses across different states, which is why he didn’t notice that the IRS hadn’t received the check. He could go through each payment but that “would be exhausting,” Steve said.
A very prevalent fraud
Check fraud is big business. In 2023, nearly 80%, or $21.1 billion, of global check fraud occurred in the Americas, according to the Nasdaq’s Global Financial Crime Report. Fraud prevention was one reason that prompted President Donald Trump to sign an executive order in March directing the federal government to stop using paper checks and switch to secure electronic payments as of Sept. 30.
Christopher Caffarone, a partner at law firm Pillsbury Winthrop Shaw Pittman’s corporate investigations and white collar defense practice, said schemes like check washing are very prevalent. "Members of the public should be vigilant about reviewing financial accounts. If they see anything suspicious, they should report it to the financial institution and to the police,” Caffarone said.
This is exactly what Steve did. On Dec. 18, the day he learned of the check fraud, Steve filed a claim with Wells Fargo. One week later, Steve received a form letter from the bank denying the claim, because too much time had elapsed. Then he reported the fraud to the Seattle police, who told Steve that he had a year to report the fraud, which started the moment he realized a crime had been committed. “I'm just shocked that [banks] don't have insurance for this kind of thing, or with all the fraud stuff they're doing, that they don't care about protecting the consumer,” he said.