There's a big difference between getting a total steal through couponing and actually stealing through coupon fraud. Coupon fraud occurs when someone intentionally uses a coupon for a product that they have not purchased, or they use a known counterfeit coupon.
In the U.S., companies lose hundreds of millions of dollars through coupon fraud each year. A single fraudulent coupon can mean a loss of up to $100,000, which can be particularly crippling for SMBs. Here's a look at three of the more scandalous coupon fraud busts that we've seen over the last few years, and how you can protect your small business from something similar.
Related Article: 4 Ways to Protect Your Business from Cybercrime and Fraud
Operation Super Coupon: A Fraud Enterprise Worth $40 Million
In the quiet suburbs of Phoenix, Arizona, Robin Ramirez was by all accounts an "ordinary" housewife. But in 2012, the Phoenix police shocked neighbors when they arrested Ramirez and two other women after an eight-week investigation. The crime? Running a coupon fraud enterprise with more than $40 million worth of fake coupons. It is the largest known coupon fraud scheme in U.S. history.
According to police, Ramirez had legitimate coupons reprinted and then sold them via her website. These coupons could be redeemed for cash if the coupon value exceeded the price of the item–in some cases up to $70.
As part of the arrest, police seized $1.1 million in assets, including a fleet of 26 vehicles, three condominiums and a 36-foot boat. Ramirez ultimately pleaded guilty and was sentenced to two years in jail.
TLC Star Busted for Scamming Target
A TLC star was recently busted for scamming a North Carolina Target out of more than $14,000 in merchandise. Surprisingly, it was not one of the stars that appeared on the Extreme Couponing program, which has been widely criticized for promoting fraudulent couponing practices and known abusers. The offender in this case was Joann Wells, star of TLC's Gypsy Sisters.
As reported by TMZ, Wells "befriended" two cashiers at the Target who ran "fake bar codes on merchandise, forced expired coupons, and cashed gift cards" for Wells. Wells would then share the profits. The scheme ran over a 10-day period before the threesome was busted. All three participants were arrested. There was no comment from TLC.
Related Article: What Target Should Have Done to Prevent Their Security Breach
How to Make Coupons: A Guide To Getting Busted
According to popular coupon news site, Coupons in the News, 24-year-old Lucas Henderson, also known as the "Coupon Guy," was sentenced by the Manhattan Federal Court to three years of supervised release and $900,000 in restitution following a conviction for counterfeiting coupons.
What makes this particularly noteworthy is that Lucas Henderson believed that he was less likely to get busted if he widely shared his knowledge about how to illegally print coupons, making it harder to track him down. So he created a step-by-step guide and posted it "anonymously" online.
Unfortunately for Lucas, it turns it out that his postings were not so anonymous. Upon arrest, Lucas faced up to 30 years for "making, using, sharing and teaching others how to create fraudulent printable coupons."
Why Does This Matter to You?
Coupons are a proven and effective marketing strategy. They bring in new business and increase total order value. So, by all means, discount away!
Here are three important steps to managing your risk:
- Develop coupon redemption policies and educate consumers about what is acceptable -- for example, coupons should scan properly, coupons must have a visible expiration date, etc.
- Work with reputable partners that can create high-tech security features to prevent fraud.
- Educate employees about your coupon policy and make sure they know what to do if they suspect fraudulent coupons are being redeemed.
For more information on steps you can take to protect your company from fraudulent coupons, visit the Coupon Information Center's website.
Meghan Heffernan has worked in marketing in the tech and retail industry for 12+ years. She is the Director of Communications of Savings.com, a leading coupon and deal destination on the web that generates $500 million in sales for its partners annually. In her role, Meghan identifies retail and consumer trends for media and analysts by analyzing Savings.com's database of 1.5 million deals from 25,000 retailers. Her data and interviews have been featured in Marketwatch, WSJ, CNBC, Bloomberg, Forbes, to name a few.