Businesses Fight Coupon Fraud

AMERICAN industry is stepping up the offensive against coupon and rebate fraud."Most people don't realize it, but every coupon is really currency," says Sharrie LaCroix, an official with Ralston Purina. The Missouri-based food conglomerate is sending out large numbers of coupons these days for its wheat, corn, and rice cereal products, and knows that it has to be alert to prevent fraudulent misuse of its coupons, Ms. LaCroix says. Neal Perlowitz, owner of Direct Mail of Westchester in Ossining, N.Y., personally meets the owners of every business that he mails coupons for, to make sure the firms are "above-board" and, in the case of rebates, will honor the terms of their offers. His firm sends out large numbers of coupons to over 200,000 households. Law enforcement experts say there is good reason for the care taken by Ralston Purina and Mr. Perlowitz. Coupon fraud - such as buying bags of coupons from church or charity groups and then turning them in for redemption without ever using them to purchase products - is a growing crime in the United States. The amount of money US companies lose to coupon fraud annually is probably higher today than the $500 million estimated by a 1983 study, says Bud Miller, operations manager of the Coupon Information Center (CIC), a business-sponsored monitoring group in Alexandria, Va. The latest twist: coupon counterfeiting, in which criminals use advanced color copier machines to reproduce coupons. Another growing problem is rebate fraud. Unlike coupons, which lower the purchase price of an item, rebates provide a partial repayment of the purchase price to the customer. A preliminary study by the Rebate Information Center, also in Alexandria, finds that rebate fraud may be costing businesses more than $300 million annually, on top of their tab for coupon fraud. About 300 billion coupons are distributed annually in the US. Some l7 billion coupons, with a surrender value of about $4 billion, are redeemed for cash discounts or for products. In addition to fraudulent redemption of coupons and rebates, there are cases where the offer itself is phony. A rip-off artist distributes promises of rebates or price reductions on construction projects, such as for aluminum siding or household repair work; the goal is to acquire down-payment money on projects that will never be undertaken. "Usually these types of coupons arrive in the mail in an unmarked envelope, or an envelope that contains no other national advertising coupons," says Perlowitz. "The rule is, if the coupon looks 'too good to be true,' it probably is." Law enforcement officials are stepping up efforts to combat coupon crime. "Coupon fraud often happens in tough times, such as now," says Paul Deery, an agent with the criminal investigation division of the US Internal Revenue Service, based in Philadelphia. Mr. Deery has helped obtain some 57 convictions for coupon fraud since he began his investigations in Philadelphia and southern New Jersey in 1984. In some cases, such as where a store owner deliberately sends in a large number of fraudulent coupons, the sums involved are considerable, he says. Some coupon criminals have made over a million dollars from their fraud. Richard Krautsack, president of Comark Merchandising, a supplier of promotional material and a printer of coupons in Elk Grove, Ill., says standard color copier machines can do such a good job of duplicating coupons that it is increasingly difficult to distinguish a genuine coupon from a counterfeit one. Comark offers clients a security process using a combination of inks and films that prevents coupon duplication.