Coupons Used by Creative Crooks

Coupon hustlers are creative crooks.

Some, say law enforcement officials, pay housewives and illegal aliens to clip thousands of coupons out of newspapers. Others use mass production methods, such as industrial-strength paper cutters. And still others run them through washing machines to give them that “used look.”

In 1972, a Los Angeles accountant recruited hundreds of housewives to clip newspapers, the biggest source of coupons, paying them $5 a pound, before he was arrested.

Fourteen years later, in a Florida case, coupon crooks still had their hooks into newspaper coupons. A national coupon fraud ring, composed of about 250 individuals, purchased many of their coupons from newspaper distributors and printing warehouses, according to postal authorities.

Roach Spray as Bait

Eventually, using discount coupons for a nonexistent roach spray as bait, inspectors cracked the ring, which, they said, had bilked manufacturers out of almost $200 million.

Phil Nater, a spokesman for the chief postal inspector in Washington, said there was no current way to quantify the success rate of coupon fraud prosecutions because the postal agency mixes coupon cases with other fraud cases. Nater said, however, that coupon fraud investigations are sharply up, so far, during the current fiscal year.

For all of fiscal year 1987, he said, there were 75 postal investigations into alleged coupon fraud. In just the first quarter of 1988--between last Oct. 1 and Dec. 31--there were 67 investigations into coupon scams, he said.

Once the hustlers have figured out how to gain access to thousands of coupons, they have to devise ways to cut them out on an assembly line basis.

A few years ago, said veteran San Francisco postal inspector Richard Schlueter, authorities discovered a “cutting room” in the Northern California community of San Bruno staffed by illegal aliens receiving 1 to 2 cents a coupon.

Another con game, postal authorities say, is to open a “store front,” where nothing is actually sold. The “store” is used to legitimize the coupons in an effort to get them past industry watchdogs.

Heidi Kelley of United Coupon Clearing in Lubbock, Tex., said clearing houses and manufacturers have set up elaborate procedures to detect such fraud. If the coupons are in “mint condition,” she said, that immediately raises warning signals. But if a smart crook runs the coupons through a washing machine to make them look “handled,” more detailed inspection methods are required, she said.

Manufacturers and clearing houses try to keep an eye on the crooks. Literally.

Close Watch in Mexico

The nation’s biggest clearing house, Manufacturers Coupon Control Center of Clinton, Iowa, a Dun & Bradstreet subsidiary, employs about 5,000 workers in Ciudad Juarez, Mexico, to eyeball each of the thousands of coupons that pour into its offices daily.

In some instances, Kelley and others said, coupons are even snatched from stacks of unsold Sunday newspapers before distributors retrieve them on Monday from supermarkets.

The Times, California’s biggest distributor of cents-off coupons, receives about four million coupon inserts weekly at a downtown warehouse. “Everything that comes in is logged in,” said Mike Howard, a warehouse supervisor. “If we don’t use them, they’re destroyed.”