Gina Bliss, The Daily Record Newswire
I know someone who has a large basement shelving system loaded with grocery products. She’s an extreme couponer. She accumulates excess amounts of food, and health and beauty products. She donates a lot of it to charities. To her, it’s fun and it’s a challenge. She doesn’t need to do it financially, and, as a working mother, she has plenty to occupy her time. She just likes to do it.
A coupon is a certificate with a stated value if it is used when purchasing a specified product in accordance with the coupon’s terms and conditions. Manufacturers issue them for a number of reasons: to appeal to price conscious consumers, to target regional markets, and also to encourage consumers to try a new product.
The first documented use of coupons seems to be in the 1890s when the inventor of Coca-Cola syrup, John Pemberton, distributed “free drink” cards on the street. The Coca-Cola Company used coupons as a marketing strategy to launch their product from 1894 to 1913. The result of that campaign was an estimated 8.5 million free drinks, and most likely, the world-wide success of the Coca-Cola Company today.
Coupons are so popular that TLC is now in the third season of a reality show, “Extreme Couponing.” This show is controversial because many experts claim that some of the results shown on “Extreme Couponing” are due to fraudulent practices.
Coupon Information Center, the association of consumer product manufacturers that account for most U.S. coupons, issued an alert about the show. In part, participants on the show “have used counterfeit coupons and engaged in other practices in violation of state or federal laws, manufacturers’ coupon redemption policies, and/or retailers’ coupon acceptance policies.”
Coupon fraud is using a coupon for a product that was not purchased, or altering or counterfeiting coupons. Coupons have clear terms and conditions that must be followed. They can’t be copied, used after the expiration date, or used for product sizes or quantities not specified.
Because coupons have value, they’re susceptible to fraud.
CIC’s membership list reads like a Who’s Who of American consumer products companies. Belonging to CIC is one way they fight against the losses they suffer because of coupon fraud. CIC advocates for reform to improve security practices for coupons, issues alerts, and participates in counterfeit coupon investigations.
Currently, there is a $100,000 reward posted on their website for information leading to the identification, successful prosecution and incarceration of the person or persons responsible for producing and distributing some counterfeit coupons shown there.
Last year in Rochester, N.Y., coupon counterfeiter Lucas Henderson, a 22-year-old Rochester Institute of Technology student, was arrested by Federal authorities. Last month, he pled guilty to wire fraud and trafficking in counterfeit goods in Manhattan Federal Court. He faces up to three years in prison for selling counterfeit coupons for Sony Playstation, Magic Hat beer and Campbell’s Soup online.
In July, arrests were made in what is being called the largest counterfeit coupon fraud in U.S. history. Manufacturers have been aware for the last four years that copies of their coupons were being made. CIC and private investigators have been searching for the source. The investigation led to Phoenix, Ariz., where police arrested three women and raided several properties.
$25 million worth of forged coupons were seized. Economic loss to the consumer goods manufacturers is estimated to be between $400 million and $600 million. The three women face charges for fraud, forgery, counterfeiting, and operating a criminal enterprise.
Coupon fraud increases costs for all of us. Those losses will be spread across product sales via price increases.
If you use coupons, you need to be careful not to unintentionally commit coupon fraud. Read the fine print, and use coupons only as they are intended. Don’t purchase coupons, don’t download them unless you know the source is reputable, and don’t use coupons you receive through email.
If you’re concerned about a coupon, you can go to CIC’s website — www.couponinformationcenter.com — and see if it’s on the long list of known counterfeit coupons posted there.
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Gina Bliss, CPA, CFE, is a senior manager at EFP Rotenberg LLP, Certified Public Accountants and Business Consultants, who specializes in internal audit, fraud audit and forensic accounting. She may be reached at (585) 295-0536 or by email at gbliss@efprotenberg.com.
