Cash a check, maybe go to jail

This article was originally published by MSN Money, on Friday, Dec. 11, 2009.

Did you get conned into joining a check-cashing scam? Even if authorities decide you're an innocent victim, you could find yourself owing a bank thousands of dollars.

By Katherine Reynolds Lewis

Cash a check, go to jail. Or at the very least, empty your own savings account and ruin your credit.

It's happened to hundreds of thousands of Americans who believed that banks don't make funds available unless the checks they've deposited are genuine.

It happened to Calvin Barnett, who could face 11 years in prison for doing what he said he thought was his work-at-home job.

As unemployment reaches its worst levels in generations, scammers are finding a growing pool of victims all too willing to deposit strangers' checks, then return part of the money by wire transfers.

"There's a knowledge gap that these scammers are clearly taking advantage of," said Susan Grant, the director of consumer protection for the Consumer Federation of America. "Under federal law here in the U.S., financial institutions have to give consumers access to the money from checks and money orders they deposit pretty quickly, usually within one to five business days. It can take much longer for counterfeits to be discovered, by which time the consumer has already sent the money."

"The problem is the con men are very persuasive," said Nessa Feddis, a vice president and senior counsel at the American Bankers Association, which is working with the Consumer Federation to educate consumers about check fraud. "People are desperate. They want to work. They want a job."

What if the Internet breaks?

This article was originally published by MSN Money, on Thursday, Dec. 10, 2009.

The 40-year-old system might be vulnerable to technical collapse and cyberattack, which could cause widespread chaos in fields from banking to health care to government.

By Katherine Reynolds Lewis

When your Internet service goes down, it's at best an inconvenience. If you rely on it for business, it can quickly cost you money.

So imagine: What happens if the Internet breaks?

Picture people wandering the streets lost without GPS or maps on their iPhones, unable to pay for food or other goods with a simple swipe of a card.

Companies would have to resort to faxes and phone calls instead of e-mail; they'd quickly reach capacity and be unable to function. Credit cards wouldn't work; stores and hospitals would run short of supplies. Even electrical power to our homes could be disrupted.

"It would be a mess," said Dave Marcus, the director of security research for McAfee. "You would be taking businesses that were designed to do all their point-of-sale and financial transactions through the Internet and going back to pen and paper and taking checks in a car to the bank. People would lose their minds."

On the 40th anniversary of the first transmission over the earliest version of the Internet, it's more than an idle question to examine the network's fragility. It's been more than 20 years since the last systemwide overhaul, and Internet infrastructure is still based on 1970s ideas about computer networks.

Headline-making outages of popular Web sites such as YouTube and Twitter merely hint at the damage a full-blown failure could wreak. The Internet protocols that allow computers to communicate in networks have infiltrated every sector of our economy.

"The Internet has moved from being a toy or ornament to something that's central to our economy," said James Lewis, a senior fellow at CSIS, a nonprofit think tank in Washington, D.C. "We've automated all these processes, which makes our economy much more efficient, which means cheap. But it also means we're now dependent."

Curbing Abuse of Prescription Drugs

This article was originally published in Parade, on Sunday, Oct. 4, 2009.

By Katherine Reynolds Lewis

More than 15 million Americans abused prescription drugs such as OxyContin, Ritalin, and Valium last year, and thousands died from overdoses. “Drug poisoning has become the second leading cause of death from unintentional injury, exceeded only by motor-vehicle crashes,” said Dr. Leonard Paulozzi, a medical epidemiologist with the Injury Center at the Centers for Disease Control and Prevention (CDC).

But while the deaths are accidental, the behavior that causes them is not: Many people who are addicted to painkillers engage in “doctor-shopping,” convincing multiple physicians to write them prescriptions. A CDC study in West Virginia found that 21% of people who died from prescription-drug overdoses had seen five or more different health-care providers for controlled substances in the prior year. Most states have drug-tracking databases aimed at preventing such abuse, but many are in need of improvement.

Currently, in some states, it can take as long as two weeks before a new prescription shows up in a database, according to Sherry Green, CEO of the National Alliance for Model State Drug Laws. Last month, the federal government distributed $2 million for states to upgrade their databases in a program to test whether access to prescription data can reduce drug abuse. “The ultimate goal would be to give doctors real-time, online access to prescribing data,” said Robert Lubran of the U.S. Substance Abuse and Mental Health Services Administration, which is overseeing the program.

'Sloppiness,' Not Wrongdoing, Led to Probe, Says WNET Chair

This article was originally published in Current, on Monday, Sept. 21, 2009.

By Katherine Reynolds Lewis

The leadership of WNET said a federal investigation into the station's use of federal grants totaling almost $13 million is wrapping up, and the organization is financially sound.

"There was sloppiness as opposed to real wrongdoing in terms of our accounting systems, which has been addressed," said James Tisch, chairman of the WNET Board, in an interview.

The station has hired a new chief financial officer and created the position of executive director, financial control, to ensure compliance with federal grant rules, said Neal Shapiro, president.

"We have a new CFO. We have a new compliance person to make it very clear we take all these rules very seriously," Shapiro said. "The systems we've put in place, the people we've hired, will make us a stronger institution."

The federal probe, reported last week by Crain's New York Business, is looking into whether the station's use of federal grant money violated federal civil statutes and is likely to be referred to the Justice Department's civil division, according to WNET.

"The grants at issue began in 2000 and include funds provided by the National Science Foundation for the animated children's math series Cyberchase," the station said in a statement.

"'s management, as a cautionary measure, elected to slow its draw down on certain grants by adding further compliance measures so as to be certain that there will be no accounting or compliance questions going forward. and its subsidiaries continue to receive federal grants, including from NSF for Cyberchase."

Time to Reevaluate Target-Date Funds

This article was originally published by Financial Planning magazine on Saturday, Aug. 1, 2009.

By Katherine Reynolds Lewis

When target-date funds (TDFs) were first introduced in the early 1990s, many considered them the best financial innovation in decades. They would incorporate best behaviors in asset allocation and rebalancing, and help individuals make age-appropriate investments. The funds really took off in 2006 when they became qualified default investment alternatives (QDIAs) for 401(k)s. Today, TDFs hold more than $180 billion in assets.

But when the financial markets collapsed in 2008, TDFs got hit—hard. Employees who were about to retire lost 25% of their portfolio, on average.

As the government takes a second look at the financial world, it is evaluating whether these funds protect investors'—your clients, whether they are employers or employees—best interests. Their findings will help shape the financial reform debate, as they cover who bears fiduciary responsibility, what is accurate nomenclature and what is an appropriate level of risk for a QDIA.

The SEC and the Department of Labor's joint hearing on June 18 was the first step toward new requirements for TDFs. Officials heard from nine panels of more than 35 witnesses who recommended enhanced disclosure, standardized naming of TDFs and even new rules for fund managers.

"We must focus on how best to address TDF issues in a way that benefits the investors who have entrusted these funds with $182 billion," SEC Chairman Mary Schapiro said in a speech after the hearing. The SEC will consider improvements in disclosure and will look closely at "whether the use of a particular target date in a fund's name is materially deceptive or misleading and should be prohibited."

Financial companies face new, strict rules

This article was originally published by on Tuesday, July 7, 2009.

By Katherine Reynolds Lewis

The proposal will likely change as it goes through Congress.
Officials hope the financial meltdown will spur passage of the proposal.
A new agency will be able to write rules that promote transparency.

President Barack Obama has proposed overhauling the U.S. regulatory structure to create a consumer-oriented regulator, consolidate existing agencies and set more strict rules for financial companies.

For individuals, the proposal offers greater consumer protection and relief from the hidden fees and confusing disclosure documents that have become commonplace in the market for mortgages, credit cards and other banking products.

Both houses of Congress must approve legislation for the plan to become law and the proposal will likely change along the way.

"There's going to be a big push to get it done before the end of the year," according to David Min, associate director for financial markets policy at the Center for American Progress, a Washington, D.C.-based progressive think tank. "A lot of it depends on how the banking sector does in the next six months."

Can You Believe What You Read on the Web?

This article was originally published by Parade on Sunday, June 21, 2009.

Recently, a man identifying himself as a representative of Belkin, a major technology company, offered to pay people to post five-star reviews of its products on When the incident was discovered, Belkin President Mark Reynoso expressed "surprise and dismay" over "unethical practices like this," and the company took steps to have any tainted reviews removed from the site. Yet businesses do spend about $1.6 billion a year on "word-of-mouth" advertising, promoting their goods to bloggers and to people who use social-media websites like Facebook, according to the research firm PQ Media.

Now the U.S. government is considering requiring people who write about products or services on the Internet to inform readers if they received compensation.

The Federal Trade Commission expects to vote on new marketing rules this summer, which would be the first revision to its endorsement guidelines since 1980. "When you're being paid to promote a product, you usually have to disclose the relationship between you and the advertiser," says Richard Cleland, an FTC assistant director.

But even if the FTC tightens its rules, experts encourage people to remain skeptical when reading opinions posted on the Web. "Go and talk to other people you trust," says Paul Rand, president-elect of the Word of Mouth Marketing Association. “Google the authors and see what else they’ve written." If you discover that a writer only posts glowing reviews about one company's products, look for other sources of advice.

— Katherine Reynolds Lewis

Regulators Urged to Review Target-Date Funds

This article was originally published by Financial Planning on Thursday, June 18, 2009.

By Katherine Reynolds Lewis

Government regulators should standardize the naming of target-date funds and require mutual fund companies to assume a fiduciary duty in providing such funds to retirement plans, witnesses told a joint hearing of the Labor Department and the Securities and Exchange Commission.

"We believe there should be a consistent standard, although we don't believe there should be a mandate on investment options," said Mark Wayne, speaking on behalf of the National Association of Independent Retirement Plan Advisors. "Fund managers should explain in plain English what the landing point will be."

The plummeting market of 2008 cost investors dearly—up to 30 percent drops in some funds targeted to 2010—and has focused attention on target-date funds, since they are often the default choice in employer retirement plans.

Haggle anywhere -- even at Kmart

This article was originally published by on Tuesday, June 9, 2009.

Retail prices are a lot more negotiable than you might think. But before you go out and try to play hardball to get a discount, learn the rules of the game.

By Katherine Reynolds Lewis

You see an item you want in your local big-box store. The price seems too high. You ask for a discount -- and you get it!

This scenario may seem far-fetched, but expert negotiators say it occurs every day in retail outlets across the U.S. With consumers restricting their spending, store owners need every sale they can close, even if it means accepting a smaller profit.

"Retailers, particularly a number of the high-end retailers, are in real trouble given the current recession, and they're willing to bargain," said Joel C. Huber, a marketing professor at Duke University's Fuqua School of Business.

That's not to say it's easy to win unadvertised discounts. The art of the haggle is an intricate dance, and you must know the steps before you venture onto the dance floor.

And you have to be willing to ask.

"The thing people don't understand about the retail industry, especially brick-and-mortar stores, is that prices aren't fixed," said Albert Ko, a co-founder of bargain-hunting site "With the economy, it's all about the numbers and getting goods sold. . . . They're willing to listen and work with you."

Parents flock to prepaid college plans

This article was originally published by on Friday, Feb. 6, 2009.

The bear market has made 529s that let you pay tomorrow's tuition at today's prices attractive. But they come with strings -- and states might not be able to keep their promises.

By Katherine Reynolds Lewis

If you thought paying for college was hard before last year, talk to some parents who had invested their kids' college cash in the stock market.

The past year's losses have crushed many parents' dreams of saving enough for their children's higher education or even a substantial chunk of that bill.

That's why a growing number of parents are turning to prepaid 529 plans, state-sponsored programs that let you pay today's prices for future tuition. Although some plans require students to attend a state university, most states let you use the money at any accredited higher-ed institution.

"When everything's going well in the markets, people think they can go it alone," said Kathleen McGrath, the director of Pennsylvania's tuition account program bureau. "When things get rocky, that's when they want the safety of the prepaid plan."

The Great College Savings Fiasco

This article was originally published by on Thursday, Jan. 15, 2009.

529 plans, sold for a decade as the 1-stop solution to paying for college, haven't performed as advertised. And for many families, there's a better option available.

By Katherine Reynolds Lewis

Mention "college savings" to a financial professional and you'll likely be steered to a 529 plan.

In the decade since these investment accounts were created, they've become practically synonymous with college savings. and the College Savings Plan Network are exclusively focused on 529 plans, for instance.

But many parents who have invested in 529s, counting on the market to help cover the soaring costs of college, would've been better off putting the money under their mattresses.

The plummeting stock market has erased many if not most gains. The balance could be less than the parents have contributed. And parents of older children, in particular, don't have much time to make up losses before they need to pay tuition.

Margot Black, a Los Angeles writer and publicist, put $15,000 into a 529 plan for her toddler son, only to see the account lose 40% of its value in less than a year.

"It was heartbreaking to watch," Black said. "The 529 plan is sold to parents as the no-hassle investing fund. . . . I honestly thought we had done such a good job upfront that we could relax."

Simply put, 529 plans don't live up to the hype. Though they remain a good choice for some, you should understand the trade-offs and alternatives before putting your college fund into one of these heavily marketed plans.