How CNNMoney investigated a company that processes money for mail schemes

CNNMoney senior writers Blake Ellis and Melanie Hicken broke the news last week of a crackdown by the U.S. government against PacNet and the companies with which it works in a months-long investigation.

The government says Vancouver, Canada-based PacNet is part of an international network that has stolen hundreds of millions of dollars from millions of elderly victims.

Ellis is an award-winning senior investigative writer with CNNMoney. Her recent projects have shed light on everything from the little-known world of government debt collection to the disturbing practice of dogs being killed by animal control agencies over unpaid fines.

She was previously on the personal finance beat, where her coverage of same-sex financial struggles earned her both the first place Excellence in Online Journalism Award from the National Lesbian and Gay Journalists Association and the Excellence in Personal Finance Reporting Award from the National Endowment of Financial Education.

She is also a recipient of awards from the Society of American Business Editors and Writers and the Newswomen’s Club of New York.

Ellis is a graduate of Kenyon College and she joined CNNMoney.com in 2009.

Hicken is a senior investigative writer for CNNMoney. Her work has shed light on everything from the shadowy world of data brokers to the legal loopholes that let debt collectors hired by government agencies play by their own rules. She was previously a personal finance reporter for the network, covering everything from 401(k) fees to retirees facing pension cuts.

Before joining CNN, Hicken worked for the Los Angeles Times Community News group, where she won awards for her local government coverage and investigative reports. She has also written for The Orange County Register and Reuters.

Hicken is a graduate of Syracuse University’s Newhouse School and holds a master’s degree in business and economic reporting from New York University.

Ellis and Hicken spoke with Talking Biz News by email about the investigation. What follows is an edited transcript.

How did you first hear about PacNet and begin to think it was a story?

Earlier this year we ran a five-part investigation all about our hunt to find the people behind a massive scam centering around a French psychic named Maria Duval. In the wake of that series, we learned that the payments for that scheme had been processed by an obscure Canadian company called PacNet.

As we looked further into this company we realized that Maria Duval was far from the only scam that had payments processed by PacNet, and that PacNet has had a history of processing payments for some of the worst scams out there.

We have both been fascinated with consumer fraud — and specifically elder fraud — for a long time. And while elder fraud isn’t always thought of as the sexiest topic, we knew that exposing a company that has been making it possible for some of the world’s worst scammers to prey on the elderly and vulnerable would hit a nerve with our readers. So we pursued it, and it ended up being an even bigger story than we initially thought.

Explain the reporting behind the stories. For example, how did you find the victims?

Most of the victims we interviewed for our investigation came from complaints filed with government agencies — which we requested from the Federal Trade Commission and state attorneys general.

One of our most important sources, the Iowa AG, we found by simply reaching out to all different government agencies to see if they had encountered PacNet. The AG’s office then helped us get in touch with Pat Wilson, the woman near the lede of our story.

But we also found victims and sources when we dug around in some of the government cases against scammers that had mentioned PacNet as the payment processor. It turned out that the exhibits sections in many of these cases contained a number of letters from victims or from family members or letters written by advocates on behalf of the victims. So that was another way we found family members and stories of victims to include in our story.

We also found our most colorful stories about the scammers that PacNet processed payment for in these lawsuits. Glen Burke, Sin City’s million-dollar scammer, for example, wouldn’t talk with us on the phone. But we were able to tell the story of his decades-long history of defrauding victims out of millions of dollars through the details in his court cases — which not only included the allegations about him and rulings against him, but copies of the actual solicitations being sent out and emails about buying orange jumpsuits, sending cash through the mail and spending time in Panama.

How much did public records help in the reporting process?

We couldn’t have done this investigation without public records. See answer above, but between the court cases that cited PacNet as the payment processor for a number of scams and the complaints filed with government agencies, public records were how we made our story bullet-proof.

What were your interactions with the company like?

One of the toughest parts of this investigation was dealing with PacNet itself. As journalists we of course wanted to get the company’s side of the story and we repeatedly asked for an in-person or phone interview. But not only did they refuse to give any interview, they hired an attorney to threaten to sue us.

We gave them ample opportunity to comment before publishing and included their on the record comments. Since publishing, we have reached out to the company and its lawyer several times, but we have yet to receive a response. PacNet did post a statement on its Facebook page the next day, however, saying it plans to “vigorously” defend itself against the allegations.

What was the hardest part of putting these stories together?

The production of a big investigation like this is always a challenge. Even as we were still reporting and writing the stories, we had to work with our graphics team to try to come up with compelling visuals, which is tough for a story about mail fraud that is mostly based on public documents. We also had to coordinate with developers who designed the physical page layout in a way that would help readers see each part of the investigation, and we worked with a video producer who created the videos.

And one of the hardest, most time-consuming, and draining parts of the process is the legal review. We have an intense legal, standards and fact-checking team at CNN, and they always put us through the ringer on investigations like these!

When in the reporting process did you realize that this was an important story and why?

We thought it was an important story pretty quickly. Early on in our reporting, we started looking through court cases against mail fraudsters and quickly began to see a clear pattern between all these different cases. Once we uncovered that PacNet had processed tens of millions of dollars for all these different scams (on top of the Maria Duval fraud we had already reported on) we knew something was there.

At what part of the reporting did you start talking to regulators?

After we began our initial reporting, we reached out to all 50 state attorneys general to see if they had any encounters with PacNet. At around the same time, we submitted a public records request for complaints filed with the Federal Trade Commission.

The Iowa Attorney General’s office, which responded to our outreach, ended up being one of the most important sources for our investigation. The office was very forthcoming with documents to back up its allegations, including a spreadsheet that listed information about every single check the elderly woman we ended up featuring in our investigation had sent.

This helped us connect PacNet to even more mail fraud schemes, including one that was shut down last week as part of the government crackdown.
And as we reached out to other government agencies, we learned that Iowa was far from the only agency investigating PacNet, which allowed us to break the news of the massive government actions taken.

What kind of reaction did you get when the stories were published?

The response from readers and viewers has been overwhelming. We have received more emails in response to this investigation than we ever have before (40 pages pasted in a word document, and counting!).

Many people have shared their own personal experiences with PacNet or mail fraud in general, sharing stories of elderly loved ones who have had their bank accounts completely decimated by schemes like these. One woman even said her parents’ home is set for a foreclosure auction after they gave away all of their savings to scammers. Others have expressed their anger that companies are helping fraud like this continue to take advantage of the elderly. And some have given us tips to help us as we continue to report out this story.

How do you plan to follow up with more reporting?

We are especially interested in continuing to report on how the government’s actions will affect PacNet’s operations globally and whether they will be able to survive as a business. We are also getting some very interesting tips about the company’s history so stay tuned for more!

This type of reporting can be tedious. How did you keep going when you hit dead ends?

We often say that investigations are emotional roller coasters, and this one was no different. At times we felt like we had hit dead ends, we would often go back to our sources (both human sources and government documents) to see if there was anything else we had been missing. Often times, these efforts were fruitful which gave us the motivation we needed to keep going.

It probably helps that we are both pretty nerdy when it comes to government documents and try to view the tedious work of sorting through them as a treasure hunt of sorts. For example, there were several times when we thought we had gleaned everything we could from the massive court files of cases filed against schemes using PacNet to process payments. But then we would go back one more time to make sure and find another gold mine.

One key document, for example, was a court declaration made by PacNet’s founder where the company acknowledged it had processed nearly $18 million on behalf of a Las Vegas fraudster named Glen Burke. While we knew early on that Burke had used PacNet to process payments, we didn’t find this document (which gave us key proof and a dollar figure of how much it had processed) until relatively late in our reporting process.

Anything else about the series you want to mention?

It may sound simple but this is just an example of why it’s important to always be curious! Many of our best stories have come from the most random sources of inspiration. Our Maria Duval series, for example, all started because we saw a letter from a psychic in a stack of junk mail we’d been sent by a source, and we were so fascinated by the letter that we decided to try to learn more. And chasing a story that hasn’t already been written about over and over again is so much more fun.

The PacNet investigation is also a great example of how one story can build on another. We have found so many new story ideas as we’re reporting the one we’re working on — from source interviews who start mentioning different companies, frauds, and other personal stories. So it’s important to not be so laser focused on the current story that you’re not open to new ideas.

And when you finally publish a story you may be ready to move on to something new, but this is often when you get your best tips from readers. So follow every lead — as crazy or wonky as they may seem at the time.