Bloomberg News

How the Rich and Famous Foil Identity Theft

May 15, 2012

Illustration by Grant Shaffer

Illustration by Grant Shaffer

Identity thieves generally pretend to be real people, create some false accounts, and spend like there's no tomorrow. The rich and famous, on the other hand, already spend that way and are pleased to maintain their true identities. Yet they're increasingly falsifying accounts of their own lives.

It's always been a struggle for the wealthy to hide from the prying eyes of everyone, from curiosity seekers to criminals. Now that every transaction is tracked by retailers, government agencies, and banks, to name a few digital data hounds, it's nearly impossible to erase the lurid details of your life.

What the wealthy can do is hire security consultants who counteract the truth with waves of false information -- stories of homes not purchased, vacation destinations never visited, and cars never leased. Their hope: False information obscures the real stuff.

"The only way to truly prevent a breach of privacy is to wipe the slate clean and create a new identity," says Jeremy M. Kroll, co-founder of K2 Global Consulting.

"Security by confusion"

That is near impossible for most people. The more realistic option: Use "security by confusion" to reinvent yourself, says Christopher Falkenberg, president of Insite Security. If you’re disturbed that a picture and the address of your mansion is online, you might flood the net with 18 other photos and addresses linked to you. When juiced by the techniques of search engine optimization, the false leads will end up on the first page of search results, while your real address is buried on page 3 or 4. On the Internet, says privacy expert and author Frank M. Ahearn, "Not everything can be deleted and the only answer is deception."

Falkenberg and Ahearn readily admit to performing such trickery on behalf of their clients because there’s nothing illegal about it. After all, it’s the lack of rules online that bedevils people who feel overexposed there, says Case Western Reserve University law professor Jacqueline D. Lipton. Except for rules against lying about someone else online -- that would be the ancient offense of "defamation" -- the U.S. lacks effective online privacy laws, she says.

Without such misinformation, you might find yourself in a situation like the one that brought Ahearn one of his clients. In a hotel lobby in Africa on a business trip, the client struck up a conversation with a stranger who already seemed to know far too much about him. Perhaps tipped off by a talkative desk clerk and a few Google searches, his new acquaintance knew not only that he lives in Scarsdale, N.Y., but that, according to Zillow.com, he’d paid $4 million for his home. To any con men, abductors or thieves in the vicinity, the traveler might as well have painted a target on his back.

"Love Shack Trust"

Increased online vulnerability means other tried-and-true privacy protection techniques are being used more often. Jonathan Crystal, of high-end insurance brokerage Frank Crystal & Company, sees more clients buying property through shell corporations or LLCs. While in the past, property records were stored in a filing cabinet in the county building, they’re often now online for anyone to see. "There is a recognition that there is no such thing as ‘quiet wealth’ anymore," Crystal says. By buying through such entities, the wealthy are following a path forged by celebrities: Britney Spears has bought properties through the "Love Shack Trust," and Sarah Palin admitted to buying Arizona property in 2011 through "Safari Investments LLC."

Ahearn, author of "The Digital Hit Man," goes further, helping clients construct fictional identities. A chief financial officer for a major company might travel under the same name, but as a paint salesman, paying bills with a credit card in the name of a fictional employer -- a legitimate LLC or other corporate entity -- and carrying bogus sales brochures in a suitcase in case hotel cleaning staffers get curious. Ahearn says his services cost $30,000 per case. Falkenberg's firm charges $4,000 to $10,000 for routine cases and much more for complicated situations.

The key to protecting yourself is knowing what information is already out there, says Kroll, whose K2 Global Consulting constantly monitors the identities and reputations of its clients online. "The sooner you know about a potential threat or issue, the sooner you can rectify it," he says.

Sometimes seemingly innocuous pieces of information can tip off fraudsters or identity thieves. You might want to make charitable gifts anonymously, Kroll says, particularly if a public thank-you for your largesse could make you a target for criminals. If you’re on the board of a company or nonprofit organization, be careful about what’s in your biography. Even the names of your children can give identity thieves valuable information, Kroll says. "Each fact is a data point that can be used to breach one’s privacy."

Information Leakage

Security firms go to great lengths to protect client privacy. They scrub online identities, check out all employees and work to prevent information "leakage," Falkenberg says. If you want your home address to be secret, details matter: Don’t sign up for catalogs in your real name. Unfortunately, Falkenberg adds, "all of that can be for naught if a teenager posts a picture on Facebook." A vacation photo posted by your children or their friends can reveal volumes about your lifestyle, traveling habits, the location of second or third homes and maybe even what cars you drive.

Then there is information the wealthy simply can’t control. More local newspapers are putting back issues online. An amble through history can be quaint, unless a printed notice of a zoning hearing or property transaction gives everyone your home address. "All that is available and there is really nothing you can do about it," says Theodore F. Claypoole, an attorney who specializes in privacy at the firm Womble, Carlyle, Sandridge & Rice, LLP.

Kroll lists a few things individuals would need to do to completely protect themselves: Never use credit cards; get off Facebook, LinkedIn and all other social networks; use only prepaid mobile phones; don’t get a driver’s license or Social Security number.

In other words: To be truly private, you have to go low-tech, use cash only, rely on public transportation and work under the table. Basically, be the opposite of rich. And that's a price very few are likely to be willing to pay.


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