Fraudulent coupons that are too-good-to-be-true circulate the web all the time and many innocent consumers, retailers, and manufacturers get stuck with the lost time and money. Last week I walked into my local Subway store for a sandwich. From the back of the line I could see a piece of paper with a coupon for a free premium Subway sub taped to the display case. Written in black marker was “Fraudulent coupon. We are sorry, but we cannot accept this.” I started imagining both the consumer’s dismay at making it up to the cashier with a sandwich chocked full of their favorites (mine is spinach, cucumbers, green peppers, honey mustard, and a little mayo) and then being declined their free treat at the cash register and instead having to pay for it. I can also imagine the poor cash register clerks who had to repeatedly let their customer down each time they saw a folded-up piece of computer paper and an “I’m-about-to-get-a-free-lunch”, eager smile. My thoughts made me wonder: who makes these fraudulent coupons anyway? Are these people ever found, and if so, what are the penalties?

Once I began researching, I was very surprised to find the problem is more widespread and costly than just a few consumers getting away with free products. Just in the month of May 2011 there were 25 counterfeit coupons posted on the Coupon Information Corporation (CIC) website with various rewards being offered from the manufacturing companies for the successful prosecution of individuals responsible for producing the counterfeit coupon. For example, Del Monte is offering up to a $2,500 reward for a counterfeit coupon that promised to save $1.85 on a case of Fruit Chillers® and another coupon to save $1.00 off the purchase price of a Del Monte® Fruit Naturals® cup. Nestle and Post Foods are offering the same reward amounts for counterfeited coupons of their products.

Even though it hardly makes national news, there have been many arrests of coupon crime rings and individuals.

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  • Arrest of Lucas Townsend Henderson, 22, known as “The Coupon Guy”, on May 12, 2011. Lucas wrote and distributed a book detailing how to make coupons. He was personally responsible for the fraudulent redemption of over $200,000 worth of counterfeit Tide coupons that Proctor and Gamble and retailers had to absorb.
  • Arrest of Glenn Rodgers, 66, who created fake coupons for national brands including Gillette, Olay and Norelco on his home computer that ranged in value from $10 to $70. Target reported losses nationwide of $25,000-$30,000 directly related to him. He had $182,000 in sales on eBay from all of the free loot.
  • John Stottlemire, 42, was arrested in 2007 for allegedly posting codes and instructions on how to circumvent the maximum printable coupons allowed from Coupon Inc.'s proprietary software. The allegation is that it is in violation of the Digital Millennium Copyright Act. Coupon Inc. represents 500 merchants.
  • Cynthia Madej, 40, was arrested in 2007 for running a counterfeit coupon operation out of her home. Once she got free products with the fake coupons, she then sold the items on eBay and at garage sales for a profit.

Penalties for Coupon Crimes

While penalties vary depending on the number of laws that have been violated and the scope, the CIC says that the longest prison sentence for coupon fraud was for 17 years, and the highest financial penalty was for $5 million. Much more commonly, the penalties are a prison sentence of between 3-5 years and penalties in excess of $200,000.

Reporting Coupon Fraud

If you would like to report coupon fraud, the CIC stresses that you do not confront the individual involved, but instead keep all of your records and contact the CIC (communications are kept confidential):

Bud@cents-off.com
The Coupon Information Corporation
115-D South Saint Asaph Street
Alexandria, Virginia 22314

You can also contact one of the law enforcement agencies listed below:

Federal Trade Commission: http://www.ftc.gov
Federal Bureau of Investigation: http://www.fbi.gov
Internal Revenue Service: http://www.irs.ustreas.gov
U.S. Postal Service: US Postal Inspection Service (USPIS)

Are you surprised at the level of coupon fraud like I was?

6 replies
  1. optionsdude
    optionsdude says:

    Wow. I had never heard of such a thing but it makes sense if these people are getting free product and then reselling on eBay for a profit. They must view it as less risky than shoplifting from the store directly.

  2. Money Beagle
    Money Beagle says:

    I didn’t realize it ran this deep but it really doesn’t surprise me. If you look at how many idiots there are constantly creating computer viruses and trojans for no good reason, you have to figure there’s going to be people out there who will do absolutely anything, no matter how silly or inconceivable it might seem to those of us who would never consider coming up with such fraud.

  3. krantcents
    krantcents says:

    As a former business owner, I am not surprised at all. Fraud contributes to higher prices in retail stores! Normally, we think of fraud as shop lifting, but merchandise losses occur in various ways. Fake coupons, counterfeit currency and stealing hurt restaurants as well as other businesses. Thanks to technology we now have different ways to defraud someone or a company.

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