Online Mortgage Scams Face Increased Government Crackdown

SAN FRANCISCO — A criminal investigation into mortgage swindlers has expanded beyond deceptive advertising on Google's Internet search engine to root out con artists who were luring their victims on Bing and Yahoo, too.

Monday's news of the widening probe confirmed that the Internet's three largest search engines had been turned into tools of prey for crooks looking to bilk homeowners scrambling to avoid foreclosure. The scams involved online ads making bogus promises of help people hold onto their homes under a government-backed program to modify mortgage payments.

After finding their victims using ads triggered by phrases such as "stop foreclosure," the swindlers extracted upfront fees or arranged to have the mortgage payments sent them without providing any assistance. The ruses had become increasingly common.

The crackdown had shuttered 125 mortgage scams by Monday, up from 85 last week, when the Office of the Special Inspector General for the Troubled Asset Relief Program announced it was cleaning up the misconduct on Google. The U.S. Treasury Department division said many of the con artists bought ads on all three search engines.

The identities of the alleged swindlers haven't been disclosed, partly because the criminal investigation is still open. A spokesman for agency steering the investigation declined to provide any further details Monday.

Like Google Inc., Microsoft Corp.'s Bing search engine agreed to stop accepting ads from hundreds of Internet advertisers and agencies tied to the scams. The ban also applies to Yahoo Inc., because it depends on Microsoft to sell its search advertising as part of a revenue-sharing partnership.

"Microsoft is committed to preventing fraud within its advertising network and online community and is working closely with the Special Inspector General for the Troubled Asset Relief Program to help tackle the problem of fraudulent mortgage-modification advertising," the software maker said in a statement.

The mortgage scams are the latest example of marketing malfeasance on large Internet advertising networks. Critics have complained the largely automated systems for buying ads next to Internet search results are vulnerable to abuse and that the companies running them aren't doing enough to screen the marketing pitches before they appear on websites.

The criminal investigation into fraudulent mortgage ads is surfacing three months after Google agreed to pay $500 million to avoid prosecution in Rhode Island for profiting from online ads from Canadian pharmacies that illegally sold drugs in the U.S.

Consumer Watchdog, a group that published a study about mortgage ad scams nine months ago, is calling for criminal charges and financial penalties against the major search engines in the current investigation.

"These Internet company executives were active enablers of fraud against vulnerable homeowners," said John Simpson, director of Consumer Watchdog's privacy project. "They cannot be allowed to benefit from these ill-gotten gains."

Fewer Americans Living In Middle-Class Areas As Country Divides Between Rich, Poor: Study

In the latest sign of a deteriorating middle class, growing number of Americans are living either in poor or affluent neighborhoods, not somewhere in between, a new study finds.

Thirty-one percent of households lived in either affluent or poor neighborhoods in 2007, according to a study by Stanford University researchers that analyzes Census data in 117 metropolitan areas. That's more than double the 15 percent that lived in affluent or poor neighborhoods in 1970.

Income segregation surged between 2000 and 2007 among black and Hispanic families, the study found. In addition, income segregation among black and Hispanic families rose much more between 1970 and 2007.

Sean Reardon, one of the authors of the study, told The New York Times that the findings indicate that the next generation of poor Americans will increasingly limit access to high-performing schools and support networks. And if the pattern holds true, affluent Americans may be less likely to interact with lower- and middle-income Americans, which could make them hesitant to support policies that benefit the larger public.

The findings underscore other studies indicating that income inequality has been on the rise for decades and that the gap between the rich and the poor is manifesting itself in America's neighborhoods. The top one percent of earners in America saw their incomes grow 275 percent between 1979 and 2007, according to the Congressional Budget Office. During the same period the bottom fifth of earners only saw a 20 percent spike in income.

In addition, the number of Americans living in areas of extreme poverty rose by one-third between 2000 and the second half of the decade, according to a study from the Brookings Institution.

And the boost in poverty isn't limited to the nation's cities. The number of Americans living in poverty in the suburbs increased by 53 percent between 2000 and 2010, according to a different Brookings analysis. That's compared to a 23 percent spike among city-dwellers during the same period.

The erosion of an American middle class could have dire consequences for the U.S. economy, experts say. Robert Kaplan, a former vice chairman of Goldman Sachs, told the Lawrence Journal-World that the country will continue to see volatility until the status of the middle class is secure. A September study from the International Monetary Fund found that greater income equality positively correlates with economic growth.

Most Americans say they believe the growing wealth gap is a problem. Nearly three-quarters of respondents in a poll conducted by The HIll last month said they think income inequality is an issue for the U.S.

For some, income inequality isn't an issue. Texas Governor Rick Perry, a Republican candidate for president, told The NYT last month that he doesn't care if his flat tax proposal leads to increased income inequality.

Riverside County, California To Charge Prisoners $142 Per Day Of Their Stay

In one southern California county, prisoners will soon have to pay for the privilege of staying in jail.

Riverside County, California will start charging prisoners $142.42 per day of their prison stay, CNNMoney reports. The county's board of supervisors approved the measure on Tuesday as a way to save an estimated $3 to $5 million per year. Not every prisoner will be forced to pay up, however. The county will review each prisoner's case individually to determine if they can afford the fee.

The fee comes as the California correctional system continues to struggle with budget woes. Last month, in an effort to save money, the state transferred responsibility for lower-level drug offenders, thieves and other convicts to counties. The "prison realignment" is one of many measures the state has taken in recent years to close its budget gap. The California Supreme Court is considering this week whether the state broke the law when it used re-development funds to close a shortfall a few years ago, according to the Wall Street Journal.

But at some prisons, there still may be room for cost cuts. A California prison nurse was paid a salary of $269,810 in 2010 after working thousands of hours in overtime. Indeed, the five highest-paid California state employees all work in the prison system, according to LA Weekly.

California isn't the only state coping with cuts to its budget and prison system. Jefferson County, Alabama filed for the biggest municipal bankruptcy in U.S. history Wednesday after amassing massive debt and contending with a huge budget shortfall.

Other states have also considered extreme measures in order to cut prison-related costs. In Washington, corrections officials are considering leaving unsupervised thousands of former prisoners currently on parol in an attempt to cut costs, according to the Seattle Times. Thousands of prisoners in Texas have been eating two meals a day on weekends since April in a bid to save the prison system money. In Camden County, Georgia, officials mulled the idea of sending prisoners to work as firefighters to cope with budget woes.

But some have pushed back against the trend. In Minnesota, department of corrections officials argued in April that proposed cuts to the state's prison system were so deep that they would endanger public safety, according to CBS Minnesota. While in New York, the State Corrections Officers Union, told Gov. Andrew Coumo in February that his proposal to cut 3,500 prison bedswould put guards who look over violent inmates in danger, the New York Daily News reported.

Though the lingering effects of the recession only made worse the budget woes of many prison systems, the problem wasn't born out of the financial crisis. The number of offenders serving life sentences in prison quadrupledbetween 1984 and 2008, USA Today reports.

And while state prisons may be suffering, federal prisons are filling that same pinch. President Obama's combined budget requests for fiscal years 2011 and 2012 included a 10 percent increase in funding for the Federal Bureau of Prisons, bringing the total to more than $6.8 billion, according to Mother Jones.