American Greed

American Heroes Being Scammed at Home

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U.S. Army Staff Sgt. Kevin Crowell, a decorated soldier and recipient of the Purple Heart and two combat infantry badges came home with symptoms of post-traumatic stress disorder after serving a year in Iraq.

Looking to settle into everyday civilian life, he invested $50,000 in Lydia Cladek Inc.—an auto financing company. Lydia Cladek, LCI's president, pitched to use investor money to buy high-interest auto loans from car lots and then collect payment on those loans promising 10 percent to 15 percent return on investment.

Crowell believed Cladek's claims. He thought it would provide his family with financial security. Little did this veteran know that he would lose the money he saved risking his life in war to Cladek's scam.

"You do come back and you have a big handshake and someone says, 'Thanks for your service,' and then they take your money. It's amazing how that works in our country," Crowell told CNBC's "Amercian Greed" team. "I fought for my life for that money."

After a decade of running the scam and owing millions of dollars to her more than 2,000 investors, Cladek was found guilty on 14 counts related to fraud in 2012. She was sentenced to 30 years in prison. Crowell lost thousands of dollars in this scam, but he wasn't alone.

Every year thousands of service members, veterans and their families fall prey to financial scams. In 2011, the Federal Trade Commission received more than 17,000 military consumer complaints. In 2012, the number of complaints almost quadrupled to more than 67,000.

(Read More: Small Business Person of the Year Helps Veterans Take Flight)

According to the FTC, along with a rise in fraud, improved reporting processes for filing complaints and an increased outreach effort by the FTC may also account for the uptick.

"We have recently in the last year or two really stepped up our partnerships with other groups that serve military audiences including the Department of Justice and Consumer Financial Protection Bureau," said Carol Kando-Pineda, an attorney at the FTC.

Yet, many other scams go unreported by military members.

"Especially within the military because it is such a macho culture, they don't like to show weakness," said Rodney L. Davis, senior vice president of enterprise programs at the Better Business Bureau. "That's one of the reasons I think that they are often times easy prey—they don't want anybody to know that they fell victim."

Davis added that changing that psychology so military members are willing to report fraud is really important. That's the gap that BBB's Military Line is trying to fill with consumer education.

"The first thing you can do is educate yourself about whether or not this is a legitimate business," said Davis. He suggests, "have some doubt and make sure you check it out before you give anyone your information."

According to the FTC, about 37 percent of military consumers reported identity theft. It was also the No. 1 complaint category overall in 2012. However, there are some protections in place for service members to avoid such theft.

"One is an active duty alert that they can put on their credit report before they are about to be deployed so that they can protect their personal information and their credit history while they are away," noted Kando-Pineda.

(Read More: Financial Titans Make Push to Hire War Vets)

In some instances, the very nature of military service plays a part in service members being victimized by a variety of scams. Service members move around a lot so they may be constantly in the market for new services and products.

Kando-Pineda added it is advised for consumers to rely on family and friends for recommendations about who to do business with but if they move around a lot, service members might not have that "well of people to rely on."

The tech-savvy scam artists are also getting more sophisticated in devising their schemes.

"They (scammers) adapt to different technologies," said Davis. He added that young service members are active on social media, places where some scam artists make contact, build trust and then put service members in a situation to give out information or money that they shouldn't be giving out.

"Once you have given your money to a scammer that individual's money is probably lost," said Davis.

But the FTC is helping soldiers fight back. They've partnered with Department of Defense and other organizations to launch the first Military Consumer Protection Day on July 17.

"The DOD wants their troops to have financial literacy to be able to make wise decisions about spending their money and to be able to avoid fraud," said Kando-Pineda. "So basically [we are] trying to leverage our resources and increase our impact" with Military Consumer Protection Day.

What Vets Should Know:

If you are a veteran or a service member, there are several free resources available to protect you and your families from fraud and to help those who have been victimized.

1. Consumer Protection Working Group—The CPWG is a unit within President Barack Obama's Financial Fraud Enforcement Task Force, created to combat consumer fraud. Apart from being able to report a scam/fraud on the website—, veterans can also find publications and websites that share useful information to help fraud victims

2. Federal Trade Commission—Consumer Information for Military Families—The Federal Trade Commission has a separate arm that looks into complaints from military families. The FTC provides resources and information customized to service members and their families including the option to report scams and also receive periodic scam alerts.

3. Consumer Financial Protection Bureau—The CFPB's core function includes working "to give consumers the information they need to understand the terms of their agreements with financial companies." It takes in consumer complaints, promotes financial education and researches consumer behavior. The CFPB also has an Office of Servicemember Affairs led by Holly Petraeus that gives information on protections available to service members including VA benefits and provisions under the Servicemembers Civil Relief Act.

4. Better Business Bureau—Military Line—BBB's mission is to advance marketplace trust by encouraging best practices in business and denouncing substandard behavior. It provides business reviews and alerts the public to scams. BBB has its own Military Line that provides free information and resources to veterans and service members across the United States. It also encourages the military community to report scams and helps in dispute resolution.

—By Divya J. Verma, Special to