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The Credit Card Hall of Shame: All-time worst credit crimes

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What does it take to make it into the Credit Card Fraud Hall of Shame?

A fast-buck scheme. A willingness to wreak widespread financial havoc for personal gain. And a taste for larceny. And prison.

In fiscal 2009, fraud loss from credit card and identity theft totaled $443 million, up slightly from $442 million the previous year, according to the U.S. Secret Service, which coordinates 31 Electronic Crimes Task Force units with state and local law enforcement across the country and internationally. The average fraud loss per Secret Service case was $90,098, down slightly from $94,452 in fiscal 2008.

Card fraud is despicable on any level. So what makes a card fraud worthy of Hall of Shame status?

For the mastermind behind the TJX/Heartland breach, the sheer scope and potential dollar loss of the attack warrants a nod. For the Hollywood hair stylist, it's the famous clients she allegedly scammed. For the crew that stole identities from patient information at Johns Hopkins Hospital, it's the sheer gall of the theft. And for the New Jersey loan sharks, the Eastern European micro-chargers, the California couple with the X-rated websites and the clueless Kroger shopper, it's the way in which the fatal flaw in their scheme reminds us that even ingenious schemes by their very nature carry the seed of their own destruction.

Here, then, are our Top 10 nominees to the Credit Card Fraud Hall of Shame:

Peter Porcelli and Kyle Kimoto were pillars of their communities, self-made multimillionaires united by a love of baseball. Porcelli, whose direct marketing company was nominated for a Tampa, Fla.,Chamber of Commerce Small Business of the Year award, used his fortune to build the Tampa Bay Smokers fast-pitch softball team that won world championships in 1996 and 1998. Kimoto, a record-setting college pitcher with Southern Utah University, ended his pro career with a Frontier League club called "the Steal." Appropriately, as it turns out.

Now they're both wearing federal prison uniforms for their elaborate card scam that preyed on American's most vulnerable: people with poor credit.

Using a lead list of 50 million potential customers, the duo orchestrated an army of cold callers who followed a script that suggested they were from Visa, MasterCard or other financial institutions that had turned down the customer's credit card request.

The pitch: For a $159.95 processing fee, the customers could now obtain a new MasterCard that would help rebuilt their credit. If they declined, they might never own a credit card again, they were told.

The estimated 500,000 consumers who took the bait received either a worthless debit card (there was no money in the account) or a phony card with the MasterCard logo and meaningless embossed numbers and mag stripe data.

Estimated steal: At least $80 million
Why it's Hall of Shame-worthy: Fraudsters walk among us, even as model citizens
Final score: Porcelli -- 13 years (with credit for ratting out his partner); Kimoto -- 29 years.

What, you don't take kneecaps anymore?

There was a day when loan sharks settled accounts the honorable way, with a late-night visit by a couple beefy galoots. Now, apparently, the new currency of choice is credit card numbers.

Authorities in Newark, N.J., arrested six people in late 2009 in a scam that defrauded several hundred neighbors in adjoining counties out of $1 million in bogus credit card charges. According to police, the defendants in "Operation Cash Flow" had loaned millions to area restaurants. When the restaurants fell behind on their payments, the loan sharks accepted their customers' credit card numbers instead.

To quote the Soup Nazi: No soup for you!

Estimated steal: $1 million
Why it's Hall of Shame-worthy: Are card numbers the new coin of the underworld?
Final score: Operation Cash Flow flows no more

If the doctor's bill doesn't kill you ... 

In a case that's not likely to make you feel any better about your next hospital visit, a federal grand jury in Maryland indicted five Baltimore residents in an alleged scheme to use stolen patient information from Johns Hopkins Hospital to open credit card accounts and make more than $600,000 in "instant credit" purchases at retail stores.

The indictment alleges that a 25-year-old former hospital employee improperly obtained names, addresses, dates of birth and Social Security numbers of patients and the parents and guardians of minor patients. Her accomplices then allegedly used the data to apply for credit cards and made $600,000 in purchases on "instant credit" before the cards were received by the victims. The defendants face up to 30 years in prison if convicted.

Estimated steal: More than $600,000
Why it's Hall of Shame-worthy: Bilking hospital patients and their families? How low is that?
Final score: A maximum 30 years in prison is nothing to sneeze at

Taking card fraud to the Maxx
The so-called TJX breach of 2007, in which 40 million debit and credit card numbers were hacked online from such retailers as T.J. Maxx, OfficeMax, Barnes & Noble, Boston Market, Sports Authority and BJ's Wholesale Club, remains one of the nation's largest identity theft and credit card fraud cases on record. The Secret Service estimates the potential loss at more than $20 billion.

In addition to unfairly targeting fit, literate Maxxinistas with a taste for bargains, the TJX case is notable because the ringleader, Albert Gonzalez, had simultaneously worked as a paid informant for the Secret Service, which ultimately helped bring him down.

According to investigators, Gonzalez and his Miami crew would drive the streets with laptops, searching for accessible computer networks that they would then use to infect the retail sites with "sniffer" programs to gain access to card data. They then sold the card information to criminals or encoded their own blank cards to withdraw cash from ATMs.

Gonzalez is now serving two concurrent 20-year prison sentences for his cybercrimes, which also include the security breaches of Heartland Payment Systems, Hannaford Supermarkets and 7-Eleven. The Department of Justice estimates that Gonzalez may have hacked more than 130 million credit and debit cards.

Estimated steal: Potentially more than $20 billion
Why it's Hall of Shame-worthy: Magnitude aside, TJX raises this disturbing question: Are we employing the best hackers or merely training them?
Final score: Gonzalez: 20 years; Maxxinistas: 0

Hollywood salon gives stars a credit makeover

In a less star-struck world, the arrest of Beverly Hills beauty salon operator Maria Gabriella Perez for credit card fraud might have gone unnoticed. But when the customers she allegedly bilked for hundreds of thousands of dollars in unauthorized credit card charges includes Jennifer Anniston, Cher, Melanie Griffith, Liv Tyler and Anne Hathaway, consider this cat fight on!

According to the affidavit, Perez ran up $68,000 in bogus charges to the credit card of high-end jewelry designer Loree Rodkin. Most of the disputed charges were allegedly made when the card numbers were entered manually instead of being swiped.

In another instance, the salon allegedly charged $214,000 for untendered services to two American Express cards owned by an unnamed actor. We can perhaps eliminate Bruce Willis, Michael Chiklis and Vin Diesel. Then again, who knows?

Estimated steal: At least $280,000
Why it's Hall of Shame-worthy: Burning Hollywood's A-List just makes our hair frizzle!
Final score: Perez, who proclaimed her innocence on Facebook, faces a maximum sentence of 25 years if convicted

Who's gonna dispute a 20-cent fee?
Funny how pocket change adds up to big bucks when credit card fraud is involved.

The Federal Trade Commission recently shut down a four-year credit card scam that resulted in $10 million in unauthorized credit and debit card charges to 1.35 million unsuspecting cardholders who barely noticed the one-time fee of 20 cents to $10 on their statements. The money was ultimately routed through 16 dummy companies to bank accounts in Eastern Europe and Central Asia.

According to the FTC, the unidentified scam artists used the names of identity-theft victims to set up bogus companies and open more than 100 merchant accounts that process credit and debit card transactions. In some cases, the fraudsters borrowed the identities of legitimate businesses.

Many card customers didn't even notice the small charge. Those who did and bothered to call the toll-free number next to the charge on their card statement were either met with a voice mail prompt that was never returned or a disconnected number.

Acting on the FTC investigation, a U.S. District Court in Illinois froze the assets of the 16 dummy companies in June 2010 and ordered them closed pending resolution of the case.

Estimated steal: $10 million
Why it's Hall of Shame-worthy: Could micro-charging be the future of cybertheft?
Final score: Unidentified "John Does:" $10 million; Officials unable to identify the fraudsters to date: 0

Find the missing piece in this X-rated puzzle

In 2000, the Federal Trade Commission won a $37.5 million judgment against a California-based adult website operation that illegally billed credit and debit card customers for more than $40 million in X-rated Internet visits they had not made and services they did not order.

According to the FTC, the Malibu husband-and-wife team and their business partner, doing business as J.K. Publications Inc., bought a list of 3 million valid Visa and MasterCard credit cards from Charter Pacific Bank. But rather than use the list to validate card purchases, the defendants used five different merchant accounts and four business names to debit the cards for bogus Web visits and services.

How do you detect such a nickel-and-dime operation? Simple: Nearly half of those who complained about the X-rated fees did not own a computer.

Estimated steal: $37.5 million
Why it's Hall of Shame-worthy: How hard would it be to detect a bogus charge for Internet porn when you don't own a computer?
Final score: In addition to the monetary judgment, the defendants have been barred from serving in positions that might tempt them to repeat the crime.

Who needs cards? We'll scam 'em with terminals!
The case of Edward Digges Jr., a former Maryland lawyer and convicted felon, doesn't technically qualify as a credit card scam. Instead, Digges defrauded 278 primarily elderly investors out of $15 million by selling them stock based on the sale and lease-back of point-of-sale credit card terminals.

According to the Securities and Exchange Commission, the elderly investors purchased a terminal for $5,000 from an entity owned by Digges and leased it to another entity owned by Digges for placement in a retail store, where it was to generate $50 per month -- or a 12 percent annual return -- for the investor. Digges' Millenium Terminal Investment Program did not maintain the promised reserves to guarantee the securities however, and ran as much as $125,000 per month in the red.

Digges now has 99 years behind bars to think up his next scam.

Estimated steal: $15 million
Why it's Hall of Shame-worthy: Only lower life forms would defraud the elderly
Final score: Digges: room and board for life; his victims: 0.

 

You had me at Vanuatu
Visa debit cards figure into a knotty online investing scheme that was frozen by the Securities and Exchange Commission in October pending investigation into the operation, which allegedly bilked $4 million from primarily deaf investors in the United States.

According to the SEC complaint, the Imperia Invest IBC website promised investors a daily return of 1.2 percent by investing in Traded Endowment Policies, the British term for viatical settlements. Investors were allegedly told that an initial $50 investment would enable them to obtain an $80,000 loan from an unnamed foreign bank which would be used by Imperia to purchase the TEPs and pay the investor the guaranteed return.

The SEC says Imperia fraudulently claimed licensure and used phony addresses in the Bahamas and the South Pacific island nation of Vanuatu, and took steps to conceal the identity of its principals.

Investors also were told they could only access their profits by purchasing a Visa debit card from Imperia for several hundred dollars. The SEC says Imperia had no association with Visa and was not authorized to use its name.

Estimated steal: $4 million
Why it's Hall of Shame-worthy: A daily return of 1.2 percent?
Final score: $4 million can buy a lot of margaritas on Vanuatu. No criminal charges have been filed to date.

Misusing all these cards gets confusing
No Credit Card Fraud Hall of Shame would be complete without at least one small reminder that the simplest of details can often unravel a scam.

Case in point: One Fannie Ophelia Henson, arrested for allegedly using a stolen credit card to purchase $400 in gas and groceries at a Kroger supermarket in Charlottesville, Va. To save a little additional stolen money, police say Henson decided to use her own Kroger Plus Shoppers Card when checking out with the stolen credit card, all of which was caught on store surveillance video.

"I guess trying to use her discount card kind of helped cement the case," said Detective Edward Pracher. "She may have absent-mindedly just scanned her card, from what I can tell on the video."

Estimated steal: $400
Why it's Hall of Shame-worthy:
She did receive the Kroger discount on her purchases
Final score: Consumer confidence in credit cards: 1; Ms. Henson: 0

See related: Jennifer Aniston, Liv Tyler, alleged victims of card fraud, International card theft targets U.S. consumers, Tackle credit card fast, whether parents or strangers are to blame, Study: Hotels a hot spot for credit card fraud

Published: November 19, 2010


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