Sunday, May 15, 2011

Fraud Ring Scams Millions, Hurts Military Families

Yeah "I Want YOU so I can steal your credit and your identity soldier! "

Just when you think the slime of the earth have thought up every way of stealing and hurting people another scheme is revealed! I know that you are already depressed and angry enough but I have to share this one from the Seattle Times with you. The saying "a sucker is born every minute" but when we, as a society and state as well as the federal government do not provide consumers with protection then sooner or later we will all be suckers.

"The Army and Tacoma, Washington police are investigating a fraud ring that last year allegedly bilked Army and Air Force Exchange Service stores out of about $500,000 in merchandise, and also hit other businesses that extend credit.

Promoters of the scheme promised to reduce debt, persuading some 1,800 people, including dozens of soldiers, to participate.

Those people allowed the promoters electronic access to their credit accounts to pay down bills. More than $3 million used to pay those debts was illegally diverted from a bank in Ohio, according to investigative documents and interviews with law-enforcement and bank officials.

"The company would pay two dollars [of debt] for every dollar" paid to them, said one staff sergeant, who learned of the scheme from a fellow soldier at a barbecue. "I asked ... how that could possibly work, but he said it worked. That should have thrown up a red flag, but it didn't."

Now some of the soldiers who accepted the deal risk being charged as co-conspirators in crimes of wire fraud and larceny, according to investigative documents.

At Joint Base Lewis-McChord, 78 soldiers have come under scrutiny, according to the Army. At least 46 of those soldiers are facing disciplinary actions, including more than a dozen who were charged through the military judicial system.

Many of the details of the investigation have not been publicly disclosed. Pierce County prosecutors have yet to file any charges in the case, so it's unclear who organized the alleged scheme.

Pleased, then alarmed

Some soldiers who gave promoters permission to electronically pay down their debts were initially pleased with the results. Payments were made, and their debts were reduced, they told Army investigators.

But later, they found their credit accounts at the Army and Air Force Exchange Service were put on hold due to fraudulent activity.

"To date, it appears that this scheme began in the civilian communities around Joint Base Lewis-McChord, and eventually grew to include a small number of ... soldiers, in much the same way it expanded to include hundreds of civilian residents of our surrounding cities and towns," said Maj. Kathleen Turner, a base spokeswoman.

Investigative documents indicate the scheme unfolded during a nearly five-month period that ended last August. The money to reduce the debt was allegedly siphoned out of a bank account of Credit First National Association in Ohio.

"This was real money. It belonged to us," said Jeremy Smith, a spokesman for Credit First National, which issues auto-related credit cards. "We have recovered some funds, but not all. We're still working on that."

Smith said the focal point of the scheme was in Washington state. The bank has been cooperating with Tacoma police and military investigators.

Promoted on Craigslist

The investigation began last year after Tacoma Public Utilities noted that more than 300 customers all paid their bills from the same bank account, according to Mark Fulghum, a spokesman for Tacoma police.

Investigators eventually found the scheme had been promoted on Craigslist, with some 1,800 people using the debt-consolidation service. The number of people involved has complicated the investigation.

"It does appear that there may be some genuine victims who just thought this looked like it was a way out of debt, but there are others who realized it was a scam," said Pierce County Prosecutor Mark Lindquist.

At Joint Base Lewis-McChord, the Army Criminal Investigation Command began interviewing soldiers to track fraudulent payments to Military Star Cards, which allow purchases at the Army and Air Force Exchange Service. Those includes PX stores.

From March to August 2010, some 300 transfers from the account paid some $500,000 debt on about 90 of these accounts. Other money from the account went to pay car loans, utility charges and other expenses, according to Army investigative documents.

Trade-off: cash, goods

Soldiers told investigators the debt-consolidation scheme was touted through a network of military personnel and off-base associates, who talked it up at bars, parties and baby showers, even at an Army training exercise.

In interviews with investigators, more than a dozen soldiers said an Army specialist with the 14th Engineer Battalion was one of the most vigorous promoters. The specialist repeatedly offered to pay down debt in exchange for a lesser value of cash or electronic gear that could be purchased at the PX, such as iPads, Xboxes or cameras.

One soldier said he had served with the specialist in Iraq and viewed him as a trusted colleague.

Others interviewed by Army investigators said the specialist's services were recommended by fellow soldiers, so they decided to give it a try.

"I thought it was strange, but when the payments kept going through, I just thought he was really trying to help us," said a female soldier. She got her washing machine and dryer paid off in exchange for an iPad her roommate delivered to the specialist.

More than a month later, that soldier got the word her Star Card was invalid and placed on fraud alert.

"I feel really dumb about it. I feel like I was just trying to make a better situation for myself and my daughter," she told Army investigators. "I feel like a victim here."

She said she then had to take out a personal loan to pay down the debts she thought had been taken care of.

To date, the Army has not filed any criminal charges against the specialist from the 14th Engineer Battalion, according to Joint Base Lewis-McChord officials.

Because he has not been charged, The Seattle Times is not naming him. In an interview with investigators, the specialist said he got involved with the scheme after a meeting at a Tacoma basketball court with a civilian who claimed to run a debt-consolidation business that helps out soldiers.

The specialist said he used that civilian's service to transfer about $29,500 from the account to pay down his own debts. He also promoted the scheme to other soldiers.

"I knew there was something shady about it," the specialist told investigators. "I didn't know exactly what was going on, but the bottom line was that those were stolen funds."

Let me remind you of the mantra you've been taught to repeat as if it were a prayer: Buyer beware, don't trust anyone, everyone is a crook, no one wants to "help you", get the Better Business Bureau and the Consumer Protection division of your state's Atty General Office to raise the fraud alert level to code RED! Pass it on.

Our ID theft prevention education seminar.

A new on line ID theft awareness certification class, offered by me through the Iowa State University College of Engineering on line learning system, covers the many risks. If you have employees who handle sensitive customer data it might be a good idea to have them take this inexpensive and engaging Internet seminar. At the end of the course upon successfully completing the user-friendly quiz they are issued a certificate of completion. You may find out more about the seminar here

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Steffen Schmidt, PhD. Professor of Public Policy and Information Security

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