Only days ago, I published an entry regarding the new Cybercrime and Identity Theft Bureau in the Manhattan District Attorney’s Office. Having served as a member of that bureau’s predecessor, the Identity Theft Unit, during my seven years as a prosecutor under Robert Morgenthau, I commented on the necessity of such a unit despite my adversarial role as a New York criminal defense attorney. I don’t think anyone could argue the significance of this expanded bureau as schemes involving Identity Theft and Computer Crime continue to flourish in New York and beyond.
Although the most recent arrests and allegations stem from the Queens County District Attorney’s Office, the purpose of such a unit or bureau has once again been made clear. According to the Queens County District Attorney’s Office, twelve individuals, including five employees at PC Richards and Sons, have been arrested and indicted in a fraudulent credit card “bust out” scheme. The 92 count indictment charges Raza Chaudry, Reema Chaudry, Tahir Chaudry, Azadar Chaudry, Zishan Chaudry, Shaheen Akhtar. Hemet Adnand, Mathew Alli, Mohammad Aslam, David Francis, Benzy Jonny and Sheikh “Naveed” Zaheer with crimes including Grand Larceny, Criminal Possession of a Forged Instrument, Falsifying Business Records and Offering a False Instrument for Filing. Although they are not charged with the technical crime of Identity Theft, it is alleged that the “bust out” scheme involved stolen social security numbers. According to the Queens District Attorney’s Office, a search warrant resulted in the recovery of “Pakistani passports belonging to several of the defendants and bearing multiple names and dates of birth, blank Social Security cards, Canadian and New York driver’s licenses and binders containing in excess of 300 credit cards.”
Briefly, a “bust out” scheme involves transactions on a credit car where the credit card is “swiped” and a transaction is completed. The credit card company pays the merchant for the transaction or purchase. There are numerous variations going forward. For example, a “collusive merchant” may be aware that the card swiped is fraudulent. However, the merchant will get paid by the credit card company and claim he sold the items and he should not be at a loss because he did not know the card was fraudulent. Therefore, the merchant keeps the money from the alleged legitimate transaction without selling anything and shares the fee with fake buyer.
Another variation is alleged in this case. It appears that fraudulent checks were used to increase credit lines on credit cards. In an example of this, an individual takes out a credit card in another person’s name without their permission, or in some circumstances pays that person to use their information. Sometimes legitimate transactions are made thereby raising the credit of the card over time. At some point a payment is made to the credit card, but with a bad check. Because of relaxed regulations, once the check hits the account and before there is a determination that the check is “good,” the credit card company credits the account in the amount of the check. Therefore, there is a window of time before the check bounces that the credit card balance is falsely lowered. During this time, the fraudster can make further purchase. Once the credit card company realizes is, the items are gone. This cycle often continues with fake checks until a credit card with a limit of $5,000 is “busted out” in the amount of $25,000. Often times these schemes are not one or two credit cards, but a network of individuals with dozens or hundreds of credit cards. As a prosecutor in Manhattan, I led a similar investigation with the Secret Service into a particular scheme involving well north of 100 credit cards with “bust out” fraud in the multiple millions.
In the instant case pending in Queens County, District Attorney Brown stated that:
“According to the indictment, armed with wallets filled with bogus credit cards and with the assistance of a handful of dishonest employees, the defendants ripped off P.C. Richards alone of more than $100,000 in merchandise, which was then shipped halfway around the world and sold for pure profit. In other instances, the defendants are accused of using the fraudulent cards to get cash advances at banks or working with dishonorable merchants who would provide no merchandise but instead give them a percentage of the charged amount in cash.”
The alleged scheme transpired as follows:
“The indictment charges that Raza Chaudhry, along with his wife, Reema Chaudhry, his sons Zishan and Amjad Chaudhry and his brother Zahir engaged in a criminal operation in which they applied for credit cards using false or synthetic identification with invalid or stolen Social Security numbers. A synthetic identification is created when a person filling out a credit card application uses a name and a social security number which either is bogus or belongs to an innocent victim. In this case it is alleged that Zishan Chaudhry created forged verification documents – such as Social Security cards, utility bills, pay stubs and college enrollment bills – which were then submitted to the various credit card companies from the fax machine at his and his parents’ residence, located at 114-15 Dalian Court in College Point. It is alleged, however, the mailing addresses associated with the applied for cards were various mail drops in Queens County and elsewhere.”
“It is additionally alleged that once the cards were received, they were activated by Azadar Chaudhry who then put the cards to work either by adding numerous additional synthetic identities as authorized users – in order to legitimately build up the cards’ credit and the credit worthiness of the synthetic identities so more cards could be applied for in those names – or “bust” the cards out – depending on the available credit for the cards. In either case, once a card was at a sufficient credit level, the Chaudhrys or their associates would allegedly “flood” the account with fraudulent payments every few days. In one instance, Shaheen Akthar, a Chaudry associate, was observed on bank surveillance video depositing fraudulent checks into a Citibank account and attempting to use a fraudulent card at P.C. Richards. It is alleged that once the cards were flooded using bogus checks, the Chaudhrys and their associates would use the short time between when the payments were made and the checks bounced to make thousands of dollars in purchases – usually high-end electronics and jewelry – or either take money out of the accounts as cash advances or perform “ghost swipes,” where, acting with collusive merchants, credit cards were swiped but no actual merchandise was purchased. The collusive merchant would then allegedly give the swiper a percentage of the charged amount in cash. In these cases, the cards were used to three and four times their actual credit limits, making a $3,000 card worth $12,000. It is alleged that one collusive merchant who performed numerous “ghost swipes”was Sheikh Zaheer who worked at MRR Wireless, a wireless phone supplier in Flushing, Queens. In addition, it is alleged that Zaheer sold numerous “sim” cards to be used with the various phones that the Chaudhrys were operating in conjunction with the credit card fraud.”
“It is further alleged that the Chaudhrys were working with a group of collusive employees at P.C. Richards and Son stores located on Long Island (Carle Place and Elmont) and College Point, Queens. It is alleged that over the course of the investigation the Chaudhrys, in collusion with store employees Benzi Jonny, Hement Adnand and Mathew Alli at the Carle Place store, Mohammed Aslam at the Elmont location and David Francis at the College Point location, stole more than $100,000 in merchandise through the use of fraudulent credit cards. In order to keep their managers in the dark, it is alleged that the P.C. Richards employees maintained open invoices using just one individual’s name to hide the fact that numerous credit cards with different names were being used in succession to make purchases. Once the electronics and other merchandise were obtained, the Chaudhrys would allegedly ship the merchandise to Lahore – where many of the items, such as cell phones and computers were not readily available – and sell them at a profit.”
Saland Law PC is a criminal defense firm located in New York. Jeremy Saland, one of the two Manhattan prosecutors who founded Saland Law PC, served in the Identity Theft Unit investigating and prosecuting Identity Theft crimes including credit card “bust outs,” “identity takeovers,” and a variety of other complex and multi-jurisdictional fraud schemes.