94 people charged in check fraud ring targeting TD Bank

Posted Dec. 07, 2011, at 8:34 p.m.

NEW YORK — Nearly 100 people formed a check fraud ring that systematically exploited a banking loophole to steal more than $450,000 by depositing bogus checks and withdrawing the money before they bounced, prosecutors said Wednesday.

With a handful of bosses recruiting dozens of people to carry out the scheme — and even driving them to out-of-state casinos for part of it — the group methodically overdrew TD Bank accounts, Manhattan District Attorney Cyrus R. Vance Jr. said as he announced that 94 people had been indicted on various charges.

Three main bosses, aided by six other leaders, enlisted people to open savings accounts at various TD Bank locations with nominal sums and then had them deposit worthless checks, Vance said. Prosecutors said they were still looking into the source of the checks.

“What you really have here is a modern version of a check-kiting scheme,” Vance said, calling it “a very organized, long-term scam that preyed upon the specific weakness of an individual bank.”

TD Bank said it was working with authorities and couldn’t comment on the investigation or security measures. The bank, based in Cherry Hill, N.J., and Portland, Maine, noted that no customer account data were compromised.

The savings accounts weren’t subject to policies that prevent money deposited into checking accounts from being available immediately and somehow the ringleaders knew that, prosecutors said.

The suspects quickly transferred the money to TD Bank checking accounts they also had opened, prosecutors said. Then they withdrew as much money as they could at cash machines, sometimes getting as much as $5,000 at once by traveling to casinos in Connecticut and Atlantic City, N.J., where the machines had high or no limits on the size of withdrawals, according to prosecutors.

The group’s leaders would escort the complicit account holders to the casinos one by one on runs so routine that they often stopped at the same gas stations and fast-food eateries en route, said David Szuchman, an assistant district attorney who heads the DA’s cybercrimes unit.

The account holders then made themselves scarce when the bank tried to contact them to discuss the overdrawn accounts, which were opened under their real names, prosecutors said.

The recruiters got most of the stolen money, generally paying each account holder a few hundred dollars, prosecutors said.

“It’s a small group of actors who have an imaginative and profitable criminal idea, who have managed to spread the risk by bringing in scores of individuals who are willing to engage in the conspiracy for relatively low amounts of dollars,” Vance said in a discussion with reporters. He said prosecutors believe the bank’s losses may actually be more than $1 million and that the investigation is continuing.

Two of the accused group’s bosses, Joel Luciano, 30, and Freddie Mercado, 25, were being held without bail after pleading not guilty at arraignments Wednesday. Luciano’s lawyer didn’t immediately return a phone call Wednesday evening; Mercado’s lawyer had no immediate comment. The third accused boss, Jose M. Cruz, 34, hasn’t been arrested, and his whereabouts and home address are unknown, prosecutors said; a phone number could not be found for him.

Other arraignments were expected to continue Thursday.

The bank spotted the pattern, which dates at least to August 2009, and brought in authorities, prosecutors said. The U.S. Postal Inspection Service aided the 18-month investigation, which involved video and physical surveillance; computer forensics; and extensive analysis of credit card, banking and phone records, authorities said.

Prosecutors said they didn’t believe any other banks had been victimized in the same fashion.

Each defendant faces grand larceny or conspiracy charges, or both.

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