Scheme to Steal Millions From B of A Is Foiled : At Least 7,000 Customers to Get New ATM Cards as a Result of Elaborate Plot

Bank of America sent letters to more than 7,000 customers of its automated teller machine system Friday, explaining that they will receive new cards as a result of an aborted scheme to steal up to $14 million from the bank’s machines around the country.

An elaborate scheme to use more than 7,700 counterfeit cards to obtain cash from B of A’s Versatel ATM network was disrupted last weekend by U.S. Secret Service agents who had spent the past month working with an informant, according to court documents.

Four Los Angeles-area residents, including an employee of a computer programming company who is accused of masterminding the scheme, and an Omaha man were arrested and charged with violating federal fraud statutes.

The people charged were identified as Mark and Jackie Koenig, a husband and wife; Mark’s brother Scott, who lives in Omaha; Jackie’s sister Bobbie Jo Bobby, and a friend of the group, Robert Hussey.

A Growing Problem

The Los Angeles-area residents were arrested in a raid conducted by Secret Service agents at Mark and Jackie Koenig’s apartment in the Ladera Heights section of Los Angeles County. Scott Koenig was arrested in Omaha.

Seized in the raid were 1,884 completed counterfeit cards, 4,900 partially completed cards and a machine to encode the cards with B of A account information, including highly secret personal identification numbers for customers, according to court documents.

The group planned to fan out across the country to use the cards for six days before and during the long President’s Day weekend, according to the charges. The holiday weekend was intended to provide more time to accomplish the task.

“We estimate right now that the loss, had they been permitted to go forward, would have been between $7 million and $14 million,” said Carolyn J. Kubota, the assistant U.S. attorney handling the case.

ATM fraud is a growing problem for financial institutions. Over the Veteran’s Day weekend last October, Security Pacific National Bank in Los Angeles lost nearly $350,000 from 300 customer accounts through its ATM network. The crime remains unsolved. Customers do not lose money from this type of fraud because they are reimbursed for any charges to their accounts.

In the B of A case, the alleged scheme was stopped before a significant amount of money was stolen. However, an affidavit filed with the court by Keith A. Edwards of the Secret Service said three “test” cards had been used successfully, but only a small amount was taken in the tests.

Shirley Norton, a spokesman at Bank of America’s headquarters in San Francisco, said the alleged scheme did not represent a breach of the bank’s ATM security system. But she said customers whose account numbers were to be used would be issued new cards and asked to select new identification numbers as a precaution.

Mark Koenig worked as a computer programmer for Applied Communications Inc. of Omaha, a subsidiary of US West, the regional telephone company there. He was temporarily working under contract for a subsidiary of GTE Corp.

The GTE subsidiary handles the telecommunications company’s 286 ATM machines at supermarkets and stores in California. The machines are used by holders of ATM cards from many banks and credit unions to obtain cash.

Koenig had access to account information for cards used at the GTE ATMs and planned to use it to create the counterfeit cards, according to Edwards and Alan Michaels, the chief financial officer of Applied Communications.

“Koenig is not to be considered an Albert Einstein but because of the type of job he was doing, he had access to data that he apparently chose to use in an illegal way,” Michaels said in an interview.

Michaels said Koenig had worked for the company since 1985 and had received a security clearance with a previous employer. He refused to disclose the nature of the previous job or the clearance.

According to the Edwards affidavit, a friend of Jackie Koenig’s who lives in Omaha came to the Secret Service last month and said she had been asked to participate in the scheme. She said Mark Koenig had been planning the scheme for months.

Should Wear Disguises

The woman, who was not identified, agreed to cooperate with the government and wore a concealed tape recorder to a meeting at the Koenigs’ apartment on Jan. 27. At the meeting, Edwards said, Mark explained that he had transferred the B of A account information to his home computer and planned to use an encoding machine from his office to create the cards.

Edwards said Mark explained that he had taken only B of A information “to make it look like an inside job” at the bank.

According to the affidavit, Mark said the group would spread out across the country over six days around the holiday and withdraw cash from machines affiliated with the B of A network. He said they should wear disguises because some ATMs have hidden cameras to photograph transactions, the affidavit said.

One-half of all the cash was to be given to Mark Koenig, said the affidavit. But on Feb. 4, as the cards were being encoded, Secret Service agents raided the apartment and arrested the suspects.