10 Arrested in Massive Credit-Card Scam

U.S. Secret Service agents announced the arrests Tuesday of 10 suspects in one of the nation’s largest credit-card scams--a Los Angeles-based ring that allegedly rang up $2 million in cash and merchandise on stolen cards.

The ring employed “shoppers,” who would each charge $1,000 to $8,000 on fraudulent credit cards, either in merchandise or cash withdrawals from automated teller machines.

Some of the shoppers went on weekend spending sprees to such vacation spots as Puerto Rico and Las Vegas, authorities said. Some held regular jobs and moonlighted for the fraud ring.

Cards also were used by robbers, drug traffickers and other criminals to buy airline tickets or hotel rooms when they traveled to other cities, Secret Service officials said during a Los Angeles news conference.

“This is the first time the (Secret) Service has seen such widespread use of stolen and altered credit cards to facilitate violent crimes nationwide,” said Secret Service Director John R. Simpson, who was joined by Dist. Atty. Ira Reiner and Los Angeles Police Chief Daryl F. Gates in announcing the arrests.

Simpson said it was one of the largest credit-card scam operations his agents have encountered.

The sophisticated ring employed Los Angeles street gang members, from both the rival Crips and Bloods factions, to run errands. Ringleaders referred to the gang members as “the South-Central labor pool,” one agent said.

The cards were obtained from an operative working in an Orange County plant that produces blank credit cards. The operative stole hundreds, perhaps thousands, of blank cards from the DataCard Corp. in Buena Park that were going to be destroyed because of imperfections, Reiner said.

Another operative worked at one of the nation’s largest credit bureaus, TRW Credit Data Division in Orange. She allegedly ferried out credit histories so that the ring could imprint the cards with the names and numbers of active credit-card holders.

Other names were obtained by more conventional means, such as fishing carbon-paper imprints of credit-card purchases out of trash cans at rental-car agencies, said Richard J. Griffin, head of the Secret Service office in Los Angeles.

All of the suspects, including three alleged ringleaders, were arrested Monday night and early Tuesday by Secret Service agents after their indictment by the Los Angeles County Grand Jury.

Among those arrested were Michael Smyer and Lydell Gordon, both of Los Angeles, who were being held in lieu of $1-million bail each. They were arraigned Tuesday in Los Angeles Superior Court on charges that included conspiracy to commit grand theft and forgery of a credit card.

The names of the other suspects were not disclosed pending their arraignments.

Agents displayed stacks of blank American Express cards, credit-card embossing equipment, drugs, guns and $18,000 in cash that were seized during the arrests and over the course of the 16-month investigation.

Reiner said the 40-count indictment was the first obtained under provisions of Proposition 115, the so-called “Speedy Trial Act” passed by California voters on June 5. He credited the measure with speeding up the grand jury process, allowing his prosecutors to obtain indictments after 11 hours of testimony in a case that previously would have required a three-month preliminary hearing.

The wide-ranging investigation, which officials hailed as a model example of cooperation between federal and local law enforcement, stemmed from a 1988 holdup in Cincinnati, Ohio, and subsequent use of fraudulent credit cards.

The ring used a variety of credit cards, although American Express and Bank of America suffered the heaviest losses from the operation--a combined loss of about $1 million, authorities said.

Besides the 10 ring members who were indicted, another 50 suspects who allegedly used the stolen cards also were arrested over the course of the investigation on various charges.

Both TRW and DataCard officials say they fired the employees they believed involved with the ring and cooperated in the investigation. A DataCard security official said the company, one of the largest makers of blank credit cards, has tightened procedures that account for all the cards it produces. He said the company has systems to track flawed cards that are destined for disposal.