10 Held in Connection With Credit Card Scam : Fraud: Operatives in 2 Orange County firms helped ring to rack up $2 million in cash and merchandise, Secret Service says.

Ten suspects were in custody Tuesday in connection with a Los Angeles-based credit card fraud ring that allegedly rang up $2 million in cash and merchandise sales with the help of operatives in two Orange County companies, the U.S. Secret Service said.

The ring employed shoppers who would each charge $1,000 to $8,000 on fraudulent credit cards either in merchandise or cash withdrawals from automatic teller machines, authorities said. The shoppers, some of whom held regular jobs and moonlighted for the fraud ring, went on weekend spending sprees to vacation spots like Puerto Rico or Las Vegas, they said.

Other cards were used by suspected robbers, drug traffickers and other criminals to buy airline tickets or pay for hotel rooms when they traveled to other cities, Secret Service officials said at 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 Los Angeles County Dist. Atty. Ira Reiner and Los Angeles Police Chief Daryl Gates in announcing the arrests.

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

The cards were obtained from an operative working in an Orange County plant that produces blank credit cards, authorities said. The operative stole hundreds, perhaps thousands, of blank cards from the DataCard Corp. in Buena Park. The cards 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.

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

All of the suspects, including three suspected 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 on $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 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 in the June primary election. He credited the measure with speeding up the grand jury process, allowing his prosecutors to obtain indictments after 11 hours of testimony in cases that previously would have required a three-month preliminary hearing.

The wide-ranging investigation, which officials hailed as a model of cooperation between federal and local law enforcement agencies, stemmed from a 1988 holdup in Cincinnati 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 alleged ring members who were indicted, another 50 suspects who allegedly used the stolen cards were also arrested over the course of the investigation on various charges.

Both TRW and DataCard say they believe they have tightened security to prevent future fraud schemes.

“I do believe our security systems are strong and we’re looking for ways to improve them,” said TRW spokeswoman Jennifer Sanchez. “Judging from infrequency of instances like this, I would say our security system does work effectively.”

She said the employee believed to have been working with the ring, a customer relations department worker, was fired in May.

David Gilmore, manager of corporate security at DataCard’s home office Minnetonka, Minn., said his company takes “the same kind of care they do in printing currency” and has taken steps to correct the lapse that led to the theft of the imperfect, blank credit cards at the Buena Park plant. He said officials at the plant, one of two the company operates in the United States, keep tabs on every card produced, even the flawed blanks that are slated for disposal.