Check Fraud Technique Making New Mark : Crime: Authorities note rise in use of chemicals to erase amounts and payees’ names from documents, often stolen from mailboxes.

The latest crime fad sweeping Los Angeles this summer involves acid--not the mind-altering drug, but a check-altering chemical process that strips stolen checks of their designated payees and amounts and leaves them blank for use by crafty thieves.

Investigators say checks made out to utilities, department stores and other creditors are increasingly being stolen from mailboxes outside post offices and reappearing made out to individuals and for amounts unknown to their senders.

Banking officials from around the state say they first detected a jump in the number of so-called “acid-washed” checks late last year and that the problem has intensified over the last few months.

“It’s one of our fastest-growing fraud problems,” said Lisa Wilhelm, senior vice president of risk management for Wells Fargo Bank. “We went from virtually zero cases to 50 to 60 a month.”

Not exactly a new technique, the scam has surfaced periodically. This time, however, thieves are using not just common household substances but also more sophisticated chemicals to “rinse” stolen checks of their original information. They also have targeted a new source from which to steal their booty.

“Before, they used old [returned] checks, but now they’re going into the post office mailboxes and stealing them from there,” said Los Angeles Police Department Detective P. J. Green of the Valley’s Bunco-Forgery Division.

Thieves simply reach into the drop boxes and grab uncollected mail with their hands if the boxes are full enough. In some cases they stuff mailboxes with cardboard so they will fill up more quickly.

“Some of these guys actually put traps or catch boxes inside the lids,” said LAPD Detective Roy Hunter, who specializes in cases involving counterfeiting.

Once they get ahold of the stolen mail, the criminals search for bill payments being sent to utilities and other creditors and steal the checks from inside envelopes. They then use a variety of chemicals to erase the original payees and amounts, but usually leave the signatures intact.

Armed with a now-blank check, the thieves fill in new names and amounts and cash the checks at banks and other businesses.

“They’ll boost the amount to what they think will be safe and then go and cash it,” Hunter said. “Your $50 electrical bill suddenly becomes $500.”

Often, victims don’t realize that their checks have been tampered with until they come back from the bank or hear from unpaid creditors.

Just last month, postal inspectors arrested a Northridge woman who is suspected of heading a sophisticated ring of 10 to 20 “mules” who allegedly stole mail for her and helped cash “dozens and dozens” of acid-washed checks statewide, banking and postal officials said.

“Ninety-five percent of our washed check cases were related to her,” said Jeanette Scheff, a senior special agent for Wells Fargo.

Kerri Lynn Morales was taken into custody outside a Hollywood hotel on a federal arrest warrant. Morales, 40, is believed to have lived in both Northridge and San Jose, according to bank officials. She could not be reached for comment.

Wells Fargo agents began investigating Morales at the end of last year when batches of stolen checks were being cashed by the same group of people, including Morales, some of whom used fake driver’s licenses to do so, said Sue Wilson, a Wells Fargo senior special agent. Wilson said her bank began distributing wanted posters displaying Morales’ picture at businesses in Hollywood, Woodland Hills, Northridge, Van Nuys and other parts of the city.

In January, it appeared Morales and her alleged cohorts had moved to the Bay Area, where a rash of acid-washed checks cropped up.

Investigators got a break when they arrested an alleged ring member who tipped them off to her hide-out at the hotel in Hollywood. She has been indicted by a federal grand jury on four counts of possession of stolen mail and is scheduled to go on trial in September, according to Assistant U.S. Atty. Andre Birotte Jr., who is prosecuting the case. Two other men, believed to be co-organizers in the ring, have also been arrested.

Scheff said that immediately after the arrest of Morales the number of acid-washed check cases reported to her bank fell by half, but that others appear to have caught on to the scam, and her caseload is rising again.

In the San Fernando Valley, postal officials have reacted by installing oversized mailboxes that fill more slowly and are harder to burglarize, especially outside post offices that have already been targeted by thieves. As a result, the number of such thefts reported to postal investigators has declined in the Valley, which was hit hard by the scam, particularly at the beginning of the year.

Banks have responded quickly to the growing problem by printing a new breed of checks on paper impervious to chemical tampering and with a host of other fraud-resistant features. Traditionally, banks have tried to thwart check fraud by monitoring customers’ transactions for irregularities.

But the recent loss of millions of dollars in thefts has prompted California bankers to search for paper-based solutions because thieves are increasingly tampering with checks.

Nationwide, check fraud losses to commercial banks were estimated to be $815 million for 1993, a 43% increase over the two previous years, according Dominick Albano, a spokesman for the California Bankers Assn. Losses in California alone accounted for $65 million of that figure.

As a result, Bank of America has begun offering its customers checks printed on chemically resistant paper that becomes discolored if exposed to solvents. Wells Fargo plans to offer something similar by September. Wells Fargo has also put 10,000 of its employees through training sessions aimed at teaching them how to spot chemically altered checks before they are cashed, Wilhelm said, declining to elaborate.

Imperial Bank, which caters mostly to a clientele of businesses, worked with a check printing company to develop its own “SafeChecks,” which are loaded with safety features--including watermarks and micro-printing--designed to make them difficult to counterfeit. The checks are also printed on paper that will spell out the word void in English, French and Spanish if exposed to certain chemicals.

Greg Litster, a senior vice president at Imperial, said his company began offering the checks at the beginning of 1994 and that by the end of the year, check fraud attempts at Imperial dropped to $400,000 from $3.2 million the previous year; actual check fraud losses dropped 82% to $72,000 from $400,000.

“We’ve had great success with this,” Litster said. “It’s made a huge difference.”