3 Charged in Identity Theft Case

Federal authorities on Monday unveiled charges against three men in what they said was the largest identity fraud case in U.S. history.

Consumers from across the country -- some 30,000 victims have been identified so far -- had private financial information stolen by a ring of thieves that authorities said used pilfered corporate passwords to electronically access consumer data from all three major credit reporting bureaus.

For many consumers, the theft was the beginning of a nightmare that left their bank accounts drained and allowed crooks to run up thousands of dollars worth of fraudulent charges in the victims’ names, James B. Comey, U.S. attorney for the Southern District of New York, said at a news conference. Losses so far have been estimated at $2.7 million, authorities said, although that total could rise as the investigation continues.

The case underscores that identity theft, already considered the fastest-growing financial crime in the country, has reached epidemic proportions, said Carl Pergola, national director of fraud investigation services at BDO Seidman in New York. Roughly 40% of all consumer complaints logged at the Federal Trade Commission now involve identity fraud, he said.

“With electronic access to data, and gangs focused on committing this fraud, it’s like giving [thieves] the keys to the vault,” Pergola said. “Maybe this will press companies to put more controls in place.”

Identity thieves use a consumer’s personal and financial information -- such as birth date, Social Security number and bank account numbers -- to make fraudulent credit card purchases, open unauthorized bank accounts and even take out loans in the consumer’s name.

Consumers aren’t legally responsible for paying the fraudulent charges. However, they must prove that the charges were fraudulent, and in some cases it has taken victims years to have the charges removed from their credit histories.

In a complaint unsealed Monday, the U.S. attorney’s office in Manhattan charged Philip Cummings, 33, with wire fraud and conspiracy. In addition, Linus Baptiste, 43, who was arrested in late October, has been charged with wire fraud in a related case, authorities said.

They said a third alleged conspirator, Hakeem Mohammed, was charged with mail fraud last month and has entered a guilty plea in connection with changing consumer addresses and opening accounts in the names of two of the victims identified in the scheme.

According to the complaint, the scam started more than two years ago, when Cummings worked for Teledata Communications Inc., a Long Island company that provides software and computer services to help banks and retail establishments access consumer credit reports online from the three big credit reporting agencies -- Equifax Inc., Experian and TransUnion.

In early 2000, Cummings was approached by an unnamed co-conspirator, who has since agreed to cooperate with authorities, according to the U.S. attorney’s office.

The co-conspirator, identified only as “CW” in court documents, told Cummings that he could get $60 for every credit report he supplied to a ring of thieves.

Cummings allegedly used his position as a computer help-desk employee to purloin passwords used by a variety of TCI’s customers, including Ford Motor Credit Co., Washington Mutual Inc. and Community Bank of Chaska, Minn. With those passwords, Cummings could get credit reports, listing everything from mortgage information to credit card numbers and loan payment histories, on thousands of consumers.

The complaint alleges that the theft ring -- a group of at least 20 individuals of Nigerian descent living in Brooklyn and the Bronx -- provided CW with long lists of names and Social Security numbers of specific individuals whose credit reports they wanted.

Armed with a laptop computer, Cummings allegedly masqueraded as one of TCI’s corporate clients, pulling dozens of credit reports at a time, according to the complaint. CW and Cummings then would split the fees.

“The defendants took advantage of an insider’s access to sensitive information in much the same way that a gang of thieves might get the combination to a bank vault from an insider,” said Kevin P. Donovan, assistant FBI director in charge of the New York field office.

“But the potential windfall was probably far greater than the contents of a bank vault, and using 21st century technology, they didn’t even need a getaway car.”

Authorities said the scam began to unravel earlier this year. Partly in response to a raft of complaints from consumers who said they’d been victimized by identity fraud, officials at Ford Motor Credit began to review bills they had received from Experian for pulling credit histories of potential car buyers. The Ford Motor Credit office identified on many of the consumer complaints said it had never requested the credit reports in question.

Investigating further, Costa Mesa-based Experian discovered that unauthorized requests for credit reports were being made in large batches -- dozens per call. It noticed a similar pattern with requests it was getting from a Washington Mutual branch in Florida.

Meanwhile, Atlanta-based Equifax had discovered that a Washington Mutual affiliate in Crossville, Tenn., had been billed for 1,100 credit reports that the company said it had never requested.

In September, Chicago-based TransUnion discovered that a corporate client was complaining that it had been billed for 4,500 unauthorized credit reports.

Authorities began tracing the requests through phone records. In late October, FBI agents arrived at CW’s New York address with a search warrant. Authorities said agents seized a laptop computer with Cummings’ name, lists of consumer names and Social Security numbers, numerous credit reports and a ledger showing amounts paid -- and owed -- to CW for the information.

All three credit reporting agencies, and the companies whose access codes were used in the scam, have been cooperating with investigators. None of the companies has been implicated in the scheme, authorities said. TCI, Cummings’ former employer, has also been cooperating with investigators.

Ford Motor Credit, Washington Mutual and the credit reporting agencies said they already have contacted the consumers identified as victims in the scam. However, the investigation is continuing.

Comey, the U.S. attorney, urged consumers who think they are victims of identity fraud to contact the Federal Trade Commission’s identity fraud hotline at 1-877-ID-THEFT.

“Identity theft is an enormous problem in this country, but we’ve yet to find something bigger than this in terms of the tens of thousands of people who were ripped off,” Comey said. “We will pursue and prosecute with equal vigor others who may be involved.”

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When identity is stolen

Monday’s discovery of what authorities described as the biggest identity theft ring in U.S. history underscored the need to guard credit information.

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How the identity theft ring worked

1 -- Philip Cummings allegedly steals passwords for credit report accounts and gives reports to unidentified

co-conspirator.

2 -- Unidentified co-conspirator sells consumer credit reports for $60 each to fraud ring of 20 and splits the money with Cummings.

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Identity theft reports rise

2001 -- 86,166

2002 (through Sept. 30) -- 117,139

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Tips on avoiding identity fraud

* Guard your Social Security number.

* Don’t give out credit card or bank account numbers to telephone or e-mail solicitors.

* Destroy all old credit, insurance and banking documents, including ATM receipts. Tear up pre-approved credit card applications you don’t use.

* Check your monthly credit card and banking statements carefully for unauthorized activity.

* Review your credit report yearly.

* Give out your Social Security number as infrequently as possible. Ask companies to use alternative identification numbers.

* Don’t leave bill payments with enclosed checks in your home mailbox unless your are sure the mailbox is secure.

* If your credit card statement is delayed, consider checking with your card issuer to make sure no one has filed a change of address form to get access to your account.

For more information:

Federal Trade Commission: www.consumer.gov/idtheft/

Justice Department: www.usdoj.gov/criminal/fraud/idtheft.html

California Department of Consumer Affairs: www.dca.ca.gov/legal/p-3.html

California Office of Privacy Protection: www.privacyprotection.ca.gov/

Privacy Rights Clearinghouse: www.privacyrights.org/identity.htm

AARP: www.aarp.org/confacts/money/identity.html

New York Attorney General’s Office: www.oag.state.ny.us/consumer/tips/identity_theft.html

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Sources: Federal Trade Commission, Associated Press - Researched by Times librarian John Jackson

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Times researcher Lynette Ferdinand in New York contributed to this report. Kristof reported from Los Angeles, Goldman from New York.