U.S. prosecutors accused an Armenian organized crime gang of bilking victims out of an estimated $20 million in an audacious series of financial scams that included replacing the credit-card machines at more than a dozen 99 Cent-Only stores with their own scanners designed to steal customers' banking information.
The charges filed Wednesday against alleged members and associates of the Armenian Power gang included allegations of two kidnappings, theft of money from elderly bank customers, the smuggling of cellphones into state prisons, and trafficking in drugs and weapons. Seventy-four suspects were arrested in early-morning raids at about 90 locations throughout Southern California in an operation that involved nearly 1,000 local, state and federal law enforcement officials. Additional arrests were made in Miami and Denver.
The charges, detailed in two lengthy indictments, are the most sweeping in what has been a campaign by law enforcement agencies to crack down on white-collar crime involving Armenian and Eurasian gangs in Glendale, Hollywood and other areas. In October, authorities arrested 52 members of an alleged Armenian crime group, charging them in a $160-million nationwide Medicare fraud.
A 134-count indictment in the current case was returned under seal three weeks ago by a federal grand jury in Los Angeles, charging 70 defendants. A second 102-count indictment by a federal grand jury in Orange County charged 20 defendants.
Authorities said the credit-card swapping scam was detected last year when the manager of a 99 Cent Only store in Huntington Beach noticed that a cash register was not processing credit and debit cards properly. The manager informed police, who caught two suspects as they were removing one of the credit card skimmers from a store, federal officials told The Times.
Officials later determined that the gang had a system for leaving the number-skimming machines in place for about a week, gathering banking information, then replacing the store's own machines.
The information was used to create phony credit and debit cards. Gang members and associates allegedly sold the credit card information to other criminals and used the forged debit cards to drain the bank accounts of victims.
After being contacted by store officials, Huntington Beach police informed federal authorities, who determined the scam was taking place across the region — one of several types of banking fraud allegedly perpetrated by the gang.
Prosecutors also accused Armenian Power of teaming up with several African American gangs to target elderly bank customers in Orange County. The gang "unlawfully obtained customer information for high-value bank accounts, impersonated the bank customers to acquire checks, and then cashed and deposited checks in an effort to deplete the accounts," netting $10 million, according to the Orange County indictment.
Gang members allegedly impersonated customers and ordered new checks from banks, which they stole out of the victims' mailboxes. Two suspects allegedly smuggled cellphones into an unidentified state prison to help with coordinating bank fraud schemes.
The indictment alleged strong ties between Armenian Power and the Mexican Mafia, which federal authorities allege controls the narcotics trade and other crimes in state and federal prisons. According to the court filing, the Mexican Mafia provides "protection and status" to imprisoned Armenian Power members and their associates. In return, Armenian Power "assists Mexican Mafia members … with collecting money or 'taxes' within prison and outside of prison."
Authorities allege the two gangs also exchange "high-value gifts, including vehicles and weapons." The indictment also alleges that Armenian Power leaders had strong ties to organized crime in Armenia, Georgia and Russia.
Officials said Armenian Power allegedly kidnapped a Glendale auto body shop owner and held him for a $500,000 ransom. The indictment details a phone conversation in which suspects said they showed the man a hole in the ground, prompting him to start crying. The two then speculated that the man "might die of a heart attack" because he was so scared.
Authorities said at a news conference that Armenian Power was able to connect with other gangs because of its technological sophistication in white-collar crime. The gang had a cadre of younger members who were highly computer savvy, officials said.
The Armenian Power organization began as a street gang based in Glendale and Burbank two decades ago to protect new Armenian immigrants, according to officials. Since then, it has morphed into a formidable financial crime syndicate with about 200 members, according to the FBI.
At the 99 Cent Only store in Silver Lake on Wednesday, customers were stunned to learn about the scam and questioned how the suspects could have accessed the store's machines.
"They should make sure that nobody can get access to the machine," said shopper Billy Prasom, adding that he hoped the store had beefed up customer protections.
Officials with 99 Cent Only stores said that they have installed new security measures to protect against potential future scams.
In addition to the federal indictments, the Los Angeles County district attorney has charged 11 defendants in seven cases filed in L.A. County Superior Court.