BILL MALONEY
Jerry Taylor lived a charmed life. He grew up in an upper-middle-class neighborhood. He was a standout in high-school lacrosse, went to a good college and was making a good living as a stockbroker. In his mid-twenties he settled down and married a local girl and they had two kids — a boy and a girl. They lived in a nice house, in a nice neighborhood, in a nice Northeast community. Life was good. That was until the National Association of Securities Dealers (NASD) took away his license for cheating and then not paying his fine.
What's a man to do when life kicks him like that? Jerry knew exactly what to do — keep on cheating. The whole NASD thing was just a big misunderstanding and if they weren't going to see it that way, he'd have to go on his own. First things first, move out West where no one knew him. He knew that with his experience in the financial arena, it would be no problem to buy a house out West, refinance it, inflate the price a few times and then move on and walk away from the loan. Jerry also knew he needed some operating capital, and forming fake companies would pay for the leases on the brand-new cars he and his wife drove. After all, a man needs to get around. He also figured that fake companies would be the perfect capital-generating projects. He could lease office equipment and apply for business loans to misappropriate for his personal use. Even better than creating fake companies was impersonating Fortune 500 companies. As long as the financial institutions did not conduct proper background checks, he would be approved for large lines of credit based on the companies' reputations.
However, Jerry knew that when his fake companies started failing and he started defaulting on loans, the creditors would come after the leased vehicles and office equipment. Unfortunately for the creditors, the assets weren't located where Jerry said they were on his loan applications, so it would take a while for the repossession teams to find them. Jerry was clearly a man who got around; one of his vehicles was recovered in Las Vegas. When an arrest warrant was issued for him in California, Jerry knew what to do — move to Florida.
With a wife and two young children, Jerry wanted a little stability but considered doing business on his own, with his own money, to be a little too risky. So Jerry decided to go back to his roots — using other people's money to fund his endeavors. Convincing other people to invest their money and take the financial risk for him was a start, but Jerry thought it would be even better to take people's money without them knowing. That way, they wouldn't say no. So Jerry simply went online and applied for a loan through Money Online Finance Company to pay for his new office and business supplies — the full $ 10,000's worth.
Jerry was familiar with the Internet and knew that a large, international company like Money Online wasn't going to check too hard to see if he had the proper paperwork and a creditable cosigner with attachable assets. The Internet offered a certain anonymity that Jerry relished. The application process was quick and easy, and if the Money Online employee on the receiving end was lax in conducting due diligence, Jerry would have a much better chance of being approved than if he applied for a loan in person.
Jerry chose Betty Sue to be the Vice President of his new company and cosigner on the loan. He found her online and was able to unearth enough of her private identifying information to add her to his loan application. Of course, it would have been nice for Betty Sue if she knew about Jerry, his business or the loan, but Jerry figured that with her in the hospital with a chronic illness, what she didn't know wouldn't hurt her (more). That is, until she recovered and was released from the hospital, Jerry defaulted on the loan and Money Online came looking for her. When Betty Sue was first contacted by Money Online, Jerry had already moved again, from Florida back to the Northeast. He decided to take the Internet identity-theft skills he practiced on Betty Sue and apply them to bigger fish. He had set his profession sites on a new target — corporate identity theft.
Money Online Finance Company was a bank holding company. For more than 100 years, Money Online provided lending, advisory and leasing services to small- and middle-market businesses. It was headquartered in New York City and was a Fortune 500 company. Money Online was a full-service, regulated state bank. It had relationships with top players in industries such as technology, office products, health care, printing and other diversified industries.
Money Online was a leading provider of vendor financing solutions to companies around the world. Its main services included designing, implementing and managing customized financing solutions to help with the sale of products for manufacturers and distributors. The company provided lease financing directly to end-user customers. Money Online was able to develop and execute structured financing relationships with industry-leading manufacturers, distributors, software vendors and service providers worldwide.
Money Online loan processors saw multiple applications each day, and because most applicants submitted the forms and documentation online, the processors were detached from the applicants. Unless employees made a conscious effort to perform due diligence on every application, it was easy for falsified information to slip past them.
Excellent Computer Technology, Inc., was started in the early 1980s. The company provided information technology solutions and a full range of computer services to companies of all sizes, including network design and installation, centralized management and remote-access solutions. It also provided small businesses services ranging from the strategy and assessment planning to design, development and implementation of computer systems and ongoing operations and support. They offered Internet services such as e-mail access, Web design, Web site hosting, firewall security and e-commerce solutions. The only thing Excellent Computer Technology, Inc., did not do was sell computers.
One day Jason Mitchell, a customer service representative, approached Valerie Rosales, Excellent Computer's general manager, with a problem: A Money Online loan processor called to speak with the sales manager to confirm the final details of a contract for the sale of computers — a contract that Excellent Computer Technology knew nothing about. Jason and Valerie discussed the supposed contract, the details of the deal and the involved parties. When all the notes were compared, a fraud in progress emerged. Valerie contacted the detective division of the police department and requested assistance.
I was working as a police detective when Valerie called to report the suspicious contract at Excellent Computer Technology. After interviewing Valerie and reviewing the paperwork and e-mails she had related to the contract, I determined that someone had found the name of Excellent Computer Technology's sales manager and assumed his identity for the purpose of arranging contract financing between Excellent Computer Technology and the perpetrator's company. A little research into the documents showed that the offender not only assumed the identity of Excellent Computer's sales manager; he also fraudulently posed as a Fortune 500 company. I contacted the company listed on the contract as the purchaser of the computers, but no one there had heard of the transaction. As my investigation proceeded, I discovered that numerous other finance companies were also approached to provide this third-party financing.
Acting as the sales manager for Excellent Computer Technology and the president or purchasing director of the Fortune 500 company that was supposedly requesting the equipment and the loan, Jerry convinced the financing company's processor that he or she had a viable business deal and the processor would send a check to Excellent Computer Technology. The check, however, would be intercepted and neither business would be the wiser — until the loan went into default months later.
My team and I started the investigation by obtaining a list of the parties and companies involved and reviewing their e-mail and paperwork. We ran them through data analysis software to develop backgrounds and patterns of information. When the supporting documents supplied with loan applications didn't pan out, we were able to identify suspects. While running our analyses, other information about individuals and companies was developed. This led us to the name of our prime suspect — Jerry Taylor — a man who kept appearing in our reports. We hit the jackpot one day when we discovered his real driver's license on a loan application; he must have gotten lazy that day. We also learned that he had active arrest warrants issued for him. As we developed more information about Jerry and cross-checked it against information already obtained, we conducted more computer analyses.
We gave Money Online some of the identifying data (name, address, driver's license number and so on) we had uncovered and asked the management team to analyze their records for other contracts with the same information. They found other contracts that had already gone into default and were in the process of being sent to civil collection. There were also several contracts in various stages of approval.
When we heard of this, we devised a sting operation using one of them as the bait. The financing request was for $150,000 for computers and peripherals, supposedly to be purchased from Excellent Computer Technology. Money Online issued a check to Excellent Computer Technology for more than $150,000 to the address Jerry provided and we tracked it. When he picked up the check at the post office, he found a few police detectives waiting to introduce themselves. We positively identified the suspect as Jerry Taylor, arrested him and went to his "office," where we found the brand-new luxury convertible he was driving. This led to search and seizure warrants for Jerry's banking records.
Jerry's crime was uncovered because a finance company representative needed to confirm the final details of the contract before sending the check but he couldn't find the phone number on the paperwork Jerry provided. Rather than look for it, the representative called information and got the direct — and correct — number.
That simple act of independently looking up the company's phone number foiled Jerry's crime. Other finance companies that had been approached but not swindled conducted these types of independent checks as part of their normal screening process. When the public records differed from the information provided by an applicant, the company refused the financing application. If the representative had relied on the contact information provided in the application, the phone would have been answered by Jerry and the check would have gone out in the mail. In fact, it would have been the third check Money Online sent Jerry that month! The other two checks he had already received were for $50,000 and $30,000. Obviously, Jerry was feeding his family well.
Admittedly, Jerry did have to expend a bit of effort for his money. With his background in business, he knew to do his homework. He formed a shell company that appeared — on paper at least — to be legitimate. He opened a Dun & Bradstreet account to search for ideal companies to pretend to be and to obtain the necessary information to accurately portray them.
He even leased office space, equipment and vehicles in the shell company's name. Of course, the leases were in default after only one month, but Jerry knew it would take the finance companies another couple months to determine the defaults were the result of deliberate nonpayment. So he moved the leased equipment and office furniture into storage and sold it privately. When the lessor's personnel went to repossess the property, they found an empty office and a bitter landlord. It was about six months before the car company went after the leased vehicle — five months too late. By then Jerry had moved his family to another state and the car company was left with the useless and inaccurate identifying information provided on Jerry's lease.
Unfortunately, Jerry still obtains vehicles for himself and his wife this way. The leasing companies don't usually prosecute for auto theft on company-leased cars. When Jerry was caught, his BMW convertible hadn't gone to collection yet; it was only behind in payment. Despite being advised of Jerry's history and the fact that all the lease paperwork was invalid, the leasing company did not want to prosecute him for the fraud. Neither did the insurance company that Jerry had the vehicles insured under (and had the bill sent to a third corporation). They just canceled the policy and said that because he didn't have an accident claim during the insured time frame, they didn't want to get involved. Even when his many loans, leases and rentals went south, the victim companies did not process the defaults as civil collections until months after Jerry had disappeared.
After reviewing the paperwork and e-mails and interviewing the loan manager at Money Online, I learned that they had six different contracts with Jerry (all for different fake companies) in various stages of the loan life-cycle. It was one of them that started the investigation. The contract was to be the third check issued by Money Online and was for $150,000.
Unrelated to our investigation, Jerry had written several bad checks at a grocery store and had warrants out for him. When we arrested him at the post office, we first mentioned his outstanding warrants. He was more than willing to discuss the "misunderstanding" of the bad checks. After all, he pointed out, a man has to eat. However, as soon as we brought up the larceny involving Excellent Computer Technology, Jerry smiled and said, "I'd like to speak with my attorney before going any farther."
Jerry was charged with larceny in the first degree and writing fraudulent checks. He was held on a $150,000 bond, but his wife posted it as soon as he was arraigned; he spent a day and a half in jail. The prosecutor allowed a plea bargain when Jerry pleaded guilty to fourth-degree larceny. When I asked the prosecutor why he settled for such a low plea, he told me, "Fraud cases are inherently boring to prosecute and present to a jury." Even though there were two other charges of first-degree larceny against Jerry for the two checks he had already received from Money Online, the prosecutor said that the deal had been made and he wasn't going to go to trial for a fraud. He said that he would tell the defendant to make restitution for the other two checks but, to date, no money has been repaid.
We found evidence in Jerry's vehicle of his plans to impersonate various Fortune 500 companies. In total, he attempted to defraud investors and businesses of more than $600,000. I contacted the FBI and turned over my evidence because they were conducting a separate investigation into Jerry's actions. The agent I spoke with said that if restitution for the other two checks hadn't been made at the conclusion of their investigation, they would incorporate it into their charges.
Note
Lessons Learned
The first and most important lesson learned in this investigation is for financial institution employees to "do it yourself." Conduct due diligence and verify the information a potential customer provides. The Money Online representative who independently looked up the phone number for Excellent Technology exposed Jerry's fraud. Other finance companies I interviewed did not give Jerry loans because they had done the same.
This case also demonstrated the importance of taking the time to coordinate with the necessary agencies, companies and departments to investigate a suspected identity thief. A large amount of the fraud losses we uncovered were treated as civil — not criminal — matters. Many of the managers I spoke with at various defrauded financial institutions were surprised that I — a police detective — was proactively investigating Jerry and admitted they probably wouldn't have thought to involve the police if I hadn't contacted them. Although almost all of Jerry's actions had elements of a tort (which is the basis for a civil lawsuit), there was a clear pattern of deception that also made them a crime. By explaining this to managers and pointing out that a criminal conviction would help their civil cases, I was able to change the view of management at several companies. (Since civil and criminal actions are separate, both can be pursued independent of each other.)
At the same time, I learned that not everyone is going to be as enthusiastic about investigating and prosecuting identity theft as I was. Some companies did not want to be involved in a criminal investigation and preferred only to pursue a civil claim and "turn it over to collection." I was also introduced to the sad truth that many district attorneys view fraud as "boring" and don't want to deal with it. Some prosecutors just want a conviction — any conviction — regardless of the cost or the negation of justice. If a defense attorney knows this about the prosecutor, he or she can simply threaten to have the defendant go to court so the prosecutor will agree to a lesser charge. However, to be fair, in my career I have seen a few prosecutors realize the necessity of prosecuting fraud.
Constant interaction, communication and monitoring are required from the victims, companies, investigative agencies and prosecutors to bring about a satisfactory resolution in an identity theft case. Lack of coordination or information-sharing and a reliance on the other guy to conduct your due diligence help the identity thief get away with his crime.
Bill Maloney, CFE, has been a police detective for the past 21 years of a 29-year-long career with the police in a Northeast city of about 100,000 people. He has been married to his wife, Vicki, for the past 27 years and is the father of three fantastic children, Michael, Meghan and Kelly.