Small Leads, Big Scams

January 2008
In 25 years of chasing identity thieves, Arvin Clar learned that sometimes the biggest cases start with the smallest tips. A few years ago, an elderly woman telephoned Clar, the financial fraud investigator for the Cleveland (Ohio) Police Department, to report a fraudulent $88 charge on her credit card.

Clar wouldn’t usually bother with such a small-fry case. Besides, the woman lived in the suburbs, not the city of Cleveland. “So I’m like, ‘Ma’am, I get 3,000 cases a year. I’m sure you can do the math,’” he remembers in an interview. “What can I say? Some days I’m not user-friendly touchy-feely.”

The woman was enraged. “So I guess it’s OK for criminals to run free in Cleveland,” she screamed into the phone.

Clar backed down. He told the woman that if she saw anything else fishy, she should have her bank call him. Three days later, the bank called. Another small order had shown up on her card, this time for a pair of $70 shoes, to be delivered to an address in the city. “Then the guy tells me that lots of little deliveries have been going to this address, all for $70, $80,” Clar says. “But it’s lots of them. Like, hundreds.”

So Clar used an old trick. He found out when the next shipment was due to arrive at the house. Then he dressed up like a UPS driver and drove to the suspect’s house.

Clar knocked on the suspect’s door. A man answered and signed for the delivery. As he stood on the front porch, Clar peered into the apartment and saw that the walls were lined with stacks of brand-new shoes, toys, baseball cards, watches. “The place looked like Wal-Mart,” Clar says.

Once inside, Clar informed the man that he was no deliveryman.

The man almost broke into tears. His girlfriend worked at a video store, he said. She had copied names, addresses and credit card numbers from hundreds of customers and used them to make fraudulent purchases at area department stores over the phone. To make sure no one paid attention, she kept all the purchases under $100.

“It was a pretty good scam, because she’s right,” Clar says. “Normally, nobody would even notice.”

It’s only petty crime if it happens to someone else

After two and a half decades of chasing identity thieves, Clar has seen his share of big cons. He’s tracked cases of fraudulently purchased laptops mailed to Moscow, seen senior citizens lose their life savings to fake Canadian lotteries, and grilled a convicted felon who from behind bars directed the theft of color TVs—using a prison payphone and a gang outside whom he instructed in the art of dumpster diving for personal identification.

But the most audacious—and most profitable—identity thieves Clar meets are the ones who steal small things, over and over again. They know that retailers, banks and police accept small theft as a regular cost of doing business.

So the smarter cons are changing tactics. Whether it’s a fraudulent withdrawal of $157 from Chase bank, or a $200 gift card from Best Buy, they’ve learned that a good theft isn’t always about the high dollar amount. It’s about volume.

“Crooks today have learned to stay under the radar,” says Clar.

And unless we change how we deal with identity theft, criminals will continue getting away with it, Clar says.

The straight dope on the long haul

One of the biggest cases Clar ever worked began with a retired Cleveland cop who couldn’t get anyone to look into a fraudulent $131 charge on his credit card. “It was under the radar,” Clar says. “The bank didn’t care.”

From the old hands who worked the beat before him, Clar learned that any investigation of financial fraud starts with the customer’s last purchase before the card was stolen, which in this case was at a gas station. When Clar arrived and introduced himself, the cashier was an easy nut to crack. “I’m on probation,” the cashier said. “Am I gonna go to jail if I tell you anything?”

There was a man who worked at the insurance company across the street, the cashier said. He would come over and ask for customers’ credit card account numbers, which the cashier had been writing down whenever he could. The cashier got a commission for each stolen account.

Clar investigated the insurance salesman. The man had started out stealing account information from his own company’s file cabinets. When he ran out of files, he went to the nearest gas station. He used all the stolen information to become a cell phone distributor.  He used each victim’s credit information to buy a few phones, then sell them at a discount. “This guy was making $20,000 a month, all with little charges under $300 each,” says Clar.

To be a mole

Possibly the most effective under-the-radar, high-volume scam happens when an identity thief lands a job inside a bank or hospital, Clar says. If he works in a back office with lots of consumer or patient files, the con man can easily photocopy mortgage applications, W-2 tax files or medical forms, all of which contain sensitive financial information that can be sold on the black market.

“That’s why I always say, ‘Pull the Trash,’” Clar says. “If you think you have an identity thief working for you, you gotta check the recycling bin right next to the photocopier. If you see a lot of tax forms in there, you’ll know you have a bad guy,” who has foolishly discarded spoiled copies.

The most troubling aspect of inside jobs, Clar says, is that the bigger the institution, the less power it has to clamp down on fraud. The Cleveland Clinic, for example, employs tens of thousands of people. If an identity thief were to manage to forge counterfeit payroll checks from the Clinic, the scam could be difficult to stop.

The Clinic’s payroll accounts are too big to shut down,” Clar says. “So if I’m a bad guy with that information, I can do whatever I want.”

Small time for big cons

The successful identity thief makes his living from high volume, Clar says, not high risk. Lots of little thefts of $50 each can quickly add up to a steady income. But because each individual theft is so small, only short jail sentences are likely if the thief is caught.

Remembering the case of the video store worker, Clar says, “Sure, if we had added up all the stolen merchandise and we had the time and ability to find everybody whose credit card was taken and get them to make a statement and to appear in court, and if I didn’t work on any of my incoming cases for a few months, I could’ve taken her for”—he says with humorous exaggeration— “100,000 counts.”

But Clar also must address the constant stream of incoming cases, which limits the time he can dedicate to any one thief, no matter how prolific. “As it was, I had to move on,” he says.

The law still classifies most small thefts as “petty misdemeanors,” which means that even when Clar has piles of evidence and affidavits from accomplices, he often can’t win much jail time for identity thieves.

“If I can get 14 months, I’ve done a pretty good job,” says Clar. “There’s nobody going to jail for 10 years in my work.”

Like other big city police departments, Cleveland’s cares about financial crime, Clar says. It employs an entire team of detectives to hunt down identity thieves and other financial criminals. But Cleveland also is the 10th worst city in the nation for crime, with high per-capita rates of murder, rape, robbery, aggravated assault, burglary and auto thefts, according to a report released in November by Congressional Quarterly Press. Cops are so busy dealing with people getting shot that they don’t have time to track down every fraudulent $88 credit card charge.

“Financial crime is a horrible thing, but we have needs in this city,” Clar says. “People are dying here. It’s all about priorities. Here in Cleveland and around the country, I’m not sure that many police departments are ready to say that ID theft is high on their list of priorities.”

So Clar trudges on, using small leads and wimpy laws to chase major identity thieves. One of the perks of his job is that Clar regularly gets to meet his enemies face-to-face. He has come to learn that petty criminals are often the best criminals.

“I talk to bad guys all the time, and I’m always in awe of them,” Clar says. “The amount of talent they have is unbelievable.”