As two huge cases in Minnesota close, authorities brace for more.
Thousands of unsuspecting Minnesotans are falling victim to increasingly sophisticated identity theft operations that cost banks and retails stores millions and test the technical savvy of law enforcement.
Just last week, six more people pleaded guilty or were sentenced to prison in the Twin Cities for their roles in two of the largest identity theft rings in the United States. Later this month, Julian Okeayainneh, one of the ring's kingpins, is scheduled to be sentenced to life in prison, the longest punishment handed down for an identity theft case.
Authorities say those cases reflect a growing confidence among some criminals to go beyond stealing a credit card out of a mailbox. Instead, they're recruiting teams of people to steal data, work it through ever-cautious financial institutions and businesses and hide the profits from police.
"Identity theft is the crime wave of the future," said Louis Stephens, special agent in charge of the U.S. Secret Service office in Minnesota. "It will affect more and more Americans."
Violent criminals and drug addicts are turning to identity theft because it's a safer and more lucrative way to make money and easier to evade police. The Internet is full of black market websites offering to sell stolen credit cards, Social Security numbers and bank and checking accounts.
The challenge of taking down the Minnesota rings, dubbed Operation Starburst and Operation Masquerade, was daunting. More than 10,000 people were victimized since 2006. So far, at least 50 people connected to the rings will be going to prison.
Starburst and Masquerade
Operation Starburst and Operation Masquerade are examples of the continuing trend of large rings investigated by the Minnesota Financial Crimes Task Force, a joint operation of federal, state and local law enforcement. Starburst ran from 2006 to 2011 and had operations in California, Massachusetts, Arizona, New York and Texas. The 200 members of the ring, which included bankers, succeeded in stealing more than 8,700 individual identities from around the world and more than $50 million.
The ring, headed by Okeayainneh, a Californian, engaged in bank fraud, credit card fraud, identity theft, takeovers of home equity lines of credit and money laundering. Bank insiders protected the ring by watching for red flags that would trigger investigations or lead authorities to the ringleaders.
"This is why the ring was effective for a long time," said Stephens. "We need to protect the financial infrastructures in the United States. People are exploiting their vulnerabilities, and they need to be stopped."
Operation Masquerade involved a ring that allegedly pilfered financial information and identities of hundreds of people from cars, businesses, trash cans and mailboxes, and obtained some information from bank employees. A former receptionist at the Minnesota Board of Psychology also lifted information for the ring from state licensing applications. Using the data, ring members stole about $2 million from banks and retail businesses in at least 14 states, prosecutors say.
The resources and expertise provided by the state financial crimes task force were critical in prosecuting the two rings, said Jeanne Cooney, spokeswoman for the U.S. Attorney's office in Minnesota. One investigation followed on the heels of the other, she said. That raises the question: Were these rings an anomaly "or is this what we are going to see in the future?" she said.
Cooney speculated the rings could be driven by the bad economy, people becoming more computer savvy or a sense of anonymity because the thefts can be done through the Internet.
"We've even heard fraudsters say it was safer than robbing a bank," she said.
2,000 reports in Minneapolis
Investigators with the state financial crimes task force went after the rings the same way they would take down a gang or another organized criminal enterprise, said Pat Henry, the task force's commander. They went after the people who initially had the stolen information, then the people who deposited the profits in banks or bought merchandise with a fraudulent check and later the ringleaders, he said. The task force's mission is to tackle the largest cases that impact the most victims, he said.
The Minneapolis Police Department received about 2,000 reports of identity theft last year, said Lt. Chris Hildreth, who oversees the financial crimes unit. Even the smallest cases, such as a credit card stolen from a mailbox, are time-consuming because of the amount of computer data that needs to be analyzed, he said.
The number of identity theft cases that resulted in charges in Hennepin County actually dropped from 132 in 2008 to 41 in 2011, said County Attorney Michael Freeman. A decrease in overall property crime may explain part of the reason, he said. But prosecutors also are charging more identity theft cases with crimes that are easier to prove and carry a similar penalty, like theft by swindle or transactional card fraud, he said.
Ramsey County Attorney John Choi does not want his office and the St. Paul Police Department to ignore the smaller theft cases because they still affect a lot of people. If thieves get away with the crime on a smaller scale, they will have confidence to commit more hefty crimes, he said.
Retailers and financial institutions play a key role in notifying law enforcement about fraud patterns, which are also shared among businesses to help train employees and develop preventive measures, said John McCullough, spokesman for the Financial and Retailers Protection Association. The group has seen an increase in business accounts taken over by computer hackers and refunds from filing of fake employee tax returns.
"It's a daunting task to prevent fraud," said McCullough. "It's disheartening for businesses to say they no longer take checks or reduce the amount people can charge on their credit cards. But you need to keep the bad guys away."
David Chanen 612-673-4465
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